Moody’s restates Barrick’s Baa3 rating and revises outlook to stable

VANCOUVER (miningweekly.com) – Credit ratings agency Moody’s Investors Service has confirmed the Baa3 ratings of the world’s largest gold producer by volume Barrick Gold and revised the ratings outlook to stable from negative.

"The outlook revision to stable reflects Barrick's reducing leverage and management's commitment to further reduce debt," stated Moody's VP and senior analyst Jamie Koutsoukis on Friday.

The lowest rating under Moody's long-term ‘investment grade’ corporate obligation rating, Baa3, means that Barrick’s obligations are subject to moderate credit risk, while the company is believed to have acceptable ability to repay short-term debt.

Moody’s advises that Barrick’s Baa3 rating is underpinned by its large-scale, diverse and low-cost gold assets, sizeable copper operations, favourable geopolitical risk profile and excellent liquidity. Moody's expects Barrick will achieve its debt reduction target of $2-billion in 2016, of which $968-million had already been achieved at the end of June, following a $3-billion reduction in 2015.

Moody's expects Barrick's adjusted financial leverage will be around 2.5x at the end of 2016 (compared with 2.8x as at June 30), assuming a gold price of $1 250/oz, with further reductions possible in 2017 and beyond.

Barrick's credit metrics have markedly improved, with the company having reduced adjusted debt to $9.2-billion in June, from $13.2-billion in December 2014 and adjusted leverage improving to 2.8x at June 30, from 3.4x at December 31, 2014.

Moody’s says it is heartened by Barrick’s continued discipline regarding capital expenditure and asset sales as it focused on debt and leverage reduction.

Moody’s forecasts Barrick’s output to fall to within a range of between 4.6-million and 5.1-million attributable ounces by 2018, from 6.1-million attributable ounces in 2015.

“As existing mines are depleted, absent mine expansions or the development of new mines, we expect Barrick's production to decrease further, resulting in a reduction of cash flow and an increase in leverage unless debt continues to be reduced. We also presume that Barrick's commitment to reduce debt further, towards $5-billion from $9.2-billion at June, will remain the more important priority compared to material new mine spending, although some of both may occur,” Koutsoukis stated.