Barrick Gold Corp. chairman John Thornton looks on during their annual general meeting for shareholders in Toronto on April 28, 2015.Mark Blinch/Reuters
Barrick Gold Corp. is considering raising funds from its key gold mine in the Dominican Republic, according to people familiar with the matter, as the world's largest gold producer races to pay down its debt.
The Canadian company is aiming to slash its $13-billion (U.S.) debt by at least $3-billion this year. It has already raised $850-million from mine sales and is in the midst of selling part of its most profitable copper mine to help reach its debt reduction target.
The company is now mulling a type of financing called a stream, where a prospective buyer would pay Barrick a lump sum of cash for future metal production from the Pueblo Viejo mine in the Dominican Republic.
Pueblo Viejo is one of Barrick's top mines. It costs less than $600 to produce an ounce of gold, a critical factor when the precious metal has been trading below $1,200 an ounce. The property also contains nine million ounces of gold reserves, which will allow Barrick and its partner there to continue producing gold for many years.
The potential sale is expected to attract interest from companies that specialize in streaming, such as Franco-Nevada Corp., Royal Gold Inc., Silver Wheaton Corp. and Osisko Gold Royalties Ltd.
Silver Wheaton's chief executive officer Randy Smallwood has said in the past he would love to stream Pueblo Viejo. It is not known whether Silver Wheaton has the appetite to do another big deal after paying nearly $1-billion in cash for a gold stream in Brazil earlier this year.
Pueblo Viejo is one of Barrick's five cornerstone mines and part of the company's plan to focus on its best operations in the Americas. The five mines accounted for 60 per cent of Barrick's production last year and have some of the lowest costs in the industry.
But with debt reduction the priority for new chairman John Thornton, Barrick has had to consider selling coveted assets.
Barrick is now entertaining offers for Zaldivar, a prolific copper mine in the Andes. Shortly after Zaldivar was put on the market, Mr. Thornton told The Globe and Mail: "We believe our owners want to see that we are capable of taking the hard decisions for the greater good of the business."
It has been a tough slog for the gold industry. Many gold producers are not profitable with gold prices down a third since 2011.
It's not only Barrick that has had to consider putting its crown jewels up for sale. AngloGold Ashanti Ltd. had to sell one of its prized mines last month to reduce its debt. And the winning bidder, Newmont Mining Corp., was able to lower its initial offer, sources said.
Earlier this year, Barrick sold its Australian mine and half of its Papua New Guinea mining operations.
Silver Wheaton did not immediately respond to a request for comment. Barrick owns 60 per cent of Pueblo Viejo and Goldcorp Inc. owns the rest. Representatives for Barrick and Goldcorp declined to comment.
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By the numbers
60%
Barrick's stake in Pueblo Viejo. Goldcorp owns the remaining 40 per cent.
665,000
Barrick's share, in ounces, of gold produced at the mine in 2014.
9.3 million
Barrick's share of proven and probable gold reserves, in ounces, at Pueblo Viejo.
Rachelle Younglai