Barrick Gold Corp. to Sell Three High-Cost Mines in Australia for $300 Million

Barrick Gold Corp. to Sell Three High-Cost Mines in Australia for $300 Million

Posadzki, Alexandra, The Canadian Press

Barrick to sell three Australian mines

--

TORONTO - Barrick Gold Corp. (TSX:ABX) has agreed to sell off three high-cost mines in Western Australia to South Africa-based miner Gold Fields Ltd. -- a move analysts say will free Barrick up to focus on more profitable operations.

Barrick said it will receive about $300 million from the sale, which is subject to customary closing conditions, including approval by Australia's Foreign Investment Review Board.

The company said the three mines that comprise the Yilgarn South assets produced a total of 452,000 ounces of gold in 2012 and a further 196,000 ounces in the first half of this year.

Kerry Smith, an analyst at Haywood Securities, said selling the higher-cost mines will reduce Barrick's operating expenses and have only a minimal impact on the company's production volumes.

"By eliminating those three mines out of their portfolio, it frees their management up to spend more time on other assets that actually make more cash," Smith said.

He estimated the mines are responsible for about five per cent of Barrick's total production.

"I'm sure they're selling them at less than they paid for them, but they've also had the assets for a long time generating cash," Smith said.

Elizabeth Collins, an analyst at Morningstar said Barrick is taking a "tiny" step towards reducing its debt burden by divesting the "troubled mines."

"They're getting rid of higher-cost mines that have low remaining reserves on a proven basis, and giving them to a company that is smaller and therefore can focus on smaller mines," Collins said 

Gold Fields Casts Its Eyes on Working Mines - Chief 

  BYLINE: Ed Stoddard and Tiisetso Motsoeneng
BULLION producer Gold Fields could afford to spend $300 million (R3.5 billion) to $500m on an acquisition but was only interested in working mines, its chief executive said yesterday.
Nick Holland told the Reuters Africa Investment Summit that the bulk of mines that fell into the category were in Africa and the Americas, and the window of opportunity to strike a deal was within the next year.
"We think our ability to do a new deal is somewhere between $300m and $500m... And there are quite a few opportunities within that range and value," Holland said.
"If we did something we would only want to buy in production mines. And the reason for that is that there is a unique value curve at the moment wherein production mines are trading at a discount to net asset value."
This means they are worth less than their asset value.
"Historically they were trading at multiples of net asset value and I don't think (the current valuations) will be around for ever, so I think that the window will close over the next year or so," he said.
Holland added that such a deal would have to generate cash from the start and the company could then probably take on additional debt