Barrick buys into QGX (October 29, 2003)

Barrick Gold (ABX-T) is dipping its toe into the Mongolian gold rush by acquiring a 9.5% interest in Waterdown, Ont.-based gold junior QGX (QGX-V).

The major is signing on for 3 million QGX shares priced at $4.00 apiece, compared with a closing price of $5.00 on Oct. 28, the day prior to the announcement.

On Oct. 29, following the news, QGX shares nailed a new all-time high of $6.50 in mid-day trading before closing at $5.67. (Shares traded below $1 as recently as July 2003.)

QGX President and CEO David Anderson calls the agreement a “major milestone in the progress of QGX as a pioneer of gold exploration in Mongolia.”

On the other side of the table, Barrick VP of Exploration Alex Davidson says that Mongolia has “tremendous development potential coupled with a favorable investment climate. We selected QGX… because of their high level of knowledge, experience and expertise acquired over ten years of operations in the country and we are impressed with the exploration prospects that they have assembled to date.”

The deal has a few more provisos: Barrick may participate in future financings by QGX to keep its 9.5% equity interest; the major will not sell its QGX shares for at least 12 months and will vote its shares as directed by QGX management; Barrick will have a right of first refusal if QGX wishes to joint venture or dispose of any property in Mongolia that was acquired by QGX after closing of this private placement (i.e. not including QGX’s current properties of Golden Hills, Uhaa Hudag and Erdene Tolgoi).

Barrick can also nominate one person to QGX’s board as long as it maintains its 9.5% equity interest.

With the cash infusion from Barrick, QGX will have about C$20 million in its treasury.