ABX Barrick Gold Corp. (BC) (delisted)

Barrick Gold Corporation (ABX) and its Chilean-based partner Antofagasta are likely to succeed mining rights for a $3.3 billion copper and gold project in Pakistan.

Tethyan Copper Co. (TCC), a joint venture between Barrick Gold and Antofagasta, one of the world's largest copper miners, has been granted an exploration license for the Reko Diq site. Tethyan, formerly a subsidiary of Australia's Mincor Resources, has a 75% interest, and the remaining 25% are with the Balochistan government.

The first stage of the project, which is expected to start production in 2015, would produce 200,000 tonnes of copper and up to 300,000 ounces of gold a year.

Earlier in 2009, Barrick and Antofagasta had announced plans to invest up to $3 billion in a copper and gold mine at Reko Diq in Pakistan's southwestern province of Balochistan.

Baluchistanis rich in natural resources. However, growing anger over outsiders exploiting Pakistan's biggest and poorest province makes it difficult for investors to gain access.

The financial benefits that might accrue from the Reko Diq site are overcoming these concerns. Rights to the nearby Saindak copper project, in the same district of Chagai, have already been sold to the Chinese on a 10-year lease.

According to the data released by Antofagasta, Reko Diq holds an estimated 5.9 billion tonnes of mineral resources with an average copper grade of 0.41% and an average gold grade of 0.22 grams a tonne. No other companies have applied for mining permission.

Last week, the Baluchistan government announced it would set up a facility to refine copper and gold concentrates extracted from Riko Diq. TCC would likely sell the concentrate from Reko Diq to the provincial government on a commercial basis if it gains permission to mine.

In a bid to secure the deal, TCC has also offered to arrange financing for the government's 25% share of investment in the project through a soft loan and pay the interest.

Recently, Barrick reported record results for the first quarter of 2011, driven by higher gold sales volumes and higher prices for both gold and copper. The first quarter reported a net income of $1.0 billion or $1.00 per share. 

Adjusted net income was up 32% year over year to $1.0 billion or $1.01 per share compared with $763 million or $0.78 per share in the prior-year quarter, in line with the Zacks Consensus Estimate of $1.01.

In the first quarter of 2011, total revenue of $3.1 billion was higher than $2.6 billion in the prior-year quarter, but below the Zacks Consensus Estimate of $3.2 billion.  In the reported quarter, gold production was 1.96 million ounces at a total cash cost of $437 per ounce or net cash cost of $308 per ounce, ahead of budget, primarily due to strong performances from Cortez, Goldstrike and Veladeron.

Copper production was 75 million pounds at a total cash cost of $1.25 per pound in first-quarter 2011.

Barrick faces stiff competition from AngloGold Ashanti Ltd. (AU) and Newmont Mining Corp. (NEM).

We maintain our Neutral recommendation on Barrick. Currently, it holds a Zacks #3 Rank (Hold) on the stock.

 
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