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TORONTO - Barrick Gold Corp. (TSX:ABX) expects that an initial public offering for a quarter stake in its African properties will reap US$834 million in cash for the global mining giant.
Toronto-based Barrick, the world's biggest gold miner, said Friday that the IPO for 101 million ordinary shares of African Barrick Gold would be priced at 5.75 pounds (C$8.77) per share on the main market of the London Stock Exchange.
Company spokesman Vince Borg said he expects the shares to begin trading on Wednesday.
Barrick will use the proceeds of the offering "for developing our pipeline of projects and general corporate purposes," Borg said.
Barrick will continue to hold a 75 per cent equity interest in African Barrick, or about 303 million ordinary shares. Assets of the new spinoff will include the Bulyanhulu, Buzwagi, North Mara and Tulawaka mines in Tanzania as well as a number of exploration properties and projects.
As of the end of 2009, the proposed new company had total reserves of 16.8 million ounces of gold and was expected to produce between 800,000 and 850,000 ounces this year.
The IPO will allow the spinoff company to more readily access capital, Barrick said.
"As an Africa-focused public company, we believe that African Barrick Gold will be better positioned to generate shareholder value from its operating platform, value which Barrick will continue to benefit from as a majority shareholder," stated Aaron Regent, Barrick's president and CEO.
"African Barrick Gold's range of growth options and ability to finance those options will be expanded and the intensity with which these options will be pursued will be improved and will be driven by an incentivized management team, guided by an experienced board of directors."
Spinning off some of the higher-cost mines was a smart move for Barrick, suggested John Ing, a gold analyst and president of Toronto-based investment dealer Maison Placements.
"Those African assets are higher-cost assets that involved a lot of management time," Ing said. "I think it was a very efficient move to remove those high-cost assets off their balance sheet and monetize those assets."
In 2009, Barrick's African mines, which account for 10 per cent of the company's overall gold production, produced 716,000 ounces of gold at an average cash cost of US$545 per ounce. By comparison, its North American mines produced 2.8 million ounces of gold at a cash cost of $504 per ounce and its South American mines produced 1.9 million ounces at a cash cost of $265 per ounce.
Besides its African assets, Barrick owns and operates gold mines in Canada, the U.S., Peru, Argentina, Chile, Australia and Papua New Guinea. Its major development projects include Pueblo Viejo in the Dominican Republic, Cortez Hills in Nevada, and Pascua-Lama on the border between Argentina and Chile.
In its release Friday, Barrick Gold said an over-allotment of about 10.1 million shares has been granted for up to 30 days after the pricing.
The offer is expected to close on Wednesday, and at that time African Barrick Gold will have a stock market value of US$3.55 billion. The new company will have an initial cash balance of approximately $280 million.
Barrick, with 16,300 employees at the end of 2008, had proved and probable gold reserves of 139.8 million ounces in 2009, the largest in the industry.
Gold production in 2010 is expected to increase to between 7.6 million and 8.0 million ounces.
Earlier this week, three workers were killed during a cave-in at the Bulyanhulu mine, part of the new African Barrick Gold's assets. Barrick has said it is investigating the collapse, and will keep the area of the rock fall closed until the cause has been determined and any necessary action taken. The rest of the mine is up and running again.
In Friday trading on the TSX, Barrick Gold shares fell 18 cents to C$40.14.
