Barrick Gold Inc. is taking junior exploration company New Gold Inc. to court to try to derail its deal to sell a 70 per cent stake in the El Morro copper-gold project in Chile to Canadian mining rival Goldcorp Inc.
Barrick had agreed in October to buy the El Morro stake from its owner, Anglo-Swiss miner Xstrata PLC, for $465-million (U.S.). However, that bid was scuttled when New Gold, the minority stakeholder in El Morro, claimed right of first refusal to Xstrata's stake and structured a deal with Goldcorp.
Barrick, the world's biggest gold miner, said on Wednesday it has filed a claim in Ontario Superior Court that alleges New Gold broke Chilean law when it essentially transferred its right of first refusal on the stake to Goldcorp in a $513-million deal announced last week.
New Gold holds the 30 per cent of the project not owned by Xstrata and has the right to match any offer for Xstrata's 70 per cent stake.
"New Gold's purported exercise of the right of first refusal is illegal, defective and ineffective under the laws of the Republic of Chile as well as under the terms of the El Morro shareholders agreement," Barrick said in a statement of claim obtained by Reuters.
Representatives of New Gold and Goldcorp could not be reached for comment.
El Morro is an advanced-stage copper-gold project in north-central Chile. It holds reserves of 5.7 billion pounds of copper and 6.7 million ounces.
In its deal with New Gold, Goldcorp agreed to advance $463-million to allow New Gold to match Barrick's offer and buy the Xstrata stake.
After the acquisition by a New Gold subsidiary, Goldcorp was to acquire that subsidiary and pay New Gold $50-million in cash upon closing the deal.
In its statement, Barrick said the deal was "an improper attempt to circumvent limitations on the transfer of interests," and represents an attempt to "induce improperly and unlawfully a breach of the sale agreement between Barrick and Xstrata Copper."
It is seeking an injunction prohibiting New Gold from attempting to acquire any part of the Xstrata El Morro stake, as well as damages and all profits or benefits incurred by New Gold as a result of the deal, including the $50-million payment from Goldcorp.
Barrick said it has been informed by Xstrata that it does not intend to go ahead with the sale to Barrick, in light of the Goldcorp deal.
But Barrick said Xstrata is contractually obliged to complete the sale within 15 business days of Jan. 12. Barrick said it is ready and able to complete the acquisition.
It also said New Gold's right of first refusal has now expired, meaning it cannot enter into any new deals to acquire the Xstrata stake.
The El Morro project is in the same region as Barrick's Veladero mine, as well as its Pascua Lama and Cerro Casale projects, and the miner hopes to enjoy cost savings from their proximity.
Goldcorp's biggest assets are in Ontario and Mexico, and the company - the world's No. 2 gold miner by value - had hoped to establish a new presence in Chile.
The battle and apparent frosty relations between Barrick and Goldcorp - who are partners on the Pueblo Viejo project in the Dominican Republic - come as a scarcity of large pure-gold deposits forces larger gold players to increasingly embrace deposits high in base metals.