Henry Lazenby | Mining Weekly
The world’s largest gold producer by output Barrick Gold on Monday announced that it has closed a deal forming a strategic partnership with Zijin Mining Group.
The Chinese firm initially acquired a 50% interest in Barrick Niugini (BNL) for $298-million in cash.
Proceeds from the transaction would be used to repay debt. Barrick had been dealing with high debt levels in a lower gold-price environment, selling various noncore assets to reduce its $12.9-billion in debt, having pledged to raise at least $3-billion for this purpose this year.
Canada’s Barrick was orchestrating a pull-back from operations in the southern hemisphere, having already sold four mines in Australia, as well as the PNG divestment. Last month, the company had also sold a 50% stake in the Zaldivar copper mine, in northern Chile, to Antofagasta for $1-billion.
It had also earlier in August struck a precious-metals streaming deal with Royal Gold, which has agreed to make an upfront cash payment of $610-million plus continuing cash payments for gold and silver delivered under Barrick’s 60% interest in the Pueblo Viejo mine, in the Dominican Republic.
BNL owned 95% of and managed the Porgera Joint Venture (JV) gold mine, in Papua New Guinea (PNG). The remaining 5% participating interest was held by Mineral Resources Enga and was divided equally between the Enga provincial government and local landowners.
Barrick and Zijin had also struck a long-term strategic cooperation accord that outlined both companies’ intentions to collaborate on future projects and joint investments, thereby, leveraging the strengths of each company.
In partnering with Zijin, Barrick was advancing two central objectives set out as part of the company’s ‘back to the future’ strategy. The first was to strengthen the company’s balance sheet; the proceeds from the transaction would be used to pay down debt. The second was to form strategic partnerships that would create long-term value for all stakeholders.
Under the new structure, Barrick and Zijin would jointly control BNL, and BNL would have a joint Barrick/Zijin board consisting of three Barrick nominees and three Zijin nominees. One party would nominate the executive MD, taking main responsibility for operations of the mine, and the other party would nominate the chairperson and the deputy MD.
Barrick noted that the current BNL management team would remain in place, with incumbent executive GM Greg Walker, nominated by Barrick as the first executive MD, while Zijin would nominate the first chairperson and deputy MD.
Zijin’s role in BNL’s management of the Porgera JV was expected to grow over time as the company gained experience operating in PNG.
Barrick’s share of gold output from the Porgera mine last year was 493 000 oz, at an all-in sustaining cost (AISC) of $996/oz. Attributable output was this year expected to range between 500 000 oz and 550 000 oz of gold, at AISC of $1 025/oz to $1 125/oz.
At the end of 2014, Barrick’s share of Porgera minerals comprised three-million ounces of proven and probable gold reserves and 4.1-million ounces of measured and indicated gold resources.