BARRICK Mining has cleared a significant hurdle ahead of its proposed North American IPO after reaching an agreement today with rival Newmont to expand their Nevada Gold Mines (NGM) joint venture and resolve all outstanding disputes between them.
Under the agreement, Barrick will contribute its Fourmile project to NGM earlier than planned, while Newmont will contribute its Fiberline and Mike developments. Newmont will pay Barrick a top-up of $1.95bn in cash in 30 days to reflect the contribution of the excluded properties, Barrick said.
Mark Hill, Barrick president and CEO, said during a webcast following the announcement that Barrick expected to return the majority of the $1.95bn cash payment to shareholders.
The enlarged Nevada complex will contain nearly 100 million ounces of gold.
Barrick would also consider increasing production capacity at NGM where Hill said there had been no increase in capacity for years and infrastructure was ageing.
Newmont has also agreed to Barrick’s proposed IPO of its North American gold assets.
In a statement earlier, Hill said that Barrick has “substantially extended the asset base and provided greater flexibility and value” through the agreement with Newmont.
The IPO has faced opposition from some major Barrick shareholders, who argue that selling a minority interest would dilute their exposure to the group’s highest-quality assets, Bloomberg reports.
Hill said Barrick still planned to sell 10% of the North American business and had no plans at this stage to increase the size of the offering.
The listing remains on track for completion by year-end, subject to market conditions and approvals.
It is expected to include Barrick’s interests and operatorship of NGM, and Pueblo Viejo, Fourmile, all other North American exploration properties, and the assets contributed by Newmont. Hill will lead the new company.
The revised NGM agreement will also give Newmont a bigger say in the joint venture. Newmont’s approval would be required for the appointment of NGM’s general manager, while a Newmont employee was likely to join NGM’s executive team.
Hill also said Barrick planned to grow its assets outside of North America. “The rest of the world portfolio is actually one of our biggest growth things,” he said.
Barrick’s board recently discussed growth opportunities in the rest of the world, including at its Zambian copper mine Lumwana and Kibali, its gold mine in the DRC.
Earnings, costs up
The announcement of the deal between Barrick and Newmont came with a strong set of second-quarter and interim operating and financial results by Barrick.
Net earnings rose 50% year-on-year to $1.22bn, while adjusted net earnings rose to $1.36bn from $800m.
Revenue increased 44% to $5.29bn, supported by higher realised gold and copper prices. Operating cash flow rose 28% to $1.70bn, although attributable free cash flow fell to $141m from $212m.
Gold production reached 796,000 ounces, up 11% from the first quarter and above guidance of 730,000 to 770,000 oz.
The improvement reflected the early restart of Loulo-Gounkoto, a faster recovery at Pueblo Viejo following maintenance, and record underground tons at Cortez as Goldrush ramped up.
But costs also increased, rising to $1,993/oz for cost of sales, from $1,654 a year earlier. All-in sustaining costs (AISC), which take account of capital growth, also increased 11% to $1,866/oz.
Barrick cited lower grades at Carlin, Cortez and North Mara, higher fuel costs and increased royalties on the back of a stronger gold price.
For this year, Barrick stuck to its full-year gold production forecast of 2.9 million to 3.25 million oz and AISC guidance of between $1,760 and $1,950/oz. But it cut its expectations for capex this year by $400m to $3.8bn.
