Miner Barrick to sell out of Russian gold venture

Mon Feb 13, 2012 8:38am EST
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By Megan Davies and Clara Ferreira-Marques

MOSCOW/LONDON (Reuters) - Canada's Barrick Gold (ABX.TO: Quote), the world's largest gold producer, plans to sell its 20 percent stake in Russia's Highland Gold (HGM.L: Quote), pulling out of one of the world's most promising - but also toughest - gold frontiers.

Barrick bought the stake in Highland, a venture backed by tycoon Roman Abramovich, almost a decade ago, with the aim of using it as a toehold to grow in Russia, home to the world's second-largest gold reserves after South Africa.

Instead, as Highland failed to significantly ramp up its production and with Russia still a tough environment for foreign miners, Barrick Gold has focused on its more lucrative U.S. and Latin American growth assets.

Highland, which missed its 2011 output target after hitting operational hitches, was Barrick's only major asset in Russia.

Highland's shares slid as much as 9.5 percent to their lowest since last June, as investors fretted over the loss of a major strategic partner. At current prices, the 20.4 percent stake is worth around 108 million pounds ($170 million).

One source close to the situation said Barrick chose to announce its plan to classify the holding as "non-core" -- despite not having a firm buyer -- after deciding not to appoint its allocated number of directors to the Highland board. No decision has been made on the timing or structure of a sale.

Highland is 40-percent owned by entities linked to Millhouse, Abramovich's investment vehicle, which said that a sale could be good for the stock as it could boost a freefloat currently around 30 percent.

"One positive effect of the divestiture would be that it would increase the liquidity of Highland's shares, which would make the stock more attractive," Millhouse spokesman John Mann said. "We view this as a positive development."   Continued...