Barrick Gold reached an agreement to sell a number of “noncore assets” in Nevada for $720 million in cash, including the Bald Mountain mine, the Ruby Hill mine, its 50% interest in the Round Mountain mine and the company’s 70% interest in the Spring Valley project. Including these transactions, Barrick has announced asset sales, joint ventures and partnerships worth $3.2 billion since the start of 2015. The company said it remains on track to meet its debt reduction target of $3 billion for 2015, which would represent a 23% reduction in total debt.
“The sale of these assets is consistent with our strategy to create long-term value for our shareholders by strengthening the balance sheet and further focusing our portfolio on core mines that will drive free cash flow growth,” said Barrick President Kelvin Dushnisky. “As we move into 2016 and beyond, we will continue to take steps to strengthen our balance sheet, but we will balance debt repayments with investments to drive future growth in free cash flow and earnings.”
Kinross Gold will acquire Barrick’s interest in Round Mountain and the Bald Mountain mine. The two companies have also agreed to form an exploration joint venture that will own a large land package on the Bald Mountain property. Both will fund exploration activities and advance new mine development opportunities on a 50:50 basis, with Kinross acting as the operator. The consideration for these assets is $610 million in cash.
Waterton Precious Metals Fund II Cayman LP will buy Barrick’s interest in the Spring Valley project and the Ruby Hill mine for $110 million in cash. The transaction with Waterton is expected to be completed by the end of 2015. The transaction with Kinross is expected to be completed by mid-January.
Kinross’ President and CEO Paul Rollinson said this is a strategic transaction that represents a rare opportunity to add quality, free cash flowing assets that build on the Kinross platform in Nevada. “These assets will increase our production, and are expected to lower costs and add significant and well-defined mineral resource potential,” Rollinson said. “We see a clear path to upside at both assets, with known mineralization extensions throughout the Bald Mountain land package and ongoing operational and continuous improvement initiatives at Bald Mountain, an open-pit, run-of-mine, heap-leach gold mine, is a low-cost producer with a large estimated mineral resource base. The operation is expected to benefit from significant capital investments in equipment, infrastructure, stripping and drilling over the past five years, positioning Bald Mountain to be a low-cost producer going forward. The mine is expected to have a production range of 175,000-300,000 oz/y of gold (equivalent) with an all-in sustaining cost (AISC) range of $700-$1,130/oz Au eq. over the three-year period from 2016 through 2018. Bald Mountain had proven and probable gold reserves of 1.36 million oz based on 60 million metric tons (mt) at 0.70 g/mt and additional measured and indicated gold resources of 4.16 million oz based on 207 million mt at 0.63 g/mt.
Located along the southern extension of the prolific Carlin trend, the Bald Mountain property is the largest mine site by area in the United States, and has numerous brownfield and greenfield exploration targets. It stretches approximately 40 km north to south and 15 km east to west.
Kinross already owned the other 50% of Round Mountain. This transaction will allow the company to advance promising initiatives to optimize the operation and potentially extend estimated mine life. Round Mountain uses conventional open-pit mining methods and recovers gold using four independent processing operations including crushed ore leaching, run-of-mine ore leaching, milling and a gravity concentration circuit.
The operation is beginning to realize the benefits of an ongoing long-term continuous improvement project known as Process Solution Management (PSM), which is focused on enhancing heap-leach performance and improvements to recovery. In Q3 2015, Round Mountain became Kinross’ third-lowest cost operation, achieving its highest production in six years and lowest cost of sales per ounce in three years. Going forward, Kinross expects to realize continued benefits from leach-pad operations, pumping and piping infrastructure optimization, gold recovery timing, and in leaching previously under-leached areas of the leach pads.
Round Mountain (on a 100% basis) is expected to have an annual production range of 340,000-430,000 Au eq. oz.with an AISC range of $850-$1,000/oz per over the three-year period from 2016 through 2018.
In December, Kinross intends to begin a scoping study on a potential expansion at Round Mountain known as Phase W. A large zone of known mineralization exists at depth and to the west of the main Round Mountain pit. The study is expected to be completed in Q2 2016.