Barrick Gold (TSX: ABX) is monetizing assets amid record high gold prices. The gold major this morning indicated it has reached an agreement to sell its 50% interest in the Donlin Gold Project in Alaska to NovaGold Resources (TSX: NG) and affiliates of Paulson Advisors.
The transaction will see Barrick’s interest in the project sold for up to $1.1 billion. Under the terms of the deal, Barrick is to receive $1.0 billion in cash for the interest. The company has also provided an option to purchase Barrick’s outstanding debt on the project for $90 million if purchased prior to closing, or for $100 million if purchased within 18 months from closing.
The transaction will see NovaGold acquire a 10% interest in the project, while Paulson will acquire a 40% interest. Each purchaser will contribute to the transaction on a pro rata basis, with certain shareholders backstopping NovaGold’s commitment.
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In support of the transaction, NovaGold is to raise up to $170 million via the sale of common shares at US$3.00 per each from Paulson, as well as the Electrum Group and Kopernik Global Investors. The company has also issued 25.5 million warrants with a five year expiry and an exercise price of US$3.00 per share.
Barrick has indicated that proceeds from the sale will be used to strengthen Barrick’s balance sheet.
READ: Barrick Q4 Earnings: Cash Flow Explodes
“The Donlin agreement allows Barrick to exit the Donlin Gold Project at an attractive valuation, while allowing NOVAGOLD and Paulson to pursue the development of the project. This is a good example of an instance where an asset we own might be better suited in the hands of others, while we pursue our priority portfolio of Barrick-managed growth projects,” commented Mark Bristow, CEO of Barrick Gold.
The transaction as a whole will see NovaGold’s interest in the Donlin Gold project increase to 60%, while Paulson will now hold a 40% interest. The project is to be managed jointly, with the partnership to immediately focus on updating the currently outstanding feasibility study.
The project currently boasts measured and indicated resources of 39 million ounces at a grade of 2.24 g/t. A 2021 technical report suggests that the project could have a 27 year mine life with average annual production reaching as high as 1.1 million ounces.
Barrick Gold last traded at $28.32 on the TSX.
Information for this briefing was found via Sedar and the companies mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
