Barrick Gold Corp. has reached an agreement to sell its aggregate 90% interest in the Massawa project in Senegal to Teranga Gold Corp. for total consideration of up to $430 million. Teranga’s flagship Sabodala gold mine in Senegal is located adjacent to the Massawa project, creating the opportunity for significant capital and operating synergies.
The agreement includes an up-front payment of $380 million, comprised of more than 20.7 million Teranga common shares with an aggregate value of approximately $80 million, and a cash payment of approximately $300 million, plus a contingent payment of up to $50 million, which is based on the average gold price for the three-year period immediately following closing.
The contingent payment is payable three years following closing.
Barrick will receive 92.5% of the total purchase price for its interest in the Massawa project, with the balance to be received by Barrick’s local Senegalese partner for its minority interest. On a pro forma basis, Barrick will hold 19,164,403 Teranga common shares, representing approximately 11.45% of Teranga’s issued and outstanding common shares on closing.
Barrick is providing $25 million of the $225 million syndicated debt financing secured by Teranga in connection with the transaction.
Barrick will have the right to nominate one Teranga director for as long as it retains at least a 10% equity interest in Teranga.
Barrick President and Chief Executive Mark Bristow said the group had been pursuing the best means of bringing Massawa — discovered by its legacy company Randgold Resources 10 years ago — to account for the full benefit of all stakeholders. The agreement with Teranga, which will realize the full value of this asset and create a substantial new West African gold mining company with significant African ownership, is the outcome of this process.
“It is gratifying to continue the value-creating consolidation of assets in the gold mining sector, which started a year ago with the merger between Barrick and Randgold, followed shortly thereafter by the merger of the Nevada assets of Barrick and Newmont Goldcorp,” he said. “In the case of Massawa, Teranga has the appropriate infrastructure and processing facilities approximately 25 kilometers away, and combining the orebodies and the geological prospectively will add further benefits. This is a good example of an instance where assets we own might be better suited in combination with others,” he said.
The transaction is expected to close in the first quarter of 2020 and is subject to receipt of the Massawa exploitation license and residual exploration license from the government of Senegal, certain other acknowledgments from the government of Senegal and other customary closing conditions.