Anglo options Barrick’s African properties

In a move its chairman described as “pulling in our horns,” Barrick Gold (ABX-T) has dealt options on its West and Central African gold projects to South African-based mining house Anglo American.

The deal has Anglo American’s gold subsidiary, Anglogold, earning half of Barrick’s interest in properties in Mali, Senegal and the Democratic Republic of Congo (DRC). Anglo American will be earning half of Barrick’s interest in a property in Niger. Anglogold and Anglo American have committed to an aggregate US$15.6 million exploration budget to earn their interests, and will take over management of each of the projects.

Barrick holds a 90% interest in the Tialkam property in Niger, with the government holding the remainder. In the DRC, it holds an 80% interest in the Kilo-Moto property; 20% is held by the DRC government.

In Mali, Barrick holds 85% interests in three properties: Misseni, Finkalo and Djelimagara. Iamgold (IMG-T) has a back-in option to participate in exploration at Djelimagara, which would dilute each participant to 28.33%.

The Malian government retains 15% in any case. In Senegal, Barrick’s 85% interests in the Madina-Foulbe and Northwest Sabodala properties are subject to a similar Iamgold back-in, and Barrick and Anglogold will be diluted to 28.33% if the option is exercised.

Barrick’s annual meeting saw a dissident shareholder, Robert Verdun, oppose management’s slate of candidates for the board of directors. Verdun, questioning the propriety of nominating new president Paul Melnuk without prior written notice to the shareholders, nominated himself and another Barrick shareholder, Nuala Freund. The meeting approved the management slate.

Chairman Peter Munk, who is retiring as chief executive officer, also mused publicly about being “the consolidator” in the gold market. Questioned further on it, he suggested that Barrick’s low costs and financial position made the company able to acquire gold producers that were finding the current depressed gold market difficult. He did not elaborate on the possibility of acquiring underperforming assets.

Barrick also announced an increase in its cash dividend, to US9cents per share.

Barrick earned US$75 million during the three months ended Mar. 31, 33% more than the US$55 million posted for the corresponding period of 1997. The increase primarily reflects a reduction in operating costs to US$154 per oz.

from US$196 per oz., which, in turn, was a function of

higher-than-anticipated gold grades.

Cash jumped to US$135 million in the first quarter — the second highest total in the company’s history — from US$101 million a year earlier.

Accumulated production in the recent quarter increased by 56,914 oz. to 769,282 oz. Through its hedging program, Barrick sold its gold at an average price of US$400 per oz., US$105 per oz. more the period’s average spot price. This was, however, US$20 less than the average price the company realized from sales in the first quarter of 1997 and consequently, more gold was sold to keep revenue virtually unchanged at US$305 million.

In Nevada, Barrick boosted production at its Goldstrike property by 23% to 564,023 oz. Nearly half came from the Meikle mine, where output more than doubled to 280,704 oz. gold and cash costs averaged US$72 per oz.

The company also reports that the Pierina mine in Peru is on schedule for startup by year-end. Once in operation, the mine will add another 750,000 oz. gold, at a cash cost of US$50 per oz., to the company’s yearly production.

Barrick expects to crank out more than 3 million oz. gold this year and reduce cash costs to US$170 per oz. Production in 1999 is expected to top 3.5 million oz., while operating costs are expected to drop to US$150 per oz.