Barrick Gold has reached an agreement to sell its stake in the Lagunas Norte mine in Peru. The mine will be sold to Boroo for a total consideration of up to $81 million.
Included in the sale is the assumption by Boroo of Barrick’s closure liability relating to Lagunas Norte of $226 million backed by an existing $173 million bonding obligation.
The total consideration consists of an up-front cash payment of $20 million, additional cash consideration of $10 million payable on the first anniversary of closing and $20 million payable on the second anniversary of closing. There is also a 2% net smelter return royalty (NSR) on gold and silver produced through the refractory sulphide ore project (PMR), which will terminate once one million ounces of gold has been produced and which may be purchased by Boroo for a limited period after closing for $16 million.
Furthermore, a contingent payment of up to $15 million which is based upon the average gold price per ounce for the two-year period immediately following closing (average gold price) is also included. The contingent payment, which is payable two years following closing, is $5 million if the average gold price is greater than $1 600 and less than $1 700; $10 million if the average gold price is greater than $1 700 and less than $1 800; and $15 million if the average gold price exceeds $1 800.
Boroo will also assume 100% of the $173 million reclamation bond obligations for Lagunas Norte in two tranches: 50% on closing and 50% within one year of closing. The deferred payments, the contingent payments, and the obligation to replace the second tranche of the reclamation bond obligations will be secured.
Barrick president and chief executive Mark Bristow said the sale was in line with Barrick’s policy of selling non-core interests — a process which has already realized some $1.5 billion — in order to focus its portfolio on Tier One assets. The proposed acquisition would benefit the mine’s stakeholders in Peru by giving Boroo the opportunity to extend its life by accessing satellite resources and adapting the infrastructure.