Toronto, March 01, 2018 -- Moody's Investors Service ("Moody's") upgraded
the senior unsecured ratings of Barrick Gold Corporation and all rated
subsidiaries to Baa2 from Baa3. The ratings outlook remains stable.
"The upgrade reflects Barrick's aggressive deleveraging with the expectation
that debt will be reduced further, to about $5 billion by
the end of 2018, so that adjusted leverage will remain well below
2x even as production declines", said Jamie Koutsoukis, Moody's
Vice President, Senior Analyst.
Upgrades:
..Issuer: Barrick (PD) Australia Finance Pty Ltd
....Senior Unsecured Regular Bond/Debenture,
Upgraded to Baa2 from Baa3
..Issuer: Barrick Gold Corporation
....Senior Unsecured Regular Bond/Debenture,
Upgraded to Baa2 from Baa3
..Issuer: Barrick Gold Finance Company
....Senior Unsecured Regular Bond/Debenture,
Upgraded to Baa2 from Baa3
..Issuer: Barrick International Bank Corp.
....Senior Unsecured Regular Bond/Debenture,
Upgraded to Baa2 from Baa3
..Issuer: Barrick North America Finance LLC
....Senior Unsecured Regular Bond/Debenture,
Upgraded to Baa2 from Baa3
..Issuer: Placer Dome Inc.
....Senior Unsecured Regular Bond/Debenture,
Upgraded to Baa2 from Baa3
Outlook Actions:
..Issuer: Barrick (PD) Australia Finance Pty Ltd
....Outlook, Remains Stable
..Issuer: Barrick Gold Corporation
....Outlook, Remains Stable
..Issuer: Barrick Gold Finance Company
....Outlook, Remains Stable
..Issuer: Barrick International Bank Corp.
....Outlook, Remains Stable
..Issuer: Barrick North America Finance LLC
....Outlook, Remains Stable
..Issuer: Placer Dome Inc.
....Outlook, Remains Stable
RATINGS RATIONALE
Barrick's Baa2 rating is underpinned by low adjusted leverage (1.6x),
large scale ( about 5mm ozs of attributable gold), diverse and low-cost
gold assets (~$650/gold-equivalent ozs), favourable
geopolitical risk (about 70% of 2018 attributable production will
be from investment grade countries), excellent liquidity,
while it is constrained by the volatility of gold prices and moderately
declining production. Barrick's adjusted debt/EBITDA dropped to
1.6x at year-end 2017 from 3.4x in 2014, the
result of asset sales and strong free cash flow dedicated to debt repayment.
Barrick's production is expected to fall in 2018, with company
guidance of 4.5-5 million attributable ounces in 2018 (5.3
Moz in 2017), however we expect leverage will remain well below
2x based on expected strong EBITDA and free cash flow generation and Barrick's
commitment to reduce adjusted debt further (to about $5 billion
by the end of 2018 from $6.4 billion at year-end
2017). We expect Barrick will stabilize production through various
low-risk brownfield projects and it may eventually pursue greenfield
projects, but in a much more prudent manner than in the past,
sharing risk with partners, and prioritizing low leverage over growth
and size.
Barrick's liquidity is excellent, which provides significant flexibility
to maneuver through gold price volatility. Cash of $2.2
billion at year end 2017, and an undrawn $4 billion revolver
(matures January 2023) will be supplemented by Moody's expectation of
about $1 billion of positive free cash flow, at a US$1250/oz
gold price range, over 2018. Maturities are minimal in 2018
with less than $100 million in debt due. The key financial
covenant in its credit facility requires Barrick to maintain a net debt
to total capitalization ratio of less than 60%. Barrick's
net debt to total capitalization was 27% as at Dec 31, 2017
and we expect ample headroom over the next year.
The stable outlook reflects our expectation that Barrick will to continue
to be free cash flow generative, which will allow the company to
further reduce debt and provide it the ability to invest in its assets
and that the company will maintain adjusted leverage below 2x in each
of 2018 and 2019.
An upgrade to Baa1 could occur if Barrick is able to demonstrate an ability
to maintain a stable production profile, and sustain leverage at
no more than 2x (1.6x at Q4/17), and (CFO-dividends)/debt
of at least 35% (30% at Q4/17) .
Barrick's rating could be downgraded to Baa3 if Debt/ EBITDA appeared
likely to be sustained above 2.5x (1.6x at Q4/17) and cash
from operations less dividends/ debt is sustainable below 30% (30%
at Q4/17).
Barrick Gold Corporation is one of the world's largest gold producers,
with mines in the US, Canada, Peru, Argentina,
Dominican Republic, Papua New Guinea, Australia and Africa,
and copper mines in Chile, Saudi Arabia and Zambia. Barrick
is headquartered in Toronto, Canada. Gold production in 2017
was 5.3 million attributable ounces and revenues were $8.4
billion for the year.
The principal methodology used in these ratings was Global Mining Industry
published in August 2014. Please see the Rating Methodologies page
on www.moodys.com for a copy of this methodology.
REGULATORY DISCLOSURES
For ratings issued on a program, series or category/class of debt,
this announcement provides certain regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt or pursuant to a program for which the ratings
are derived exclusively from existing ratings in accordance with Moody's
rating practices. For ratings issued on a support provider,
this announcement provides certain regulatory disclosures in relation
to the credit rating action on the support provider and in relation to
each particular credit rating action for securities that derive their
credit ratings from the support provider's credit rating.
For provisional ratings, this announcement provides certain regulatory
disclosures in relation to the provisional rating assigned, and
in relation to a definitive rating that may be assigned subsequent to
the final issuance of the debt, in each case where the transaction
structure and terms have not changed prior to the assignment of the definitive
rating in a manner that would have affected the rating. For further
information please see the ratings tab on the issuer/entity page for the
respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this credit rating action,
and whose ratings may change as a result of this credit rating action,
the associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
The ratings have been disclosed to the rated entities or their designated
agent(s) and issued with no amendment resulting from that disclosure.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Jamie Koutsoukis
Vice President - Senior Analyst
Corporate Finance Group
Moody's Canada Inc.
70 York Street
Suite 1400
Toronto, ON M5J 1S9
Canada
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Donald S. Carter, CFA
MD - Corporate Finance
Corporate Finance Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Releasing Office:
Moody's Canada Inc.
70 York Street
Suite 1400
Toronto, ON M5J 1S9
Canada
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653