Barrick Gold Keeps Door Open to Selling Most Prized Assetsby
Selling stakes in Veladero and Pascua-Lama ‘could make sense’
Dushnisky reiterates will only sell Kalgoorlie for full value
Barrick Gold Corp. is keeping the door open to selling pieces of its most-prized assets, with South American partnerships among the more likely opportunities.
The company would consider forming partnerships with investors at its Veladero mine and its Pascua-Lama project, Kelvin Dushnisky said. But while “you never say never,” selling stakes in Barrick’s two key Nevada mines is unlikely.
“A core mine doesn’t stay a core mine forever,” he said Thursday in a phone interview. “But if you consider a Goldstrike or a Cortez, those are examples where these are engines of growth for company. They’ll be core mines for a very, very long period of time.”
Over the past three years, the world’s biggest gold producer has been divesting non-core assets to reduce debt. In an interview earlier this year, Executive Chairman John Thornton raised the possibility that sales could extend to some core assets. On Thursday, Dushnisky expanded on that view.
Barrick would consider selling assets it owns in the 140-kilometer (87-mile) stretch between Argentina and Chile that includes Veladero and the Pascua-Lama project, he said, but would only do so if there was a “strategic rationale.” Asked if this could include selling a stake in Veladero in exchange for help in developing Pascua-Lama, Dushnisky said such an arrangement “could make sense.” He declined to comment on whether potential buyers have approached the company about this.
Pascua-Lama, a $8.5 billion project high in the Andes, has been mostly shuttered since 2013 when a Chilean court accepted an injunction filed by indigenous groups over water-contamination concerns.
Toronto-based Barrick considers five mines as core assets: Cortez and Goldstrike, its 60 percent stake in Pueblo Viejo in the Dominican Republic, Lagunas Norte in Peru, and Veladero. The company has viewed its Turquoise Ridge mine in Nevada as an “emerging core” asset.
Barrick expanded through the commodities super cycle, purchasing Equinox Minerals Ltd. in 2011 and swelling its debt to a peak of $15.8 billion in 2013. Hit by a lengthy gold rout, it has been working ever since to cut costs and sell assets. Those include the sale of a 50 percent stake in the Porgera mine in Papua New Guinea and half its stake in the Zaldivar copper mine in Chile.
The company isn’t concerned that selling core mines, or stakes in those mines, would reduce production, Dushnisky said. “The notion of producing less gold isn’t something that would necessarily be troubling to us,” he said, noting that the company remains focused on improving margins. Thornton recently unveiled ambitious plans to use technology to increase efficiency across operations, starting with Cortez.
Proceeds from asset sales would be more likely used for debt repayment than to replenish production, Dushnisky said. Barrick’s debt stood at about $8.5 billion at the end of the third quarter, and should be down to $8 billion by year end, he said. Although the cost to buy back debt is rising, the company remains committed to cutting debt to $5 billion in the “near to medium term,” he said.
Barrick rose 1.8 percent to C$22.96 at 10:01 a.m. in Toronto. The shares have more than doubled this year.
On Wednesday, Barrick reported better-than-expected earnings as it produced more ounces at lower costs than analysts estimated at a time of recovering prices.
Third-quarter profit excluding one-time items rose to 24 cents a share, the company said in a statement. That compares with a 21-cent average estimate among analysts tracked by Bloomberg. Sales were also slightly ahead of projections.
In an interview in July, Dushnisky said the company will continue divesting non-core assets assuming it can get full value. These include its 50 percent stake in Zaldivar; its Zambian Lumwana copper mine; and its 64 percent interest in the publicly traded African operation, Acacia Mining Plc.
In July, Barrick announced a formal process was under way to sell its 50 percent stake in the Kalgoorlie Super Pit in Australia, which it co-owns with operator Newmont Mining Corp. The company has put no timeline on closing the Kalgoorlie deal, Dushnisky said.
“What we’re hopeful is to extract the best possible value,” he said Thursday of Kalgoorlie. “If we feel that at the end of the process we’re not where we think we should be, then we’re happy to continue to own the asset. We’re not going to lose that discipline.”