Barrick Gold Corp. (NYSE: ABX), the world's biggest gold producer, plans to eliminate all of its gold hedges and raise $3 billion in an offering of shares to help pay for the move.
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The company said Tuesday it made the decision because of an increasingly positive outlook on the price of gold, according to Associated Press. Barrick said it believes the gold hedges hurt its appeal to the broader investment community and its share price.
Barrick will issue about 81.2 million shares at a $36.95 per share under a bought deal underwritten by a syndicate led by RBC Capital Markets, Morgan Stanley, J.P. Morgan and Scotia Capital.
It will use $1.9 billion to eliminate all of its fixed priced gold contracts within the next 12 months and another $1 billion to eliminate a portion of its floating spot price gold contracts.
The company will take a $5.6-billion charge to earnings in the third quarter as a result of a change in accounting treatment for the contracts.
Barrick also agreed Tuesday to sell silver reserves from four of its mines to Silver Wheaton Corp. in a deal worth $625 million.
The transaction will provide Barrick with a source of financing for its Pascua-Lama mining project, which is under construction on the border between Argentina and Chile, while it significantly boosts the size of the 5-year-old Silver Wheaton.
The company agreed to pay $625 million in cash over three years.
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