Chinese firm eyes Kenyan gold company

• Canada’s Barrick Gold confirmed Thursday that it was in talks to sell a 74 per cent stake in London-listed Africa Barrick Gold (ABG) to Beijing-based China National Gold Group Corporation.
• If successful, the deal would hand the Chinese firm a stake in the country’s gold mining sector because ABG has already announced that it is buying out Aviva Mining (Kenya) Ltd’s prospecting rights in Nyanza and Western provinces.
• The deal could also signify China’s resolve to grow its presence in Africa’s gold prospecting business as the Asian nation attempts to satisfy growing demand for the mineral by investors in its domestic market.

A giant Chinese firm could soon enter into the country’s gold mining industry through a planned purchase of stakes in a rival London-listed company that has already secured exploration rights in western Kenya.

Canada’s Barrick Gold confirmed Thursday that it was in talks to sell a 74 per cent stake in London-listed Africa Barrick Gold (ABG) to Beijing-based China National Gold Group Corporation.

“Discussions are at an early stage, and there can be no certainty that these discussions will result in the acquisition of all or part of Barrick’s holding in ABG,” Barrick Gold, the world’s largest miller of the mineral said in a statement.

If successful, the deal would hand the Chinese firm a stake in the country’s gold mining sector because ABG has already announced that it is buying out Aviva Mining (Kenya) Ltd’s prospecting rights in Nyanza and Western provinces where recent activity has found huge reserves of gold.

READ: UK company buys Kenya gold rights for Sh2.7bn

The deal could also signify China’s resolve to grow its presence in Africa’s gold prospecting business as the Asian nation attempts to satisfy growing demand for the mineral by investors in its domestic market. China has a small presence in Africa’s gold mining industry.

Aviva (K) is a subsidiary of Aviva Corporation Ltd listed on the Australian Securities Exchange (ASX) and the Botswana Stock Exchange.

ABG said the planned acquisition would hand it a 51 per cent stake that Aviva Mining (K) presently holds in a joint venture with Lonmin Plc.

The deal would also hand ABG access to Aviva Mining’s right to earn up to 75 per cent interest in a second joint venture with Advanced Gold Corporation.

The principal assets of the present joint venture between Aviva and Lonmin Plc are two special licences — SL123 and SL213 —located in Nyanza province’s Ndori and Siaya areas respectively.

The second joint venture between Aviva and Advanced Gold has three main assets —SL265, SL266, and L267 — in Western province’s Bukura, Sigalagala, and Rosterman, respectively.

As part of the deal, ABG plans to offer Aviva an initial cash consideration of Sh1.73 billion (A$20 million) and an additional Sh867.6 million (A$10 million) once it offers an instrument confirming the existence of the indicated three million ounces of gold in the targeted mines.

ABG has also accepted to provide an additional Sh86.7 million (A$1 million) to Aviva (K) to cover the cost of an agreed exploration programme from June 1, 2012 until when the transaction closes.

Aviva said that the deal would boost its cash reserves and help pursue coal projects which it has lined up in Botswana. Analysts said that the acquisition would help ABG deal with uncertainties in the Tanzania market in the wake of tighter tax policies being pushed by the government.

“In our opinion, the principal risks of operating in Tanzania can be divided into those related to the country’s taxation and royalty policies and those related to operational issues facing mines in the country.

As with other global mining jurisdictions, we believe that the dialogue surrounding increased taxes and royalties is set to continue in Tanzania,” analysts at CIBC World Markets said.

aodhiambo@ke.nationmedia.com