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Goldcorp spends nearly $1 billion to get into Chilean joint venture with Barrick Gold -
SUNNY FREEMAN, FINANCIAL POST 03.28.2017



Goldcorp spends nearly $1 billion to get into Chilean joint venture with Barrick Gold
Barrick Gold Corp and Goldcorp Inc, the world's No. 1 and No. 3 gold miners by value, have agreed to team up to potentially develop gold projects in northern Chile. / FINANCIAL POST

Two Canadian gold giants, Barrick Gold Corp. and Goldcorp Inc., will form a partnership in Chile’s gold belt in a multi-faceted deal that will see Goldcorp spend nearly US$1 billion as miners look for creative solutions to find and fund new sources of growth.

Goldcorp will take a 50 per cent stake in the Cerro Casale gold and copper project in Northern Chile through a deal with Barrick and a separate deal with Toronto-based gold producer, Kinross Gold Corp.

To achieve a 50-50 ownership of the Cerro Casale project, Goldcorp will purchase a 25 per cent stake from Barrick, as well as Kinross Gold Corp.’s 25 per cent interest in the project.

The partnership will also acquire Kinross’s adjacent Quebrada Seca property. Goldcorp will fund that deal and will pay Kinross US$260 million for both properties.

Goldcorp will grant Barrick and Kinross an additional 1.25 per cent royalty interest on 25 per cent of gross revenues from metal production at both projects.

Goldcorp also announced Tuesday that it has a separate deal to acquire Exeter Resource Corp. for US$185 million. The junior miner’s sole asset is the Caspiche project, about 10 kilometers north of Cerro Casale. That project will also go into the joint venture portfolio.

“This joint venture structure with Barrick has the potential to allow us to consolidate infrastructure to reduce costs, reduce the environmental footprint and provide increased returns compared to two standalone projects,”
said Goldcorp CEO David Garofalo.

“With our combined technical and financial strength, we see significant potential to increase net asset value per share and deliver value for all partners and stakeholders.”

Goldcorp will agree to fund Barrick’s first US$260 million investment in Cerro Casale as well as spend the same amount on its own behalf for a total commitment of US$520 million.

Half of Goldcorp’s acquisition costs for the Caspiche project will be deducted from its commitment with Barrick.

Goldcorp will be obligated to spend US$60 million a year for the first two years and $80 million thereafter. If it fails to spend the minimum amount it will owe Barrick a cash penalty of 50 per cent of any shortfall. It will also pay US$40 million after a construction decision is made at Cerro Casale.

For Barrick, the deal is a way to keep a large and attractive, but capital intensive and undeveloped project in its portfolio – as well as add another adjacent property into the mix — though it reduces its ownership stake from 75 per cent to 50 per cent.

For Goldcorp, it represents an opportunity to take a stake in one of the largest undeveloped gold projects in the world, as well as giving it a strong presence in a lucrative gold belt in an increasingly friendly mining jurisdiction. Cerro Casale has proven and probable gold reserves
of 17.4 million ounces, as well as 2.5 million ounces of measured and indicated gold resources.

Many big miners have said they have been on the hunt for such partnership opportunities given the dearth of new projects in existence and the advantages in a slow growth environment.

The two companies will form a joint venture board, comprised of an equal number of members from Barrick and Goldcorp.

“We are pleased to welcome Goldcorp as our new joint venture partner at Cerro Casale, and look forward to the fresh perspective they can bring to the project, in addition to the potential for synergies in the district,” said Barrick president Kelvin Dushnisky.

“This agreement will allow us to direct capital elsewhere in our portfolio, while ensuring shareholders retain exposure to the optionality associated with one of the largest undeveloped gold and copper deposits in the world.”

The deal is expected to close in the second quarter of 2017.


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