By Paul Ploumis 31 Jul 2015 Last updated at 02:24:03 GMT
(Kitco News) - Barrick Gold Corp. (NYSE, TSX: ABX) has reached an agreement to sell a 50% interest in the Zaldívar copper mine in Chile to Antofagasta Plc. for a little more than $1 billion in cash, the two companies reported on their websites late Thursday.
Barrick, the world’s No. 1 gold producer, has unwound other assets lately and using the proceeds to pay down debt. With Chilean-based Antofagasta, Barrick will be forming a partnership with one of the world’s largest copper-mining groups. Antofagasta will operate the mine.
"The sale of 50% 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.
The sale occurred after a “highly competitive” auction process, he added.
Diego Hernandez, chief executive of Antofagasta, said the copper group has “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."
Antofagasta will pay Barrick $980 million in cash upon closing and $25 million in additional cash payments over the next five years, according to the agreement. The transaction is expected to be completed in late 2015. 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 said the transaction will be funded with cash from its balance sheet and is expected to be immediately accretive to earnings and cash flow per share.
Including Zaldívar, Barrick has now announced transactions valued at approximately $1.85 billion, or nearly two-thirds of its target, representing a “substantial contribution” to its debt-reduction goal, the gold-mining giant said. The other transactions include sale of the Cowal mine for $550 million in cash and sale of a 50% interest in Barrick (Niugini) Ltd., operator of the Porgera Joint Venture, for $298 million in cash. Barrick’s news release said the company is also “actively exploring a number of other joint venture and sales opportunities.”
Zaldívar produced 222 million pounds of copper in 2014 at cash costs of $1.79 per pound, Barrick said. Production for 2015 is expected to be 230 million to 250 million pounds at cash costs of $1.65–$1.95 per pound. At the end of 2014, Barrick had 5.6 billion pounds of proven and probable copper reserves at Zaldívar, the company reported.
Courtesy: Kitco News