SANTIAGO – Barrick Gold had its credit outlook raised by S&P Global Ratings as the biggest bullion producer’s balance sheet benefits from higher metal prices, asset sales and lower costs.
The Toronto-based miner’s outlook was lifted to positive from stable, S&P wrote in a statement Wednesday, affirming its BBB-rating.
Shares in Barrick have more than doubled in value this year after five straight annual declines and its bonds have gained 38% as bullion rallies 23%. While prices have retreated this month, investors have flocked to bullion and the companies that mine it, as central banks around the world increased economic stimulus to support growth and as the Federal Reserve kept US borrowing costs low.
Barrick exemplifies the mining industry’s push to grow and diversify as commodities surged, before grappling to sell assets and cut costs as a price downturn exposed high leverage. Barrick’s debt, which peaked at $15.8-billion after it bought Equinox Minerals, was back at about $9-billion in the second quarter with President Kelvin Dushnisky saying the company could be debt free within a decade. In the second quarter, it posted its highest net income since 2013 while its stock surged 56%.
“A continuing favourable gold price environment and improvement in Barrick’s cost position should translate into free cash flow and debt repayment above our previous expectations,” the S&P analysts wrote. “As such, we believe there is an increased likelihood that Barrick will achieve a stronger financial risk profile and a one-notch upgrade on the company within the next one to two years.”