DBRS Comments on African Barrick $885 Million IPO

DBRS notes that Barrick Gold Corporation (Barrick or the Company, rated “A” and R-1 (low)) today announced the pricing of the initial public offering of African Barrick Gold plc (African Barrick), a new company to hold Barrick’s African gold operations. Approximately 25% of African Barrick’s equity will be issued to the public, with Barrick retaining the remainder. At an offer price of GBP 5.75 per ordinary share, the net proceeds of the offering are expected to be approximately $834 million, which will be paid to Barrick. DBRS views this as a modestly positive transaction but not material enough to warrant a rating action. The proceeds from the African Barrick transaction will help fund the Company’s heavy capital expenditure program for 2010 and help maintain the Company’s financial metrics in line with its ratings.

African Barrick is expected to produce approximately 800,000 ounces in 2010 and would have had total reserves of 16.8 million ounces (100% basis) as of December 31, 2009. The new company is expected to be debt free and will have approximately $280 million as an initial cash balance. African Barrick will trade on the London Stock Exchange’s main market for listed securities.

Barrick has a solid business profile as the largest gold producer in the world, as well as strong financial metrics. The Company is also engaged in the aggressive development of its extensive gold-oriented project pipeline, with new mines or major expansions under construction in the United States, Dominican Republic and along the Chilean-Argentine border, as well as a number of mine projects under feasibility analysis. The Company’s 2010 capital expenditure program is expected to range between $2.8 billion and $3.3 billion, well above the Company’s $2.3 billion in operating cash flow generated in 2009.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The applicable methodology is Rating Mining, which can be found on our website under Methodologies.

This is a Corporate rating.