[miningmx.com] – AFRICAN Barrick said its Canadian parent company, Barrick Gold, remained a seller of its 73.9% stake in the company, but that it had currently shifted its attention to rationalising other parts of its portfolio.
Barrick Gold said 12 months ago it was in “preliminary discussions” to sell its stake in African Barrick to China National Gold Group. The sale dissolved six months later in January. This was only two years after Barrick Gold spun out its Tanzanian assets for $3.7bn. African Barrick is currently valued at $731m.
Greg Hawkins, CEO of African Barrick, said Barrick Gold was supportive of African Barrick’s restructuring proposals which aimed at slashing $185m from corporate costs and taking the cost of production down $150 per ounce to $1,350/oz.
“I don’t think their position has changed; it [Barrick Gold] is not a long-term holder,” said Hawkins who was speaking as the company’s interim and second quarter results announcement in which it posted a net loss of $701m – a number that included a $727m impairment on its Tanzanian mines.
On pretax basis, African Barrick posted a $131m profit versus a R184m profit in the previous financial year. Most of the write-down related to African Barrick’s Buzwagi ($543m) and North Mara ($128m) mines.
All-in sustaining costs, which includes corporate and exploration and development costs, increased 3% over the six months, but were down quarter-on-quarter; production was up 5% to 311,000 ounces.
Said Hawkins of Barrick Gold: “Their interests are aligned with ours; they think the restructuring is the right plan and that it will improve the share price. They have got other problems”.
Barrick said earlier this month it may write down its delayed Andean project, Pascua-Lama, by $5.5bn. It also sold part of its energy division for C$223m to Canadian Natural Resources at a cash loss.
Hawkins also dismissed a legal claim lodged in London, in which relatives of slain Tanzanian villagers near where African Barrick operates, intend to sue the gold producer. Wilkens said the claim was “without merit”, and that the firm would “vigorously defends its position”.
It was reported earlier today that at least 12 villagers had filed a lawsuit in London accusing the company and North Mara Gold Mine of using excessive force to protect the mine. “Unfortunately, these are not isolated incidents,’ Richard Meeran, a lawyer at Leigh Day, told Bloomberg News.
“We are aware of many other instances in which local people have reportedly been seriously injured or killed at ABG’s [African Barrick Gold’s] mine,’ he said.
Investors were unimpressed with African Barrick’s cost-cutting plans. The stock was down 5% by midday in London. One analyst, Leon Esterhuizen of CIBC Capital Markets, said the company ought to driving for much greater cost cuts than $150/oz as that would only put it at break-even assuming the current gold price.
“I think we have identified enough that will give us a margin and we will try to improve on that,’ said Hawkins. It also emerged that the company is working on a gold price of $1,300/oz for its reserves and resources calculation in the next financial year. “That is a good mark,’ Hawkins said.
