Part of strategy to own long-life, world-class assets

Baeau Tai
Barrick Gold, one of the world’s largest gold miners, has entered into a purchase and sales agreement with Emperor Mines Limited on the sale of Emperor’s 20 percent interest in Porgera mine in Enga province, Papua New Guinea.

The deal has given Barrick majority control of Porgera mine by raising its shares  from 75 to 95 percent.

The agreement is subject to certain conditions, including the receipt of regulatory approvals from Papua New Guinea.

The total consideration is US$250 million in cash, plus an adjustment amount.

In connection with the transaction, Emperor has granted Barrick the option of subscribing up to 15 percent of Emperor’s current issued capital within 10 days following a special meeting of Emperor’s shareholders.

The boards of Emperor and DRD Gold Limited, the 78 percent shareholder of Emperor, have announced their support for the proposed transaction and will recommend that their respective shareholders vote in favour of the sale of Porgera to Barrick.

“Consolidating the ownership of Porgera mine is part of Barrick’s strategy of owning long-life, world-class assets,” said Greg Wilkins, president and chief executive officer.

Porgera produced approximately 542,000 ounces in 2006 and has proven and probable reserves of 9.42 million ounces (1) (100 percent basis).

Barrack acquired its 75 percent interest in Porgera through its acquisition of Placer Dome in January 2006. Barrick is currently in discussions regarding the possible sale of up to a 5 percent interest to its joint venture partner, Mineral Resources Enga Limited (MRE), for the proportionate acquisition cost paid by Barrick.

The sale of Emperor’s 20% interest in the Porgera Joint Venture (PJV) is subject to MRE waiving its pre-emptive rights under the PJV agreements.

Should MRE elect to exercise its pre-emptive rights, Emperor will proceed to complete the sale of its 20 interest in the PJV to both Barrick and MRE in accordance with the PJV pre-emptive rights process.

Brad Gordon, Chief Executive of Emperor Mines, said the sale provided an opportunity for the company to clear its debt.

“We are pleased to have secured a full price for our interest in Porgera,” Gordon said.

The transaction follows Emperor’s announcement of February 1,2007 that the company would be pursuing a restructuring plan in order to retire debts and realise the full potential of the company’s assets.

Following completion of the transaction, Emperor will have no debts and will have cash resources of approximately A$130 million.

KEY MINING ASSETS: Emperor’s key mining assets will comprise the wholly-owned Tolukuma gold mine, as well as a significant copper/gold exploration portfolio which incorporates over 5000 square km of exploration tenements in mineral-rich Papua New Guinea.

In due course, Emperor expects to make more a detailed announcement regarding its future strategy.

“We will provide ongoing support for the improvements that are being implemented at the Tolukuma mine,” Gordon said.

In connection with the Porgera transaction, Emperor has granted Barrick the option of subscribing for up to 153,325,943 Emperor shares (approximately 13% of Emperor’s capital, post issue) at any time prior to the date that is 10 days after the Emperor shareholders meeting to be held to consider the transaction.

The subscription price for the option is to be determined by the volume weighted average price of Emperor shares on the ASX (Australian Stock Exchange) over the five-trading day period immediately preceding Barrick notifying Emperor of its election to subscribe for those shares.

Governor of Enga province, Peter Ipatas called on the national government to purchase the 20% interest through the Mineral Resources Development Company (MRDC), a state entity that manages assets for resource owners with its K2.4 billion surplus money it has been boasting.

He made the call after hearing strong rumours that Barrick was bidding for Emperor’s 20% interest in Porgera. But his call may have come too late.

Ipatas said the PNG economy has improved a lot on the back of mineral exports and with the windfall gains bringing PNG’s surplus cash of up to K2.4 billion, this money should be used to acquire the 20%.

“The acquisition of these assets would give better returns for the country and resource owners. We as Papua New Guineans must have a major shareholding in Porgera and this is an opportunity for the government. If we don’t get it, then we are missing the boat,” Ipatas said.

Ipatas said if the government acquired the 20%, it should then sell 5% to Mineral Resources Enga, whose shareholders are the Enga provincial government and Porgera landowners.

In February, MRDC expressed interest to bid for Emperor’s 20% interest.

If the bid were to be successful, MRDC would buy the assets and later transfer them to Petromin, a new commercial entity solely owned and managed by the State with interest in all mining and petroleum projects.

DILEMMA: In related developments, the disposal of Emperor’s Vatukoula gold mine in Fiji has left new owners Westech Gold Pty Ltd in a dilemma.

Fiji’s interim government announced last month it will not sign the Vatukoula Rehabilitation and Social Assistance Deed which was to have seen a US$3 million fund set up to assist in the resettlement of the estranged mining community. 

In what is brewing up to be a possible difficult situation, the interim administration expressed concern at Westech Gold’s capital adequacy and also announced it wants the deed to look at a number of issues including royalties and tax.

“Little information has been provided about Westech Gold. We are concerned that it may have only nominal paid-up capital and little in the way of immediately available resources to call upon to fund working capital or indeed to fund any capital expansion, meet liabilities and the like,” said Fiji’s interim attorney-general Aiyaz Sayed-Khaiyum.

“Information provided by Westech so far as to the manner in which it will fund the project is positive but substantially lacking in detail.”

Fresh talks among the three parties on the components and conditions in the deed are expected soon. Should a stalemate ensue, Saiyed-Khaiyum said the interim government is prepared to revoke the mining lease that Westech now holds by virtue of its purchase last month of Emperor Australia Pty Ltd and Emperor Finance Ltd, the Australian incorporated subsidiaries of Emperor Mines Ltd and holders of the Fiji incorporated Emperor Gold Mines Ltd shares.