Barrick to Sell Half of Mine to Antofagasta for $1 Billion

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Barrick Gold Corp. agreed to sell a 50 percent interest in its Zaldivar copper mine in Chile to Antofagasta Plc for $1.01 billion as it moves to pay down its debt amid falling gold prices.

The transaction with the Santiago-based copper producer is expected to close late this year, Barrick said Thursday in a statement. Antofagasta will pay $980 million in cash upon closing and $25 million in additional cash payments over the next five years, Barrick said.

The transaction is the latest divestiture in 2015 for the Toronto-based company that has committed to reducing its debt by at least $3 billion this year. In May, Barrick announced the sale of a 50 percent stake in its Porgera mine in Papua New Guinea to China’s Zijin Mining Group Co. Ltd. for $298 million. That deal came a few days after Barrick sold its Australian Cowal mine to Evolution Mining Ltd. for $550 million.

“Including Zaldivar, we have now announced transactions valued at approximately $1.85 billion, or nearly two-thirds of our target, representing a substantial contribution to our debt reduction goal,” the company said.

Competitive Bidding

The process for the joint venture was competitive throughout with China Molybdenum Co. and BHP Billiton Ltd. among the bidders in the final round, people familiar with the matter said earlier this month.

Antofagasta’s strong all-cash offer and its presence and experience in the Chilean market gave it an edge in the bidding, a person familiar with the process said Thursday, asking not to be identified because the matter is private. There are also possible synergies with Antofagasta’s existing operations in the country that might be explored later with Barrick having several development-stage projects in the country, the person said.

The Zaldivar joint venture will have a joint board of directors with three nominees from each company, Barrick said in the statement. Antofagasta, controlled by Chile’s Luksic family, will operate the mine and will choose the first chairman until Jan. 1, 2017, after which the appointment right will rotate between the companies.

Zaldivar, in northern Chile, is expected to produce 230 million to 250 million pounds of copper at cash costs of $1.65 to $1.95 a pound, Barrick said in the statement. Proven and probable copper reserves from the mine as of December 2014 were 5.6 billion pounds.

The announcement was made after regular trading ended in New York, where Barrick rose 0.4 percent to $7.08 at 4:49 p.m. The shares declined 34 percent this year through Thursday’s close.

M. Klein and Co. and TD Securities acted as financial advisers to Barrick, and Davies Ward Phillips & Vineberg and Carey & Co. were legal counsel. Citigroup Inc. acted as financial adviser for Antofagasta, and Cassels Brock & Blackwell and Bofill Mir & Alvarez Jana acted as legal counsel.