Barrick Outlook Raised by S&P as Gold Rally Helps Debt Fight

  • Toronto-based miner’s outlook lifted to positive from stable
  • Sees increased chance of a one-notch upgrade within 1-2 years

Barrick Gold Corp. had its credit outlook raised by S&P Global Ratings as the biggest bullion producer’s balance sheet benefits from higher metal prices, asset sales and lower costs.

The Toronto-based miner’s outlook was lifted to positive from stable, S&P wrote in a statement Wednesday, affirming its BBB- rating.

Shares in Barrick have more than doubled in value this year after five straight annual declines and its bonds have gained 38 percent as bullion rallies 23 percent. While prices have retreated this month, investors have flocked to bullion and the companies that mine it as central banks around the world increased economic stimulus to support growth and the Federal Reserve kept U.S. borrowing costs low.

Barrick exemplifies the mining industry’s push to grow and diversify as commodities surged, before grappling to sell assets and cut costs as a price downturn exposed high leverage. Barrick’s debt, which peaked at $15.8 billion after it bought Equinox Minerals Ltd., was back at about $9 billion in the second quarter with President Kelvin Dushnisky saying the company could be debt free within a decade. In the second-quarter, it posted its highest net income since 2013 while its stock surged 56 percent.

“A continuing favorable gold price environment and improvement in Barrick’s cost position should translate into free cash flow and debt repayment above our previous expectations,” the S&P analysts wrote. “As such, we believe there is an increased likelihood that Barrick will achieve a stronger financial risk profile and one-notch upgrade on the company within the next one to two years.”

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