Barrick Gold to raise up to $4 billion through equity sale

Canada's Barrick Gold Corporation, the world's largest gold miner, announced yesterday that it plans to raise approximately $4 billion through share sale, including the provision for over allotment, in order to remove its gold hedges in the rising market.

A day before, the company said that it entered into agreement with underwriters for a bought deal public offering for proceeds of approximately $3 billion, with a provision for over allotment which could have raised up to $3.45 billion.

The company said the offering is raised from $3 billion to $3.5 billion in response to strong investor appetite. The deal involves equity offering of 94.8 million common shares of Barrick Gold against the previous 81.2 million shares, at a price of $36.95 per share.

The over allotment option allows an additional subscription of 14.21 million shares at the offer price which is exercisable for a period of 30 days after closing.

On completion of the issue proceedings, Barrick Gold's common shares outstanding will increase from approximately 873 million shares to 968 million shares and the gross proceeds of the public offering will be approximately $3.5 billion. If the over allotment option is exercised in full, the outstanding shares would increase to 982 million shares, generating around $4 billion.

The company intends to use $1.9 billion of the net proceeds to eliminate all of its fixed priced gold contracts and approximately $1.5 billion to eliminate a portion of its floating spot price gold contracts. A $5.6 billion charge to earnings will be recorded in the third quarter as a result of a change in accounting treatment for the contracts.