Barrick Gold entered a strategic cooperation agreement with Shandong Gold Group Co., Ltd., a leading underground mining company in China, based in Jinan, Shandong province. Shandong will acquire 50% of Barrick’s Veladero mine in San Juan province, Argentina, for $960 million. As a second step, Barrick and Shandong will form a working group to explore the joint development of the Pascua-Lama deposit. As a third step, both companies will evaluate additional investment opportunities on the highly prospective El Indio Gold Belt on the border of Argentina and Chile, which hosts a cluster of world-class gold mines and projects including Veladero, Pascua-Lama, and Alturas.

“Our ambition is to make Barrick a leading 21st century company in any industry in any jurisdiction, and by definition, that means creating a distinctive, enduring, and trust-based relationship with China and China’s best companies. This agreement moves us down that path. Shandong is an ideal partner to help us unlock the untapped mineral wealth of the El Indio Belt over the long-term, while working with us to generate more value from the Veladero mine today,” said Barrick’s Executive Chairman John L. Thornton. “We look forward to working in partnership with Shandong, sharing mining and development expertise, talent, and capital in ways that will create added value for our respective owners, and our government and community partners in San Juan province.”

Sitting at elevations of between 4,000-4,850 meters above sea level, the Veladero mine is located on the El Indio Belt, approximately 10 kilometers away from Barrick’s Pascua-Lama project. The mine is expected to produce 770,000-830,000 oz of gold in 2017, at a cost of sales of $750-$800 per oz, and all-in sustaining costs of $840/oz-$940/oz. It has proven and probable gold reserves of 6.7 million oz, and measured and indicated gold resources of 3.3 million oz.

Shandong was optimistic about the agreement. “Our goal is to build a long-term relationship with Barrick,” said Shandong Chairman Chen Yumin. “In this global economy, it is more important than ever to find international partners with a common vision for developing mines and generating prosperity in an environmentally and socially responsible manner. We are excited to enter Argentina’s dynamic mining industry in partnership with Barrick at Veladero, while exploring other opportunities in one of the most prospective mineral districts in the world.”

Upon completion of the transaction, the Veladero mine will be overseen by a Joint Venture Board consisting of three nominees appointed by each company. In order to ensure continuity of operations, both companies intend to maintain the mine’s current management team.

The transaction is expected to close at the end of the second quarter of 2017 and is subject to customary approvals. Shandong Gold Group was founded in 1996, has 23,000 employees and produced approximately 1.2 million oz of gold in 2016. Barrick reported Shandong has the financing commitments for the full value of the transaction.