Barrick Forms Strategic Alliance with Reunion Gold

Barrick Gold (TSX:ABX,NYSE:GOLD) has entered into a strategic agreement with Reunion Gold (TSXV:RGD), in order to form a 50-50 alliance to collaboratively explore for, develop and mine mineral projects in the Guiana Shield.

The miners announced the move on Monday (February 4), noting that Reunion will initially make its contribution to the the Waiamu, Aremu, Arawini and Oko projects. Meanwhile, Barrick will fund approximately US$4.2 million on these projects, as credit for previous exploration completed by Reunion. Subsequent funding will be on a 50-50 basis between the two companies.

“The [agreement] expands Barrick’s exploration footprint in the Guiana Shield, a significantly underexplored region and one of the most prospective in the world for large scale gold discoveries,” said Mark Bristow, president and CEO of Barrick.

“The alliance will seek to identify and acquire properties that have the potential to yield discoveries consistent with Barrick’s definition of tier one mines,” he added. For Barrick, a tier one mine is a low-cost operation that produces at least 500,000 ounces of gold per year. 

Throughout the duration of the deal, if Reunion acquires an interest or has the option to acquire an interest in any mineral property in the Guiana Shield, Barrick will have 90 days to elect to include the new project in the alliance.

Under the agreement, Barrick will have the ability to nominate an alliance project as a designated project. It also holds the right to earn a 70-percent interest by sole funding and completing a feasibility study for said asset.

Additionally, Barrick will buy more shares of Reunion, increasing its interest in the company from 15 percent to 19.9 percent of outstanding shares. Barrick has also agreed to acquire up to 35.7 million shares of Reunion for C$0.15 each for a total purchase of just under C$5.4 million.

Barrick will also have the ability to nominate one director to Reunion’s board of directors.

Commenting on the agreement, Réjean Gourde, president and CEO of Reunion, stated, “[t]he alliance combines long-term local knowledge and record of success of the Reunion team together with the industry-leading skills and knowledge of Barrick. This combination focused on the Guiana Shield creates a greatly enhanced opportunity of success.”

“In summary, you have one of the best geological environment in the world with political and social support and local acceptance for exploration and development which is being conducted by responsible companies in a professional manner,” he added.

Towards the end of January, Barrick announced that it had produced 1.26 million ounces of gold during Q4 2018 and 4.53 million ounces of gold for the entirety of last year.

For its part, Reunion is in the process of raising C$15-million for various projects and recently revised the issue price from C$0.18 per common share of the company to C$0.15. The miner repriced the deal due to current market conditions. The company anticipates that the deal will close on Tuesday (February 5).

As of 12:11 p.m. EST on Monday, Barrick was up 0.40 percent, trading at C$17.40; meanwhile Reunion was up 8.82 percent, trading at C$0.19.

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Securities Disclosure: I, Nicole Rashotte, hold no direct investment interest in any company mentioned in this article.