A goldsmith displays gold bars at his shop in Riyadh October 12, 2009. Africa Barrick Gold (ABG) has announced that it is acquiring rights to prospect for gold in western Kenya at a cost of Sh2.67 billion. Photo/ File
What you need to know:
Africa Barrick Gold (ABG) has announced that it is acquiring rights to prospect for gold in western Kenya at a cost of Sh2.67 billion.
The company has applied to buy-out Aviva Mining (Kenya) Limited’s prospecting rights in Nyanza and Western provinces where recent activity has found large reserves of gold.
The deal also hands ABG access to Aviva Mining’s right to earn up to 75 per cent interest in a second joint venture with Advanced Gold Corporation.
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 the transaction closes.
The ongoing transformation of Kenya’s nascent mining sector into a multi-billion- shilling industry has been boosted by the entry of a foreign company into the search for gold.
Africa Barrick Gold (ABG) has announced that it is acquiring rights to prospect for gold in western Kenya at a cost of Sh2.67 billion.
The company, which is listed on the London Stock Exchange, has applied to buy-out Aviva Mining (Kenya) Limited’s prospecting rights in Nyanza and Western provinces where recent activity has found large reserves of gold.
Aviva (K) is a subsidiary of Aviva Corporation Limited, which is listed on the Australian Securities Exchange (ASX) and the Botswana Stock Exchange.
“There is growing interest in our gold mining sector because of success that the companies prospecting on the ground have realised in the recent past. It is a sign of confidence that the Kenyan gold mining business has potential supported by a good business environment,” said Moses Masibo, the commissioner of geology and mining.
The announcement came five months after GoldPlat made the initial shipment of products from Trans Mara, catching the attention of international rivals.
“With 649,804 oz of gold now quantified, we have exceeded the 500,000 resource base targeted for 2012 and achieved a dramatic 520,502 oz increase on our initial resource estimates published in 2009,” GoldPlat’s outgoing CEO Demetri Manolis said in June.
Mining industry insiders said such information excited interest among foreign firms and investors looking for entry into the lucrative and stable gold market away from stock market volatility.
Gold prices in key futures markets such as the US Wednesday climbed marginally to about $1,604.10 an ounce buoyed by entry of investors nervous of the uncertain global economic outlook.
Barrick said the planned acquisition would give it the 51 per cent stake that Aviva Mining (K) holds in a joint venture with Lonmin Plc.
The deal also hands 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 assets — SL266, SL266 and L267 — situated in Western Province’s Bukura, Sigalagala and Rosterman, respectively.
“This acquisition represents the first step in expanding our footprint out of Tanzania and building our future growth pipeline,” ABG’s CEO Greg Hawkins said, adding that the acquisition makes an attractive entry into an under-explored and highly-prospective land.
Stable government
“Whilst Kenya is a relatively new mining destination, it has a solid transport infrastructure, a stable government and ABG has an established supply chain in the country,” he said.
As part of the deal, ABG is 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 gets the instrument confirming the existence of the indicated three million ounces of gold from 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 the transaction closes.
Aviva said it expects the deal to boost its cash reserves and help it pursue coal projects it has lined up in Botswana.
“Your directors believe that the transaction with result in a number of benefits,” Aviva chairman, Geoffrey Loftus-Hill said in a call for a shareholders’ meeting scheduled for September 11 in Perth, Australia to approve the acquisition.
He said the deal would also help the company to avoid raising additional funds and dilute shareholder interests at a time there is significant aversion to risk in global financial markets.
Francis Wangombe, who heads of the Competition Authority, confirmed the two companies applied for the acquisition. “We have the application but we have not yet reached a verdict. We will do that as soon as our analysis is completed,” he said.
The acquisition is expected to help ABG deal with uncertainties in Tanzania in the wake of tighter tax policies being pushed by the government.
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