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LONDON Aug 16 Canadian mining major Barrick
Gold is in talks to sell all or part of its 74 percent
stake in African Barrick Gold to China's largest gold
producer, just two years after the underperforming Tanzanian
assets were spun off.
News of the early-stage talks with China National Gold Group
sent African Barrick Gold shares up more than 13
percent in early London trade on Thursday, as investors bet on a
sale at a premium.
Barrick, the world's largest gold producer which is
grappling with falling profits and soaring costs, abruptly
replaced its chief executive in June. His successor, Jamie
Sokalsky, is reviewing the company's operations - including the
African unit, which has lagged expectations since it was listed
separately in London in 2010.
African Barrick Gold, whose shares at Wednesday's close were
almost a third below their listing price, is one of Africa's
largest gold miners. It has suffered a series of setbacks over
the past two years, ranging from villagers armed with machetes
invading its North Mara mine to power outages and fuel thefts.
"Discussions are at an early stage, and there can be no
certainty that these discussions will result in the acquisition
of all or part of Barrick's holding in ABG," Barrick Gold said,
confirming an earlier report. At Wednesday's closing price the
74 percent stake was worth almost $1.9 billion.
An offer for more than 30 percent of African Barrick Gold
would trigger a full takeover offer for Tanzania's largest gold
producer from the Chinese suitor, under UK takeover rules.
"African Barrick has always looked like it offered good
value albeit at a high risk, and if the potential acquirer can
get the asset and is comfortable with the risk, you will be able
to get a reasonable set of assets for a good price," Investec
analyst Hunter Hillcoat said.
"This now officially puts (ABG) in play."
ABG shares were trading up 9.3 percent at 430 pence at 0856
GMT, outperforming a 0.6 percent rise in the broader UK mining
If recent gold deals are a guide, analysts said ABG could
expect an offer at a premium - and potentially above 500 pence -
for assets which include mines North Mara, Bulyanhulu, Buzwagi
and Tulawaka, all in Tanzania. ABG currently produces around
700,000 ounces of gold a year and is targeting 1 million by
Analysts at Nomura said recent gold transactions had an
average takeover premium of 40 percent, with Endeavour Mining's
recent offer for Avion Gold hitting 57 percent.
"Anything north of 500 pence isn't bad considering where
they've been trading recently," Numis analyst Cailey Barker
said. "Barrick aren't going to sell down unless its in that sort
Analysts cast doubt, however, on the prospect of a bidding
war against the Chinese suitor, though other miners operating in
the region, from South Africa's gold sector to London-listed
Randgold are expected to look.
The Financial Times earlier quoted one person with knowledge
of the discussions who suggested that Zijin Mining Group
, the Chinese copper and gold miner, had
indicated interest in African Barrick.
African Barrick declined to comment beyond its statement
acknowledging the talks. Vancouver-based officials of China Gold
International, a subsidiary of China Gold which handles its
international assets, were not immediately available for
(Reporting by Clara Ferreira-Marques in London and Brenton
Cordeiro in Bangalore; Editing by Erica Billingham)