Barrick Mining Corp (TSE: ABX) (NYSE: B) (ETR: ABR0) has agreed to sell its only remaining operational Canadian gold mine in a deal valued at up to US$1.1 billion. The strategic move was announced on Wednesday.
Upon closing, an US$875-million-dollar cash infusion will strengthen the gold major’s balance sheet while it shifts its focus the Nevada Gold Mines joint venture, copper deposits and other global operations. The remainder of the sum will be paid in equity and potential future payments dependent on production and gold prices.
Barrick’s move raises questions about the opportunity cost of divesting an asset with significant untapped reserves when considering the high price of gold. Those in agreement with the decision argue that the Hemlo Mine’s high operating costs have justified the sale, but debate on the subject is ongoing among observers.
The buyer, Carcetti Capital Corp (CVE: CART.H), has gained a foothold in Canada’s gold sector with a resource that is far from depleted. It is small in comparison to major mines, but still holds about 250,000 ounces of proven and probable gold.
The mine has been operating continuously for three decades and has produced over 21 million gold ounces to date.
Carcetti’s purchase is being backed by mid-tier miners and investment firms like Wheaton Precious Metals Corp (TSE: WPM) (NYSE: WPM) (FRA: SII) and Orion Mine Finance.
Carcetti has arranged a US$400-million-dollar streaming agreement with Wheaton. After the deal closes, Carcetti will become known as Hemlo Mining Corp.
“Hemlo offers a unique opportunity to add immediate, accretive gold ounces from a politically stable jurisdiction, backed by a long history of production and a capable operating team,” said Wheaton chief executive Randy Smallwood.
Despite deciding to get rid of Hemlo before the end of its life and largely exit the Canadian sector, Barrick still retains exploratory assets within the country.
“Canada remains an important jurisdiction for Barrick, with a portfolio that includes a number of prospective early-stage projects and exploration targets,” the mining giant said in a news release.
The aim is to construct and develop new Canadian production sites instead of remaining focused on one with only so much life remaining. Barrick started looking for a buyer to take Hemlo over in April and has now succeeded.
“We will continue to pursue opportunities to find and operate world-class gold and copper mines in Canada,” Barrick added.
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