It must have been a slow news day in Vancouver for Reuters to come up with an ‘exclusive’ story that Barrick Gold (NYSE:ABX, TOR:ABX)) is trying to offload its 64% holding in its African subsidiary, Acacia Mining (LSE:ACA), formerly African Barrick Gold – according to sources familiar with the situation! Reuters described the story as ‘Exclusive’ but in truth, Barrick has been trying to offload its African offshoot for years. Indeed it nearly closed a deal with the Chinese company, China National Gold to do so some four and a half years ago. On a detailed analysis the Chinese walked away!
In order to reduce its still considerable debt burden, Barrick has been looking to offload what it sees as non-core assets, and those which don’t meet its cost criteria, and Acacia, with its three operating gold mines in Tanzania at one time fell into both categories. However it has seen something of a turnaround bringing costs down and improving its earnings figures – but still almost certainly at least comes into Barrick’s non-core business category. And in the Reuters article Acacia’s value was put at around $1.9 billion, which would provide a nice chunk of debt reduction for the Canadian gold mining giant.
The focus of the Reuters piece was that it had been having talks with the South African gold mining majors – Harmony, Sibanye, AngloGold, Gold Fields – and rather oddly Randgold & Exploration (which should not be confused with West and Central African top tier gold miner Randgold Resources which doesn’t like itself described as a South African company). Randgold & Exploration has a market cap of only R179 million (US$12.5 million) which would presumably rule it out from bidding for a stake worth $1.9 billion! The South Africans might indeed be a logical target for such a sale – particularly Sibanye where CEO Neil Froneman has expressed an interest in expanding outside its home country, and which has just reported some positive Q2 earnings figures. The article then went on to say that the talks were at an early stage and there was no assurance a deal will be done! This suggests an article just dragged out of thin air with no specific new substance at all behind it perhaps fed to the reporters by someone with a not so hidden agenda.
It also said Barrick had been talking about an Acacia sale to ‘some Australian and North American miners’. No doubt it has. Acacia has always been on the table to elicit interest from other mining companies, but having been unable to sell it when the stock was hugely depressed a year ago, Acacia’s 197% stock price rise this year may make it even more difficult to offload.
Yes, Barrick would probably love to divest itself of its stake in Acacia as part of its non-core business disposal efforts, but it may well still be no nearer so doing so than it was after its Chinese deal fell through in January 2012.