Barrick Gold (ABX-T, ABX-N) is pricing the initial public offering of African Barrick Gold (ABG) at 5.75 (US$8.71) per share. African Barrick Gold will trade on the London Stock Exchange. Barrick expects to add US$834 million from the IPO to its treasury.
ABG is selling 101 million shares in the offering, or about 25% of its equity, and Barrick will retain an interest in 303 million shares, or 75% of the equity of ABG, assuming the over-allotment option is not exercised.
An over-allotment option has been granted of up to about 10.1 million shares, representing roughly 10% of the offer size, exercisable for a 30-day period.
Based on the offer price, ABG’s market capitalization immediately following the offering will be roughly US$3.55 billion. ABG has an initial cash balance of US$280 million. The offering closed on March 24.
The world’s top gold producer operates four mines in Tanzania. The African assets make up about 10% of Barrick’s global production and 12% of its gold reserves, according to Vince Borg, Barrick’s executive vice-president of corporate communications.
“The pricing implies a market capitalization of approximately US$3.5 billion (based on March 18’s exchange rate of 0.66 to the greenback) and a P/NAV of around 1.2x based on our NAV estimate of US$3 billion for African Barrick,” Paul Burchell, an analyst at Dundee Capital Markets, wrote in a note to clients. “The valuation is slightly lower than our estimate of a P/NAV of 1.3x for the parent company; however, we consider the lower multiple to be justified given the location of the assets and the valuation awarded to African Barrick’s (predominantly South African-based) peers.”
Burchell has a buy on Barrick Gold with a price target of $51 per share.
In Toronto at presstime, Barrick was trading at $39.64 per share, above its 52-week low of $33.01 per share but well below its peak of $50.53 per share. The gold major has 983.1 million shares outstanding.
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