Barrick Gold Corporation (ABX) and its wholly owned subsidiary, Barrick North America Finance LLC (BNAF) has planned to raise capital by issuing public notes of $4.0 billion.
The company plans to sell these notes in four parts. The first comprises $700 million with a coupon rate of 1.75% and issue price of $99.881 maturing in 2014; the second, $1.1 billion with a coupon rate of 2.90% notes maturing in 2016 and issue price of $99.912. The other two parts of BNAF comprise $1.35 billion with a coupon rate of 4.40% due in 2021 and issue price of $99.936 and finally, the fourth offering of $850 million at a coupon rate of 5.70% due in 2041 and issue price of $99.544. The 2021 and 2041 Notes of BNAF will be guaranteed by Barrick. The offering is expected to close by June 1, 2011.
The Canada-based gold miner plans to use the proceeds from the offering toward the wholly owned subsidiaries in the Barrick group and to finance a portion of the acquisition of Equinox Minerals Limited, including the payment of related fees and expenses. Alternatively, the proceeds from the 2014 Notes may also be used for general corporate purposes.
In April 2010, Barrick entered into a support agreement with Equinox for Barrick to acquire, through an all-cash offer, all of the issued and outstanding common shares of Equinox for C$8.15 per share, or a total of approximately C$7.3 billion.
The acquisition of Equinox would add a high quality, long-life asset to the company’s portfolio and is consistent with the strategy of increasing gold and copper reserves through exploration and acquisitions. The transaction is expected to be accretive to cash flow and earnings on a per share basis. It does not dilute Barrick shareholders’ gold exposure per share, and enhances copper exposure and leverage per share in a strong copper price environment. Combined with the Zaldivar mine and the Cerro Casale project in Chile, this acquisition would position Barrick with significant production growth potential in two of the most prolific copper-producing regions of the world.
Recently, Barrick reported record results for the first quarter of 2011, driven by higher gold sales volumes and higher prices for both gold and copper. The first quarter reported a net income of $1.0 billion or $1.00 per share.
Adjusted net income was up 32% year over year to $1.0 billion or $1.01 per share compared with $763 million or $0.78 per share in the prior-year quarter, in line with the Zacks Consensus Estimate of $1.01.
In the first quarter of 2010, total revenue of $3.1 billion was higher than $2.6 billion in the prior-year quarter, below the Zacks Consensus Estimate of $3.2 billion. In the reported quarter, gold production was 1.96 million ounces at total cash cost of $437 per ounce or net cash cost of $308 per ounce ahead of budget, primarily due to strong performances from Cortez, Goldstrike and Veladeron.
Copper production was 75 million pounds at total cash cost of $1.25 per pound in first-quarter 2011.
Barrick faces stiff competition from AngloGold Ashanti Ltd. (AU) and Newmont Mining Corp. (NEM).
We maintain our Neutral recommendation on Barrick. Currently, it holds a Zacks #3 Rank (Hold) on the stock.
BARRICK GOLD CP (ABX): Free Stock Analysis Report
ANGLOGOLD LTD (AU): Free Stock Analysis Report
NEWMONT MINING (NEM): Free Stock Analysis Report
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