Barrick Gold in Talks to Sell More Assets in Australia

Barrick Gold Corp., the world’s largest producer of the metal by sales, is in talks to sell more assets as it seeks to reduce operating costs and focus on its most efficient mines.

The company, which last month agreed to sell three Australian mines, is in talks about selling additional assets in the country, Chief Executive Officer Jamie Sokalsky said yesterday in an interview at the Denver Gold Forum. The Toronto-based company is mulling the sale of other assets around the world and would consider a joint venture with U.S. competitor Newmont Mining Corp. in Nevada to reduce costs.

Sokalsky is leading efforts to improve Barrick’s performance and revive profitability following gold’s steepest quarterly slump in more than nine decades. Barrick will probably be targeting the sale of its smaller Plutonic and Kanowna operations in Australia, according to RBS Morgans Ltd.

“They are fringe assets for Barrick, and they are attractive to others,” said James Wilson, a Perth-based analyst at RBS Morgans. They may attract bids from companies including Evolution Mining Ltd. and Norton Gold Fields Ltd., he said.

Barrick rose 0.3 percent to C$19.20 at 9:46 a.m. in Toronto. The shares have declined 45 percent this year, more than the 21 percent drop in the price of gold. The company took $8.7 billion of writedowns in the second quarter, and cut its dividend to improve its liquidity.

‘No Secret’

South Africa’s Gold Fields Ltd. said last month it will pay $300 million for Barrick’s interests in the Granny Smith, Lawlers and Darlot gold mines in Western Australia. Barrick’s remaining Australian assets include the Cowal mine and a 50 percent stake in the Kalgoorlie Super Pit mine, which it’s unlikely to sell, Wilson said.

The company said in August it will either sell, close or reduce output at 12 of its 27 mines that are located across five continents.

“It’s no secret that some of the Australian assets fit the kind of description that I’ve talked about in terms of being non-core and assets that are higher-cost and I think don’t fit well long term with our portfolio,” Sokalsky said. “We are talking to some people about those assets, and then various assets around the world which I wouldn’t want to name.”

Newmont Talks

Barrick is getting unsolicited expressions of interest in some of its operations from private-equity firms and smaller mining companies, Sokalsky said. In regard to the possibility of a joint venture with Newmont in Nevada, both companies have had talks on the idea, which could be revived, he said.

“There are a number of different things we could do that maybe you would characterize somewhat as financial engineering,” Sokalsky said. “We’re getting approached by people on this too.”

Copper producer Sandfire Resources NL, which has its DeGrussa mine close to the Plutonic site, may see potential to add gold production to its portfolio by acquiring the mine, which is likely to sell for more than $50 million, according to RBS Morgans’ Wilson.

Evolution Chairman Jake Klein declined to comment on whether his company planned to bid for any of the Barrick assets, while Norton Gold Fields and Sandfire Resources didn’t immediately respond to phone calls requesting comment.

Corporate Governance

Canada’s biggest pension funds are asking Barrick to appoint new independent board members and have said the miner should consider replacing directors who have been there longer than 20 years and are close to Co-Chairman and founder Peter Munk, two investors briefed on the matter said last week. The company said Sept. 17 it will add new directors and strengthen its executive pay policies after investors criticized governance. Sokalsky said yesterday that the selection process continues.

“The board really wants to go through a thoughtful process to make sure that any type of transition is done in the best way possible,” he said. “They’ve had those discussions with shareholders and it is definitely a discussion that the board is taking very seriously.”

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