Barrick Sells Stake in Australian Super Pit Gold Mine to Saracen

Precious metals major Barrick Gold (TSX:ABX,NYSE:GOLD) will offload its 50 percent stake in the Kalgoorlie Consolidated Gold Mines (KCGM) joint venture (JV) to Australian gold miner Saracen Mineral Holdings (ASX:SAR,OTC Pink:SCEXF).

The KCGM JV, which was formed with Newmont Goldcorp (TSX:NGT,NYSE:NEM) in 2001, oversees several leases within the Kalgoorlie region known as the Golden Mile.

The sale will bring in US$750 million for Barrick, while allowing Saracen access to the continent’s largest gold mine — the Super Pit.

“The sale of our non-operating interest in KCGM represents the first step in our plan to realize in excess of US$1.5 billion from the disposal of non-core assets by the end of next year,” Mark Bristow, Barrick’s president and CEO, said in an announcement.

“While this iconic gold mine has been a valuable contributor to Barrick over the years, the asset does not fit with our strategy of operating mines that we own.”

The Super Pit mine entered production in 1989 and has produced 21 million ounces of gold over its three decades of operation.

Despite being a long-established asset, yearly production at Australia’s largest open-pit gold mine has been reduced due to a rock slide at the east wall of the site in July 2018. This was in addition to a collapse of the mine’s western wall in 2017, which restricted the areas that could be developed and mined.

The structural issues lowered the amount of monthly ore processed at the Super Pit from 1.2 million metric tons to 0.4 million metric tons following the collapses.

According to Saracen’s newly released project overview, KCGM is in the process of developing a remediation strategy for the mine to enable the mining of the Golden Pike North area and enhance access to a number of lay backs.

The remediation effort is estimated to take 3.5 years to complete, but will increase the amount of ore processed monthly at the project.

“This transaction will enhance our business across a variety of key financial and operational metrics and provide our shareholders with exposure to a third high quality Western Australian gold asset,” Saracen Managing Director Raleigh Finlayson said of the deal.

“The transaction establishes Saracen as a leading gold miner with anticipated production in excess of 600,000 ounces per annum exclusively from the Goldfields region of Western Australia for many years to come,” he continued.

In terms of management, Newmont Goldcorp will retain daily oversight of the Super Pit mine.

“We congratulate Saracen on its agreement to purchase Barrick’s stake in KCGM and we look forward to partnering with them to continue delivering value at this world-class asset, safely and efficiently,” said Tom Palmer, Newmont Goldcorp’s president and CEO.

The value of Barrick’s shares remained unchanged on Monday (November 18) at C$22.24. Shares of Saracen were up slightly at AU$3.39.

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