Barrick Spinoff to Create Biggest U.K. Gold Miner (Update3)
By Thomas Biesheuvel
Feb. 18 (Bloomberg) — Barrick Gold Corp. plans to create the biggest U.K.-based producer of the metal by spinning off Tanzanian assets and listing them in London next month.
Barrick, the world’s largest gold miner, will be a “significant” investor in African Barrick Gold after selling a stake of at least 25 percent, it said in a statement today.
African Barrick produced 716,000 so-called attributable ounces of gold last year, more than London-based Petropavlovsk Plc, which mines in Russia, and Jersey, Channel Islands-based Randgold Resources Ltd., operating in Mali. Africa made up 10 percent of third-quarter sales at Toronto-based Barrick Gold, which also mines in North and South America, and Australia.
“Maybe they feel these assets are undervalued in their current portfolio and this is a way of achieving a value for them,” Investec Securities mining analyst Jonathan Guy said. “London seems to have a great appetite for African assets.”
Robin Walker, an external spokesman for African Barrick in London, declined to comment on why Barrick Gold is spinning off the assets. The company is planning an investor roadshow that will start around March 5, Barrick Gold’s Chief Executive Officer Aaron Regent said in a call with analysts today.
JPMorgan Cazenove is sole sponsor of the offer. Morgan Stanley Securities Ltd. and JPMorgan are book-runners and Citigroup Inc. is co-book-runner. BMO Capital Markets, Canaccord Adams Ltd., RBC Capital Markets and Scotia Capital are advisers.
Fresnillo Spinoff
“We expect that investors should react positively to the news of the ABG spin-out as the company takes actions to, in effect, shrink to grow from less a risky asset base with a lower cost profile,” Greg Barnes, a Toronto-based analyst at TD Newcrest, wrote today in a note to clients.
Mexico’s Industrias Penoles SAB created U.K.-listed Fresnillo Plc in 2008 to spin off its silver assets. Fresnillo, the world’s largest primary silver producer, has gained 42 percent since its May 2008 listing.
“They see what Penoles achieved by listing a minority of their assets in London and think that looks quite attractive,” said Guy, who follows Randgold, Fresnillo and Petropavlovsk. “There is an appetite for a large listed gold producer in London to add to the existing universe.”
African Barrick has four mines in Tanzania and plans to boost annual output to more than 1 million ounces in four years. Earnings before tax, depreciation and amortization were $249.5 million in 2009 on sales of $693.4 million.
It will use proceeds to repay loans to Barrick Gold. African Barrick has an initial cash balance of about $280 million and a $100 million credit facility with the parent.
Barrick Gold said separately net income was $215 million in the fourth quarter, compared with a loss of $468 million a year earlier. Earnings per share were 21 cents while analysts expected profit of 57 cents, according to the average of 21 estimates in a Bloomberg survey.
–With reporting from Rob Delaney in Toronto. Editors: Simon Casey, Tony Barrett
To contact the reporter on this story: Thomas Biesheuvel in London +44-20-7073-3259 or tbiesheuvel@bloomberg.net
To contact the editor responsible for this story: Simon Casey at +44-20-7673-2631 or scasey4@bloomberg.net