Barrick’s 50% stake sale in Porgera JV

Just two days after announcing the sale of Cowal mine, Barrick Gold (ABX) took a solid second step towards its debt reduction target. On May 26, Barrick announced that it had agreed to divest its 50% stake in the Porgera joint venture (or JV) in Papua New Guinea for $298 million in cash. The company expects that this transaction will be completed in 3Q15.

Barrick has formed a strategic partnership with Chinese mining company Zijin Mining Group. Under the new structure, Barrick and Zijin will jointly control Barrick Niugini, which manages the Porgera JV.

Is Barrick’s Strategic Partnership a Step in the Right Direction?

Barrick’s 95% share of production from the Porgera joint venture in 2014 was 493,000 ounces at all-in sustaining costs (or AISC) of $1,015 per ounce. The company has guided for 2015 attributable production of 500,000 to 550,000 ounces at AISC of $1,025 to $1,125 per ounce from Porgera.

Strategic partnership with Zijin

In addition to this investment, Barrick and Zijin have agreed to collaborate on future projects and joint investments. Zijin is expected to bring low-cost capital and leading Chinese engineering and construction skills, and other supplies at competitive costs.

With the completion of this deal, Barrick has already raised $850 million in cash towards its $3 billion debt reduction target.

Could the Pascua-Lama project be the next JV candidate?

Market speculation is such that the strategic partnership could include development of projects such as Pascua-Lama. The Pascua-Lama mine is one of the world’s largest gold and silver resources with more than 15 million ounces of proven and probable gold reserves and 675 million ounces of silver reserves. The project is currently stalled.

To read more about the Pascua-Lama project, read Market Realist’s Why Barrick suspended Pascua-Lama operations. Barrick’s other highly capital intensive projects could also be seen as potential opportunities over time.

There are other projects as well that have been stalled by local governments citing environmental concerns. One example is the $3.9 billion El Morro mine owned by Goldcorp (GG) and New Gold (NGD). The companies are working on a new plan for its development. GG and NGD make up 7.3% and 1.9%, respectively, of the VanEck Vectors Gold Miners ETF (GDX). Investors can also access the gold industry through gold-backed ETFs such as the SPDR Gold Trust (GLD).

Other potential non-core assets for Barrick could include its 64% interest in Acacia Mining and its 50% interest in Kalgoorlie, apart from its stake sale in the Zalvidar copper mine.

Latest articles

Broadcom (AVGO) stock fell ~8.5% after markets closed yesterday following the semiconductor giant's fiscal 2019 second-quarter earnings release. It missed analysts' revenue estimate and cut its fiscal 2019 revenue guidance by $2 billion to $22.5 billion due to sluggishness in its semiconductor solutions business.

The SPDR Gold Shares ETF (GLD), which tracks physical gold prices, has underperformed the broader markets year-to-date, rising just 4.4% compared to the S&P 500’s (SPY) gain of 15.9% as of June 14. The sentiment for gold, however, has been turning around.

Safe havens such as Treasuries and gold were back in favor on June 14 as stocks fell due to rising tensions in the Middle East, concerns over growth, and the looming threat of the US-China trade war. The tech-heavy Nasdaq Composite Index fell 0.67% in the first hour of trading.

Lululemon (LULU) stock rose 2.1% on June 13 in reaction to better-than-expected first-quarter results and an upgraded outlook for fiscal 2019 overall. The company's first-quarter adjusted EPS grew 34.5% to $0.74 on revenue growth of 20.4% to $782.32 million. Analysts had expected EPS of $0.70 and revenue of $755.31 million. Here's why the outlook got an upgrade.

14 Jun

IEA Again Slashes Its Oil Demand Growth Estimate

WRITTEN BY Rabindra Samanta

As of 4:40 AM Eastern Time today, US crude oil active futures were at $51.83, ~4% below their closing level in the previous week. If US crude oil prices stay at those levels today, they'll mark their third week of decline in five weeks.

Amazon is discontinuing its Amazon Restaurants service, which has been delivering food for restaurants in parts of the United States. Amazon Restaurants launched in the United States in 2015 and entered the British market the following year. However, it met strong opposition in the British market.

172.31.59.107