Canadian gold miner Barrick Gold Corp moved closer to its asset sales target on Tuesday by agreeing to sell its entire 90% stake in its Massawa project in Senegal to Teranga Gold Corporation for up to $430 million.
The sale is the latest by Barrick Chief Executive Officer Mark Bristow as he seeks to shed at least $1.5 billion of unprofitable mines by the end of 2020, following its acquisition of Rangold Resources a year ago.
The Canadian miner last month sold its half of the Kalgoorlie super pit gold mine to Australia’s Saracen Mineral Holdings Ltd for $750 million.
Barrick could also look to sell its Tongon mine in Ivory Coast and its Lumwana copper project in Zambia, analysts have said.
Gold miners have notched transactions worth more than $30 billion this year as they seek to replace dwindling reserves and win back investors.
Under the terms of Tuesday’s deal, Barrick will have the right to nominate one Teranga director for as long as it retains at least a 10% equity interest in Teranga.
Teranga said it plans to combine the Massawa project with its flagship Sabodlala gold project, creating a low-cost mid-tier producer with higher production and lower costs.
Barrick Gold Corporation (NYSE:GOLD)(TSX:ABX) today announced that it and its Senegalese joint venture partner have reached agreement to sell their aggregate 90% interest in the Massawa project in Senegal to Teranga Gold Corporation (“Teranga”) for total consideration of up to $430 million.
The consideration consists of an up-front payment of $380 million, comprised of 20,718,273 Teranga common shares with a value of $3.85 per share and an aggregate value of approximately $80 million (based on the same price per Teranga subscription receipt under the concurrent equity offering announced by Teranga), and a cash payment of approximately $300 million, plus a contingent payment of up to $50 million which is based upon the average gold price for the three year period immediately following closing (“three year average gold price”). The contingent payment, which is payable three years following closing, is $25 million if the three year average gold price is greater than $1,450 and less than $1,500 per ounce; $35 million if the three year average gold price is greater than $1,500 and less than $1,600 per ounce; and $50 million if the three year average gold price exceeds $1,600 per ounce.
Barrick will receive 92.5% of the total purchase price for its interest in the Massawa project, with the balance to be received by Barrick’s local Senegalese partner for its minority interest. On a pro forma basis, Barrick will hold 19,164,403 Teranga common shares, representing approximately 11.45% of Teranga’s issued and outstanding common shares on closing (calculated on a non-diluted basis).
Barrick is providing $25 million of the $225 million syndicated debt financing secured by Teranga in connection with the transaction.
Under the terms of an investor agreement to be entered into on closing of the transaction, Barrick will have the right to nominate one Teranga director for as long as it retains at least a 10% equity interest in Teranga, and will also be entitled to customary anti-dilution and piggyback registration rights. Barrick has also agreed to a 24-month standstill pursuant to which Barrick will not increase its share position in Teranga for 18 months, and thereafter may increase its position by an additional 5% over the ensuing six-month period. The standstill expires after 24 months.
Barrick president and chief executive Mark Bristow said the group had been pursuing the best means of bringing Massawa – discovered by its legacy company Randgold Resources 10 years ago – to account for the full benefit of all stakeholders. The agreement with Teranga, which will realise the full value of this asset and create a substantial new West African gold mining company with significant African ownership, is the outcome of this process.
“It is gratifying to continue the value-creating consolidation of assets in the gold mining sector which started a year ago with the merger between Barrick and Randgold, followed shortly thereafter by the merger of the Nevada assets of Barrick and Newmont Goldcorp. In the case of Massawa, Teranga has the appropriate infrastructure and processing facilities approximately 25 kilometres away, and combining the orebodies and the geological prospectivity will add further benefits. This is a good example of an instance where assets we own might be better suited in combination with others,” he said.
The transaction is expected to close in the first quarter of 2020 and is subject to receipt of the Massawa exploitation license and residual exploration license from the Government of Senegal, certain other BARRICK GOLD CORPORATION PRESS RELEASE acknowledgments from the Government of Senegal and other customary closing conditions. Teranga is a TSX-listed gold company whose flagship Sabodala gold mine in Senegal is located adjacent to the Massawa project, creating the opportunity for significant capital and operating synergies.
Barrick is acquiring Teranga common shares for investment purposes. Depending on market conditions and other factors, including Teranga’s business and financial condition, Barrick may, subject to the terms of the investor agreement to be entered into in connection with the transaction, acquire additional common shares or other securities of Teranga or dispose of some or all of the common shares or other securities of Teranga that it owns at such time.
An early warning report will be filed by Barrick in accordance with applicable securities laws. To obtain a copy of the early warning report, please contact Kathy du Plessis, whose contact details are included below.
Barrick is a senior gold mining company organized under the laws of the Province of British Columbia. Barrick’s corporate office is located at Brookfield Place, TD Canada Trust Tower, Suite 3700, 161 Bay Street, P.O. Box 212, Toronto, Ontario M5J 2S1. Teranga’s head office is located at 77 King Street West, Suite 2110, Toronto, Ontario M5K 2A1.
Scotia Capital Inc. is acting as financial adviser to Barrick. Davies Ward Phillips & Vineberg LLP and Norton Rose Fulbright LLP are acting as legal counsel to Barrick.
