Barrick Gold Corporation ABX has signed a strategic deal with leading Chinese mining company – Zijin Mining Group Co., Ltd. Per the deal, Zijin will buy a 50% interest in Barrick (Niugini) Limited (BNL), which owns 95% of the Porgera Joint Venture gold mine in Papua New Guinea and manages the same. Zijin will pay $298 million in cash for the stake purchase.
The transaction is expected to consummate in the third quarter of 2015 following customary closing conditions. Under the deal, BNL will be jointly controlled by Barrick and Zijin. BNL will have a joint Barrick-Zijin board of directors, comprising three Barrick nominees and three Zijin nominees.
To ensure continuity of operations at the mine and retain the interest of stakeholders, the current BNL management team will remain in place, with current Executive General Manager, Greg Walker, nominated by Barrick as the first Executive Managing Director, while Zijin will nominate the first Chairman of the Board and Deputy Managing Director.
Barrick’s experience of successfully operating in Papua New Guinea, when combined with Zijin's strong cost management capabilities, will enable both companies to harness the full potential of the Porgera mine. Both the companies expect significant value creation opportunities at the mine. They will work with local communities and other partners in Papua New Guinea to ensure the Porgera mine generates value for all its stakeholders in the future.
Barrick and Zijin have also signed a long-term strategic cooperation agreement to jointly collaborate on future projects and investments. Significant synergies are expected by bringing Zijin’s relationships and expertise to Barrick, which include low-cost capital from Chinese institutions, leading Chinese engineering and construction skills, and Chinese machinery, equipment and other critical supplies that meet world-class standards of quality at competitive costs.
Barrick has partnered with Zijin to achieve two major objectives. The first is to strengthen the company's balance sheet as the proceeds from the transaction will be used to pare debt. The second is to form strategic alliances that will create long-term shareholder value.
Currently, Barrick carries a Zacks Rank #3 (Hold).
Better-ranked gold mining companies include Primero Mining Corp. PPP, Newmont Mining Corporation NEM and Richmont Mines Inc. RIC. While Primero Mining sports a Zacks Rank #1 (Strong Buy), Newmont and Richmont Mines hold a Zacks Rank #2 (Buy).
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