Zijin Spends $710 Million on Deals With Barrick, Ivanhoe

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Zijin Mining Group Co. will spend $710 million buying into mines in Papua New Guinea and the Democratic Republic of Congo as China’s most valuable gold producer extends its reach across the globe.

Zijin will buy a 50 percent stake in Barrick Gold Corp.’s Porgera mine in Papua New Guinea for $298 million, according to a statement on Tuesday. Separately, the company based in China’s Fujian province agreed to acquire 49.5 percent of Ivanhoe Mines Ltd.’s Kamoa copper project in Congo for $412 million. Ivanhoe shares jumped as much as 17 percent.

“A strategic partnership with Barrick is an excellent fit for Zijin and a powerful combination as we look to expand our business globally outside of China,” Chairman Chen Jinghe said in the statement.

Zijin, which will look at collaborating with Barrick on future projects, also said its board approved a plan to raise as much as 10 billion yuan ($1.61 billion) in a private share sale. The investment in Kamoa helps Ivanhoe, the explorer founded by Robert Friedland, develop mines in Africa and comes after Zijin was blocked from entering Congo five years ago. The Chinese company said last August it was looking for acquisitions on the continent.

Ivanhoe has been in “regular communication” with Congolese authorities regarding the sale to Zijin, Emery Mukendi Wafwana, a lawyer for the company, said by phone. Ivanhoe will complete the sale through Congo’s Portfolio Ministry, which controls the government’s 5 percent stake in Kamoa, Wafwana said.

Congo Government

Congolese Mines Minister Martin Kabwelulu said by text message he was unaware of the sale.

Ivanhoe has offered to sell an additional 15 percent to the government at market rates.

Congo blocked a previous attempt in 2010 by Zijin to enter the country, Africa’s largest copper producer. The ministry refused to approve the company’s $284 million bid for a stake in the Deziwa and Ecaille C copper and cobalt projects because it said the sale violated government regulations. The operations are now fully owned by state-owned miner Gecamines.

Zijin has an option to buy an additional 1 percent stake upon arranging project finance for 65 percent of Kamoa’s first phase of development, the company said Tuesday in a joint statement with Ivanhoe. Should it exercise that option, Zijin will arrange project financing for subsequent development phases, the parties said.

Expansion Possibility

The first phase of Kamoa entails developing a 100,000-ton copper mine at an estimated cost of $1.4 billion. A smelter will be constructed in a second phase in addition to other expansions that will take annual output of blister copper to 300,000 tons.

“We will examine the possibility of expanding the Kamoa project beyond the currently contemplated second phase,” the companies said in the statement.

The latest agreement follows Zijin’s March acquisition of 9.9 percent of Vancouver-based Ivanhoe, which also explores for platinum in South Africa.

For Barrick, the venture with Zijin helps the world’s biggest gold producer forge closer ties with China, the largest consumer of the precious metal.

“A 21st century mining company with global reach and the intention to become an industry leader must, by definition, have a distinctive relationship with China,” Barrick Chairman John Thornton said in the statement. “Our partnership with Zijin is the first step in a long-term strategic relationship with one of China’s leading mining companies.”

Barrick Strategy

The last few years have been tumultuous for Barrick, with the departure of two chief executive officers, a sliding gold price and tumbling shares. That forced the company to sell assets as it targets cutting net debt by $3 billion, or 29 percent, this year. Barrick on Monday said it sold a mine in Australia for $550 million.

Thornton, a former senior banker at Goldman Sachs Group Inc. who replaced founder Peter Munk in April, has said he’s applying a “back to the future” strategy at the Toronto-based company in a bid to return it to the nimble, entrepreneurial roots that first made it successful.

Ivanhoe advanced 7.8 percent in Toronto trading to C$1.25 at 4 p.m. on Tuesday. Barrick dropped 3.7 percent to C$14.56, giving the company a market value of about C$17 billion ($13.7 billion).

Credit Suisse Group AG advised Barrick while BMO Capital Markets advised Ivanhoe.

(A previous version of this story corrected the spelling of Zijin Mining in the headline.)

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