Barrick Gold, the world’s leading gold producer, has formed a strategic partnership with major Chinese mining company Zijin Mining Group Co Ltd. As a first step, Zijin will acquire 50% of Barrick (Niugini) Limited (BNL), the company which owns 95% and manages the Porgera Joint Venture Gold Project.

In addition, Barrick and Zijin have signed a long-term strategic cooperation agreement which outlines the intent of both companies to collaborate on future projects and joint investments, leveraging the strengths of each company.

Zijin will pay $298 million in cash for the 50% interest in BNL. The transaction is expected to be completed in the third quarter of 2015 and is subject to customary closing conditions.

Under the new structure, Barrick and Zijin will jointly control BNL and BNL will have a joint Barrick-Zijin Board of Directors consisting of three Barrick nominees and three Zijin nominees. One party will nominate the executive managing director, taking primary responsibility for operations of the mine, and the other party will nominate the chairman of the Board of Directors and the deputy managing director.

Barrick says in order to ensure continuity of operations and demonstrate its ongoing commitment to its stakeholders in Papua New Guinea, the current BNL management team will remain in place, with incumbent executive general manager Greg Walker, nominated by Barrick as first executive managing director, while Zijin will nominate the first chairman and deputy MD. Zijin’s role in BNL’s management of the Porgera JV is expected to grow over time as the company gains experience operating in Papua New Guinea.

By partnering with Zijin, Barrick says it advances two fundamental objectives set out as part of its ‘back to the future’ strategy. The first is to strengthen the company’s balance sheet; the proceeds from the transaction will be used to pay down debt. The second is to form strategic partnerships that will create long-term value for all stakeholders.

As part of the agreement, Barrick and Zijin will explore long-term opportunities to collaborate on future projects. Barrick says substantial synergies and value may be realized by bringing the expertise and relationships that Zijin offers, including low-cost capital from Chinese institutions, leading Chinese engineering and construction skills, and Chinese machinery, equipment and other critical suppliers that meet world-class standards of quality at competitive costs.

It says BNL will continue to honour its contracts with local suppliers at the Porgera JV. As opportunities for major projects arise in the future, Barrick and Zijin may agree to develop the mine together if it is considered in the best interests of both companies.

“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. This is particularly true in our industry, where China has become both the largest producer and consumer of gold, and a major source of capital and expertise for the mines of the future,” says Barrick chairman John L Thornton.

“Our partnership with Zijin is the first step in a long-term strategic relationship with one of China’s leading mining companies - a multi-faceted partnership that will provide significant opportunities to work together on an ongoing basis as we continue to create value for our respective owners.”

“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. Our companies have complementary expertise and experience and share a common vision for creating long-term value for our owners,” says Zijin chairman Chen Jinghe. “Barrick has strong international operating presence and experience as well as many of the best assets in the gold industry, while we have unrivalled access to the Chinese market, including distinctive engineering and construction management capabilities and advanced technology. We are excited to leverage our competitive strengths together, to start with at Porgera, while exploring additional joint opportunities for the future.”

The news came barely a day after Barrick announced the sale of its Cowal Gold Project in western New South Wales, Australia, to Evolution Mining.

Also in late May Zijin and Ivanhoe Mines agreed to a strategic co-development of the Kamoa copper discovery in the Democratic Republic of Congo. Under terms of agreements signed in China, Zijin, through its subsidiary, Gold Mountains (HK) International Mining Co Ltd, will buy a 49.5% share interest in Kamoa Holding Ltd, an Ivanhoe subsidiary that presently owns 95% of the Kamoa project, for an aggregate consideration of US$412 million.

A Zijin senior executive told Reuters last week that now is a good time to buy overseas assets as the mining sector is weak. “In terms of acquisitions, now is the low level (of prices), good opportunity,” he said.

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