CHINESE company Zijin Mining Group will acquire 50 per cent of Barrick (Nuigini) Limited as part of a strategic partnership announced by Barrick Gold in late May.
Zijin will acquire 50% of Barrick (Niugini) (BNL), which manages and owns 95% of the Porgera joint venture gold mine in Papua New Guinea.
Barrick and Zijin signed a long-term strategic cooperation agreement which outlines the intent of both companies to collaborate on future projects and joint investments, leveraging the strengths of each company.
By partnering with Zijin, Barrick advances two fundamental objectives set out as part of the company’s “back to the future” strategy – forming strategic partnerships that will create long-term value for stakeholders and strengthening the company’s balance sheet, with the proceeds from the transaction used to pay down debt, Barrick said.
Outlined in the Porgera transaction, Zijin will pay US$298 million in cash for a 50% interest in BNL, with the transaction expected to be completed in the third quarter of 2015, subject to customary closing conditions.
Under the new structure, Barrick and Zijin will jointly control BNL, with the company having a joint Barrick-Zijin board of directors consisting of three Barrick nominees and three Zijin nominees.
Barrick said one party will nominate the executive managing director, taking primary responsibility for operations of the mine, and the other party will nominate the chairman of the board of directors and the deputy managing director.
Ensuring continuity of operations the current BNL management team will remain in place, with incumbent executive general manager, Greg Walker, nominated by Barrick as the first executive managing director, while Zijin will nominate the first chairman of the board and deputy managing director.
Zijin’s role in BNL’s management of the Porgera joint venture is expected to grow over time as the company gains experience operating in PNG.
As part of the strategic cooperation agreement, Barrick and Zijin will explore long-term opportunities to collaborate on future projects.
Barrick said substantial synergies and value may be realised by bringing to Barrick the expertise and relationships that Zijin offers, including low-cost capital from Chinese institutions, leading Chinese engineering and construction skills, and Chinese machinery, equipment and other critical suppliers that meet world-class standards of quality at competitive costs.
BNL will continue to honour its contracts with local suppliers at the Porgera joint venture, the company said.
As opportunities for major projects arise in the future, Barrick and Zijin may agree to develop the mine together if it is considered in the best interests of both companies.
Barrick chairman John L. Thornton stressed the importance of having a distinctive relationship with China.
“Our partnership with Zijin is the first step in a long-term strategic relationship with one of China’s leading mining companies—a multi-faceted partnership that will provide significant opportunities to work together on an ongoing basis as we continue to create value for our respective owners,” Mr Thornton said.
Zijin chairmain Chen Jinghe said a strategic partnership with Barrick was an excellent fit.
“[It is] and a powerful combination as we look to expand our business globally outside of China.”
“Our companies have complementary expertise and experience and share a common vision for creating long-term value for our owners.”