TORONTO, Nov 1 (Reuters) - A massive public share offering from Barrick Gold Corp has met with sluggish demand, market sources said on Friday, with the shares of the world’s biggest gold producer falling below the offer price.
Barrick said late on Thursday it would issue more than $3 billion worth of common shares in a bought deal to pay down part of its large debt load. The shares are priced at $18.35 each.
“I don’t think this has gone really well at all,” said one trading source who asked not to be named. “There’s a good chance the stock will continue to work its way lower.”
Just before noon, Barrick’s New York-listed shares were just above $18.00, down 7 percent. It was not clear how much of the offering the banks had been able to sell before the shares, which closed at $19.39 on Thursday, dropped below the offer price.
Shares of precious metal miners were broadly lower on Friday as the gold price fell to a three-week low.
The offering followed news early on Thursday that Toronto-based Barrick would temporarily shelve its massive Pascua-Lama mine project. The gold-silver mine, being built high in the Andes on the border between Chile and Argentina, had been a key growth project for Barrick, but also a drain on its cash reserves.
The weak reception for the share offering will have no impact on how much Barrick receives, but could hurt the deal’s underwriters, led by RBC Capital Markets, Barclays and GMP Securities LP.
In a bought deal, underwriters commit to purchase the entire offering from a client and then resell it. If they resell shares below the offer price, their margins take a hit, and they could even lose money on the deal.
RBC and GMP could not immediately be reached for comment. Barclays declined to comment.
The fall in Barrick’s Toronto-listed stock on Friday - down C$1.41 at C$18.87 - was the biggest drag on Canada’s main stock index, the Toronto Stock Exchange’s S&P/TSX composite index .
$1=$1.04 Canadian Reporting by Allison Martell and Euan Rocha; Editing by Peter Galloway