Barrick on track to meet 2016 debt reduction target — Haywood

Barrick on track to meet 2016 debt reduction target — Haywood

Barrick Gold is selling its 50% stake in Kalgoorlie's Super Pit. (Image from archives)

Canada’s Barrick Gold Barrick (TSX, NYSE:ABX), the world’s No.1 producer of the precious metal by output, has done a “great job” this year reducing its outstanding debt by over US$1.4 billion as of Sep.30, Haywood said in a research note Monday.

The registered broker-dealer believes the Toronto-based miner is on track to meet 2016 debt reduction target.

Some of the report’s highlights:

  • Debt: On November 2, 2016 Barrick announced a debt tender offer for up to US$350 million of outstanding debt, which was subsequently increased to US$650 million on November 17, 2016. The offer includes payment of principal, accrued and unpaid interest and an early tender premium of 3%. Based on US$650 million in total, principal will be reduced by ~US$593, which will take Barrick's 2016 total debt repayment to about US$2.0 billion, reducing Barrick's outstanding debt from ~US$10 billion at the start of the year to ~US$8 billion by year end.
  • Strengthening Balance Sheet Expected to Continue – In the first 9 months of the year, Barrick generated US$1.8 billion of free cash flow (before debt repayments) and the Company's cash balance stood at US$2.6 Billion on September 30, 2016. With positive free-cash-flow generation expected to continue, Barrick is well positioned to continue to reduce net debt.
  • Asset Sales Could Drive Further Debt Reduction – The Kalgoorlie (KCGM) sale process is well underway with lots of interest from both inside and outside Australia. The sales of KCGM and Barrick's 63% interest in Acacia would provide well in excess of US$2B. However, we do not expect Acacia will be divested this year and assume the KCGM sale is finalized in Q1/17. We do not expect a strategic partnership on Pascua Lama until Barrick has a better idea on how this re-engineered project will look financially and operationally. Re-engineering is just starting and likely will take at least 12 months.

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Click here for the full report.