Incredible deal in the gold mining space this week. With a completely unknown player emerging from the wings to pick up one of the world’s most iconic mining projects.
That’s the Kalgoorlie superpit mine in Western Australia. One of the world’s largest operations — producing a whopping 800,000 ounces per year for current owners Barrick Gold and Newmont Mining.
Barrick however, has decided it wants to exit Australian mining. And this week struck a deal to sell its 50% stake in the Kalgoorlie mine — to a Chinese property developer.
Chilton Capital's REIT Composite was up 6.1% last month, compared to the MSCI U.S. REIT Index, which gained 4.4%. Year to date, Chilton is up 6.3% net and 6.5% gross, compared to the index's 8.8% return. The firm met virtually with almost 40 real estate investment trusts last month and released the highlights of those Read More
The acquirer in question is Minjar Gold — a subsidiary of Shanghai-listed real estate firm Shandong Tyan Home. With that company saying it will pay $1 billion to get into the gold business by picking up the Kalgoorlie ownership.
The deal has reportedly stunned the mining industry. With this out-of-nowhere offer coming in much richer than competing bids that had been on the table from major miners like Newcrest Mining.
That’s yet another reminder of the massive sums of cash available in China for global resource M&A. With players here able to pay much more than Western counterparts that are right now looking at assets coming available.
It’s also an interesting illustration of the appetite for gold in China. Showing that even professionals in industries completely outside mining have a drive to get into the bullion production business.
One question around the deal is how Shandong will fund the purchase. With the company’s current market capitalization totalling just $1.8 billion — only slightly above the $1 billion acquisition price.
Likely the cash will come through some form of debt provided by Chinese banks. Which would be an important demonstration that China’s lenders are still willing to back big deals in the mining space — even when spearheaded by non-mining investors.
The biggest selling point for the incoming buyers here may be the fact that the other 50% of Kalgoorlie is owned by Newmont — giving the Chinese owners a reliable source of operating expertise. Watch to see if the deal gets completed, and where the money comes from. And then how the working relationship between Newmont and Shandong pans out.