Barrick Gold (ABX), which I believe is the world's largest gold mining company by volume, announced yesterday a hostile bid for Alberta-based Cadence Energy (CDS. TO). The cash bid amounts to C$354 million, which is a 10 percent premium on Cadence's market value.
With the price of gold near record highs, why does Barrick want to buy a junior oil company? Unfortunately gold isn't the only thing that's expensive these days - oil prices have spiked nearly 50% this year, and 25% of Barrick's production costs are fuel-related. Cadence produces more than 3,500 bpd, which would help Barrick lock in fuel costs and hedge against further increases.
Still, this is an interesting example of how the effects of expensive oil are reverberating through even very profitable sectors of the global economy.
1 comment:
I bet you guys love irony:
Alaskan's get paid to live there. The Permanent Fund is a private fund created to manage the wealth of oil revenue generated in the State. Regardless, Alaskans' pay 2-3 times the national average for fuel to heat their homes.
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