(Alliance News) - Barrick Gold Corp said Monday has entered into an agreement with Shanta Gold Ltd for disposal of its wholly-owned subsidiary Acacia Exploration Kenya Ltd, which owns the West Kenya exploration project.
Acacia Exploration Kenya is part of Acacia Mining, which was on the London Stock Exchange until its takeover by parent Barrick last year.
The company said the consideration for the disposal will be USD7.0 million in cash, approximately USD7.5m in Shanta shares and a 2% life-of-a mine net smelter return royalty relating to the project. Barrick will become Shanta's fifth-biggest shareholder, with a 6.4% stake.
The Canadian mining company said the project is first of the Acacia Exploration Properties in respect of which Barrick has procured a sale. As a result, the company determined that the best sale price obtainable involved a combination of cash and non-cash consideration.
The company said the sales process to dispose of the other Acacia Exploration Properties remain ongoing and may also involve non-cash consideration.
Earlier on Monday Shanta Gold had announced the purchase of gold project in East Africa.
The project, Shanta said, is one of the highest-grade gold projects in Africa, and gives the company a "major" presence in a geologically rich and under-explored gold region.
The West Kenya project has an inferred mineral resource of 1.2 million ounces of gold, at a grade of 12.6 grams of gold per tonne of ore. It covers 1,161 square metres on the Lake Victoria goldfield in north-western Tanzania and south-western Kenya.
Acacia's North Mara gold mine is nearby, as is South African miner AngloGold Ashanti Ltd's Geita mine.
Shanta said some USD55 million worth of exploration has taken place since 2010 at West Kenya. The Rosterman mine, which is within the West Kenya licence area, produced 259,000 ounces of gold in the past.
"The West Kenya acquisition is significant for Shanta Gold, creating an East African gold mining champion with realisable growth prospects and high asset quality across three attractive gold projects," commented Shanta Chief Executive Eric Zurrin.
"Shanta has successfully operated in East Africa for nearly 20 years and this acquisition is a natural extension in terms of geographic footprint, skillset, size and mining method.
"One of Shanta's competitive advantages is being able to operate long hole open stoping operations more efficiently than its peers which lends itself well to the advancement of the West Kenya project," he added.
Shanta Gold shares closed 2.0% higher in London at 11.25 pence each on Monday. Barrick was 1.5% higher at USD18.46 in New York on Monday afternoon.
By George Collard; georgecollard@alliancenews.com; updated by Loreta Juodagalvyte; loretajuodagalvyte@alliancenews.com
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Shanta Gold (SHG)