Barrick Gold to sell its stake in Massawa project to Teranga for up to $430 million

December 11, 2019

Barrick Gold Corp. announced that it will sell its entire 90 percent stake in its Massawa project in Senegal to Teranga Gold Corp. for up to $430 million. The move brings Barrick closer to its target of shedding $1.5 billion of unprofitable mines by the end of 2020, following the company’s acquisition of Rangold Resources a year ago.

The sale follows Barrick’s sale of its half of the Kalgoorlie super pit gold mine to Australia’s Saracen Mineral Holdings Ltd. for $750 million. 

Reuters reported that the sale of the Massawa project includes an upfront cash payment to Barrick of $300 million and Teranga shares worth a total of $80 million, giving Barrick close to an 11.5 percent stake in the miner.

Barrick could also look to sell its Tongon mine in Ivory Coast and its Lumwana copper project in Zambia, analysts have said.

Gold mining companies have completed more than 345 deals worth more than $30.5 billion in 2019, led by Barrick’s acquisition of Randgold Resources and Newmont Mining’s acquisition of Goldcorp to form Newmont Goldcorp.

The consolidation has also led to a raft of mine sales around the world as top miners Barrick and Newmont Gold Corp. focus on their best performing assets.

“You’ve seen a lot of these seniors consolidate and there are non-core assets for them that are quite meaningful for other companies like ourselves,” Teranga chief executive officer Richard Young told Reuters.

The price also includes a contingent payment of up to $50 million based on the average gold price for the three years from when the deal closes, the companies said.

Credit Suisse analyst Tariq Fahad said Barrick had now achieved 79 percent of its divestment target when the value of Teranga shares was included.

Barrick will have the right to nominate one Teranga director for as long as it retains at least a 10 percent equity interest in Teranga.
Teranga said it plans to combine the Massawa project with its flagship Sabodala gold project, creating a low-cost mid-tier producer with higher production and lower costs.

The company will invest up to $10 million to begin processing ore from Massawa in the second half of next year, Young said.

Barrick can increase its stake in Teranga after 18 months according to a standstill agreement reached by the companies.

Barrick president and chief executive Mark Bristow said the group had been pursuing the best means of bringing Massawa – discovered by its legacy company Randgold Resources 10 years ago – to account for the full benefit of all stakeholders. The agreement with Teranga, which will realise the full value of this asset and create a substantial new West African gold mining company with significant African ownership, is the outcome of this process.

“It is gratifying to continue the value-creating consolidation of assets in the gold mining sector which started a year ago with the merger between Barrick and Randgold, followed shortly thereafter by the merger of the Nevada assets of Barrick and Newmont Goldcorp. In the case of Massawa, Teranga has the appropriate infrastructure and processing facilities approximately 25 km away, and combining the orebodies and the geological prospectivity will add further benefits. This is a good example of an instance where assets we own might be better suited in combination with others,” he said.


 

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