Barrick Gold is planning to use some of the newly raised cash to pay down a substantial debt load of about US$ 15 billion, but even after this move, the debt load will still remain high, which is an additional risk factor for shareholders to consider. The secondary offering consisted of about 163.5 million new shares, which were priced at $18.35. With around a billion shares outstanding before the offering, this secondary offering dilutes existing shareholders by about 16%.
If over-allotment option is exercised in full, Barrick would receive net proceeds of approximately $3.3B. The company intends to use $2.6B of the net proceeds to redeem or repurchase outstanding debt…
We believe shares may be range-bound near term as market digests the $3B stock issuance, new operating cost reduction program, pace of asset sales and board changes.
The plight of Barrick Gold is similar to many other gold mining stocks. Profits in this industry are declining along with the price of gold, and this has caused increased concerns over debt servicing and even dividend cuts. Furthermore, this stock is trading for about half of the 52-week high of $36.91, and that means many investors have significant losses. At this time of year, stocks that have performed poorly are likely to see substantial tax-loss selling pressure as investors want to harvest losses to offset gains in other assets. This is why many gold stocks like Barrick are likely to remain under pressure for the next few weeks.It could rebound a bit into January as this tax-loss selling pressure ends.
Investors who want more diversification while still having the potential of playing a rebound into January as tax-loss selling ends could consider the Market Vectors Gold Miners ETF GDX which, has also fallen sharply in 2013.
Source: Hawkinvest, SeekingAlpha
If over-allotment option is exercised in full, Barrick would receive net proceeds of approximately $3.3B. The company intends to use $2.6B of the net proceeds to redeem or repurchase outstanding debt…
We believe shares may be range-bound near term as market digests the $3B stock issuance, new operating cost reduction program, pace of asset sales and board changes.
The plight of Barrick Gold is similar to many other gold mining stocks. Profits in this industry are declining along with the price of gold, and this has caused increased concerns over debt servicing and even dividend cuts. Furthermore, this stock is trading for about half of the 52-week high of $36.91, and that means many investors have significant losses. At this time of year, stocks that have performed poorly are likely to see substantial tax-loss selling pressure as investors want to harvest losses to offset gains in other assets. This is why many gold stocks like Barrick are likely to remain under pressure for the next few weeks.It could rebound a bit into January as this tax-loss selling pressure ends.
Investors who want more diversification while still having the potential of playing a rebound into January as tax-loss selling ends could consider the Market Vectors Gold Miners ETF GDX which, has also fallen sharply in 2013.
Source: Hawkinvest, SeekingAlpha
