Gold giants on hunt for Barrick mines
Bridget Carter and Gretchen Friemann | The Australian
Newcrest, OceanaGold and China’s mining goliath, Zijin, are among the seven to eight contenders pursuing Barrick’s two gold mine assets, according to sources, despite the increasingly skittish conditions for the yellow metal.
Indicative bids on the Credit Suisse-run process are due on April 2 but prospects are now fading for a $1 billion price tag.
It’s understood up to eight contenders have entered the race for the two mines on the block, the Cowal mine in NSW and the Porgera project in Papua New Guinea.
However, value expectations for the two assets have dwindled with a deal likely to be struck at about the $800 million mark.
The more bearish price assumptions gained greater strength last week after UBS published a research note assessing Cowal’s value, by far the larger and more attractive asset, at $665m.
While the Swiss bank’s analysts highlighted that operating gold mines tended to change hands for less than the approximate net present value, insiders pinpointed $700m as a reasonable price tag.
Porgera, located in PNG’s highlands and beset by numerous social and environmental challenges, is expected to fetch close to $100m.
Barrick’s decision to jettison the bulk of its Australian and PNG assets — it will retain a half share in Kalgoorlie Consolidated Gold Mines, which runs the Super Pit, has long been in the offing.
The Canadian miner, and the world’s largest gold producer, considered divesting Cowal, 350km west of Sydney, two years ago when the gold price was far higher the outlook far rosier. Back then the mooted price hit close to $800m. While many regard Zijin, the Chinese mining group that owns most of Norton Gold Fields as among the most likely suitor, it’s understood gold and copper producer, Newcrest, is also casting an eye over the portfolio.
News of its involvement comes as the Melbourne-based miner continues to feel the pressure from a class-action lawsuit launched last year by Slater & Gordon.
That case, which had been expected to start later this year, has now been delayed until early 2016.
It’s understood Newcrest and Slater & Gordon have squabbled over the scale of provision of information so far with a hearing scheduled next week in the Melbourne federal court aimed at resolving the discovery problem.
However, the looming class action, characterised by many investors as a minor irritant, has left little dent on the miner’s acquisitive ambitions.
OceanGold is also viewed as a contender given its intentions to expand to three or four producing assets in two to three countries.
UBS ranked the company as the fourth most likely buyer for Barrick’s mines, with Independence Group considered the most logical suitor due to its healthy balance sheet, a refreshed board and keen growth aspirations.
Barrick’s auction comes amid an increasingly uncertain outlook for the yellow metal as a rally in the US dollar continues to pile on pricing pressure. These conditions are unlikely to sway the Canadian miner’s course though as it tackles a near $US3bn ($4bn) debt pile.