Barrick uses spare change to shop in junior mall

Armed with a war chest of more than US$2 billion in cash and debt facilities, mega-miner Barrick Gold (ABX-T) has gone on a shopping spree in the bargain-basement junior mining sector.

In the past few months, the Toronto-based titan has been making strategic but low-cost investments in junior companies holding ground near its existing portfolio of mines and development projects.

The two latest deals — one with IMA Exploration (IMR-V), the other with Tan Range Exploration (TNX-A) — will provide Barrick with additional ground near advanced mine projects in Africa and South America.

The deal with IMA calls for Barrick to buy 1.5 million units at $1 per unit, consisting of one share and one warrant. The junior must use $1.1 million of the proceeds to explore its 34,000-ha Valle del Cura properties; these are near Barrick’s Pascua-Lama gold discoveries, which straddle the border between Chile and Argentina.

Gerald Carlson, IMA chairman, describes the Valle del Cura region as “a world-class gold-silver camp” on the Argentine side of Chile’s prolific El Indio gold belt. He cites Barrick’s reserves and resources (totalling 21.5 million oz. gold and 525 million oz. silver) at Pascua-Lama, and the Veladero discoveries (5.8 million oz. gold and 150 million oz. silver) recently acquired by Homestake Mining as proof of this geological potential.

Barrick has the option to select one of two properties; Rio de las Taguas or Portrerillos. The former borders Pascua-Lama to the west and Homestake to the south, and is near Barrick’s existing discoveries. IMA’s reconnaissance teams have already discovered widespread alteration and three breccias enriched in gold and arsenic. Potrerillos is bordered by Barrick ground to the north and southeast, and is near the Veladero discoveries. Prospecting has outlined a zone of silicification and has discovered mineralized float from a sulphide-bearing quartz vein.

To earn a 50% interest in either property, the major must pay US$250,000 and spend US$5 million on exploration over five years. It can boost its interest to 75% by providing production financing.

Barrick’s financing agreement with Tan Range will provide the junior with $3 million, of which 80% must be spent exploring the Itetemia gold property in Tanzania’s Lake Victoria greenstone belt. The property is adjacent to Barrick’s advanced Bulyanhulu gold deposit, which was acquired this spring for US$284 million. Ten rigs are at work at Bulyanhulu, aimed at doubling the existing resource to about 10 million contained ounces.

The Tan Range private placement will be carried out in three stages, with an option for an additional financing of about $1 million.

Once the four placements are completed, Barrick has the exclusive option to earn 51% of Itetemia, which it can exercise by making a production decision either on a stand-alone basis, or by treating mined ore at its Bulyanhulu mill on a custom basis.

Tan Range notes that, in either case, the decision “must contemplate the production of gold at an annual rate of not less than 100,000 ounces per annum.” While the junior has been drilling the Golden Horseshoe Reef at Itetemia “with encouraging results,” no resource calculation has been released.

Once a production decision is made, Barrick can increase its interest to 60% by arranging production financing. The agreement is still subject to a formal agreement and approvals.

Earlier this year, Barrrick acquired the Tanzanian exploration portfolio of Randgold of South Africa for US$4.5 million. The package includes a 65% stake in the Golden Ridge project (1.6 million contained ounces), 30 km from Bulyanhulu.

Barrick competitor Newmont Mining (NEM-N) also has an agreement with Tan Range covering ground in Tanzania. Newmont can earn up to 70% of the junior’s interests in four properties — Kabahelele, Luhala, Mnekezi and Mulehe — in return for up to US$6 million of work expenditures, plus the costs of a feasibility study.