TORONTO (miningweekly.com) – One of China’s largest mining companies Zijin Mining Group has extended its global reach after forming two new long-term mining partnerships with Western miners, while sustaining an aggressive pursuit of an Australian gold miner. 

The world’s largest gold producer by output Barrick Gold on Tuesday announced that it had formed a strategic partnership with Zijin that would see the Chinese firm initially acquire a 50% interest in Barrick Niugini (BNL) for $298-million in cash. The transaction was expected to be complete by the third quarter and was subject to customary closing conditions.

BNL owned 95% of and managed the Porgera Joint Venture (JV) gold mine, in Papua New Guinea (PNG). The remaining 5% participating interest was held by Mineral Resources Enga and was divided equally between the Enga provincial government and local landowners.

Canada's Barrick was orchestrating a pull-back from operations in the southern hemisphere, having already sold four mines in Australia and now the PNG divestment. The mining major had set itself a debt-reduction target of about $3-billion.

Barrick and Zijin had also struck a long-term strategic cooperation accord that outlined both companies’ intentions to collaborate on future projects and joint investments, thereby, leveraging the strengths of each company.

"A twenty-first century mining company with global reach and the intention to become an industry leader must, by definition, have a distinctive relationship with China. This is particularly true in our industry, where China has become both the largest producer and consumer of gold, and a major source of capital and expertise for the mines of the future," Barrick chairperson John Thornton said.

In partnering with Zijin, Barrick was advancing two central objectives set out as part of the company’s ‘back to the future’ strategy. The first was to strengthen the company’s balance sheet; the proceeds from the transaction would be used to pay down debt. The second was to form strategic partnerships that would create long-term value for all stakeholders.

Under the new structure, Barrick and Zijin would jointly control BNL, and BNL would have a joint Barrick/Zijin board consisting of three Barrick nominees and three Zijin nominees. One party would nominate the executive MD, taking main responsibility for operations of the mine, and the other party would nominate the chairperson and the deputy MD.

Barrick noted that the current BNL management team would remain in place, with incumbent executive GM Greg Walker, nominated by Barrick as the first executive MD, while Zijin would nominate the first chairperson and deputy MD.

Zijin’s role in BNL’s management of the Porgera JV was expected to grow over time as the company gained experience operating in PNG.

Barrick’s share of gold output from the Porgera mine last year was 493 000 oz, at an all-in sustaining cost (AISC) of $996/oz. Attributable output was this year expected to range between 500 000 oz and 550 000 oz of gold, at AISC of $1 025/oz to $1 125/oz.

At the end of 2014, Barrick’s share of Porgera minerals comprised three-million ounces of proven and probable gold reserves and 4.1-million ounces of measured and indicated gold resources.

DRC COPPER DEAL
Meanwhile, Zijin had also shaken hands with Canadian explorer Ivanhoe Mines to codevelop the Kamoa copper discovery, in the Democratic Republic of Congo (DRC).

Under the terms of the agreement, Zijin, through its subsidiary Gold Mountains International Mining, would for $412-million buy a 49.5% interest in Kamoa Holding – an Ivanhoe subsidiary that owned 95% of the Kamoa project.

Zijin would make an initial cash payment of $206-million upon the closing of the transaction, which was expected at the end of July, subject to it receiving approval for the deal by the government of the People's Republic of China.

In addition, Ivanhoe had agreed to sell 1% of its interest in Kamoa Holding to Hong Kong-based Crystal River Global for $8.32-million.

Zijin, meanwhile, committed to arranging or procuring project financing for 65% of the capital required to develop the first phase of the Kamoa project, as set out in the feasibility study.

Upon the successful arrangement or procurement of project financing, Zijin would have the right to acquire Crystal River's 1% interest in Kamoa Holding.

The agreements also provided that, upon exercise of the 1% option, for an amount to be determined by an independent expert valuator, Zijin would be required to arrange or procure project financing for all subsequent phases of the Kamoa project.

In addition, since 65% of the preproduction capital required to develop the first phase of Kamoa was to be funded through project financing, the balance of 35% of the required capital would be funded pro rata by the shareholders.

Therefore, Zijin and Ivanhoe would each effectively be required to fund 17.5% of the remaining first-phase development costs.

AUSTRALIAN OFFER
Zijin had lifted its takeover offer for ASX-listed gold producer Norton Gold Fields from $0.23 a share to $0.25 a share.

The increase in the offer price followed discussions with certain parties that committed to support the takeover offer at the increased price.

The board of Norton had already endorsed the takeover offer.

Zijin informed Norton that the revised offer price would be its best and final offer for the company.

Canadian project developer Pretium Resources announced in mid-January that Zijin had acquired about 9.9% of its shares for about C$80.9-million. The deal gave Zijin access to Pretium's high-grade, underground Brucejack gold/silver project, in northern British Columbia.