Barrick Gold Corp. said Thursday that it will pay about $1.7 billion for Rio Tinto subsidiary's 40 percent stake to complete its ownership of the Cortez joint venture in Nevada.
Toronto-based Barrick said that buying out the 40 percent stake will increase its share in proven and probable reserves by 4.6 million ounces to 11.5 million ounces.
Barrick acquired its 60 percent interest in Cortez through its acquisition of Placer Dome in March 2006.
CEO Greg Wilkins characterized Cortez as "a multi-million-ounce deposit with tremendous exploration potential" that is expected to contribute almost one million ounces of gold annually to the company's production within a few years.
The Cortez Joint Venture is comprised of the Cortez mine and the Cortez Hills development project.
Cortez Hills is expected to produce 950,000 ounces to 1 million ounces of gold a year at an estimated cash cost of $280 to $290 an ounce in the first five years of production, the company said.
Barrick's average cash cost in the three months ended Dec. 31 was $375 an ounce, the company said in its earnings announcement Thursday.
The purchase is set to close in the first quarter this year.
"This acquisition reflects the company's strategy of focusing on our core districts, increasing our investors' exposure to gold on a per share basis, and offering investors a quality portfolio with a balanced geopolitical risk profile," Wilkins said in a statement.
Cortez is located about 100 kilometers south of Barrick's flagship Goldstrike property.
Barrick's other mines in Nevada include Bald Mountain, Ruby Hill, Turquoise Ridge, Round Mountain, and Marigold.
"Nevada remains a key focus of our exploration dollars and we see excellent potential on the Cortez property, which shares many of the geological characteristics of our Goldstrike mine," said Alex Davidson, Executive Vice President of Exploration and Corporate Development in a statement Thursday.
Barrick, which reports results in U.S. dollars, also reported Thursday that its fourth-quarter profit jumped 28 percent to $537 million.
Its fourth-quarter net earnings amounted to 61 cents per share diluted, compared with year-earlier earnings of $418 million or 48 cents per share.
Operating cash was particularly strong during the quarter, rising 104 percent to $676 million on production of 2.14 million ounces of gold at a cost of $375 per ounce.
Total sales rang in at $1.92 billion, up from $1.35 billion.
For the full year, Barrick earned a net profit of $1.12 billion or $1.28 per share, down from $1.51 billion or $1.77 per share in 2006.
Adjusted net income from continuing operations, excluding the impact of corporate gold sales contracts in the first half of the year, were $1.73 billion, up from a prior-year $1.56 billion.
Annual sales were $6.33 billion, versus $5.63 billion a year earlier on production of 8.06 million ounces of gold at a cost of $350 per ounce, as well as 402 million pounds of copper.
Barrick rose 53 cents, or 1 percent, to $51.35 in midmorning trading on the Toronto Stock Exchange.
The shares have climbed 38 percent in the past 12 months.