Barrick Gold, the world’s second largest gold producer, sold its 90 per cent stake in the Massawa project in Senegal to Teranga Gold for up to $430m, as it makes further headway on plans to sell over $1.5bn of assets.
The west African gold producer said it will pay $380m upfront in cash and the rest in shares to Barrick and its Senegalese joint venture partner, while $50m will be paid out based on the average gold price in the three years following the deal.
“The Massawa acquisition is transformational for Teranga and . . . an important milestone for the gold mining industry in Senegal,” said Richard Young, Teranga’s president and chief executive.
The sale of Massawa was widely anticipated and Teranga had been touted as a potential buyer of the mine in Senegal by Barrick’s chief executive Mark Bristow.
Barrick is targeting $1.5bn or more in sales of non-core assets by the end of 2020 following the company’s $6bn takeover of Randgold in January, as well as further deals with Newmont Gold and Acacia later in the year.
It sold a 50 per cent stake in one of Australia’s biggest gold mines to Saracen Mineral for $750m last month, meaning it is now over three-quarters of the way towards achieving its target.
Teranga said that it will combine operations at Massawa with those at its adjacent flagship Sabodala mine to create a low-cost, mid-tier operator with higher output volume and lower costs.
“This is a good example of an instance where assets we own might be better suited in combination with others,” said Mr Bristow.
Barrick will hold approximately 11.45 per cent of Teranga’s shares and it may nominate a board director as long as it retains over 10 per cent of equity.
If the gold price averages above $1,450 per troy ounce over the next three years, Barrick is set to receive an extra $25m, rising to as much as $50m if gold prices exceed $1,600 per troy ounce.
After five years of trading below $1,400 per troy ounce, gold prices rose above $1,500 earlier this year but they have since fallen below $1,470 a troy ounce.
Teranga also has gold mining activities at two sites in Burkina Faso, where security concerns are high for mining companies after a deadly ambush last month on a convoy of workers and contractors from a gold mine.
The gold industry is undergoing a wave of deals to consolidate a highly fragmented industry and the biggest producers have been selling off smaller, unwanted assets as they scale-up through acquisitions.
In the last month, Endeavour Mining made a £1.5bn bid for Centamin, which was rejected, while China’s state-backed Zijin Mining agreed a $1bn offer for Canada’s Continental Gold.