Barrick sells stake in mine to China’s Shandong

Barrick Gold Corp. is selling half of its Veladero mine in Argentina to Shandong Gold Group in the latest example of the Canadian company's increasing focus on partnerships and on closer ties with China.

Shanghai-listed Shandong will take a 50 per cent stake in a US$960 million deal that's set to conclude by the end of this quarter, Barrick, the world's largest gold producer, said in a statement Thursday. Veladero is expected to produce as much as 830,000 ounces this year and has reserves of 6.7 million ounces.

The arrangement, which extends to exploring joint development of the Pascua-Lama project on the Argentina-Chile border, presages deeper cooperation with China's secondbiggest producer by market value. It's another sign that Barrick executive chairman John Thornton's decision to forge stronger ties in Asia is paying dividends. In 2015, Barrick sold a 50 per cent stake in a mine in Papua New Guinea to Zijin Mining Group Co. for US$298 million.

Barrick wants to create a “distinctive, enduring, and trust-based relationship” with China and “China's best companies,” Thornton said in the statement. Proceeds from the sale of the Veladero stake are earmarked for paying down debt and other investments.

Shandong signalled a year ago it was looking to expand overseas. It is also preparing to raise as much as US$1 billion by listing shares in Hong Kong, people familiar with the matter said in February.

As a second step, the two firms are forming a working group to explore ways to jointly develop the giant Pascua-Lama gold and silver deposit, just 10 kilometres from Veladero. Shandong's expertise in underground mining probably will come into play with that project. The companies also will look at further potential partnerships in the “highly prospective” El Indio Gold Belt between Argentina and Chile, which includes Veladero, Pascua-Lama and Alturas, according to the statement.

Barrick shares have jumped 41 per cent in the past year, making it the best performer on the BI Global Senior Gold Valuation Peer Group index after Newcrest Mining Ltd.