Barrick to buy Rio's Cortez stake for $1.7 billion

By Cameron French

TORONTO (Reuters) - Barrick Gold Corp (ABX.TO: Quote, Profile, Research) will pay $1.7 billion to buy out Rio Tinto's (RIO.L: Quote, Profile, Research) 40 percent stake in their Cortez joint venture in Nevada, acquiring ownership of the potential million-ounce-a-year gold-mining project, Barrick said on Thursday.

Barrick, the world's top gold producer, announced the deal as it reported a 28 percent rise in fourth-quarter profit on the back of soaring gold prices.

The deal for Cortez comes as Rio (RIO.AX: Quote, Profile, Research) looks to sell assets to whittle down the heavy debt it took on to buy aluminum producer Alcan. Rio owned the Cortez stake through its Kennecott Explorations unit.

Barrick will pay in cash and will see its reserves rise by 4.6 million ounces at a time when top producers have struggled to build up their production pipelines.

"We are very delighted to have that acquisition under our belts," Barrick Chief Executive Greg Wilkins said on a conference call. "That's something that I think people have tried unsuccessfully in the past to acquire."

Cortez should produce between 950,000 ounces and 1 million ounces a year at initial cash costs of $280 to $290.

The joint venture consists of the Cortez mine and the Cortez Hills development project, and is about 60 miles (100 km) from Barrick's Goldstrike property. Construction of Cortez Hills is expected to start later this year, and production should follow about 15 months after that.

Following a rush of takeovers in the past few years, Barrick has shifted to buying up smaller assets, including a 20 percent stake in the Porgera gold mine in Papua New Guinea, and a majority stake in the Cerro Casale project in Chile through its acquisition of Arizona Star.