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The bankers behind Barrick Gold Corp.’s US$3-billion equity offering faced a tall order: sell the most shares ever issued in a Canadian bought deal; do it in a tough gold market; and do it for a company that was struggling to regain investor confidence after a series of writedowns and strategic blunders.
It was clear by last summer that Barrick, the world’s biggest gold producer, should do something about its over-levered balance sheet. Gold prices were down sharply from their highs in 2011, and analysts were warning the company could have liquidity problems if prices dropped below US$1,200 an ounce for a prolonged period.
Throughout this period, Barrick’s management was in touch with bankers from RBC Capital Markets on a potential plan to issue equity in order to retire debt. That Barrick turned to RBC was no surprise: the two firms have a longstanding relationship that dates back to the gold miner’s earliest days in the mid-1980s.
“They have done business with others. But if you look at who they have done business with over a long period of time, we’ve been privileged to have supported Barrick on a number of their milestone transactions,” said Jamie Anderson, deputy chairman of RBC Capital Markets.