Barrick buys into QGX (November 10, 2003)

Barrick Gold is joining the Mongolian gold rush by acquiring a 9.5% interest in Waterdown, Ont.-based junior QGX (QGX-V).

The major has signed on for 3 million QGX shares priced at $4 apiece, a hefty discount to the closing price of $5 on Oct. 28, the day prior to the announcement.

On Oct. 29, following the news, QGX shares nailed a new all-time high of $6.50 in mid-day trading before closing at $5.67. (Shares traded below $1 as recently as July 2003.)

QGX President and CEO David Anderson calls the agreement a “major milestone in the progress of QGX as a pioneer of gold exploration in Mongolia.”

Barrick’s vice-president of exploration, Alex Davidson, says Mongolia has “tremendous development potential coupled with a favourable investment climate. We selected QGX . . . because of their high level of knowledge, experience and expertise acquired over ten years of operations in the country, and we are impressed with the exploration prospects they have assembled.”

The deal has a few more provisos: Barrick may participate in future financings by QGX to keep its 9.5% equity interest; the major will not sell its QGX shares for at least 12 months and will vote its shares as directed by QGX management; Barrick will have a right of first refusal if QGX wishes to joint-venture or dispose of any property in Mongolia that was acquired by QGX after the closing of this private placement (not including QGX’s current key properties of Golden Hills, Uhaa Hudag and Erdene Tolgoi).

Barrick will be able to nominate one person to QGX’s board as long as it maintains its 9.5% equity interest.

With the cash infusion from Barrick, QGX will have about C$20 million in its treasury.

In late September, QGX reported that five new holes drilled into the Central Valley zone of Golden Hills had extended gold-in-oxide mineralization to the east by 300 metres. QGX now reckons that the South, Central and North zones and their eastern extensions (the East zone) have a collective strike length of 2.2 km.

Two additional infill holes drilled into the Central zone returned 16 metres grading 5.3 grams gold and 17.9 grams silver per tonne in oxide and 17.3 metres of 3.1 grams gold in oxide.