Barrick Gold to sell 50% in Veladero gold mine to China's Shandong Gold for $960 mn

07 Apr 2017

Barrick Gold Corp, the world's biggest gold miner, yesterday struck a deal to sell a 50-per cent stake in its Veladero gold mine in Argentina to China's Shandong Gold Mining Co Ltd, for $960 million as part of a "strategic co-operation agreement."

As part of the deal, both companies will also explore the joint development of its Pascua-Lama deposit, located about 10 kms from the Veladero mine and also look into investment opportunities on the El Indio Gold Belt along the Argentina-Chile border, which is already home to a cluster of gold mines and projects.

Barrick Gold said that it will use the proceeds from the sale to reduce debt and for investments to grow free cash flow per share.

"Shandong is an ideal partner to help us unlock the untapped mineral wealth of the El Indio Belt over the long-term, while working with us to generate more value from the Veladero mine today," said Barrick Gold's executive chairman, John Thornton.

"We look forward to working in partnership with Shandong, sharing mining and development expertise, talent, and capital in ways that will create added value for our respective owners," he added.

The Veladero mine is located in the San Juan Province of Argentina in the highly prospective Frontera District and accounted for almost 10 per cent of Barrick's total gold production in 2016.

Veladero is a conventional open-pit operation where ore is crushed by a two-stage crushing process and transported via overland conveyor and trucks to the leach pad area. Run-of-mine ore is trucked directly to the valley-fill leach pad.

Veladero produced 544,000 ounces of gold in 2016, at a cost of sales of $872 per ounce, and all-in sustaining costs of $769 per ounce.

Proven and probable mineral reserves are 6.7 million ounces of gold (252 million tonnes, grading 0.83 grams per tonne).

Barrick Gold expects gold production in 2017 to be 770,000-830,000 ounces, at an all-in sustaining cost of $840-$940 per ounce.

Last month, Barrick Gold discovered a rupture in the pipelines carrying gold-bearing solution on the leach pad in the Valdero mine and the government of San Juan province temporarily restricted operations and also restricted the addition of cyanide to the mine's heap leach facility pending repairs.

With a market cap of about $9.6 billion, Jinan, Shandong province-based Shandong Gold is China's biggest gold miner having produced about 1.2 million ounces of gold in 2016.

The transaction has received approvals from China's National Development and Reform Commission, and the State-owned Assets Supervision and Administration Commission of Shandong Province.

The deal is yet to be approved by other Chinese regulatory authorities, including China's Ministry of Commerce and State Administration of Foreign Exchange.