02/13/2012 10:17 EST | Updated 04/14/2012 05:12 EDT

Barrick looks to sell stake in Highland Gold, Russian gold miner says

Barrick Gold Corp. (TSX:ABX) is pulling out of Russia, with plans to sell its 20.4 per cent stake in Russian gold miner Highland Gold Mining Ltd.

Highland Gold said Monday that Barrick has decided that its investment in the company is not core to its operations.

"Barrick intends to divest its shareholding in Highland in an orderly process which delivers proper value to Barrick and, accordingly, supports the interests and aims of Highland and its shareholders," Highland said in a statement.

Highland Gold shares were down about five per cent in trading on London's AIM market. Based on the company's share price Monday, Barrick's stake was worth about $170 million.

Barrick first acquired a 10 per cent stake in Highland Gold in 2003 and would later increase its holdings as well as open a project office in Moscow and appoint a regional vice-president to lead development in the region.

By 2005, the company had a 20 per cent stake in the Russian gold miner.

John Ing, president and chief executive of investment firm Maison Placements Canada, said Barrick is pruning its operations and Highland Gold has never been considered a core holding.

"Russia has always been a difficult place for miners," Ing said.

Ing also noted that Barrick often likes to be control of the properties it owns and that wasn't the case with just a 20 per cent stake.

"This was a minor holding," he said.

Highland Gold, which has three operating mines, one development project and five exploration properties, said Barrick and Highland's largest shareholder, Primerod International Ltd., have agreed to work together on the sale.

Primerod is controlled by Millhouse Capital, the investment firm run by Russian billionaire Roman Abramovich, who also owns the Chelsea Football Club.

Barrick declined to comment Monday.

The world's largest gold producer is expected to report its fourth-quarter and 2011 results on Thursday.

The average analyst estimate is for a fourth-quarter profit of $1.28 per diluted share and $4.85 per diluted share for all of last year, according to those polled by Thomson Reuters.

Ing noted that Barrick reported record results for its third quarter, but since then the price of gold has backed off.

"The third quarter was probably their peak quarter," he said.

However, Ing called Barrick a "cash-generating machine" and said it still has plenty of room to increase its dividend, adding that the gold miner pays a much smaller portion of its earnings to shareholders than rival BHP Billiton.

The pullback from Russia comes as Barrick works to develop several large projects, including Pueblo Viejo in the Dominican Republic, Pascua-Lama on the border between Chile and Argentina and Cerro Casale in Chile.

Barrick is also working to develop the Donlin Gold project in Alaska, which it holds jointly with NovaGold Resources (TSX:NG).

Barrick owns and operates gold mines in Canada, Peru, and Australia and has major projects in the Dominican Republic, Nevada and on the Argentina-Chile border.

Shares in the company were down 35 cents at $47.90 on the Toronto Stock Exchange in morning trading Monday.