Barrick Could Pay $800M for Rio Tinto's Stake in Cortez

Barrick Gold Corp. (ABX) would be the most logical buyer if Rio Tinto (RTP) decides to sell its 40% interest in the world class Cortez gold mine in Nevada, says Citigroup analyst John Hill. Barrick owns the remaining 60% stake and has US$2.5-billion in cash on hand, while the deal could be worth more than US$800-million, he told clients in a note, while acknowledging that Cortez’ bumpy history makes putting a price on it difficult. Rio is looking into asset sales to fund its US$38-billion buyout of Alcan Inc. (AL). Mr. Hill also pointed to Barrick’s recent purchase of an additional 20% stake in the Porgera mine in Papua New Guinea as an example of its willingness to make such a move. “Rio has reportedly negotiated to sell its Cortez stake in the past, prior to the Cortez Hills discovery,” he told clients in a note. “Now, faced with daunting debt, wilting aluminum prices, and jittery credit markets, gold may be the perfect divestiture.” For Barrick, the deal would add low risk and high value gold ounces, could be a catalyst for the company, and hopefully would be followed by a buyback of “value-eroding project hedges,” Mr. Hill said. “Gold’s tepid safe-haven performance during recent credit/equity volatility is disappointing,” he added. “However, demand-side data suggests the gold market is healthier than ever.”