Barrick, China walk away from Africa deal – by Pav Jordan (Globe and Mail – January 9, 2013)

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Barrick Gold Corp. has ended months of efforts to sell its African unit to state-owned China National Gold Group (CNGC), unwilling to settle for fire-sale prices even as it struggles to cover massive cost overruns elsewhere.

The assets had been up for sale as part of a revitalization strategy that was launched by the world’s largest gold miner last summer amid a falling stock price and shareholder discontent.

The move leaves Barrick with a high-cost producer in African Barrick Gold PLC at a time when mining on the African continent is losing its shine for shareholders, who are wary of resource nationalism amid months of labour strife in African mines.

The end to the talks also underscores the fiscal discipline of Chinese state-owned mining companies, showing they are careful not to overpay for assets even as the country seeks ownership of mineral resources to feed booming economic growth.

Barrick chief executive officer Jamie Sokalsky, who took the helm of the Toronto-based miner in June after the ouster of predecessor Aaron Regent, engaged the Chinese as one of a series of bold moves to address investor backlash against Barrick, which like others in the sector pursued aggressive growth for years but failed to spark good returns for shareholders.

“These discussions were part of our ongoing efforts to identify opportunities to optimize our portfolio. However, we are approaching this in a prudent and disciplined manner and will only proceed with opportunities that generate acceptable value for Barrick,” Mr. Sokalsky said in a statement Tuesday.

No other buyers are likely to emerge any time soon. “We’ve concluded the talks with China National Gold. We’re not in direct talks with any other party,” said Andy Lloyd, a Barrick spokesman.

Analysts had expected a sale of the assets to raise about $2.5-billion, bringing much needed financial relief to Barrick as it struggles with billions in cost overruns at the Pascua Lama gold project in the southern Andes.

Under Mr. Sokalsky, Barrick has deferred some $4-billion in planned spending on projects that did not meet rigorous investment criteria to help offset Pascua’s costs. Barrick also shelved development of two multibillion-dollar projects, Cerro Casale in Chile and Donlin in Alaska.

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