Gold price slump puts Barrick’s Super Pit deal with Minjar at risk

A recent and sharp decline in gold prices is casting serious doubts on the feasibility of China’s Minjar Gold’s $1.3 billion bid for Barrick’s 50% stake in Australia’s Kalgoorlie “Super Pit” mine.

Minjar, a unit of Shanghai-listed Shandong Tyan Home, had until Friday night to secure a loan that would persuade Barrick of selling its part in one of Australia’s best-known gold operations, which produces around 800,000 ounces of the precious metal a year.

But, according to The Australian, the small Chinese miner has had difficulties trying to convince Western lenders of financing part of the deal. Its position took a turn for the worse in recent days after Beijing announced it would curb lending to all investments outside the country.

Minjar has until Friday night to secure a loan that would persuade Barrick of selling its 50% stake in Australia’s Kalgoorlie mine.

Buying Kalgoorlie open pit doesn’t seem like a great deal these days. The mine, operated by Newmont Mining (which owns the other half), is due to run out of ore by 2019 though underground mining is likely to extend its life beyond that date. Besides, it is said to carry costly remediation problems that whoever happens to own the mine when it ends production will have to face.

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).

Perth-based Minjar has been on the hunt for Australian mines all year. The company in August purchased Evolution Mining's (ASX:CAH) Pajingo mine for $40 million – a deal that looks like small change in comparison to the offer on the table for Kalgoorlie.

If the deal goes trough, Minjar will join a few other conational firms currently mining for gold in Australia. One of them is Zijin Mining, which became the first Chinese company to invest in the Australia’s gold sector after paying $229 million in 2012 for Norton Gold Fields' 30-year-old Paddington operations near Kalgoorlie-Boulder.

Shortly after, Shandong Gold landed Down Under with a $227 million deal that saw it acquiring 51% of Focus Minerals, but the company soon mothballed its Laverton and Coolgardie operations following a sharp drop in gold prices in 2013