Heavyweights line up for shot at Barrick assets

Barrick Gold, the world’s largest gold producer by output, is expected to receive at least half a dozen final bids for its assets in NSW and Papua New Guinea later this week, underscoring the renewed momentum in mergers and acquisition activity in the sector.

The Credit Suisse-run auction has attracted a host of high-profile names, including the nation’s largest gold miner, Newcrest, as well as Oz Minerals, Evolution, Northern Star, Regis, South African producer Gold Fields and Chinese mining goliath Zijin.

Final bids are due by the end of the week and, according to sources, most suitors are likely to bid on just one of the assets. Barrick’s Cowal mine in NSW is by far the more attractive asset. A UBS note earlier this year assessed its value at $665 million while the stake in the Porgera mine could fetch between $100m and $200m.

The sales come at a volatile time for bullion prices, which have fluctuated heavily for most of the year in reaction to swings in the US dollar. Earlier this week gold hit a three-month high as the market bet against any early increases in interest rates from the Federal Reserve.

Despite the price volatility, conditions for domestic producers of the yellow metal have drastically improved. The decline of the Aussie against the greenback has rendered gold a more attractive commodity in Australia, and the advantageous currency fluctuations have coincided with a fall in production costs, triggered largely by the difficulties buffeting the iron ore sector.

The improved fortunes of the goldminers is expected to generate robust values for the Cowal and Porgera assets and has prompted speculation about whether the Toronto-based company will exit Australia altogether by offloading its 50 per cent share in Kalgoorlie-Boulder’s Super Pit in Western Australia,

It’s a torrid time for Barrick as if fights fires on multiple fronts. The company, which wants to eliminate at least $US3 billion ($3.76bn) of its $US13bn debt pile by the end of the year, has committed to job cuts and a string of asset sales. The miner is also under pressure from shareholders over its corporate governance performance and executive pay packages. One source argued it makes little sense for Barrick to cut its exposure to the region and still retain Super Pit, even though the company’s strategy is to maintain large-scale assets.

According to sources, Oz Minerals, Newcrest and Evolution remain among the frontrunners for Cowal. Northern Star’s determinations in doubt while Gold Fields is considered a logical candidate for Porgera.