Barrick Gold Corp. said Thursday it will spin off its gold mines in Africa into a separate, publicly traded company as part of its strategy to capitalize on higher gold prices.
African Barrick Gold will consist of four mines that produced 716,000 ounces of gold in 2009 and a number of exploration properties.
The Toronto mining giant will keep a 75 percent interest in the new company with the remaining 25 percent to be sold in an initial stock offering expected this spring on the London Stock Exchange. Proceeds will be used by Barrick as financing for other projects in development.
"We believe that by doing this, we will be better positioned to realize the full potential of this operating platform and maximize value for our shareholders," Barrick President and CEO Aaron Regent told analysts during a conference call.
Analysts believe Barrick's decision shows that the company believes gold prices will stay high. The price of gold peaked at $1,227.50 an ounce in early December. It was around $1,120 an ounce on Thursday.
Other companies may take similar action to cash in on assets, Argus Research analyst Bill Selesky said.
"I think they realize they're in a stretch here, a period where gold prices are going to continue to stay very high, above historical levels," he said.
Barnard Jacobs Mellet analyst Patrick Chidley said a management team devoted to developing the Barrick assets in Africa may create more value for shareholders.
Initially, African Barrick Gold will have a cash balance of $280 million and no debt. The four mines are all in Tanzania and have total reserves of 16.8 million ounces.
Barrick will keep a nickel project in Tanzania which is a 50-50 joint venture with Xstrata PLC.
Barrick's announcement came as it reported fourth-quarter net income of $215 million, or 21 cents per share, compared with a loss of $468 million, or 53 cents per share, in the year-ago quarter.
Revenue for the quarter was $2.4 billion, up from $2.1 billion in the fourth quarter of 2008.
Barrick shares rose $1.44, or 3.8 percent, to $39.30 in afternoon trading.
Copyright 2010 AP News
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