Barrick plans to spin-off its African unit

Barrick Gold, the world’s largest gold miner, is spinning off its African gold assets into a new publicly traded company that will be floated on the London Stock Exchange.

The new company, called African Barrick Gold, will be the biggest UK-based gold miner. It will have 10 per cent of Barrick’s assets, giving it a potential market value of $3.7bn (£2.4bn). This could catapult it straight into the FTSE 100 index.

Barrick plans to retain a 75 per cent stake in the group initially.

“Size-wise it’s bigger than Randgold Resources and certainly it would be one of the prime gold listings on the LSE,” said Leon Esterhuizen, an analyst at RBC Capital Markets in London.

African Barrick, which operates four mines in Tanzania, also intends to have a secondary listing on the country’s Dar es Salaam stock exchange. It hopes to boost its annual production to more than 1m ounces of gold by 2014, from an estimated 800,000 to 850,000 ounces this year. Randgold mines 488,000 ounces a year.

While the London stock market has been hit by several high-profile flotations being pulled last week – private equity-owned Travelport, Merlin Entertainments and New Look – there is confidence that African Barrick will succeed because it has no debt and $280m in cash. An investor roadshow will start around 5 March.

The spin-off is the latest big move by chief executive Aaron Regent, who took the helm a year ago. He plans to use the proceeds from the flotation to fund its pipeline of development projects.

Barrick announced the move as group operating profits doubled in the fourth quarter, thanks to gold prices hitting record levels in the final three months of 2009.

Average gold prices in the quarter were $1,119 per ounce, up from $809 a year earlier.