Barrick Reaches Agreement in Principle on Pueblo Viejo
Barrick Gold Corporation (ABX) announced that Pueblo Viejo Dominicana Corporation (:PVDC) has reached an agreement in principle with the Government of the Dominican Republic regarding amendments to the Pueblo Viejo Special Lease Agreement. The Pueblo Viejo mine is operated by PVDC. Barrick owns about 60% of PVDC with Goldcorp Inc. (GG) holding the balance.
The agreement in principle was reached after successful discussions between the local government and PVDC for about eight months. It preserves the economic value of the Pueblo Viejo mine. The agreement in principle will also address the fiscal objectives of the Dominican Republic.
If the proposed amendments are implemented, revenues to the government will increase through a number of proposed changes to the lease agreement.
Based on the proposed amendments, it is expected that that the estimated cash flows from the mine will be split equally between PVDC and the government from 2013 to 2016. Thus, tax revenues to the government will be about $2.2 billion over this period at a gold price of $1,600 per ounce.
The proposed amendments are subject to the negotiation of a Definitive Agreement, which will require the approval of the Boards of Barrick and Goldcorp along with the project lenders. The amendments will also require the approval of the Congress of the Dominican Republic.
The local government has also reaffirmed its commitment to facilitating the timely granting of permits and other requirements necessary for the ongoing operations at Pueblo Viejo.
Barrick, which is among the prominent players in the gold-mining industry along with Goldcorp., Kinross Gold Corporation (KGC) and Newmont Mining Corporation (NEM) currently retains a Zacks Rank #5 (Strong Sell).
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