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Barrick's Massawa Project Sale Cleared by Senegal Government

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Barrick Gold Corporation (GOLD - Free Report) and Teranga Gold Corporation recently received some key approvals from the Government of Senegal for closing the earlier announced acquisition by Teranga of 90% stake in the Massawa Gold Project from Barrick’s fully-owned subsidiary and its Senegal-based joint venture partner.

The major approvals include a formal waiver by the Senegal government of its equity participation right to elect, on behalf of the private sector or on its behalf, to buy an additional 25% interest in Massawa at market value. The parties have also received a formal consent to Teranga’s plans for integrating Massawa into its existing Sabodala Gold Mine. Notably, these were the major conditions necessary for closing the transaction.

Other conditions prior to the closing of the transaction include granting by the Government of Senegal of a residual exploration license and an exploitation license for Massawa. Barrick and Teranga are required to meet these conditions in the upcoming weeks.

The companies expect the closing of the transaction along with earlier announced concurrent debt, prospectus and private placement financings in first-quarter 2020.

Background of the Deal

In December 2019, Barrick along with its Senegal-based joint venture partner agreed to sell the combined 90% stake in the Massawa project to Teranga Gold Corporation for total consideration of up to $430 million.

Barrick is expected to receive 92.5% of the aggregate purchase price for its stake in the Massawa project. The company’s local Senegal partner is expected to receive 7.5% of the total purchase price for its minority interest.

Per Barrick’s management, the deal is expected to realize the full value of the Massawa assets and create a substantial new West African gold mining company, with significant African ownership.

In connection with the transaction, Teranga will secure a syndicated debt financing of $225 million. Notably, Barrick will provide $25 million.

Per the agreement, Barrick will be entitled to nominate one Teranga director for as long as it holds at least 10% of Teranga’s equity stake. Also, Barrick has agreed to a 24-month standstill under which it will not increase its stake in Teranga for 18 months. Also, Barrick may increase its stake by a further 5% over the following six-month period.

Barrick is expected to hold 19,164,403 Teranga common shares on a pro forma basis. This represents nearly 11.45% of Teranga’s issued and outstanding common shares on closing.

Share Price

Barrick’s shares have surged 51.8% in the past year compared with the industry’s 32.9% rise.

Zacks Rank & Key Picks

Barrick currently carries a Zacks Rank #3 (Hold).

Few better-ranked stocks in the basic materials space are Daqo New Energy Corp DQ, Sibanye Gold Limited SBGL and Impala Platinum Holdings Limited IMPUY, each currently sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Daqo New Energy has an expected long-term earnings growth rate of 29%. The company’s shares have rallied 117.6% in the past year.

Sibanye has an expected long-term earnings growth rate of 20.4%. Its shares have returned 167.7% in the past year.    

Impala Platinum has an expected long-term earnings growth rate of 26.5%. The company’s shares have surged 202.5% in the past year.

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