LONDON (Reuters) - African Barrick Gold (ABG), a spin-off of Barrick Gold Corp ABX.TO, has launched a London listing to raise as much as $1 billion, valuing its assets at about $4 billion, according to people familiar with the matter.
The biggest gold miner in Tanzania started pre-marketing its $875 million to $1 billion initial public offering on Monday, London's biggest in almost two years after New World Resources NWRS.L, the sources said.
Although many private equity firms are shelving IPO plans after receiving knock backs from fund managers, candidates with a smaller debt, such as ABG, are braving the market as volatility recedes.
Nevertheless, London-headquartered ABG, which is likely to be admitted to the FTSE 100 Index after selling 25 percent of its enlarged share capital in the IPO, is testing appetite with a 30 percent discount to smaller rival Randgold RRS.L.
ABGold declined to comment.
The deal, arranged by J.P. Morgan JPM.N and Morgan Stanley MS.N, will run a bookbuilding between March 5 and March 18. Parent firm Barrick, the world's biggest gold miner, plans to retain a 75 percent stake.
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ABG, the world 16th biggest gold miner with 26 million ounces of reserves, plans to use the IPO proceeds to repay debt, and is expected to hold a net cash of $280 million after the listing.
A price range will be announced when the bookbuilding starts, but analysts estimate ABG’s market value at $3.5 billion to $4 billion, valuing the firm at 1.4 to 1.6 times its net asset value (NAV) of $2.5 billion.
That would put ABG, which produced 716,000 ounces of gold last year, at a 30 percent discount to Randgold, which trades at 2.2 times NAV.
Shares in Randgold fell 1 percent to 4,644 pence each at 1200 GMT.
ABG generated earnings before interest, depreciation and amortization of $250 million on the back of $693 million in revenues in 2009, reflecting a margin of 36 percent.
Analysts expect ABG to see its production increase to 1 million ounces by 2014, assuming gold prices remain at the current level of $1,100 per ounce.
The costs of gold production on a by-product basis was $533 per ounce.
Reporting by Daisy Ku; Editing by Simon Jessop and Louise Heavens
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