China in talks to buy 74% stake in African Barrick Gold

http://www.guardian.co.uk/world/2012/aug/16/china-talks-afrcian-barrick-gold
Shares in African miner leap on speculation of $2bn move amid concern over China's pursuit of resources across continent

Terry Macalister
guardian.co.uk, Thursday 16 August 2012 12.30 EDT

Photograph: Anama Images/Corbis

China National Gold says it is in preliminary-stage talks with African Barrick Gold, a London-listed miner.

China is in talks to buy a 74% stake in the African arm of Barrick Gold, the world's largest gold miner, amid soaring demand for jewellery from an increasingly wealthy middle class. However, the $2bn (£1.3bn) move is likely to revive concerns about the country's expansionist role on the continent.

Shares in the London-listed African miner soared 13% after China National Gold said it was in a "preliminary stage of contact and discussion" with the company, which has mines concentrated in Tanzania.

Rapid industrialisation has led to an enormous demand for grain, oil and precious metals in China, triggering a surge in acquisitions throughout Africa, a continent rich in natural resources.

China is the world's largest producer of gold and is poised to replace India as the biggest buyer of the metal as it snaps up an expected 850 tonnes this year. The commodity is used mainly for adornment but is increasingly being held in bar form as an alternative to cash and other investments.

Barrick Gold, the Canadian company that owns African Barrick Gold, said discussions were at an early stage, adding "there can be no certainty that these discussions will result in the acquisition of all, or part of, Barrick's holding in African Barrick Gold".

Barrick Gold has recently seen its share price fall to its lowest level in three and a half years amid lower profits, rising costs and a succession of questionable acquisitions. It ousted its chief executive two months ago and the new boss, Jamie Sokalsky, has said he wants to streamline the business by disposing of non-core assets.

African Barrick Gold, whose share price before Thursday's surge, was a third lower than the price it was listed at on the London Stock Exchange in 2010, has also experienced difficulties including an attack on its North Mara mine by 200 villagers who caused $15m of damage.

On the basis of the current share price, a 74% holding in African Barrick would be worth $1.9bn. Analysts said there was only a small possibility that other miners such as Randgold would trigger a bidding war.