Barrick Gold Corporation (USA) (NYSE:ABX) announced that it has reached an agreement to sell a 50 percent interest in the Zaldívar copper mine in Chile to Antofagasta Plc (“Antofagasta”) for a total consideration of $1.005 billion in cash, forming a new partnership with one of the world’s leading copper companies.
“The sale of 50 percent of Zaldívar is consistent with our strategy to create long-term value for our shareholders. By selling a stake in this non-core asset, we strengthen our balance sheet while maintaining significant exposure to a strong cash-generating operation,” said Kelvin Dushnisky, Co-President of Barrick. “Following a highly competitive auction process, we are pleased to reach an agreement with the ideal partner for Zaldívar. Antofagasta has an outstanding track record of building and operating mines in Chile, and we see this as the first step in an ongoing, collaborative partnership. There are many potential opportunities to benefit from Antofagasta’s experience as Barrick evaluates development projects in the future.”
“We are enthusiastic about partnering with Barrick at Zaldívar. Together, we believe that we are well positioned to enhance the long-term value of the Zaldívar operation through our collective best practices,” said Diego Hernandez, CEO of Antofagasta. “We have consistently been impressed with the workforce at Zaldívar, and look forward to partnering with them. We also look forward to exploring other opportunities to collaborate with Barrick in the future.”
Details of the Zaldívar transaction
Antofagasta will pay Barrick $980 million in cash upon closing and $25 million in additional cash payments over the next five years for a 50 percent stake in the Zaldívar mine. The transaction is expected to be completed in late 2015 and is subject to customary closing conditions.
As joint venture partners, Barrick and Antofagasta will work together to maximize the value of the Zaldívar mine, leveraging the collective expertise and experience of both companies. Barrick has intimate knowledge of the Zaldívar operation and its potential. Antofagasta will help to realize that potential by leveraging its deep operating expertise in Chile, including potential synergies with its existing portfolio. Such synergies may include the ability to leverage Antofagasta’s extensive in-country procurement programs, contractor relationships and administrative efficiencies.
Under the new ownership structure, Zaldívar will have a joint Barrick-Antofagasta Board of Directors consisting of three Barrick nominees and three Antofagasta nominees. Antofagasta will act as the operator of the mine and will be subject to oversight and direction by the Board. The initial Chairman of the Board will be appointed by Antofagasta and will hold the office of Chairman until January 1, 2017, at which point the right to appoint the Chairman will rotate between the parties on an annual basis on January 1 of each year.
M. Klein and Company and TD Securities Inc. are acting as financial advisors to Barrick. Davies Ward Phillips & Vineberg LLP and Carey y Cía. Ltda. are acting as legal counsel to Barrick.
Progress on debt reduction
Including Zaldívar, we have now announced transactions valued at approximately $1.85 billion, or nearly two thirds of our target, representing a substantial contribution to our debt reduction goal. These transactions include:
- Sale of 100 percent of the Cowal mine for $550 million in cash
- Sale of a 50 percent interest in Barrick (Niugini) Ltd., operator of the Porgera Joint Venture, for $298 million in cash
- Sale of a 50 percent interest in the Zaldívar copper mine for a total consideration of $1.005 billion in cash
We are actively exploring a number of other joint venture and sales opportunities and will provide a general update on debt reduction activities with the company’s second quarter results on August 5. (Original Source)
Shares of Barrick Gold closed today at $7.05, down $0.18 or 2.49%. ABX has a 1-year high of $19.36 and a 1-year low of $6.79. The stock’s 50-day moving average is $9.89 and its 200-day moving average is $11.55.
On the ratings front, Barrick Gold has been the subject of a number of recent research reports. In a report issued on July 16, Barclays analyst Farooq Hamed maintained a Sell rating on ABX, with a price target of $11, which represents a potential upside of 56.0% from where the stock is currently trading. Separately, on July 8, J.P. Morgan’s John Bridges maintained a Hold rating on the stock and has a price target of $13.
According to TipRanks.com, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, Farooq Hamed and John Bridges have a total average return of -13.3% and -27.3% respectively. Hamed has a success rate of 26.1% and is ranked #3652 out of 3721 analysts, while Bridges has a success rate of 13% and is ranked #3712.
Barrick Gold Corp produces and sells gold and copper. The Company business activities also includes exploration and mine development. It holds interests in oil and gas properties located in Canada.