Gold giants partner up in Chile
Barrick, Goldcorp look for growth
Two Canadian gold giants, Barrick Gold Corp. and Goldcorp Inc., will form a partnership in Chile’s gold belt in a multifaceted deal that will see Goldcorp commit nearly US$1 billion as miners look for creative solutions to find and fund new sources of growth.
Goldcorp will pay upfront costs of about US$445 million to get into a lucrative gold belt in a friendly mining jurisdiction through a complex series of deals involving four miners. A joint venture with Barrick will see the companies own and operate at least three properties in Chile’s Maricunga region with further investments largely funded by Goldcorp.
For Vancouver-based Goldcorp, the deal represents an opportunity to take a stake in one of the largest undeveloped gold projects in the world. Goldcorp’s stock fell 6.9 per cent to close at $19.98 in Toronto.
For Toronto-based Barrick, it is a way to keep a large and attractive, but capital intensive and undeveloped project in its portfolio — as well as add more properties into the mix — though it reduces its ownership stake from 75 per cent to 50 per cent. Barrick’s share price fell 2.48 per cent to $25.55 in Toronto.
For both miners, it is a chance to deliver a strong rate of return on capital to shareholders in an era of few new opportunities in the space. “Duplicating infrastructure has been significantly value destructive in the past in the space,” said Goldcorp CEO David Garofalo, noting that deposits that size “don’t grow on trees, they’re extremely scarce assets.”
“This agreement will allow us to direct capital elsewhere in our portfolio, while ensuring shareholders retain exposure to the optionality associated with one of the largest undeveloped gold and copper deposits in the world,” said Barrick president Kelvin Dushnisky.