Barrick revives Argentine odyssey
Toronto miner, Chinese firm deepen ties to explore potential of building gold mine
Barrick Gold Corp. may be the largest gold miner in the world, but that hasn’t stopped it from asking a state-owned Chinese conglomerate to help in its decades-long quest to dig up a vast gold deposit near the border between Argentina and Chile.
On Monday, the Toronto-based company announced China’s Shandong Gold Group Co. Ltd. will study whether it makes sense to build an open pit, heap leach mine squarely inside Argentina — after Chilean authorities last year ordered the closure of mining activities on its side of the border.
The announcement, which came while Barrick’s senior management team visited China, shows the company’s growing reliance on Shandong as a partner. In April 2017, Shandong paid $960 million and formed a 50/50 joint venture in Barrick’s Veladero gold mine in Argentina, and the two agreed to explore future opportunities together. It also signals yet another inroad for Chinese companies, which in recent years have been heavily investing and partnering with Canadian mining companies involved in copper, uranium and other metals.
“Over the past year, we have been laying the foundation for a distinctive, enduring, and trust-based relationship with Shandong Gold,” John Thornton, Barrick’s executive chairman, said in the press release.
Shandong is “a state-owned capital investment company,” that’s the largest gold producer in China, and has a mandate to become one of the 10 largest gold companies in the world, according to its website. It did not detail its gold production but has said it produced 1.2 million ounces in 2016, and that one of its subsidiaries is listed on the Shanghai stock exchange with a market capitalization of $9.6 billion.
Barrick gave Shandong full access to all geological and other data related to the “Lama” deposit, according to Barrick spokesman Andy Lloyd.
Previously known as “PascuaLama” and now rebranded as Lama — which Lloyd said refers only to the Argentine-side of the deposit — Barrick has been hoping to extract gold from the site since at least 1998, but consistently faced obstacles.
Originally, it planned to build an open pit mine that spanned the border of both countries. After years of planning and having obtained a permit, Chilean regulators in 2017 ordered all mining activity on its side halted and assessed an economic fine of around $11.6 million, after a court found adverse impacts to local environment — which Barrick disputes.
Barrick subsequently considered building an underground mine in Argentina, but as recently as April, the company ’s chief finan- cial officer said the project did not meet internal rates of return and was “not a priority.”
Per the new agreement, Shandong will study whether an open pit, heap leach mine could be used for the “low-grade and easy to leach gold ore,” or if other methods could be economically implemented.
If Shandong finds an economically feasible way to build a mine there, the two companies would need to negotiate a financial arrangement to work together, as Barrick currently owns the property, Lloyd said.
The site is located just six kilometres from its Veladero mine, also in Argentina, from which Barrick last year received 432,000 ounces of gold, and in 2018, is expecting to receive 275,000 to 330,000 ounces of gold during its first-full year as a joint venture with Shandong.
Shandong was also reported to be one of several Chinese companies interested in purchasing a stake in Acacia Mining Plc, of which Barrick owns 63 per cent. In 2017, authorities in Tanzania, where all of Acacia’s mines are located, hit the company with a $190-billion tax bill in a dispute that remains unresolved and one which Barrick has been leading negotiations on.
Acacia confirmed that it received interest from Chinese suitors, but did not name any companies.
Barrick, of course, has formed other partnerships in South America, which have helped it share the risk and cost of projects: In March 2017, Vancouver-based Goldcorp Inc. agreed to invest $520 million for a 25 per cent stake and deal to develop its Cerro Casale project in Chile on a 50/50 joint venture basis, among other caveats.
But Barrick’s deal with Shandong shows how Chinese companies have in recent years stepped up their involvement with Canadian mining companies.
Over the past year, we have been laying the foundation for (an) enduring, and trust-based relationship with Shandong.