Barrick plans London listing for African assets
By Matthew Kennard
Published: February 18 2010 15:46 | Last updated: February 18 2010 17:26
Barrick Gold of Canada, the worlds largest bullion producer, is set to spin off its African mines and list them on the London Stock Exchange.
The company said it would retain a 75 per cent majority stake in the new vehicle, African Barrick Gold, but make the remaining equity available to institutional investors.
ABGs assets comprise four mines in north-west Tanzania, representing 9.6 per cent of Barricks total gold production. Barrick has a market capitalisation of about $37bn, and if a similar valuation is applied to ABG its market capitalisation could be as much as $3.7bn (£2.4bn), making it a potential entrant to the FTSE 100.
The key thing for Barrick has been looking at the way it can get its assets optimised, said Greg Hawkins, ABG chief executive. With the African assets, sometimes its been difficult to grow because there are so many other huge Barrick projects around the world and Africa is often a bit smaller and hard to get on the radar.
Barrick has been operating in Tanzania for a decade and its assets there produced 716,000 ounces of gold in 2009, which would make it the largest UK-listed gold producer at flotation and the fourth largest working in Africa. ABG hopes to raise annual production to 1m oz within four years.
If the listing is successful, ABG said it expected to have about $280m of cash on its balance sheet.
One overarching thing about this is that companies the size of Barrick and Newmont are now so large that it becomes very hard to grow. If you make an acquisition or expand, that makes very little difference in overall size and can go unnoticed, said Richard Morgan, an analyst at Mirabaud. You could argue that splitting a company up is inevitable when you get to an ex-growth position.
In 2008, Industrias Penoles SAB, a Mexican miner, span off its silver assets into a new London-listed vehicle, Fresnillo, which has since seen its share price soar.
Barricks primary listing is on the Toronto Stock Exchange, but London-based investors are seen as more favourable toward African assets.
Our understanding is that Africa is more attractive for the investor base in Europe and London, said Mr Hawkins. Theres a variety of reasons for this: Londons neatly in the time zone, theres the history. We think this is a real opportunity to take advantage of that.
The competition for London-listed gold-producers is especially thin.
It is a marketing thing London is starved of large cap gold miners, said Joe Lunn, an analyst at FinCapp. Randgold Resources is the only mid to large-cap producer in London and as such commands a significant premium. In spinning off its African assets, Barrick will be hoping this new company commands a similar premium.
ABG said it was also considering a secondary listing on the Tanzanian Stock Exchange.
In 2009, ABG generated earnings before interest, taxation and depreciation of $249.5m on revenues of $693.4m. Its cash cost of gold production on a by-product basis was $533 per ounce.
http://www.ft.com/cms/s/0/e439a642-1ca1-11df-8456-00144feab49a.html
By Matthew Kennard
Published: February 18 2010 15:46 | Last updated: February 18 2010 17:26
Barrick Gold of Canada, the worlds largest bullion producer, is set to spin off its African mines and list them on the London Stock Exchange.
The company said it would retain a 75 per cent majority stake in the new vehicle, African Barrick Gold, but make the remaining equity available to institutional investors.
ABGs assets comprise four mines in north-west Tanzania, representing 9.6 per cent of Barricks total gold production. Barrick has a market capitalisation of about $37bn, and if a similar valuation is applied to ABG its market capitalisation could be as much as $3.7bn (£2.4bn), making it a potential entrant to the FTSE 100.
The key thing for Barrick has been looking at the way it can get its assets optimised, said Greg Hawkins, ABG chief executive. With the African assets, sometimes its been difficult to grow because there are so many other huge Barrick projects around the world and Africa is often a bit smaller and hard to get on the radar.
Barrick has been operating in Tanzania for a decade and its assets there produced 716,000 ounces of gold in 2009, which would make it the largest UK-listed gold producer at flotation and the fourth largest working in Africa. ABG hopes to raise annual production to 1m oz within four years.
If the listing is successful, ABG said it expected to have about $280m of cash on its balance sheet.
One overarching thing about this is that companies the size of Barrick and Newmont are now so large that it becomes very hard to grow. If you make an acquisition or expand, that makes very little difference in overall size and can go unnoticed, said Richard Morgan, an analyst at Mirabaud. You could argue that splitting a company up is inevitable when you get to an ex-growth position.
In 2008, Industrias Penoles SAB, a Mexican miner, span off its silver assets into a new London-listed vehicle, Fresnillo, which has since seen its share price soar.
Barricks primary listing is on the Toronto Stock Exchange, but London-based investors are seen as more favourable toward African assets.
Our understanding is that Africa is more attractive for the investor base in Europe and London, said Mr Hawkins. Theres a variety of reasons for this: Londons neatly in the time zone, theres the history. We think this is a real opportunity to take advantage of that.
The competition for London-listed gold-producers is especially thin.
It is a marketing thing London is starved of large cap gold miners, said Joe Lunn, an analyst at FinCapp. Randgold Resources is the only mid to large-cap producer in London and as such commands a significant premium. In spinning off its African assets, Barrick will be hoping this new company commands a similar premium.
ABG said it was also considering a secondary listing on the Tanzanian Stock Exchange.
In 2009, ABG generated earnings before interest, taxation and depreciation of $249.5m on revenues of $693.4m. Its cash cost of gold production on a by-product basis was $533 per ounce.
http://www.ft.com/cms/s/0/e439a642-1ca1-11df-8456-00144feab49a.html
