Barrick Gold, the Canada-based mining group, has confirmed negotiation with China National Gold Group Corporation over its 74 percent stake in African Barrick Gold. The information comes after exactly 2 years after Tanzanian assets were spun off. News on the early-stage talks with China’s largest gold producer sent African Barrick shares up by 13 percent in London early trade on 16th of August.
ABG takeover by Chinese group
Barrick Gold has admitted that it wants to sell its stake in ABG to China National Gold Group and that negotiations are ongoing. Talks are at a preliminary stage and there can be no certainty whether those negotiations will result in the ABG takeover or not, according to the statement of Barrick Gold.
It is said that the possible ABG takeover is a part of Barrick Gold’s program of maximizing shareholder value through allocation. According to some sources familiar with the situation, Barrick Gold’s officials halted work on a possible sale of ABG and that the takeover may not take place this week. However the Beijing-based company, China National Gold Group, is interested in ABG takeover.
Although there is a company seriously interested to buy ABG shares, Barrick Gold is said to be working with UBS to consider all options for African Barrick Gold as well. Certainly ABG is like a child to Barrick Gold. Moreover it was Barrick Gold itself that partially floated it in 2010.
In one of statements, Barrick Gold informed that if China Gold Group, the largest Chinese copper and gold miner, wants to purchase more that 30 percent of voting rights in the company, it would have to make an offer for a full ABG takeover. China Gold group is a serious partner for a possible ABG takeover as it is the largest producer of gold in China and has subsidiaries listed in Hong Kong, Toronto and on Beijing’s share market. On the other hand, African Barrick Group is tidbit for any interested investor because it is Tanzania’s largest gold producer. However since being spun off ABG’s shares had dropped about 30 percent.
The new beginning after ABG takeover
African Barrick Gold has been going through tough times as it has to struggle with obstacles such as national grid, expensive diesel generation devices. In addition, ABG informed that production had dropped 14 percent in the first half of the year.
But those kinds of obstacles do not discourage China National Gold Group. The company, similarly to other Chinese companies, is on a way to expand its business. China National Gold Group has recently bought more than 50 percent of Norton Gold Fields, an Australian-based company. The takeover of the Australian miner is said to be “the first successful example for Chinese enterprise to take over large-sized gold mine in production”.
The ABG takeover would be a next step toward the international expansion of the Chinese giant. However it seems that Barrick Gold’s officials are not so willing to sell its child to an unknown subject. The ABG takeover may not be finalized.