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Barrick Would Use Proceeds From Asset Sales to Cut Debt

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Nov. 1 (Bloomberg) -- Barrick Gold Corp., in talks to sell a majority stake in its African unit, would use the funds from asset disposals to reduce debt, Chief Executive Officer Jamie Sokalsky said.

“If we were to realize proceeds from the sale of any assets, the first priority from that money would be to reduce our debt,” Sokalsky said today in a telephone interview. “We’d like to get more to a debt-to-total-capitalization ratio of 30 percent or better and a debt-to-Ebitda ratio of about one and a half or better.”

Barrick, the world’s largest gold producer, is reviewing its assets to improve cash flows and returns. There are “opportunities” to optimize the company’s portfolio, which may include selling assets, said Sokalsky, who took over as CEO in June after his predecessor Aaron Regent was fired.

Sokalsky, 55, declined to comment on the progress or timing of talks with China National Gold Group Corp. about a possible sale of Barrick’s 74 percent stake in African Barrick Gold Plc. Toronto-based Barrick disclosed the discussions Aug. 16.

Barrick had total debt of $13.9 billion as of Sept. 30, according to data compiled by Bloomberg. The company had a debt-to-total-capital ratio of 33 percent and a ratio of debt to 12-month trailing earnings before interest, taxes, depreciation and amortization, or Ebitda, of 1.87 at the end of June, the data show.

In July, Standard & Poor’s Ratings Services lowered its credit rating on the company to BBB+ with a negative outlook, from A-, saying Barrick’s higher spending forecasts for the next two years would probably limit its ability to reduce debt. BBB+ is the third-lowest investment-grade rating.

Barrick fell 9.5 percent to C$36.56 in Toronto, the most since Feb. 24, 2009, after the company reported earnings that missed analysts’ estimates and raised the cost estimate for a project it’s building in the Andes. The shares earlier declined as much as 9.4 percent, the most intraday since July 26.

To contact the reporter on this story: Liezel Hill in Toronto at lhill30@bloomberg.net

To contact the editor responsible for this story: Simon Casey at scasey4@bloomberg.net

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