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A gold mine in Arusha, northern Tanzania. Photo/FILE
By KENNEDY SENELWA Special Correspondent
Posted Saturday, January 19 2013 at 16:26
IN SUMMARY
- The company will now undertake an operational review to improve performance of the subsidiary.
- Barrick Gold, started talks with China National Gold Group Corp (CNGG) in August 2012, to sell its equity to the latter for an estimated $3 billion.
Canadian mining firm Barrick Gold will not sell all or part of its 74 per cent stake in its Tanzanian subsidiary Africa Barrick Gold (ABG) to Chinas largest gold producer.
In a turn of events, the company will now undertake an operational review to improve performance of the subsidiary.
The Toronto-based Barrick Gold, started talks with China National Gold Group Corp (CNGG) in August 2012, to sell its equity to the latter for an estimated $3 billion.
Yuan Zhibin, an analyst at CIConsulting Industrial Research Centre, a Chinese consultancy said it was inevitable for talks between the two parties to fail as both were negotiating to discover each others weakness to cut or raise prices.
CNGG also did not agree with the Tanzanian governments plan to hike tax, and found out that ABG had issues of unpaid debts. Meanwhile, Barrick questioned scientific credentials of CNGGs research report, he said.
Last November, Tanzania renewed two mining licences for ABG for the North Mara project, both for a period of 15 years.
Although the possibility of a sale to another party has not been ruled out, Barrick has decided to support ABG to realise full its business potential as it sees considerable long-term value in assets base of the subsidiary, its executives said.
Barricks chief executive officer Jamie Sokalsky said, We are approaching this in a prudent and disciplined manner and will only proceed with opportunities that generate acceptable value for Barrick.
Given the direct nature of the discussions between Barrick and CNGG, this has meant an extended period of uncertainty for ABG as well as significant extra work, said ABGs chief executive Greg Hawkins.
He said the discussions did not lead to a transaction but the process shed light to fundamental long-term value of ABGs portfolio and the scarcity of large scale producing opportunities to enter the gold market in Africa.
ABGs management has been tasked to undertake a full review of the business with the aim of enhancing operations of the company with the target to produce one million ounces of gold a year by 2014.
The scope covers delivering more cash flow from its asset base by deploying capital more effectively and making sure the company has an appropriate organisational structure.
ABG in October 2012 revised down full-year output forecast by five to 10 per cent below the previous range of 675,000 to 725,000 ounces of gold due to illegal mining operations and interruption of power supply among others.
Revenue in third quarter of 2012 was $265 million compared with $354 million in a similar period the previous year. In October, ABG raised its 2013 forecast for average costs to $900 to $950 per ounce of gold from Julys projection of $790 to $860.
To recognise support of ABGs shareholders, the companys board of directors intends to recommend in the full year results that the total dividend for 2012 be maintained at the 2011 level of $67 million.
Acting AB chairman, Derek Pannell, said the board is confident in the ability of the management to deliver significant value from high quality asset base to the benefit of all stakeholders.
While our operational and financial performance in 2012 has been lower than the previous year, we are positive on the future potential of the business, we have built up a strong balance sheet, he said in a statement.
China National Golds revenue in 2012 rose by 27.1 per cent 16.18 billion from the previous year and posted $715.6 million as profit effectively placing it in the 47th position among Chinese state-owned companies.
China was banking on the proposed acquisition of ABG assets to drive its foray into the continents exploration business, which has been in the grip of Western firms.
Had CNGG clinched the assets, this deal would have given impetus to Chinas bid to take over exploration and mining operations on the continent to satisfy its expanding domestic demand for commodities, especially gold.
CNGG would have gained a foothold to Bulyanhulu, Buzwagi, Tulawaka and North Mara mines in Tanzania and exploration areas acquired in western Kenya by ABG in October 2012, for $20 million from Aviva of Australia.
CNGG recently announced that it will accelerate its overseas acquisitions to secure resources abroad