Barrick Worth $59 as JV in Pakistan Approved

Barrick Gold Corporation (NYSE:ABX) recently announced that its joint venture with Antofagasta – the Tethyan Copper Co. (TCC) – is likely to win an exploration license at the Reko Diq site in Pakistan. ((Antofagasta, Barrick to win Pakistan rights -govt, Reuters)) Tethyan will likely have a 75% interest in the project while the remaining 25% will rest with the government. Barrick is the world’s largest gold mining company. Headquartered in Toronto, it competes with other mining companies such as Newmont Mining (NYSE:NEM), AngloGold Ashanti Ltd. (NYSE:AU), Goldcorp Inc. (NYSE:GG) and Freeport McMoran Copper (NYSE:FCX).

Our $59 price estimate for Barrick Gold is roughly 30% ahead of market price.

The capital investment for developing the Reko Diq region into a world class copper-gold open-pit mine is valued at $3.3 billion. There is close to 5.9 billion tons of mineral deposits in the region with an average copper grade of 0.41% and gold grade of 0.22 grams a tonne. Last year, TCC completed exploration activities in the area and submitted its mining feasibility report to the government. The JV now plans to set up its mining facilities in the region. If given the permission to mine, Tethyan Copper will sell the concentrate from Reko Diq to the provincial government on a commercial basis.

The project has been under controversy in the past due to the outrage caused by the locals expressing concerns over outsiders exploiting the resources. The locals have waged a low-level revolt over control of Baluchistan’s resource base for long. The Pakistan media had also raised concerns over the project being undervalued and claimed that the estimated resources are far less than the reported numbers – leading to a stay being ordered on any further developments in the projects early this year.

With matters now resolved, the companies are looking forward to develop mining base in the region. ^[1] Moreover, in a recent development, the Baluchistan government earmarked close to $99 million for setting up a copper-gold refinery in the area. Analysts believe that the government may make it necessary for TCC to separate the metals from the ore in Balochistan itself – so that the government can assess the real value of the product before selling it in the open market. ^[2]

Barrick Gold has increased its focus on copper in the recent past due to the increasing demand. This was highlighted by its bid for Equinox Minerals. Barrick’s share of indicated and inferred copper resources from the project are 11.7 billion pounds and 8.4 billion pounds respectively and its share of measured and indicated and inferred gold resources will be 9.5 million ounces and 6.4 million ounces, respectively.

See our complete analysis for Barrick Gold

1. Barrick & Antofagasta Joint Venture—Tethyan—in Limbo at Reko Diq, Energy Digital [↩]
2. Rs 8.5 billion earmarked for refinery at Reko Dik, DailyTimes.pk [↩]