Barrick Gold sells $720 mn of US assets to pay debt
13 November 2015
The world's biggest gold miner Barrick Gold Corp plans to sell a number of non-core assets in the US state of Nevada for $720 million in cash to pay down the company's debt amid falling prices for the precious metal.
The buyers include Canadian gold mining major Kinross Gold Corp and a precious metals fund managed by Waterton Global Resource Management.
Kinross will buy Barrick's 100-per cent stake in Bald Mountain and 50-per cent interest in Round Mountain for $610 million, while Waterton will purchase the company's full ownership in Ruby Hill mines and 70-per cent interest in Spring Valley project for $110 million.
Barrick president Kelvin Dushnisky said in a statement: "The sale of these assets is consistent with our strategy to create long-term value for our shareholders by strengthening the balance sheet and further focusing our portfolio on core mines that will drive free cash flow growth."
He said Barrick will continue to take steps to strengthen its balance sheet, but also balance debt repayments with investments to drive future growth.
The miner said it is on track to achieve its debt reduction goal of $3 billion by year end. Completed or announced asset sales so far are valued at approximately $2.46 billion.
The company's total debt stands at around $11.2 billion, a 15 per cent down from $13.1 billion in the beginning of the year.
Both Kinross and Waterton were enthused by the purchase as they believe that this opportunity would never have emerged if gold prices were stronger.
Kinross chief executive Paul Rollinson said, ''It's taken a while to find the 'Goldilocks' that fits for us, but this would be it.''
Waterton chief investment officer Isser Elishis commented: ''It has been pretty much insane.'' He added that Spring Valley is a super high-quality asset that Waterton plans to new areas of Ruby Hill to extend the mine life.
The transaction with Waterton is expected to be completed by the end of 2015, while the Kinross deal is expected to close by mid-January 2016.
Gold prices are hovering near their six-year lows, having fallen by over 16 per cent from their January highs of $1296 an ounce to $1079 an ounce yesterday. Prices for the yellow metal hit an all time high of around $1890 an ounce in August 2011.
Analysts believe the recent decline in gold prices was mainly on concerns over a potential rate hike by the US federal reserve, which could prompt investors to shift from gold to interest-bearing assets.
However, lower prices tend to increase demand for the precious metal.
According to a recent world gold council report, demand for gold rose by 8 per cent to a two-year high of 1,121 tonnes in the third quarter, compared to the same quarter last year. However, overall production from the mines declined by 1 per cent in the quarter.
For the third quarter, Barrick reported a $264-million loss, compared to a profit of $134 million for the same period last year. Excluding non-recurring items, adjusted net earnings were $131 million, a 41-per cent drop from $222 million a year ago. Revenue dropped 12 per cent to $2.32 billion from $2.62 billion.
Although Barrick's profits have been affected by the fall in gold prices, the company's planned spending cuts, aided by currency movements, have helped partially offset the negative impact.
Barrick shares have taken a 40-per cent slump from their January highs of around C$16.26. Further to the asset sale news, the stock gained over 4 per cent to end at C$10.06 yesterday in Toronto.
CIBC World Markets Inc is acting as financial advisor to Barrick on the transaction.