TORONTO - A US$1.25-billion debt financing and a Chilean copper-gold acquisition planned by Barrick Gold Corp. (TSX:ABX) are well within its means, Moody's Investors Services said Wednesday as it affirmed the Toronto-based company's ratings.
"Barrick's stable outlook reflects Moody's expectation that the company will continue to generate good cash flows and prudently manage its investment decisions, particularly in light of general economic conditions,' the New York-based rating agency said in its analysis.
"The outlook also reflects our expectation that gold prices will continue at levels comfortably ahead of Barrick's cost position over the next 12 to 15 months although we expect gold prices to retreat from current levels," Moody's said.
Barrick said Tuesday it plans to issue US$400 million of 4.95 per cent notes due in 2020 and $850 million of 5.95 per cent notes due in 2039 to fund its plans to support its obligations under gold hedging activities, which are being wound up.
Moody's said Wednesday that it had affirmed Barrick's rating of Baa1 and assigned a Baa1 rating to the two series of unsecured notes.
Barrick, which has grown into the world's biggest gold mining company through a combination of acquisitions and internally generated growth, announced Monday that it has bought a 70 per cent stake in the El Morro copper-gold project in Chile from Xstrata Plc's Chilean subsidiary for US$465 million in cash.
Moody's said Wednesday that the El Morrow investment "is comfortably accommodated within the company's liquidity profile."
"While Moody's expects Barrick to continue to opportunistically look to grow by acquisition, we anticipate that such will be done in a disciplined manner and not further erode the capital structure."
JP Morgan has raised its rating for Barrick to "overweight" from neutral and raised its price target for the company's shares to US$54, from US$40. The stock traded between US$39.71 and US$40.51 on the New York Stock Exchange and between C$40.86 and $41.70 at the Toronto Stock Exchange on Wednesday.
Barrick has said prior to the El Morrow deal that it expected 2009 gold production to be 7.2 million to 7.6 million ounces at total cash costs of US$450 to US$475 per ounce with gold production in 2010 to grow to 7.7 million to 8.1 million ounces at lower total cash costs.
The gold miner raised about US$4 billion in an equity offering earlier this year as part of the plan to eliminate its gold hedges.
A $5.6-billion charge to earnings will be recorded in the third quarter as a result of a change in accounting treatment for the contracts.
Barrick has major mines in Canada, the United States, South America, Australia and Africa.