Barrick reduces hedging

admin — Thu, 24 Sep 2009 17:46:49 +0000

Barrick recently closed an equity offering of 109.0 million shares at a price of $36.95/share. The estimated $3.9 billion in net proceeds is expected to be used to: (1) reduce the number of floating hedge contracts outstanding from 6.5 million ounces to an estimated 3.0 million ounces; and (2) close out the 3.0 million ounces in fixed hedge contracts. Both parts of the hedge book wind-up strategy are expected to occur within the next 12 months. RBC CM expects Barrick to eliminate the remaining 3.0 million ounces of floating contracts by the end of 2010 by issuing ~$1.8 billion in debt. Investors view this transaction as a bold move by company management. Combined with the recent permitting success at Pascua Lama and expected production growth into 2010, RBC CM would expect the positive momentum in Barrick’s share price to continue. RBC CM believes ABX shares have been trading at a discount due in part to the uncertainty surrounding the gold hedgebook and expect a re-rating higher now that a reduction strategy is in place.

TSX Commentary » Barrick Gold Corp (ABX)

Barrick reduces hedging