Barrick Gold Corp. (ABX) and its global competitors are poised to sell assets this year as the companies seek to reverse two years of share-price declines.
Barrick, the largest producer of the precious metal, held talks to sell its majority stake in African Barrick Gold Plc (ABG), which runs the company’s highest-cost mines, before announcing today the negotiations had ended. CEO Jamie Sokalsky is reviewing the company’s other assets, and Newmont Mining Corp. (NEM), the world’s second-biggest gold miner, and Canada’s Kinross Gold Corp. (K) are among other producers that may sell assets, according to Dahlman Rose & Co.
“Every single one of the companies in this industry is looking for ways to create value, whether it be a spin out, or being taken over, or a restructuring,” David Christensen, who oversees about $450 million as CEO of San Mateo, California- based ASA Ltd., said in a Dec. 11 phone interview.
The possibility of increased sales represents an about-face for an industry that spent $69.7 billion on 410 takeovers and joint ventures in the last five years, as companies competed to boost output and reserves. Now gold miners including Barrick say they’re focused on returns instead of growth after equities lagged behind gains by the metal for the sixth straight year.
Barrick has received approaches from companies interested in some of its assets and is continually reviewing its entire portfolio, Sokalsky said today in an interview.
“We are being approached by companies, other buyers,” he said. “If there are opportunities to divest assets that are worth more to someone else than us, we will absolutely take a look at that.”
“There are many people that see our assets as quite attractive,” Sokalsky said. Barrick doesn’t “have anything to talk about at the moment.”
Selling high-cost or lower-return assets is a way producers can show investors they’re serious about making better decisions, said Ari Levy, a money manager at TD Securities Inc. in Toronto.
“That’s one of the steps that the Street is going to be looking for to see that these companies really are invoking increased capital discipline,” Levy, who co-manages the TD Precious Metals Fund and the TD Resource Fund, said by phone Dec. 20. “The market is absolutely in a ‘show me’ phase.”
Barrick and Newmont may consider selling or spinning off Australian assets, where rising labor costs and a stronger local currency have pressured profit margins, said Adam Graf, a New York-based analyst at Dahlman Rose. It may also make sense for Greenwood Village, Colorado-based Newmont to sell its holdings in the Yanacocha mine and delayed Conga project in Peru and reinvest the money elsewhere, he said last week in a phone interview.
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