The unit of Barrick Gold Corp. (ABX) fell as much as 17 percent, the largest drop since Jan. 8, 2013. The parent sold 41 million shares to institutions for $188 million, cutting its stake to 64 percent less than four years after an initial public offering.
“This sale confirms that the parent is an ongoing seller and has been a potential seller since the 2010 IPO left it with more shares than it had hoped,” Citigroup Inc. said. “Having a parent keen to dispose of stock does not help with the image that Barrick has been an uncomfortable investor in Africa.”
African Barrick declined 15 percent to 262 pence by 11:55 a.m. in London, valuing it at 1.2 billion pounds ($2 billion).
Barrick Gold, based in Toronto, sold shares in its African arm for 275 pence apiece, it said yesterday in a statement. UBS AG, JPMorgan Chase & Co. and Royal Bank of Canada managed the sale. The parent had already held talks with China National Gold Group Corp. in 2012 over selling its majority stake, with discussions ending in January of last year without agreement.
Barrick Chief Executive Officer Jamie Sokalsky is seeking to boost profit and returns after gold’s biggest annual drop in three decades last year. He cut output forecasts and spending, and sold about $1 billion of assets in the past eight months. The company also suspended construction of its delayed and over budget Pascua-Lama project on the Argentina-Chile border.
“This transaction allows us to realize some liquidity,” Sokalsky said in the statement. It’s part of the “program to optimize and lower the average cost of our portfolio.”
African Barrick has been dogged by setbacks since it first listed, struggling to meet production targets. When listed, it planned annual output of 1 million ounces by 2014. Instead, the company has posted declines for three years and been surpassed by rivals Randgold Resources Ltd. and Petropavlovsk Plc.
CEO Greg Hawkins quit in August and Brad Gordon was hired as a replacement to try to reverse the company’s fortunes. African Barrick, which operates mines in Tanzania, in January reported its first annual increase in production since listing.
“This is a positive step by Barrick which significantly increases our free float,” Gordon said in a separate statement today. “The placing is a reflection of the increased interest in the business as a result of the progress we are making.”
The company’s shares are still up 13 percent in the past 12 months, while the 30-member Philadelphia Stock Exchange Gold and Silver Index has declined 25 percent.
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