Barrick Gold has entered into an agreement that will give its famous Cowal Mine a new owner. Barrick is the top producer of gold in the world and the $550 million deal will turn Evolution into the second largest producer of gold in Australia.
Canada’s Barrick Gold announced the sale along with other assets such as the Porgera mine in Papua New Guinea. In addition, the miner has for a while been seeking buyers for stakes in Zaldivar copper mine located in Chile. The deal equips Evolution with the potential of producing up to 800,000 ounces of gold each year. The amount is, however, a third of Australia top producer, Newcrest Mining.
According to a statement released by Barrick’s Co-President, Kelvin Dushnisky, the sale of the mine is in accordance with the company’s strategy of creating long-term value for their owners. The sale will make a significant contribution in reducing debts while still focusing on the geographic footprint as outlined in their portfolio. The deal will offset debts amounting to at least $3 billion before the year ends.
Analysts have applauded Evolution for fetching Cowal at reasonable price below the initial tag of $650. Jake Klein, Evolution’s Executive Chairman told analysts that they put a price that they thought was fair and were happy for acquiring it. “The price reflects the subdued asset values that are currently in the market,” said Klein.
Evolution managed to place the bid with the support of La Mancha, a Luxembourg-based private company. It plans to pay for the new mine by raising in excess of $248 million through sales of new shares and with bank loans. This does not take into account equipment, such as mining weigh scales and payload management assets.
Analysts project that Evolution’s production will surpass that of Northern Star Resource, a fellow Australian gold miner. Northern Star Resource expanded rapidly in 2014 after purchasing for gold mines from Newmont Mining Corp and Barrick for less than $200 million.
With the successful sale of Cowal, Barrick will have one asset left in Australia, the 50 percent stake in the Kalgoorlie Super Pit. It is expected that the Cowal gold mine will be at the hands of Evolution by the end of October.