Message Lun 7 Juil 2014 11:16

Barrick’s Zambia mine in spotlight

Barrick’s Zambia mine in spotlight
Paul Garvey

SUITORS are circling Barrick Gold’s Lumwana copper mine in Zambia as expectations build that the becalmed gold giant could be open to a $1 billion-plus offer.

Several companies are said to be looking at Lumwana, which was picked up by Barrick through its $7.3bn top-of-the-cycle acquisition of Australia’s Equinox Resources in 2011.

Miners and investment bankers believe Barrick could be receptive to an offer as it looks to streamline its business and turn around four years of disappointing share price performance.

Barrick’s Jabal Sayid copper mine in Saudi Arabia, which was also acquired through the acquisition of Equinox, is another asset that could come up for sale but its appeal is likely to be limited to Middle Eastern groups.

Lumwana has struggled to meet expectations under Barrick’s ownership. The costly ­acquisition of Equinox was ­widely seen as the reason behind Barrick’s decision to oust Aaron Regent, the chief executive responsible for the deal, in 2012 and the company has since struggled to keep operating costs down.

The mine produced 260 million pounds of copper in 2013 but output was hampered over the course of 2014 after a partial ­collapse. In 2013, operating costs averaged just under $US3 per pound of copper. That compares with a current spot copper price of $US3.24 per pound, so the mine should only appeal to parties with a bullish view on long-term copper prices.

The $1 billion-plus price tag likely to be required to bring Barrick to the table would put Lumwana out of reach to Australia’s mid-tier miners. But at least one Chinese group is believed to be exploring the prospect of securing an Australian partner to oversee the operation of the mine.

Bankers suggested Lumwana would appeal to a number of international groups. London-listed, Chile-based copper heavyweight Antofagasta could be interested, while the X2 Resources private equity fund of former Xstrata chief Mick Davis is hunting for assets after raising $US3.75bn earlier this year. Lumwana could also catch the eye of Mr Davis’s former company, Glencore. Two of the most obvious suitors for the mine, China’s MMG and Canada’s First Quantum Minerals, may not be in a position to make offers after both recently announced significant acquisitions.

MMG launched a $C6.3bn bid for Equinox in 2011 before it was trumped by Barrick. But its recent deal to acquire the huge Las Bambas mine in Chile for $US5.8bn ($6.2bn) means it may not have the capacity to acquire Lumwana at a far lower price than it was previously willing to pay.

First Quantum, which owns the Kansanshi copper mine, also in Zambia, last month struck a $C470m ($471m) deal to acquire Lumina Copper and its Taca Taca project in Argentina. The development of Taca Taca is expected to cost more than $C3bn.

While the potential deal is on the radar of a number of companies and investment banks, it is understood Barrick has not started a formal sales process.

Barrick has sold more than $US1bn in assets over the past year as it sheds non-core investments to reduce debt and focus on its most profitable operations. The company earlier this year sold its Kanowna and Plutonic goldmines in Western Australia to Perth-based Northern Star in two transactions totalling $100m.

It has reportedly put its Golden Sunlight gold mine in Montana up for sale in recent weeks.

Jabal Sayid has been in limbo after Saudi authorities decided the mine did not meet safety and security standards just as it was entering commissioning. The regulatory problems experienced by Barrick mean the mine is unlikely to be of interest to potential buyers outside the region.

A spokesman for Barrick declined to comment.

Originally published as Barrick’s Zambia mine in spotlight
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