No matter how you look at it, $4 billion is a lot to ask for in today's capital market. Nonetheless, with the security of being the world's largest gold producer, Barrick Gold of Toronto is doing just that.
The company is issuing $4.0 billion in debt securities. They include $700 million of 1.75% notes due in 2014, $1.1 billion of 2.90% notes due in 2016, $1.35 billion of 4.40% notes due in 2021, and $850 million of 5.70% notes due in 2041. The offering is to close on or about June 1, 2011.
A portion of the proceeds will be used to finance part of Barrick's $7.3-billion acquisition of Equinox Minerals. The deal will expand Barrick's presence among copper producers.
Another portion of the proceeds will be advanced to wholly owned Barrick subsidiaries, of which there are many mining gold around the world.
So what can we gather from a $4-billion offering? First, Barrick is confident of its place in the business world, and it should be. Gold is a much desired and high priced commodity, and the price of copper is strong because global demand is rising thanks largely to the Chinese.
Second, interest rates will go up over the next three decades. Compared to the measly rate banks are paying on guaranteed income certificates, the 2.90% on 2014 notes is generous. The 5.70% on 2041 notes is very attractive.
Canada has been fortunate to bounce back from the 2008 crash of the financial markets. Other countries are still struggling. I hope Barrick's offering marks a general turnaround in the world's fortunes.
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