Barrick Raises $3 Billion in Three-Part Bond Sale to Refinance

Barrick Gold Corp., the most indebted miner of the precious metal, raised $3 billion in a three-part bond offering to refinance debt as lower gold prices reduce profitability.

Barrick sold $650 million of 2.5 percent, five-year year notes to yield 185 basis points more than similar-maturity Treasuries and $1.5 billion of 4.1 percent, 10-year notes with a relative yield of 245 basis points through its parent company, according to data compiled by Bloomberg. The Toronto-based firm also issued $850 million of 5.75 percent, 30-year securities at a 285 basis-point spread through its North America Finance division. Proceeds from the sale will be used to help refinance its $14.8 billion in total debt.

The miner last sold new bonds May 9, issuing $2 billion in 10- and 30-year maturities, according to data compiled by Bloomberg. Its $1.25 billion in 3.85 percent notes due April 2022 traded at 100.2 cents on the dollar to yield 3.83 percent April 26, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. The securities had traded as high as 107.9 cents on the dollar last year.

Standard & Poor’s dropped its credit rating on the company April 26 to BBB, the second-lowest investment grade, with a negative outlook, citing the company’s intention to issue debt and interruptions at a South American mine. Barrick was cut one level by Moody’s Investors Service on April 24 to Baa2, equivalent to S&P’s rating.

Higher production costs and falling gold prices have lowered Barrick’s gross margin to 47.4 percent in 2012 from 56.2 percent a year earlier, Bloomberg data show. The company burned through $930 million in 2012 and is expected by analysts in a Bloomberg survey to consume $825 million more this year, reversing free cash flow of $342 million in 2011. Gold has fallen 22 percent since peaking at $1,900 an ounce in September 2011.

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