Gold boost for African Barrick

Eric Cartman · 2011-02-18T09:35:17+00:00

Gold boost for African Barrick By Christopher Thompson: The FTSE 100 Tanzania-focused gold miner made a pre-tax profit of $309m (£193m) in 2010, up from $150.4m in 2009, as turnover rose to $975m ($711.1m) on an average gold price of $1,240 an ounce, up from $974. Strong fourth-quarter results contributed handsomely, with revenue up from $229.6m to $309.5m and despite decreased production down 2 per cent to 700,934 ounces annual sales rose 6 per cent to 724,083 ounces. The miner proposed a final dividend of 3.7 cents, bringing the total pay-out to 5.3 cents, on earnings per share of 53.2 cents (14.3 cents). Shareholders have endured a volatile ride since African Barrick was floated by Barrick Gold, the Canadian miner, in March 2010 at a price of 575p. On Wednesday the shares closed up 5½p at 532½p. In July it cut its 2010 production forecast because of delays accessing higher grade ore at Buzwagi, the newest of the companys four mines in Tanzania. Last October it warned that organised and systematic theft of fuel at Buzwagi meant overall 2010 gold production would be cut by more than 30,000 ounces to a figure comparable to 2009. Trouble at Buzwagi and lower than expected production helped push production costs up 7 per cent to $569 an ounce. Greg Hawkins, chief executive, said the miner, which has no debt and $401m in funds, expected to produce between 700,000 and 760,000 ounces in 2011. Cailey Barker, an analyst at Numis Securities, said he was cautiously optimistic for the year ahead. They didnt start on a great foot [so] for them its about building market confidence. Theyve got brownfield expansions at all four mines that could bring on 200,00 extra ounces . . . that should drive the share price. FT Comment Mr Hawkins said he would abstain from a celebratory gin and tonic to mark his first anniversary in the job this week. It has been a similarly sober year for shareholders who had high hopes for Barrick Golds spin-off of its African assets. Production difficulties and theft led to two cuts in the production forecast and damped expectations. It also pointed to the political risk of operating in emerging economies such as Tanzania, where African Barricks assets are all based. The shares currently trade at 12 times 2011 earnings, a significant discount to the 20 times sector average. If Mr Hawkins can prove that problems at Buzwagi are over it is expected to add 40,000 ounces to overall production in 2011 and ploughs ahead with brownfield expansion elsewhere, African Barrick could prove good value.

Thread starter Eric Cartman
Start date Feb 18, 2011

Eric Cartman

JF-Expert Member

Feb 18, 2011

Semilong

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Gold boost for African Barrick

Eric Cartman

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Semilong

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