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Barrick Gold (TSX:ABX) (NYSE:GOLD), the world’s second largest producer of the precious metal, has agreed to sell its 90% stake in the Massawa project in Senegal to Teranga Gold (TSX:TGZ), in a stock and cash deal valued at up to $430 million.

Massawa, one of the highest-grade undeveloped open-pit gold reserves in West Africa, is located only 20 km away from Teranga’s flagship Sabodala mine. For that reason, Teranga had been named by experts as the logical buyer of Massawa, ever since Barrick announced it was up for sale as part of its plan to offload $1.5 billion in assets through 2020. 

The purchase includes an upfront payment of $380 million, comprising $300-million in cash and about 20.72-million in Teranga shares. It also involves a contingent payment of up to $50 million based on the average gold price for the three-year period immediately following the closing of the transaction.

After that, Barrick will hold more than 19.1 million Teranga common shares, representing 11.45% of the company’s issued and outstanding shares, and it will have the right to nominate one Teranga director for as long as it retains at least a 10% equity interest in the company.

The mining giant acquired the 4-gram-per-tonne Massawa gold project as part of its $6-billion purchase of Randgold Resources earlier this year.

Barrick president and chief executive, Mark Bristow, said the company had been pursuing the best means of bringing Massawa to account for the full benefit of all stakeholders.

He noted the agreement with Teranga would create a “substantially new” West African gold mining company with significant African ownership.

“Massawa is a good example of an instance where assets we own might be better suited in combination with others,” Bristow said.

Teranga president and chief executive, Richard Young, said in a separate statement that the acquisition was transformational for the company and would enable it to create a top-tier gold complex in Senegal.

“We anticipate that production from the Sabodala-Massawa Complex, together with our Wahgnion gold mine, in Burkina Faso, will increase Teranga’s targeted consolidated annual gold production and reposition Teranga as the next multi-asset, low-cost, mid-tier gold producer in West Africa, one of the world’s premier gold mining regions,” he said.

Based on the project 2018 feasibility study, Massawa holds 20.9 million tonnes of gold grading 3.94gpt for 2.6 million ounces of reserves, using $1,200/oz open pit reserve pricing. It could be explored further to take reserves past 3 million ounces, Barrick had said.

Teranga, which kicked off operations at its $240 million Wahgnion mine in southern Burkina Faso this year, expects to produce between 300,000-350,000 ounces in 2020 and generate more than $100 million of free cash flow at a $1,250 gold price.

The acquisition of Massawa will likely make the company revise its target, leaving it closer to its five-year goal of being a 500,000 ounce-a-year gold miner.

Deal making in the Canadian gold sector has grabbed headlines this year, particularly in the past few weeks. Late last month, Kirkland Lake Gold (TSX, NYSE: KL) (ASX:KLA) announced it was buying smaller rival Detour Gold for C$4.9 billion ($3.7 billion).

Soon after, China’s Zijin Mining said it would acquire Canada’s Continental Gold (TSX: CNL) for C$1.4 billion, and Endeavour Mining (TSX: EDV) made an unsolicited $2.5 billion bid to acquire Egypt-focused gold miner Centamin (LON:CEY) (TSX:CEE) last week.