African Barrick to sweat assets harder as earnings fall

LONDON (Reuters) - Tanzania-focused mining group African Barrick Gold, a takeover target until talks collapsed in January, said on Wednesday it would focus on improving returns by cutting costs this year, after earnings tumbled by 39 percent in 2012.

Detailing the first findings of an operational review, initiated in the wake of parent company Barrick Gold's failed attempt to sell the company, African Barrick said it plans to cut back on spending. It will investigate ways of reducing power and other operational costs as it seeks to work its assets harder to boost cash generation through this year.

The review, to run for six months until mid-2013, comes as the company forecast that it will produce less gold in 2013 than last year and that production costs will stay in the same range as last year.

The miner's 2012 earnings before interest, tax, depreciation and amortisation (EBITDA) came in at $331 million, behind a Thomson Reuters I/B/E/S consensus forecast of $354 million from a poll of 19 analysts, and 39 percent lower than last year.

The crash in earnings was a result of lower production - the company flagged in January that output fell 9 percent to 626,212 ounces in 2012. But cash costs also soared from $692 per ounce sold to $949 in 2012.

"During 2012 the increases in our operating expenses and in the level of capital we invested in our assets meant that the business consumed capital which is not sustainable over the longer term," Chief Executive Greg Hawkins said in a statement.

The company guided that it expected to prevent a big cost rise this year, forecasting that they would be in the range of $925 and $975 per ounce sold, as it said production would fall to between 540,000 ounces to 600,000 ounces of gold.

Canada's Barrick Gold, which owns 74 percent of African Barrick, ended talks over a possible $3 billion deal to sell its stake in African Barrick to China National Gold this month and analysts said that a downgrade to 2012 production during discussions could have hindered negotiations.

Since being spun out of Barrick in 2010, African Barrick has downgraded production forecasts a number of times and has suffered a range of setbacks from villagers armed with machetes invading a mine to power woes and fuel thefts.

The stock has dropped around 21 percent since the beginning of the year, reflecting the ending of talks, lagging the European mining index which is 2 percent lower and far outpacing a 1.7 percent drop in the U.S. dollar gold price.

Gold stocks globally have failed to match the huge gains in the gold price in recent years, due to rising costs and a proliferation of exchange-traded gold funds, which provide investors with direct exposure to gold commodity markets.

Source: http://news.yahoo.com/african-barrick-sweat-assets-harder-earnings-fall-080954927--finance.html

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