Barrick Gold Corporation obtains majority rights to the Cerro Casale project in Chile

Barrick Gold in C$773 mln deal for Chilean project

TORONTO (Reuters) - Barrick Gold said on Monday it will acquire Arizona Star Resource Corp in a friendly cash deal worth C$773 million ($805 million) that will give it majority rights to the Cerro Casale project in Chile.

A successful bid by the world's No. 1 gold producer could finally spark development of the massive project, said to be one of the world's largest untapped deposits of gold and copper.

Barrick is offering C$18 per share. Arizona Star's stock was up nearly 21 percent at C$17.76 in afternoon trading, suggesting investors don't expect a rival bid. Barrick climbed 49 Canadian cents to C$41.91 on the Toronto Stock Exchange.

The companies said the bid represents a 27 percent premium to Arizona Star's 20-day volume-weighted average trading price on the TSX's small capitalization Venture Exchange.

The agreement, which includes a C$27-million termination fee, would give Barrick rights to Arizona Star's 51 percent interest in Cerro Casale. Kinross Gold owns the remaining 49 percent.

"Cerro Casale is an attractive, long-life asset that we look forward to adding to our unrivaled project pipeline," Greg Wilkins, Barrick's president and chief executive, said in a statement.

Arizona Star's board has agreed to the offer. The companies said about 35 percent of the target company's shares have already been tendered, including those of Arizona Star's largest shareholder, FCMI Resources Ltd.

A support agreement gives Toronto-based Barrick the right to match any rival offer.

The undeveloped Cerro Casale deposit -- in the Maricunga district of Region III of Chile -- has proven and probable reserves of 1.035 billion tones of ore, containing 23 million ounces of gold and nearly 6 billion pounds of copper.

A successful bid by Barrick for Arizona Star would be good news for Chile as it would likely mean a long-awaited go-ahead for Cerro Casale.

"My impression is that this is going to finally clear the problems that were holding back the project," said Juan Carlos Guajardo, executive director of Chile mining-industry think tank CESCO.

"At low prices this was already a massive project. With inflation in the costs of materials and goods and services, I would calculate the project costs have jumped more than 50 percent."

The cost of developing Cerro Casale was estimated last year at about $2 billion. The project has awaited a start for years, but previous owners, including former gold giant Placer Dome, had failed to get it off the ground due to financing concerns.

"This involves a massive investment and requires serious financial backing, like Barrick has," Guajardo said.

A spokesman said Barrick had no comment on what impact the deposit will have on the company's revenue or earnings, and no estimate on when it would be developed.

"We've got a pipeline of projects that no other major (mining company) light a candle to ... which will continue to sustain the company going forward," Vincent Borg told Reuters.

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