Barrick Debt Insurance Climbs as Gold Price Plunges

The cost to insure the debt of Barrick Gold Corp. increased the second-most among Canadian companies as the price of gold fell to a four-year low.

Credit default swaps tied to bonds of the world’s largest gold producer surged 11 basis points to 199 basis points for five years, close to a 2014 high of 206 basis points.

Gold fell 2.3 percent to $1,171.86 an ounce at 1:45 p.m. in New York. It earlier touched the lowest intraday price since July 2010, as the dollar strengthened after the Bank of Japan unexpectedly boosted stimulus and the Federal Reserve ended asset purchases this week.

If prices sink below $1,100 an ounce and stay there, producers including Barrick, Iamgold Corp. and Kinross Gold Corp. may be downgraded by Standard & Poor’s, the ratings company said yesterday.

“We would want to be patient but if in the event that it’s clear that prices will settle at or below $1,100 then we would probably consider taking action on some of these companies,” Jarrett Bilous, an analyst with Standard & Poor’s in Toronto, said by phone today.

Credit-default swaps pay the buyer face value if a borrower fails to meet its obligations, less the value of the defaulted debt. A basis point equals $1,000 annually on a contract protecting $10 million of debt.

Barrick sold some of its smaller mines and cut costs after gold fell the most in more than three decades last year. The Toronto-based company is working to strengthen its balance sheet and will use the proceeds of potential asset sales to repay debt, Co-President Kelvin Dushnisky said yesterday.

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