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streetwise

So long Royal Bank of Canada, hello Michael Klein.

In what will be one of Barrick Gold Corp.’s largest deals in its history – the US$6-billion acquisition of Randgold Resources Ltd. – the Canadian mining company bypassed the country’s biggest lenders.

Instead, the gold miner chose former Citigroup banker Michael Klein’s firm, M. Klein and Co LLC, and Morgan Stanley as its financial advisers. If the deal succeeds, the foreign investment firms will reap the rewards. It’s a sign of how the Canadian mining finance industry has lost some of its clout.

Toronto was once the centre of the mining universe, with major companies like Falconbridge and Inco generating work for domestic lenders and allowing them to hold their own against global banks like Goldman Sachs and Morgan Stanley. Today, Barrick is one of the few major mining companies headquartered in Toronto, while most of the world’s biggest mining firms are in London, Australia and the United States.

Now, Mr. Klein and Morgan Stanley could earn between US$25-million and US$35-million in banking fees, according to estimates from financial services advisory firm Freeman & Co. Randgold’s advisers, U.K.-based Barclays and domestic bank Canadian Imperial Bank of Commerce could earn between US$35-million and US$45-million.

It is a blow to RBC, which for years was Barrick’s go-to financial adviser and was routinely chosen for its biggest deals. When Barrick bought Placer Dome in 2006 in a US$10.3-billion takeover, it used RBC.

Royal Bank was also used for the gold miner’s US$7.5-billion acquisition of copper company Equinox in 2011 and its US$2.3-billion takeover of Homestake Mining IN 2001, according to Thomson Reuters data.

But for what will be Barrick’s third-largest deal in its history, the gold miner bypassed RBC. The bank declined to comment.

Mr. Klein made a splash in the mining industry when he served as a dual adviser for Glencore PLC’s multi-billion dollar of Xstrata in 2012. He has gone on to serve as an adviser on other big deals, including Barrick’s failed 2014 takeover of Newmont Mining.

Although Freeman said most major full-service banks earn more from debt than M&A, to be left out of the biggest mining deal since the commodities boom is a hit to the Canadian mining banking industry.

Since the downturn in 2013, it has been slim pickings. The number of deals has dropped, as companies hunkered down to improve balance sheets. If a deal succeeded, the transaction was in the millions of dollars instead of billions as was the norm when metal prices were skyrocketing.

During the slump, Barrick spread the work around to Canadian and foreign banks. CIBC was tapped to sell a suite of tiny U.S. mines, Rothschild Inc. was used for Pueblo Viejo financing deal, Credit Suisse was the banker on Papua New Guinea and Australian gold deals, and Toronto-Dominion Bank and Mr. Klein were used to sell Barrick’s partial stake in copper mine Zaldivar.

But for Barrick’s transformational deal, the miner went outside.