Historically, Africa was known as The Dark Continent. Now Barrick Gold is shedding some light on this unique business climate by creating African Barrick Gold.
The new company will hold Barrick’s mines and exploration interests on the continent. The properties are in Tanzania and include the Bulyanhulu, Buzwagi and North Mara gold mines and 70% of the Tulawaka gold mine (with Northern Mining Explorations). These are not inconsiderable producers. Together they have a target of between 800,000 and 850,000 oz of gold in 2010.The four mines also have a combined reserve of 16.8 million oz. Buzwagi is the country’s largest single open pit operation. Bulyanhulu and Buzwagi are, however, higher-cost producers.
The Kabanga nickel sulphide project, also in Tanzania, will not be part of African Gold. It will remain a 50:50 joint venture with Xstrata. A feasibility study is expected later this year.
Barrick management says African Barrick will have a business model customized to that region. The support and expertise of the world’s largest gold producer will be provided by an experienced management team and strong board.
African Barrick has been launched with an initial public offering (IPO) on the London Stock Exchange. About 25% interest will be sold, and Barrick will retain the remaining 75%. The sale is expected to close by the end of March 2010.
The spin off of its African assets makes sense to a company so bullish on gold. Barrick would do nothing without a thorough examination of the business case for such a move. It signifies faith in the country’s political future as well as the future of gold.