Barrick Gold Corporation (ABX) Stock Update

Barrick Gold Corporation (USA) (NYSE:ABX) stock opened the trading session on Tuesday down by 2.03%, as a result of losses posted by spot prices of gold during trading today. Recently, the company announced that it would be consolidating its operations in an effort to reduce debt.

The stock is trading down during pre-market trading today, due to the weakness in bullion during trading today after a statement from the Federal Reserve Chair, Janet Yellen. Ms. Yellen assured investors that an interest rate hike is expected this year. With an interest rate hike on the horizon, the attractiveness of the non-interest bearing yellow metal would fall, which led to the spot prices of gold trading down.

The company announced on Monday that it would be selling its Cowal mine located in Western Australia, to Australia-based Evolution Mining Ltd. The mine would be sold to the local miner in an all-cash transaction valued at $550 million.

The Canada-based gold miner had earlier in the year outlined plans of reducing its debt by $3 billion by the end of 2015. The move was aimed at strengthening the state of the company’s balance sheet, which at the end of the March 31 this 2014 had a long-term debt of $12.6 billion. At the end that quarter, the company had a total long-term debt of $12.78 billion.

The company said that it expects Evolution Mining Ltd to take full operational control of the Cowal mine by the end of October this year. The sale of the Cowal mine is one of many divestments that the company is looking to make in an effort to strengthen its balance sheet.

Since 2012, the company has sold a total of six mines, having made $1.3 billion from the sale. Five of the six mines sold over the period were located in Australia. Following the completion of the acquisition of the mine by Evolution Mining, the company would be closing down its office in Perth, which would help it in trimming costs in addition to strengthening its balance sheet.

Kelvin Dushnisky, the co-president of Barrick Gold, said: “The sale of Cowal is consistent with the strategy we have outlined to create long-term value for our owners.” He added that in addition to the move being geared towards their debt-reduction target, the sale would also allow the company to further focus its portfolio’s geographic footprint.

The company is also looking to sell other mines under its portfolio in the near future, with it looking for possible buyers of its Papua New Guinea mine. Along with this, the company is also looking to sell its Zaldivar copper mine, located in Chile. According to a Wall Street Journal report, citing people close to the matter, the company is also looking to sell its stake in a nickel project, which it is operating in partnership with Glencore PLC.

After the announcement of the sale, Goldman Sachs said in a report published on Monday, that it viewed the sale of the Cowal mine to be a promising first step. The investment bank said that the company was able to get a price which was 30% higher than their estimated Net Present Value for the asset. Moreover, the bank highlighted that the costs for the company would be substantially lowered following the closure of the Perth office.

Goldman Sachs said in its report: “We remain bullish on ABX as dissipating concerns surrounding its debt and its ability to consistently deliver operationally across its asset portfolio should, in our view, drive a re-rating of its shares.” The bank rates the stock a Buy, with a 12-month price objective of $17 per share, compared to Friday’s close of $12.29.

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