Barrick Gold Corporation (USA) (NYSE:ABX) is debating the sale of what it considers its “Crown Jewel”, Chilean copper mine, Zaldivar. This news comes as the company is in the middle of implementing a staunch cost-cutting program that is designed to make them more appealing to potential investors. The Chilean copper mine is one of the company’s key assets and gets much interest from private eqyuity vehicles. These include Mick Davis’s X2 Resources. Davis is a well-known mining executive and he was the head of Xstrata before it was sold to Glencore. Davis’s company, X2 is looking for mining deals and has risen over $5.6 billion at this point.
The potential sale of the Zalvidar mine could raise as much as $1.5 billion for Barrick. The mine is responsible for producing more gold than any other company. This would be a strong message sent by Barrick as falling commodity prices are forcing mining companies to react strongly to pressures on their balance sheets. The sector has been under intense pressure due to the weakness in wholesale pricing and many companies have been forced to liquidate their most prized assets to stay afloat.
X2 wouldn’t be the only suitor for the high-production mine. Many Chinese groups are interested. These include Minmetals, which bought Las Bambas. Las Bambas was a former Xstrata project and was also the largest copper mine under construction in the previous 12-months. Teck, which is a Canadian mining group, is also looking to make acquisitions and could be a suitor for the mine. At one time, Barrick Gold Corporation (USA) (NYSE:ABX) was the most valuable gold miner on the planet. But years of poor results and failed acquisitions have erased around $2 billion off its market cap. The company has never said it would not sell the Zaldivar mine, and that is leading to the speculation.
The stock is a technical mess right now and should be avoided. The recent sell-off took a heavy toll, and until it regains some positive momentum it isn’t attractive.