UPDATE 1-Barrick to sell $3 billion in stock to pay down debt

Thu Oct 31, 2013 5:48pm EDT

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Oct 31 (Reuters) - Barrick Gold Corp, the world's largest gold producer, said on Thursday that it will issue more than $3 billion in stock as it looks to improve its liquidity position by paying down its large debt load.

The company will offer 163.5 million common shares at a price of $18.35 per share, worth about $3 billion, through a bought deal share offering. With the over-allotment option, the proceeds would be about $3.45 billion.

Shares of the company dropped more than 5 percent to $18.34 in New York in after-hours trade.

A bought deal occurs when an underwriter commits to buy the entire offering from the client company and then resells it. Barrick's underwriters are led by RBC Capital Markets, Barclays and GMP Securities L.P.

Barrick's net proceeds after commission will be $2.9 billion. If the over-allotment option is exercised in full, the miner's proceeds will rise to $3.3 billion.

The company said it will use $2.6 billion of the money raised to pay down debt, with the remaining funds earmarked for strengthening its balance sheet, including possible future debt reductions and for general corporate purposes.

It is no secret that Barrick has been looking for ways to reduce its debt load, which stood at $14.6 billion at the end of third quarter, more than any other major gold producer.

Several sources familiar with the situation have told Reuters the company was considering a wide range of options from a strategic equity investment to further streaming deals that yield upfront cash.

Barrick separately announced that it would stop development of its Pascua-Lama mine in South America indefinitely, a surprise reversal on a project that has already cost the world's largest gold producer more than $5 billion.

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