Barrick in talks to sell African unit to Chinese buyer

Thu Aug 16, 2012 2:32pm EDT
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By Clara Ferreira-Marques and Euan Rocha

LONDON/TORONTO (Reuters) - Barrick Gold Corp (ABX.TO: Quote), the world's top gold miner, is in talks to sell all or a part of its stake in its African arm to a Chinese buyer, the first big move by new boss Jamie Sokalsky to clear out its more expensive assets and revive a flagging share price.

News of the talks with China National Gold Group, which bills itself as the country's largest gold miner, saw African Barrick Gold ABGL.L shares close up 8.0 percent at 425 pence, as investors bet the buyer would pay a premium to help satisfy China's insatiable appetite for the precious metal.

If it goes ahead, the sale would be one of China's largest mining deals in Africa and its most significant incursion into large-scale gold mining on the continent to date.

Toronto-based Barrick Gold is grappling with falling profit, rising costs and the fallout from what some investors see as mistakes, including the takeover of Africa-focused copper miner Equinox Minerals.

Barrick ousted its previous chief executive in June, saying it was frustrated the stock had languished while bullion prices were surging. Its shares, which have fallen roughly 30 percent in the last year, rose more than 3.7 percent on Thursday in Toronto and New York, on news that it may sell the African unit.

Sokalsky, who was chief financial officer until June, is under pressure to show he is investing Barrick's cash wisely.

He has been reviewing the group's operations, including the 74 percent stake in the African Barrick which has disappointed investors since it was listed separately in London in 2010.

Barrick Gold produced 7.7 million ounces of gold in 2011 at total cash costs of $460 an ounce. Output from African Barrick accounted for 509,000 of those ounces, but total cash costs for these ounces was $692 per ounce.   Continued...

Barrick Gold Corporation Chairman Peter Munk speaks during the annual general meeting of shareholders in Toronto May 2, 2012. REUTERS/ Mike Cassese