Barrick Gold has reportedly been in discussions with key investors in First Quantum Minerals to assess their backing for a potential takeover, Bloomberg reported.
This move comes as First Quantum was hit by the abrupt shutdown of its flagship Cobre Panama mine in Panama, significantly reducing its market value.
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People privy to the matter told Bloomberg that Barrick CEO Mark Bristow had contacted some of the largest shareholders of First Quantum late last year.
The talks, which were private, have not led to a clear indication of whether Barrick will make an offer.
However, Barrick is said to have ambitions to grow in the copper sector, suggesting a strategic move to become one of the top copper producers in the world.
First Quantum was weakened by the closure of its most profitable asset, the Cobre Panama mine, by Panamanian authorities.
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By GlobalDataThis vulnerability has potentially opened a door for Barrick, which claims that it can resolve the issues in Panama and effectively manage First Quantum’s mines.
Bloomberg noted that Barrick had met with First Quantum’s largest shareholders including the Capital Group, which owns a 22% interest, and China’s Jiangxi Copper, which owns an 18% interest.
Both Barrick and First Quantum have declined to comment on the matter.
The copper miner has been a potential acquisition target for several major mining companies, especially because of its Cobre Panama mine, one of the newest and largest copper mines.
However, the Panama project has become the company’s Achilles’ heel, with production halts due to protests and legal challenges leading Panama’s Supreme Court to declare the company’s contract to operate the mine as unconstitutional.
The turmoil has led to a sharp decline in First Quantum’s share price, wiping out more than 60% of its value last year, bringing it to around $6.8bn (C$9.08bn).
In contrast, Barrick, which is valued at $30bn, aims to become a significant copper producer with projects such as the Reko Diq copper mine in Pakistan.
A potential offer from Barrick is expected to put pressure on First Quantum’s management as they struggle to compensate for the loss of their primary profit source.
