Barrick Gold begins sale of non-core assets

Barrick Gold Corp. [ABX-TSX; GOLD-NYSE] has struck a deal to sell its 50% stake in Kalgoorlie Consolidated Gold Mines (KCGM) in Western Australia to Saracen Mineral Holdings Ltd. [SAR-ASX] for US$750 million in cash.

KCGM is a joint venture which owns and operates the Super Pit gold mine. It ranks as one of Australia’s largest gold mines, with average annual production of 660,000 ounces. Newmont Goldcorp Corp., [NGT-TSX; NEM-NYSE] holds the other 50% stake in the joint venture. Operations began at KCGM in 1989 and the mine has produced 21 million ounces of gold over the last three decades.

“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,” said Barrick President and CEO Mark Bristow. “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,” he said. “The sale allows us to further focus our portfolio on core operations,” he said.

Barrick shares advanced on the news, rising 1.78% or 39 cents to $22.30. The shares are currently trading in a 52-week range of $15.37 and $26.69.

Bristow said Barrick was pleased to have achieved a successful outcome following a competitive sale process and was confident that Saracen would be an excellent partner at KCGM going forward. “Proceeds from the sale will be used to further strengthen the balance, invest in our future and support our commitment to deliver returns to shareholders,” he said.

News of the sale comes after Barrick released its third quarter financial results. It has predicted that its annual gold production will remain flat at between 5.15 to 5.6 million ounces over the next five years.

The world’s second largest gold miner beat street estimates by reporting an adjusted third quarter profit of US$264 million or US $0.15 a share. That was ahead of the consensus forecast of US $0.12 a share, and compares to a year ago profit of US$89 million or US$0.08 per share.

Meanwhile, Barrick said it remains on track to achieve the upper end of its production forecast in 2019 (5.15 to 5.6 million ounces), while costs are expected to be at the lower end of the forecasted US$870 to US$920/oz.

The company said its guidance for copper production this year remains unchanged at 375-430 million pounds at an all-in-sustaining-cost range of US$2.40 to US$2.90/lb.

Barrick has mining operations and projects in 15 countries, including Canada, Argentina, Chile, the Democratic Republic of Congo Senegal and the United States. The company recently moved to consolidate its position as one of the world’s leading gold producers by agreeing to merge with Randgold Resources Ltd.