Why Barrick Gold (NYSE: GOLD) Could Acquire These Copper-Gold Projects
Barrick Gold President & CEO Mark Bristow has made no secret of the fact that he sees huge value in copper. “As gold miners, we’re going to have to take on other assets, and copper is a good thing to own, it’s a fantastic asset and very strategic,” he told a reporter from Bloomberg BNN back in February of this year.
Bristow, who joined Barrick as CEO in early 2019, has spoken openly of his plans to expand the Company’s copper business since he came aboard. “Where we have opportunities to secure or expand our copper footprint, we will,” he told the Financial Times in an interview last year.
In particular, Bristow seems to have his eye on copper-gold projects. Aside from the two assets often existing alongside one another, copper is also processed in a very similar way to gold, adding to its strategic appeal. “You can leach [copper], you can concentrate it, you can smelt it. It is a very uncomplicated process. It’s the same as gold and it comes with gold,” he told the Financial Times.
Currently, Barrick owns the Lumwana copper mine in Zambia, as well as 50% of the Zaldivar deposit in Chile and a half share of Saudi Arabian copper mine Jabal Sayid, but its copper output is relatively small, and certainly no match for copper giants like BHP, Glencore, Freeport-McMoran and Anglo American.
Analysts have said that in order to compete with this group of companies, the most logical option would be for Barrick to make a major acquisition, and we would wager that Bristow is thinking along the same lines.
Barrick is well positioned to make such a strategic acquisition. The strength of gold prices in 2020 has helped it to pay down debt and improve its balance sheet, and in an earnings call with investors in May, Bristow said this year offered a “dynamic M&A environment”, adding that Barrick was “not shy” about making deals. He wasn’t exaggerating, either – last year he launched a hostile bid for rival gold company Newmont, which was later resolved when the two companies entered into a joint venture in Nevada.
“This industry needs to consolidate, and it needs to consolidate with assets that are related, that are not disparate…and copper and gold have a close association. Look at it in the bigger context – we, as Barrick, are going to play in this space of consolidating tier 1 assets – not just consolidating for the sake of consolidating,” he told BNN Bloomberg.
Because copper mines have longer lives than gold mines, the acquisition of a copper-gold asset would also help Barrick extend and diversify its production life. With that in mind, here are a few projects we think have a shot at being acquired by Barrick in the future.
Bristow has previously spoken of his interest in acquiring US mining company Freeport-McMoran’s Grasberg mine in Indonesia, which is the world’s largest gold mine and second largest copper mine.
Grasberg’s proven and probable reserves estimate at its four producing mines and one undeveloped mine are 46.4 million ounces of gold, 18.9 million tonnes of copper, and 291 million ounces of silver.
However, an acquisition would likely not be easy or straightforward – in 2018 after years of negotiations, majority ownership of Grasberg was transferred to the Indonesian government, reducing Freeport’s stake to just under 49%.
With proven probable reserves of 6.7 billion lbs of copper, 7 million ounces of gold and 30 million ounces of silver, Josemaria is a large-scale undeveloped deposit in Argentina’s pro-mining San Juan province that is expected to begin commercial production in 2026.
Barrick has history with both San Juan and the Lundin Group – Josemaria is not far from the Lundin Group’s previous discovery, the Veladero gold deposit, which was acquired by Homestake Mining after the Lundins fought off a hostile bid by Barrick, who later bought Homestake in order to gain ownership of Veledaro.
In 2015, Teck and Newmont agreed to combine their respective Relincho and El Morro projects located in the Huasco province of Chile, into the Nueva Union JV, now one of the largest undeveloped copper-gold-molybdenum projects in the Americas.
The project is expected to produce an average of approximately 419 million lbs of copper and 315,000 ounces of gold per year over the first 10 years.
El Arco Copper-Gold Project, Mexico
Owned by Southern Copper Corp (NYSE: SCCO)
Located in Baja California, Mexico, the El Arco project is owned by Southern Copper Corp, which is controlled by Grupo Mexico. Expected to come into production in 2025, El Arco has the potential to become a 190,000 kt copper / 105,000 kt gold mine.
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