African Barrick Gold starts IPO bookbuild

African Barrick Gold, a subsidiary of the world’s biggest gold mining company, yesterday started bookbuilding for its expected $975m London floatation.

The group, part of Barrick Gold, is asking investors for between 550p and 650p a share, which would value the miner at 1.3 to 1.6 times its net asset value (NAV), a discount to other gold miners on already on the market.

At the guidance level, African Barrick Gold, is valued at a 30 per cent discount to its parent company, and at about a 40 per cent concession to Randgold Resources and Petropavlovsk.

Randgold’s shares have rallied by almost 10 per cent to trade at 2.5 times 2010 NAV of 2,055p a share, since posting a strong 2009 result in mid-February. Petropavlovsk shares trade at 2.3 times NAV of 472p.

However, the IPO, if it is successfully concluded, would be the biggest on the London market since May 2008 when New World Resources raised £2.5bn. A deal would also sooth fears that equity markets are closed to new entrants. In recent weeks a number of proposed IPOs, including those for airline ticketing group Travelport and Legoland owner Merlin Entertainments, have been pulled after weak investor support.

Barrick Gold is selling a 100m shares in its London-based subsidiary, which is set to be admitted to the FTSE 100.

The IPO is being arranged by JP Morgan Cazenove and Morgan Stanley.