China’s International Investment Push In Gold Continues With This $1B Deal

I wrote yesterday about big international interest returning to Brazil’s oil sector. And this week the head of the Brazil-China chamber of commerce confirmed that Chinese firms are also looking at entering Brazil oil projects. 

And elsewhere in South America, we got a reminder of the big capital Chinese companies can bring to resource deals. Through a major transaction struck by producer Shandong Gold in Argentina. 

Shandong agreed to purchase a 50% stake in the Valedero gold mine near the Chile-Argentina border — from current owner Barrick Gold. With the Chinese firm paying $960 million for the interest. 

That’s a big deal financially. And also puts Shandong into partnership with Barrick, the world’s largest gold firm. 

In fact, the two companies said they are looking to expand their cooperation from here. Noting that “step two” of their deal will include Shandong studying a joint investment in developing the Pascua Lama gold deposit that Barrick owns on the Chile-Argentina border. 

And it doesn’t stop there. With the firms saying they are further contemplating a third step in the deal, where Shandong will work with Barrick to explore additional project opportunities in the El Indio gold belt of Chile. 

All of which adds up to a potentially huge partnership between the two firms. One which has apparently been in the works for some time now, based on Barrick’s comments that discussions on the deal began a year ago in April 2016. 

All of these transactions make a lot of sense for Shandong. With the company getting access to a completely new geographic region — in line with the strategy for international expansion recently laid out by management. 

Shandong also gets Barrick’s operational and exploration expertise. While Barrick in return gets something it badly needs: cash. 

The Pascua Lama project is a perfect example of where Chinese capital and Western experience can work together. With the deposit representing a tremendous exploration success — which then proved to be a nightmare in development, due to exploding capital costs. 

The project has thus been stalled the last few years due to Barrick’s tight budgets. But with Shandong’s treasury, it might now see a second coming. 

Watch to see how well the two groups are able to work together, and how successful the results will be. If the deal works, it could become a template for other international Chinese partnerships in mining. 

Here’s to new friends,

Dave Forest

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