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Barrick ends talks to sell African unit

$3 billion deal with China National Gold is off the table

Gulf News

London: Barrick Gold Corp has ended talks to sell a stake in majority-owned African Barrick Gold to a Chinese buyer, dashing hopes of a potential $3 billion (Dh11 billion) deal for the underperforming unit.

Canadian mining major Barrick Gold, which owns 74 per cent of London-listed African Barrick, had said in August it was in early-stage talks with state-owned China National Gold about the possible sale of all or part of its stake.

Shares in African Barrick slumped 21 per cent to 353 pence in early trading to hit their lowest level for five months, on disappointment that the Chinese would no longer be offering an exit from a stock which has frequently traded well below its 575 pence listing price set in March 2010.

The termination of talks over what could have been one of China’s largest mining deals in Africa — if China National Gold had opted to buy the whole of African Barrick the deal would have been worth around $3 billion — could suggest China is becoming an increasingly tough negotiating partner.

Chinese companies made a string of deals in gold miners in 2012 as the country’s demand soared for bullion, sought for jewellery and as an inflation hedge, and it had been increasingly seen as a deep-pocketed investor.

“We are approaching this in a prudent and disciplined manner and will only proceed with opportunities that generate acceptable value for Barrick,” Barrick Gold Chief Executive Jamie Sokalsky said in a statement on Tuesday.

China National Gold declined to comment on the ending of discussions.

Barrick, the world’s largest gold producer, reiterated it was evaluating all of its portfolio as it grapples with falling profits and soaring costs, suggesting the sale of its African Barrick stake could still occur.

African Barrick said in a separate statement that its management would carry out a review with the aim of improving returns from its projects, primarily based in Tanzania.

Analysts said African Barrick’s downgrading of its 2012 production forecast in October, during China Gold’s due diligence process, would likely have hindered discussions on price between the company’s parent and suitor.

“The likelihood of a China National Gold bid was the key driver of our ‘buy’ case. Now that this appears to have subsided, focus will turn back to the operational performance of the business,” said Nomura analysts.

Since being listed, African Barrick has lagged expectations, suffering setbacks ranging from villagers armed with machetes invading a mine to power woes and fuel thefts.