Barrick to sell stake in Kalgoorlie mine

Barrick Gold (TSX: ABX; NYSE: GOLD) has agreed to sell its 50% interest in Kalgoorlie Consolidated Gold Mines (KCGM) in Western Australia to Saracen Mineral Holdings (ASX: SAR) for US$750 million in cash.

KCGM owns and operates the Kalgoorlie mine, also known as the Super Pit, about 550 km east of Perth.

Barrick holds a 50% interest in the joint-venture and Newmont Goldcorp (TSX: NGT; NYSE: NEM) owns the remaining 50%.

Barrick says the sale represents the first step of its plan to realize at least US$1.5 billion through the sale of non-core assets by the end of next year.

“The asset does not fit with our strategy of operating mines that we own,” Mark Bristow, Barrick’s president and CEO, says in a statement. “The sale allows us to further focus our portfolio on core operations.”

The transaction is expected to be completed before the end of the year.

Andrew Kaip, an analyst with BMO Capital Markets, describes the sale as a good price for an ageing mine.

“We like the sale price as we carried Barrick’s 50% interest in at $614 million,” he states in a research note. “As for the A$1.3 billion number floated 12 months ago, we never took it seriously.”

Kerry Smith of Haywood Securities notes that Barrick is delivering on its strategy to optimize its portfolio of assets and described Kalgoorlie as a higher cost asset.

“For the first 9 months of the year, KCGM has contributed to Barrick 179,000 oz. at a total cash cost of US$857 per oz. and all-in sustaining costs (AISCs) of US$1,186 per oz.,” he comments in a note to clients. “The operation has been negatively impacting Barrick’s consolidated cost numbers, as the mine still works to recover from the wall failure in May 2018.”

At press time, Barrick was trading at $22.29 per share with a 52-week range of $15.37 to $26.69.

BMO’s Kaip has an “outperform” rating on Barrick and a 12-month price target on the stock of $22.50 per share, and Haywood’s Smith has a “buy” rating and $28 per share price target.

The company has 1.8 billion common shares outstanding for a $39.6-billion market capitalization.


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