Barrick Gold Corp. (ABX), the world’s largest producer of the metal, plans to sell shares to raise as much as $3.45 billion to help reduce its debt, which has increased this year as the price of the commodity declined.
It agreed to sell 163.5 million shares for $18.35 apiece in a so-called bought deal that’s being underwritten by a group led by RBC Capital Markets, Barclays Plc and GMP Securities LP, Toronto-based Barrick said today in a statement. There’s an over-allotment option for the sale of an additional 24.5 million shares, the company said.
Barrick has come under pressure this year after the price of gold fell 21 percent. Chief Executive Officer Jamie Sokalsky has explored cash-raising options including a strategic equity investment, a sale of a stake in its copper business and selling a stale in its $8.5 billion Pascua-Lama project to a state-backed Chinese investor, people with knowledge of the matter said yesterday. Barrick said earlier today it will suspend construction work at Pascua-Lama to help conserve cash.
The announcement of the share sale was made after the close of regular trading in New York, where Barrick fell 5.4 percent to $18.34 at 6 p.m.
Barrick plans to use $2.6 billion from the stock sale to buy back bonds. It will use $1.1 billion to repurchase $700 million of 1.75 percent notes due 2014 and $350 million of 4.875 percent notes, also due in 2014.
A further $1.5 billion will be used to buy back bonds from 10 issues due between 2015 and 2023, with priority given to notes with shorter maturities, the company said in a separate statement.
Even before today’s announcement, Sokalsky had chosen a series of measures to counter the gold decline and rising mining costs, including the sale of some mining and energy assets. Barrick took $8.7 billion of writedowns in the second quarter and cut its dividend.
Long-term debt was $14.6 billion at the end of the third quarter, up from $12.1 billion at the end of 2012. Barrick said in a separate statement today before announcing the stock sale that options to improve liquidity included drawing down $4 billion available on a credit facility, further asset sales, and selling debt or equity either in the public markets or to private investors, a course of action that may include the creation of a strategic partnership.
Barrick said today it’s targeting $500 million of additional annual savings from measures including an organizational restructuring, which involves cutting 1,850 jobs.
Today It reported third-quarter earnings excluding tax adjustments and foreign-exchange losses of 58 cents a share, topping the 50-cent average of 20 estimates compiled by Bloomberg. Sales declined 12 percent to $2.99 billion, beating the $2.91 billion average estimate.
The suspension of work at Pascua-Lama will cut capital spending in 2014 by as much as $1 billion and improve near-term cash flows.
The project is located more than 12,000 feet (3,657 meters) up in the Andes mountains on the Argentina-Chile border and was already partially halted amid concerns from local groups about potential water contamination. Barrick said all activity except that needed for environmental protection and regulatory compliance will cease, with a restart depending on future costs, gold prices and the regulatory and legal outlook.
Barrick has struggled with the project, its sole mine-construction project, amid ballooning costs, delays and environmental challenges. Pascua-Lama was originally expected to cost no more than $3 billion when construction was approved in 2009.
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