TORONTO (miningweekly.com) – The world’s largest gold miner by output Barrick Gold has agreed to sell half of its interest in the Zaldívar copper mine, in Chile, to Antofagasta for $1-billion in cash, forming a partnership with one of the world’s largest copper producers.

Barrick was in the process of reducing its $12.9-billion in debt, having pledged to raise at least $3-billion for this purpose this year. The gold miner had earlier this year acknowledged that it had deviated from its roots by taking on too much debt in recent years.

Many mining majors, across all commodity groups, were currently grappling with sagging profits and low company valuations. This was often regarded as the result of the industry’s past ‘sins’, when companies were in pursuit of growing their output at all costs in a high commodity price environment.

“By selling a stake in this noncore asset, we strengthen our balance sheet while maintaining significant exposure to a strong cash-generating operation. Following a highly competitive auction process, we are pleased to reach an agreement with the ideal partner for Zaldívar,” Barrick copresident Kelvin Dushnisky stated.

Antofagasta had long been active in Chile and had a record of building and operating mines in the country.

Under the terms of the deal, Antofagasta would pay Barrick $980-million in cash upon closing and $25-million in additional cash payments over the next five years. The transaction was expected to close by year-end and was subject to customary closing conditions.

As joint venture (JV) partners, Barrick and Antofagasta would work together to increase the value of the Zaldívar mine, leveraging the collective expertise and experience of both companies. Barrick had intimate knowledge of the Zaldívar operation and its potential.

Antofagasta would help to realise that potential by leveraging its deep operating expertise in Chile, including potential synergies with its existing portfolio. Such synergies might include the ability to leverage Antofagasta’s extensive in-country procurement programmes, contractor relationships and administrative efficiencies.

Under the new ownership structure, Zaldívar would have a joint Barrick-Antofagasta board consisting of three Barrick nominees and three Antofagasta nominees. Antofagasta would act as the operator of the mine and be subject to oversight and direction by the board.

The first chairperson would be appointed by Antofagasta and would hold the office until January 1, 2017, at which point the right to appoint the chairperson would rotate between the parties yearly.

M Klein & Company and TD Securities were acting as financial advisers to Barrick, while Davies Ward Phillips & Vineberg and Carey y Cía were acting as the company's legal counsel.

Last year, Zaldívar produced 222-million pounds of copper at C1 cash costs of $1.79/lb. Output for 2015 was expected to range between 230-million pounds and 250-million pounds at cash costs of $1.65/lb to $1.95/lb.

At the end of 2014, Barrick reported 5.6-billion pounds of proven and probable copper reserves at Zaldívar on a 100% basis.

DEBT REDUCTION
Including Zaldívar, Barrick had now announced transactions valued at about $1.85-billion, or nearly two-thirds of its target, representing a substantial contribution to its debt reduction goal.

In May, the company sold a 50% stake in its Porgera mine, in Papua New Guinea, to Zijin Mining Group for $298-million. That came two days after it had agreed to sell its Australian Cowal mine to Evolution Mining for $550-million.

Barrick noted that it was actively exploring a number of other JV and sales opportunities and would provide a general update on debt-reduction activities next week, when it released its second-quarter results.