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Update 1: Barrick Gold Buys Celtic Resources Stake

Update 1: Barrick Gold Buys Celtic Resources Stake < News < Bet On Markets

Canada’s Barrick Gold Corp. said Thursday it was acquiring a 9 percent stake in London-based Celtic Resources Holding Ltd. — a deal that potentially gives the Canadian gold giant major clout ahead of next year’s auction of Russia’s biggest gold deposit.

The $28 million deal gives Toronto-based Barrick — one of the world’s largest gold producers — the right to put two members on Celtic’s board. It also lays the groundwork for another deal that would put Barrick at a major advantage going into the eagerly anticipated auction of Russia’s Sukhoi Log deposit.

One of the largest untapped gold fields in the world, Sukhoi Log has some 22 million troy ounces of reserves. Its auction will be closely watched by gold investors worldwide, according to Russian investment group Troika Dialog.

«For Celtic this strengthens their negotiating position. Everyone is waiting for the negotiations to close with Alrosa. This will be a very powerful alliance,» said Vasily Nikolayev, an analyst at Troika.

The deal, announced Thursday by Barrick President and Executive Director Greg Wilkins, gives Barrick the option to purchase 51 percent of another Russian gold deposit_ the 8.1 million troy ounce Nezhdaninskoe field.

Celtic owns 50 percent of the Nezhdaninskoe field and is negotiating to acquire the other half from Russia’s diamond mining monopoly, Alrosa.

Alrosa is expected to swap its share in Nezhdaninskoe and other gold fields interests for a stake in Celtic.

That would give Celtic essentially three owners — Barrick, Alrosa, and Celtic’s current owners — and give the venture huge financial clout in bidding for Sukhhoi Log.

Analysts predict Barrick’s acquisition of the Celtic stake will speed those negotiations.

Wilkins also said the deal with complement Barrick and its only current Russian project — a 17 percent stake in Highland Gold Mining Ltd., an international gold miner with properties in Russia.

«The deal with Celtic complements our investments in Highland Gold since both companies presently work different geographical regions,» Wilkins said in a statement.

The lure of Russia’s gold fields is strong: the Soviet Union spent millions of dollars on their geological exploration, meaning most of the hard work has been done for prospective developers.

«The Russian gold market is different: you know where it is you just have to start digging,» said Tim McCutcheon, an analyst at the Aton investment bank. «You have significant volumes of virgin gold fields here.»

New fields can also mean fewer costs lingering from the Soviet era, when factories, smelters and pulp mills were expected to maintain and support everything from roads to nurseries.

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