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Barrick selling Massawa gold project to Teranga for up to US$430M

As it continues to divest noncore assets, Barrick Gold Corp. and its Senegalese partner are selling their combined 90% stake in the Massawa gold project in Senegal to Teranga Gold Corp. for up to US$430 million.

Teranga will pay about US$300 million in cash, US$80 million in shares and up to US$50 million in gold price-linked payments due three years after closing.

Barrick will own about 11.45% of the company on a nondiluted basis once the deal closes, expected in the first quarter of 2020, the companies said in separate Dec. 10 news releases.

To fund the transaction, Teranga said Taurus Funds Management Pty. Ltd. and Barrick agreed to lend it US$200 million and US$25 million, respectively, in a facility with a 7.85% interest rate.

Teranga also plans to raise US$45 million in a private placement with Tablo Corp., an existing shareholder expected to increase its interest to 21.2%, and about US$106 million in a bought-deal equity offering scheduled to close Dec. 18.

On a Dec. 10 conference call, Teranga President and CEO Richard Young cast the acquisition as central to Teranga's strategy to become a low-cost, midtier gold mining company. "This acquisition is transformational," Young said.

Massawa is within about 30 kilometers of Teranga's Sabodala gold mine and hosts 2.6 million ounces of gold grading 3.94 g/t in historical reserves. The Massawa reserves would add to Sabodala's 2.4 Moz in gold reserves grading 1.35 g/t.

Young said Teranga plans to start milling Massawa ore at Sabodala in the second half of 2020, and unit operating costs are expected to fall as a result.

"This is a good example of an instance where assets we own might be better suited in combination with others," Barrick President and CEO Mark Bristow said in the company's release.

Among other terms, the deal is contingent on the Senegal government issuing exploitation and exploration licenses for Massawa.

The transaction comes on the heels of Barrick's US$750 million sale of its 50% stake in the Kalgoorlie Super Pit gold mine in Western Australia as it looks to reap about US$1.5 billion in divestments by the end of 2020. Barrick is tweaking its portfolio in the wake of its Randgold takeover late in 2018 and the consolidation with Newmont Goldcorp Corp. of key Nevada assets in a joint venture.