“We continue to actively pursue opportunities to optimise our
existing portfolio,” Barrick Chief Executive Officer Jamie Sokalsky said
on Friday on a conference call. “We’re open to anything that will
increase shareholder value.”
Sokalsky, who took over as CEO in June after his predecessor Aaron
Regent was fired, has previously said he’s reviewing assets in an effort
to improve returns and cash flow as costs soar.
The Toronto-based company is actively seeking to sell Barrick Energy Inc. and Kabanga, its 50 percent-owned nickel project.
The latter project is 130 km south west of Lake Victoria near the
border with Burundi and owned by Barrick Gold and Xstrata Nickel.
“When I started talking about portfolio optimisation, the phone
actually started ringing off the wall a bit, with a lot of buyers,”
Sokalsky said on the call. “And many of those buyers are serious buyers
that are willing to look at paying a fair price for assets.”
The company on Friday posted an unexpected fourth-quarter loss
after taking a $3 billion writedown on a Zambian copper mine it bought
in 2011.
The loss was $3.06 billion, or $3.06 a share, compared with net
income of $959m, or 96 cents, a year earlier, Barrick said in a
statement.
Earnings excluding the writedown and other one-time items were
$1.11 a share, beating the $1.05 average of 22 estimates compiled by
Bloomberg. Sales rose 11 percent to $4.19bn.
The writedown “was twice as big as we expected,” Pawel Rajszel, an
analyst at Veritas Investment Research in Toronto who has a buy rating
on the stock, said by phone. “They definitely didn’t do their due
diligence.”
Barrick is the latest major mining company to take multibillion impairment charges as it grapples with rising production costs.
The gold producer said it now won’t proceed with an expansion at
the Lumwana copper mine, acquired as part of its C$7.3bn ($7.29bn)
takeover of Equinox Minerals Limited, Barrick’s second-largest
acquisition. It doesn’t plan to build any new mines in what is a
“challenging environment” for such investments.
“When we bought Equinox, our view was that Lumwana was a very
long-life mine, with exceptional resource potential,” Sokalsky said in
the statement. “Unfortunately, our new mining plan projects mining costs
to be higher than we anticipated.”
Other miners reporting charges include Kinross Gold Corporation,
Canada’s third-largest gold miner, which said on Thursday it took a
$3.09bn writedown on its Tasiast mine in Mauritania. Kinross acquired
the project when it bought Red Back Mining Inc. for about C$8bn in 2010.
Rio Tinto Group, the world’s second-biggest miner, today reported
its first full-year loss in at least 21 years after taking a $14 billion
charge on the value of its coal and aluminum businesses.
Gold, which has risen for 12 straight years, averaged $1,719 an
ounce in the fourth quarter on the Comex in New York, 1.9 percent more
than a year earlier and 3.8 percent higher than in the previous three
months.
Asked for comments, Energy and Minerals minister Prof Peter Muhongo
said there is nothing to amazing about that. “that is business”.
Barrick Gold’s sale of Kabanga nickel mine will be the second in
the line up of the company’s mines earmarked for sale in Tanzania.
In August last year, the company announced that its African arm,
African Barrick Gold (ABG) may pull out of Tanzania and the continent if
the deal to sell its 74 percent stakes to a Chinese owned mining giant
sails through.
China National Gold, the state-owned miner, has been in talks to
buy Barrick Gold’s stake in London-listed African Barrick, in a move
that could lead to a full takeover.
With about 17million ounces in reserves, the sheer size of
Barrick’s resource base could be appealing to possible buyers, as could
the miner’s sizeable position in Tanzania to other African miners
seeking diversification.
According to its half-year report for the six months ended 30 June
2012, ABG produced 297,742 ounces of gold down by 14 percent compared to
similar period last year—attributing the low production with lower
grade material mined at Buzwagi, waste stripping at North Mara and batch
processing at Tulawaka.
ABG’s revenue was US$534m, down by 8 percent compared to similar period in 2011.
If the Chinese deal sails through, ABG will have walked into the
path of its predecessors, Placerdome of Vancouver Canada, and Kahama
Mining Corporation.
The two companies came to Tanzania, did exploration, established
gold mines, but sold everything at a profitable amount and left the
Tanzanian government in the cold about six years ago.
Source: The Guardian, http://www.ippmedia.com, reported from Dar es Salaam
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