Glencore plans to sell option in Falco's Horne gold project -sources (updated)

Falco Resources

16/06/2016 14:06

(Adds detail on companies, deal) 
    By Freya Berry and Barbara Lewis 
    LONDON, June 16 (Reuters) - Glencore  GLEN.L  is planning to 
sell its option in a gold mine owned by Falco Resources  FPC.V , 
two sources familiar with the situation said on Thursday, as the 
mining group and commodities trader presses ahead with asset 
sales. 
    London-listed Glencore has appointed BofA Merrill Lynch 
 BAC.N  to sell the 65 percent option in the Horne 5 gold 
project in Quebec, the sources said, and potential buyers have 
been contacted.  
    Falco has calculated that the undeveloped Horne 5 deposit 
could have a net present value (NPV) of about $667 million, 
assuming a gold price of $1,250 an ounce and certain currency 
exchange conditions, according to its website. 
    Spot gold  XAU=  was up 1 percent at $1,303.91 an ounce at 
1148 GMT on Thursday. 
    Situated close to Canada's Val d'Or, the asset is likely to 
appeal to Canadian miners already familiar with the region. 
Barrick Gold  ABX.TO , Alamos Gold  AGI.TO  and Agnico Eagle 
Mines  AEM.TO  are among those who could be interested, one of 
the people said, cautioning that no deal was certain.  
    Falco is the full owner of the project. However Glencore, 
which originally inherited the mine when it bought Xstrata, has 
a right to buy back a 65 percent stake.   
    That right was triggered when Falco released a positive 
economic assessment in May on the low-cost Horne project. But 
Glencore does not see gold as core and is seeking to sell the 
option, one of the sources said.  
    The mine would average around 236,000 ounces a year of 
production, making it a significant gold producer in Quebec. 
    Glencore declined to comment. BofA Merrill Lynch and Falco 
Resources did not immediately respond to requests for comment.  
    Glencore has 90 days to sell the option outright. But if a 
deal cannot be struck in that period then the miner would likely 
opt to buy the stake and then sell it on in an auction, the 
source said.  
    Like other mining majors, Glencore has been looking to sell 
assets to reduce high levels of debt following a plunge in 
commodity prices and a fall in Chinese demand for raw materials. 
    The Horne 5 deposit sits immediately below the former 
producing Horne Mine, which was operated by Noranda Inc from 
1926 to 1976, according to Falco's website.  
 
 (Additional reporting by Susan Taylor and John Tilak in 
Toronto; Editing by David Goodman and Elaine Hardcastle) 
 ((freya.berry@thomsonreuters.com; +44207 5420214; Reuters 
Messaging: freya.berry.thomsonreuters.com@reuters.net)) 
 
Keywords: GLENCORE FALCO RESOURCES/M&A