DBRS Morningstar Confirms Rating on Barrick at BBB With Stable Trend

DBRS Limited (DBRS Morningstar) confirmed the Issuer Rating of Barrick Gold Corporation (Barrick or the Company) at BBB with a Stable trend. The confirmation takes into account the successful integration of five mining complexes and related infrastructure that have been included in Barrick’s 61.5%-owned Nevada Gold Mines (NGM) Joint Venture (JV) with Newmont Corporation since its formation in July 2019. The Stable trend reflects DBRS Morningstar’s expectation that Barrick’s financial risk profile will remain at the high end of the “A” range based on forecast gold prices of $1,793 per ounce (oz), $1,741 per oz, and $1,652 per oz in 2021, 2022, and 2023, respectively (according to the Bloomberg consensus as of May 21, 2021). This gold forecast is modestly below current levels. However, DBRS Morningstar believes that there should be a cautious recognition of the global economic uncertainty as the world continues to deal with the negative economic impacts caused by the Coronavirus Disease (COVID-19) pandemic. Barrick’s business risk profile is assessed at the upper end of the BBB (low) band based on the Company’s robust reserves, low operating cost structure, and position as an industry leader.

During the last 12 months ended March 31, 2021 (LTM March 2021), Barrick completed the sale of its Eskay Creek, Morila, and Bullfrog assets. These proceeds, along with those realized from other divestments over the last 12 months ended March 31, 2020 (LTM March 2020), total approximately $1.5 billion. Management is in the process of distributing approximately half of these funds ($750 million) as a return of capital with the first tranche of $250 million expected to be distributed on June 15, 2021. During LTM March 2020, the Company repurchased its 4.95% Notes due 2020 and 3.85% Notes due 2022, which resulted in a further improvement in the Company’s key credit metrics. However, the next material debt maturity is not until 2033 and the premium to repurchase this debt would be unattractive from a cost of capital perspective. As a result, Barrick has been increasing its cash balances in advance of its return of capital program. The Company has a favourable liquidity profile as of March 31, 2021, with $5.7 billion of cash, $3.0 billion in undrawn credit availability, and no near-term maturities.

Based upon Bloomberg consensus forecasts (as of May 21, 2021), DBRS Morningstar expects Barrick to generate robust EBITDA and cash flow over the near term and, DBRS Morningstar expects the Company to add to its cash surplus. If the cash surplus is used to acquire assets that are significantly accretive and improve Barrick’s business risk profile, a positive rating action is possible. Conversely, a negative rating action could result if gold prices decline significantly below Bloomberg’s consensus estimates for an extended time period of time thus suppressing EBITDA and cash flow and causing a material deterioration in Barrick’s key credit metrics to the point at which the Company’s credit metrics do not support the rating.

ESG CONSIDERATIONS
A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://www.dbrsmorningstar.com/research/373262.

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

The principal methodology is Rating Companies in the Mining Industry (August 17, 2020; https://www.dbrsmorningstar.com/research/365807), which can be found on dbrsmorningstar.com under Methodologies & Criteria. Other applicable methodologies include the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings (February 3, 2021; https://www.dbrsmorningstar.com/research/373262).

For more information regarding rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/357883.

The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link under Related Documents or by contacting us at [email protected].

This rating was not initiated at the request of the rated entity.

The rated entity or its related entities did not participate in the rating process for this rating action. DBRS Morningstar did not have access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

This is an unsolicited credit rating.

Generally, the conditions that lead to the assignment of a Negative or Positive trend are resolved within a 12-month period. DBRS Morningstar trends and ratings are under regular surveillance.

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at [email protected].

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