Barrick Gold divests shares in African Barrick

11 March 2014 (Last Updated March 11th, 2014 18:30)

Barrick Gold has divested 41 million ordinary shares in African Barrick Gold (ABG) for about £113m ($188m).

Barrick Gold has divested 41 million ordinary shares in African Barrick Gold (ABG) for about £113m ($188m).

The sale represents in aggregate about 10% of the issued ordinary share capital of ABG, at a price of 275 pence per ordinary share.

Barrick president and CEO Jamie Sokalsky said that to increase production and reduce operating and capital costs the company has made good progress with its operational review.

"Barrick continues to support ABG management as they advance the operational turnaround and make other efforts to improve the business," Sokalsky said.

"We valued ABG at US$5.63 per share at a gold price of US$1,345 per ounce."

Following the transaction, which will allow Barrick to realise some liquidity from its holding in ABG, the company will still be a controlling shareholder.

Barrick will also continue to hold ABG's 262 million ordinary shares, representing about 64% of the issued ordinary share capital of ABG.

Without obtaining Joint Bookrunners's approval, Barrick has undertaken not to dispose of any further ABG ordinary shares for a period of 120 days, following completion of the placing.

According to Barrick Gold, the placing is being conducted through an accelerated bookbuild offering process that will be launched immediately after the announcement.

Edison Investment Research analyst Charles Gibson commented that Barrick's sale seems to place a cap on the price of ABG.

"Prior to today's announcement, we valued ABG at US$5.63 (£3.38) per share at a gold price of US$1,345 per ounce, based on the value of its maximum potential dividend stream to investors, discounted at 10%. I.e. quite close to the level of 321 pence that the shares reached last week," Gibson said.

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