Barrick Gold Divests its Donlin Gold Stake

Earlier this week, Barrick Gold Corporation announced that it’d be selling its 50% holding in the Donlin Gold Project for $1 billion in cash to affiliates of NOVAGOLD Resources Inc. and Paulson Advisers LLC. The project is found in Southwest Alaska, within the historic Kuskokwim Gold Belt. The project holds approximately 39 million gold ounces and is said to be one of the biggest known undeveloped open-pit gold deposits today.

The Kuskokwim Corporation owns the surface and mineral rights to this gold project, while Donlin Gold LLC manages the project that is equally owned by NOVAGOLD and Barrick Gold.

This sale agreement will see NOVAGOLD and Paulson acquire 20% and 80% stakes in the project respectively, thereby increasing NOVAGOLD’s stake in the project to 60% with Paulson holding the remaining 40%.

Barrick, a major producer of gold and copper with mining projects and operations in various parts of the globe, has also granted NOVAGOLD the option to purchase an outstanding debt it’s owed in relation to the project at $90 million. It should be noted that this figure only applies if the debt is purchased before the deal closes.

If NOVAGOLD is to purchase the debt in 18 months or less of the deal closing, it will have to pay $100 million.

Revenue from this sale of Barrick’s stake in the gold project will be used to invest in the company’s future, bolster the firm’s balance sheet, in addition to supporting its commitment to delivering returns to its shareholders.

Following the announcement, NOVAGOLD’s shares gained 6.8% while Barrick’s shares rose by 1.7%.

Mark Bristow, the CEO and President of Barrick, stated that its divestment from the gold project would allow NOVAGOLD and Paulson to pursue the project’s development. He explained that the asset may be better suited in the hands of others, as Barrick was currently focused on pursuing its priority portfolio of growth projects.

Bristow added that they remained committed to optimizing their portfolio of assets that align with their objective of focusing on sustainable, long-life Tier one copper and gold operations.

The transaction’s completion is expected towards the end of Q2 or in early Q3, once the required regulatory approvals have been obtained and customary closing conditions have been satisfied. Holland & Hart LLP and Davies Ward Phillips & Vineberg LLP are acting as legal counsel to Barrick while CIBC World Markets Inc. is acting as its financial advisor.

The growing number of deals in which gold-rich properties are changing hands indicates that firms like Platinum Group Metals Ltd. (NYSE American: PLG) (TSX: PTM) that are operating gold mines stand to record significant gains as the gold market sustains its current bull run and attracts more investors.

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