Precious Metals

Sources familiar with the matter say that the Marigold mine, jointly-owned by the two biggest gold miners, could be sold for at least $200 million.

Barrick (NYSE:ABX, TSX:ABX) and Goldcorp (NYSE:GG, TSX:G), the two largest gold miners by market value, are reportedly in talks to sell the Marigold gold mine in Nevada.

The mine is owned jointly by the companies — Goldcorp has a two-thirds stake and the other third is owned by Barrick.

According to press reports last week, sources familiar with the situation say that Goldcorp has retained BMO Capital Markets, and Barrick has engaged RBC Capital Markets, to negotiate a possible sale of the high-cost operation.

Reporters at Bloomberg who spoke to ”two people with knowledge of the sale process” wrote last Friday that the mine could fetch at least $200 million. Spokespeople for the companies, however, declined comment.

What appears obvious is that the open-pit mine, which has been producing for over two decades, is on the chopping block due to its high cost of production.

The Globe and Mail reported that Marigold is one of 10 mines that Barrick has identified as unprofitable at current gold prices, noting that the company has said it will “divest or revamp” mines that cost over $1,100 to produce an ounce of gold. The Globe quoted Barrick’s last quarterly report as saying that Marigold’s cost of production so far this year averaged $1,609 per ounce.

According to Goldcorp, the mine produced about 81,000 ounces during the first half of 2013 and the operation is expected to mine between 95,000 and 100,000 ounces this year. The mine is one of the largest in the United States, with proven and probable gold reserves of 3.28 million ounces as of the end of 2012.

Barrick in particular has made moves to sell underperforming assets, as the Toronto-based gold miner seeks to reduce operating costs amid a falling gold price, while focusing on more efficient mines. Two weeks ago Barrick said it was shelving its troubled Pascua Lama project indefinitely, and in September Barrick said it was selling three mines in Australia — collectively known as its Yilgarn South assets — to South Africa’s Gold Fields (NYSE:GFI) for about $300 million.

For its part, Goldcorp said it would be delaying production at its Cerro Negro project in Argentina, amid rising costs, as well as stopping all exploration activity. Reuters reported on Oct. 24 that Goldcorp has upped its cost estimate for Cerro Negro by a third, to between $1.6 and $1.8 billion from the previous $1.35 billion. However, Goldcorp still expects first production by mid-2014.

Gold Investing News reported last month that Barrick’s cost-cutting strategy appears to be working, with costs falling 10 percent this year through June, according to a recent Citigroup report. Goldcorp hasn’t fared so well, with costs ballooning some 80 percent, according to Citigroup.


Securities Disclosure: I, Andrew Topf, own stock in Goldcorp. 

Related reading:

Are Cash Costs for Gold Producers Rising or Falling?


S&P 5004280.15+72.88


Heating Oil3.49-0.02
Natural Gas8.63-0.14