Barrick Gold (TSX: ABX; NYSE:ABX) is peeling back its presence in Australia, as it prepares to take another hit on its balance sheet due to Pascua-Lama.
Having already sold two gold assets Down Under, the company has now sold a third: its Kanowna property, 570 km east of Perth.
Kanowna is being sold to Australian-based Northern Star Resources (ASX: NST) for $73 million in cash, and it marks the second transaction with Northern Star in the last few months. Barrick recently sold its Plutonic mine to the company for $25 million.
The deals with Northern Star come on the heels of selling a group of three mines in Western Australia’s Yilgarn region to Gold Fields (NYSE: GFI) last October for US$270 million.
Barrick describes the moves as part of a “portfolio optimization program” that has it looking to shed non-core assets with shorter mine lives and higher operating costs.
The Kanowna property — which hosts the Kanowna Belle and Kundana mines — produced 225,000 oz. gold last year, and has proven and probable reserves of 600,000 oz. gold, measured and indicated resources of 600,000 oz. and inferred resources of 400,000 oz.
The recent selling hasn’t found favour with everyone, however, as HSBC recently downgraded Barrick, citing dwindling reserves and mine life.
The sale price for the Kanowna asset also came in below BMO Research’s US$277-million net present value estimate. That estimate was generated using a 10% discount rate and the spot price for gold.
BMO called the sale slightly dilutive, but saw some upside to the transaction.
“While the agreed consideration for the Kanowna assets is below the BMO Research valuation for the mine, continued portfolio optimization may ultimately allow the company to focus on more attractive opportunities and enable modest corporate-cost reductions,” BMO analyst David Haughton said in a research note.
And while Barrick has cut its Australian portfolio, it has more to sell in the country if it chooses, as it holds the Porgera, Cowal and Super Pit assets.
BMO estimates the remaining assets’ combined value at US$800 million.
If fair value is received, the capital inflow would be most welcome, especially in light of another expected impairment charge at Pascua-Lama.
Pascua-Lama is a large-scale gold–copper mine construction project at the Chile–Argentina border. Barrick says the upcoming impairment would stem from suspended development at the site.
Barrick offered no guidance on how much the impairment charge could be. Fourth-quarter and full-year results are due on Feb. 13.
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