Barrick Gold Corp. (TSE:ABX, Mkt cap 10.44B, P/E – , Div/yield 0.02/0.9, EPS -3.32, Shares 1.16B) has announced a deal to sell a 50% stake in its Zaldivar copper mine in Chile for a figure in the region of US$1 billion, the Financial Post reports.
The news is likely to be well received by investors, who have grown increasingly concerned at the level of debt carried by Toronto-based Barrick.
The firm also looks set to be faced with tumbling gold prices, making the sale of the stake to Antofagasta PLC, a large Chilean copper miner, particularly timely.
The deal was a long time coming due to a protracted auction process which saw almost every notable copper mining business in the world materialise as a potential buyer.
In the end it was Antofagasta that managed to secure the Zaldivar deal, which makes most sense from an experience and expertise point of view, the Financial Post notes.
“By selling a stake in this non-core asset, we strengthen our balance sheet while maintaining significant exposure to a strong cash-generating operation,” Barrick co-president Kelvin Dusnhisky said in a statement.
With net debt of more than US$10 billion to its name as of the end of the first quarter, Barrick has since worked hard to shed some lucrative assets with combined sales totalling US$1.85 billion.
This is in keeping with the miner’s pledge to cut debt by at least US$3 billion by the end of the calendar year. The company said last week that it was eyeing up a number of other “joint venture and sales opportunities.”
Barrick also explained that the deal with Antofagasta marks the start of a long-term partnership between the two firms, which could see them join forces on future development projects.
Antofagasta will pay Barrick US$980 million in cash up-front, and an additional US$25 million over the next five years.
Barrick has also cut its quarterly dividend to US2 cents a share from US6 cents, a move that will save the company almost US$140 million a year.
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