CALGARY (CP) -- The world's largest gold-mining company is hoping to cope with skyrocketing energy costs by pumping some black gold of its own.
Barrick Gold Corp. [TSX:ABX] is proposing to pay $350 million cash take over Cadence Energy Ltd. [TSX:CDS], a Calgary-based oil producer company that would be able to satisfy about one-quarter of the Toronto-based gold company's needs.
Vincent Borg, a senior vice-president at Barrick, said the acquisition of Cadence would help the company deal with cost pressures from rising oil prices.
''We were interested in the quality, long-life nature of their properties,'' said Borg, adding that Cadence produces approximately 3,600 barrels of oil equivalent each day, 70 per cent light crude oil, with close to 14 years of reserve life in its oil properties.
Borg estimated that Cadence would allow Barrick to match about 25 per cent of its oil consumption, as well as a significant portion of its natural gas consumption.
''We're looking to deal with the cost pressures that higher oil prices present us with these days and into the longer term,'' Borg said.
Cadence's reserves include approximately 18.2 million barrels of oil at an acquisition cost of approximately $20 per barrel, according to Jamie Sokalsky, Barrick's executive vice-president and chief financial officer.
Barrick's unsolicited $6-per-share offer tops a units-and-shares bid from Daylight Resources Trust [TSX:DAY.UN], valued at about $300 million, which Cadence agreed to in May.
Cadence said Monday the conditional proposal from Barrick would be superior to the Daylight offer, but the Cadence board of directors said that ''at this time'' it maintains its recommendation in favour of the Daylight arrangement.
Under that arrangement, Daylight was to pay 0.47 of a trust unit or $5.32 in cash for each Cadence share, with the cash portion capped at $30 million.
''They do say that [Barrick's] is a financially superior proposal, but for the time being they need to give Daylight a chance to consider sweetening their bid,'' said Borg.
Cadence's board has entered into a confidentiality agreement with Barrick to allow five days of due diligence.
Under the plan of arrangement announced May 26, Daylight has the right to match a higher bid for Cadence.
Borg said Barrick will file the required takeover bid documents as soon as possible, and he said Cadence's board will meet to discuss the offer after that.
A Daylight takeover of Cadence, which recently sold its natural gas assets and changed its name from Kereco Energy, would put the Sturgeon Lake South Leduc light oil pool under the control of a single owner for the first time since its discovery in 1953.
Shareholders of Cadence were set to vote on the Daylight offer July 22.
Barrick said its proposed acquisition of Cadence ''is expected to form a long-term strategy to economically hedge oil exposure at lower rates than currently available in the forward market.''
''In addition, the acquisition is expected to have break-even cash flow at oil prices that are less than one-half of current market prices.''
Sokalsky said it follows other energy-input moves including a US$70-million investment in a wind farm in Chile.
Barrick shares closed Monday at $50.43, up 43 cents on a volume of 3,424,984 shares. Cadence shares were up 72 cents to $6.16 on a volume of 2,060,498 shares.
© The Canadian Press 2008
