Barrick Mulls Selling Gold Mines in Australia, Papua New Guinea

By @ibtimesau on
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An overall view of the Barrick Gold annual general meeting for shareholders is seen as the CEO Jamie Sokalsky speaks in Toronto, April 30, 2014. Barrick Gold Corp reported a steep drop in first-quarter earnings Wednesday, and cut its forecast for 2014 copper production REUTERS/Justin Chin REUTERS/Justin Chin

Barrick Gold Corp will be selling off two of its mines in Australia and Papua New Guinea to aid plans of generating cash that will help trim down some of its debt by $3 billion. This, as shares of the company shed off 2.2 percent on Monday in reaction to an analyst’s negative comments on the firm’s gold production level path.

A report by Bloomberg said Barrick has started coordinating with Credit Suisse Group AG to divest its control on the Cowal and Porgera mines in Australia and Papua New Guinea, respectively. In a meeting with analysts on Feb 19, Kelvin Dushnisky, co-president of the Toronto-based company, said “a number” of unsolicited approaches on the two mines have actually been submitted before the company.

Located in Australia’s New South Wales state, the Cowal mine churned out 269,000 ounces of gold for Barrick in 2014, at an average cost of $787 an ounce. Porgera in Papua New Guinea, in the same period, produced 493,000 ounces.

TD Securities said the gold producer could raise as much as $1.1 billion from selling the assets. It likewise divulged Acacia Mining, formerly known as African Barrick Gold, could also be considered on the sale table. Barrick has a 64 percent hold in Acacia Mining.

Apart from the assets write-off, Barrick said it will also lay off staff members at its head office in Canada. The gold producer operates across five continents.

Long regarded as the world's top producer of the safe haven yellow metal gold, JP Morgan analyst John Bridges said Barrick’s output will drop to 4.5 million ounces by 2020 and then even lower in the following years. "It's become apparent recently that the upper limit of sustainable gold production is around the [3m – 4m ounces] level assuming [Barrick] is skilled at acquiring new projects in a way that makes them accretive,” Bridges said in a new research note quoted by Financial Post.

When this happens, Barrick would be listed as only the fourth global gold producer according to annual output, next to Newmont Mining, Anglogold Ashanti and Goldcorp. “As gold sales decline, the margins on each ounce have to increase to carry the financing costs,” Bridges said.

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