Gold Miners Trade Like Junk as Bullion Sinks Below $1,200
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Barrick Gold Corp. (ABX) and Kinross Gold Corp. (K) are trading as if they’ve lost their investment-grade ratings after the price of the metal plunged 28 percent this year to the lowest since August 2010.
Barrick’s implied bond rating has deteriorated to Ba1, the highest junk rating, according to Moody’s Corp. Moody’s Investors Service’s actual rating for Toronto-based Barrick, the world’s biggest gold miner, is an investment grade Baa2. Kinross, Canada’s third-largest producer, also has an implied rating of Ba1, versus an actual rating of Baa3.
Barrick Chief Executive Officer Jamie Sokalsky is reducing spending and selling assets as gold heads for its first annual drop since 2000. Barrick, which had $12.5 billion of net debt as of March 31 and sold $3 billion of bonds in April to bolster liquidity, also faces higher costs at its delayed and over-budget billion-dollar Pascua-Lama gold project in the Andes.
“All the gold names have been pretty much getting hammered both on the credit side and the equity side for quite some time with gold prices coming down,” Wen Li, an analyst at CreditSights Inc., said in a phone interview yesterday. Pascua-Lama is also a “really big overhang” for Barrick, he said.
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