Toronto-based Barrick Gold (NYSE: ABX) is unlikely to win a lawsuit filed in Ontario against compatriot miners Goldcorp (TSX: G, NYSE: GG) and New Gold (TSX, Amex: NGD) over the disputed El Morro gold-copper project in Chile, Haywood Securities analyst Kerry Smith told BNamericas.

“I think if Barrick really thought they were going to be successful, they probably wouldn’t have bothered buying the additional 25% of the Cerro Casale gold-copper project [from JV partner Kinross Gold for a total US$474mn],” Smith said.

Last October Barrick reached an agreement with resources group Xstrata (LSE: XTA) to acquire the latter’s 70% in El Morro for US$465mn, a deal that depended on New Gold not exercising its right of first refusal.

However, in January Goldcorp made a deal with New Gold in which it agreed to pay US$463mn for the latter to exercise the right and then transfer the 70% to Goldcorp. Afterwards, Goldcorp paid New Gold an additional US$50mn in cash upon acquiring its Chilean subsidiary, the holder of the El Morro stake. New Gold still has the other 30% of the project.

“Intuitively what Goldcorp did doesn’t seem like it should be precluded in any JV agreement, what they did doesn’t seem illegal,” Smith said. “Barrick seems to be arguing that Goldcorp shouldn’t have been able to loan money to New Gold to exercise the option. Why can’t they do that? Seems like a reasonable move.”

“My feeling is that if Xstrata or New Gold had seen some problem with the JV arrangement that would have prohibited them from doing the transaction the way they did, then they would have cleaned it up a long time ago,” he added.

El Morro’s estimated capex is US$2.5bn. On a 100% basis, the project has proven and probable reserves of 6.7Moz gold and 5.7Blb (2.59Mt) copper.

The full interview with Kerry Smith will be published in this week’s Mining Perspectives, for subscribers only.

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