Aussie gold miner with Chinese parent company looking to buy half of Kalgoorlie
Barrick Gold's (NYSE,TSX:ABX) quest to find a buyer of the Kalgoorlie "Super Pit" has taken another intriguing turn.
Over the past couple of days rumours have been swirling that a Chinese company with deep pockets has put in an offer for Barrick's 50% stake in the Australian gold mining operation. The bid is reportedly $540 million above any other competing offer.
Newmont Mining (NYSE:NEM) owns the other half and Barrick handed over operational control of the iconic mine to Newmont in May of last year. The Super Pit is expected to be depleted of ore by 2019 but underground mining could continue after that.
[I]f it goes through, the transaction would put an end to earlier dalliances between Barrick and Newmont, the natural buyer of the stake since it already owns half the mine.
Two sources told Reuters that "Barrick Gold Corp. is reviewing the financial backing behind an approximately $1.3-billion (U.S.) bid for its stake in Australia’s Kalgoorlie mine by Minjar Gold, a unit of Shanghai-listed Shandong Tyan Home," according to a story carried today in The Globe and Mail.
Unsurprisingly, considering that major miners rarely offer press comments on mergers and acquisitions in whole or in part, Barrick was mum on the potential deal. But if it goes through, the transaction would put an end to earlier dalliances between Barrick and Newmont, the natural buyer of the stake since it already owns half the mine.
The Reuters source said Canadian, Australian and Chinese companies have also shown interest in the Kalgoorlie stake, which is Toronto-based Barrick's last gold holding in Australia. The mine is valued between US$600 million and $1 billion. Reserves top 7.5 million ounces and the mine is one of the biggest in Australia, producing about 800,000 ounces annually.
Barrick, the world's No. 1 gold company, has set a target of paying down $2 billion in debt this year, mostly by selling mines or stakes of mines, including its majority stake in its African subsidiary Acacia Mining (LON:ACA). Barrick sold four U.S. gold mines this time last year. Newmont has shown interest in purchasing Barrick's Kalgoorlie stake, but price has been an issue and a deal has so far eluded the Denver-based company.
Minjar Gold has been on the hunt for Australian mines all year. The company in August purchased Evolution Mining's (ASX:CAH) Pajingo mine for US$40 million – a deal that looks like small change in comparison to the offer on the table for Kalgoorlie.
Perth-based Minjar Gold is incorporated in Australia but is owned by Shandong Tyan Home. That company is listed on the Shanghai Stock Exchange and its primary business is Chinese property development. It has a current market value of $12.1 billion.
News of the whopping bid for Australia's Super Pit emerged around the same time that China’s Chinalco inked a preliminary deal with Peru's government to expand the Toromocho copper mine, the Asian nation’s largest overseas copper project.
The move is part of a series of agreements signed this week that will see China pouring close to $5.3 billion into Peru’s mining and energy sector. Chinalco is expected to inject $1.3 billion into Toromocho in the coming months.