By BRIAN GOMEZ in Sydney
HIGHLANDS Pacific has agreed to sell its troubled Kainantu gold mine in Eastern Highlands to Porgera mine owner and operator, Barrick Gold, for US$141.5 million (K412 million).
Industry sources told The National the deal had been sealed in recent days and following Monday’s suspension of Highlands Pacific on the Australian Stock Exchange and the PNG Government has been informed of the decision.
The Kainantu operations generated unprecedented losses for Highlands Pacific which, together with outstanding gold hedging contracts, threatened the financial viability of the company.
The sources said the deal represented a win-win situation for Highlands, giving newly-appointed managing director John Gooding significant cash to seek out new opportunities.
Highlands is expected to use revenue from sale of the mine to close its hedging book and pay off all debts, ending up with around US$30 million in cash for future initiatives.
Newly-appointed executives and mine staff at Kainantu will be retained by Barrick, the world’s largest gold mining company, which can be expected to accelerate exploration drilling to increase mine production.
There are possible synergies for Barrick which could quickly turnaround operations at Kainantu.
Highlands presently ships gold concentrate to a Japanese smelter but Barrick could well handle these concentrates at its large and sophisticated Porgera gold operation.
With cash in the bank, Highlands is expected to seek opportunities in advanced exploration or other mining projects in the Australian and Asia Pacific region.
It is also likely to forgo earlier plans to sell off its highly-valued stake in the Ramu nickel mine, which will begins production in two years.
It will also pursue future development of its huge Frieda River copper-gold deposit.
Highlands recently stunned the market with a US$113.9 million (K337 million) loss for the half year to June 30, including an operational loss at the mine of US$16.2 million (K47.9 million).
Industry sources confirmed that Kainantu continued to struggle from severe mine dilution problems although mill throughput had increased from 100,000 tonnes a year to 250,000 tonnes a year under Gooding.
Gold production has also more than doubled to around 1,000 ounces a week but mine grade has remained stubbornly below projected levels of around eight grams of gold per tonne.
The sources said the takeover of Kainantu by Barrick should be completed by mid-December.
Highlands Pacific share prices, which recently slid to six-year lows of around A$0.12, can be anticipated to rally strongly following announcement of the Barrick deal.