China National Gold Moves Closer to African Barrick Gold Deal

on Oct 26, 2012

The state-owned gold miner China National Gold has moved closer to striking a deal for Barrick Gold’s (TSE:ABX) stake in its London-listed African subsidiary, African Barrick Gold (LON:ABG), the Financial Times reported on 24 October 2012. The interest of the Chinese miner highlights the growing trend of Chinese companies looking to acquire gold assets globally.

**China National Gold Closer to Making Offer for African Barrick Gold**
The FT quotes sources familiar with the matter as saying that China National Gold was set to meet with the world’s largest gold producer Barrick Gold, and the chairmen of the two companies were likely to discuss the deal. Detailed price negotiations are expected to start in the next two weeks, with China National Gold expressing interest in acquiring Barrick’s 74 percent stake in African Barrick Gold.

In addition, China National Gold has appointed Bank of America Merrill Lynch as well as Standard Bank to advise on the deal, whereas the Chinese lender CICC is reported to be helping with the financing.
**Value and Timing Unclear**
Some people familiar with the matter have said that the deal could be worth between $3 billion (£1.9 billion) and $4 billion (£2.5 billion). In September, Bloomberg reported that the sale of African Barrick would be Barrick’s biggest divestment, since over 18 years the company spent more than $28 billion (£17.3 billion) on acquisitions.

China National Gold, however, has refused to discuss the timing and the value of the possible deal, with the FT quoting the company’s head of overseas operations Wu Zhanming as saying that China Gold was in the middle of the process. “If we make material progress we will immediately release all necessary information through a public statement.”

African Barrick Gold, which has set up a special board committee to consider a possible offer, declined to comment, whereas Barrick Gold only noted that the negotiations were ongoing, without commenting further.
**China’s Appetite for Gold Grows**
China National Gold, however, is not the only Chinese miner expressing interest in acquiring gold assets overseas. Some of the other examples include Zijin Mining’s (SHA:601899, HKG:2899) offer for Australia’s Norton Gold Fields (ASX:NGF), and Shandong Gold’s (SHA:600547) acquisition of a 51 percent stake in Australia’s Focus Minerals (ASX:FML).

!m[](/uploads/story/645/thumbs/pic1_inline.png)“China’s appetite for gold seems to be growing,” noted Jake Greenberg, mining specialist at Jefferies, as quoted by the FT. Mr Greenberg also pointed out that in the year to September, China imported a record 458.6 tonnes, four times the amount it imported in the previous year. Mr Greenberg notes that Chinese buyers are showing a preference for mines which are already producing, with relatively high-grade deposits and potential for significant growth through further exploration.
**Interest in African Assets**
Reuters in turn reports that Chinese companies are particularly interested in assets in Africa, with their interest coinciding with a shift away from Australia and Canada where asset purchases have become more expensive. Long approval processes in these countries have also prompted Chinese investors to search for assets in emerging markets.


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