Barrick Gold Considering Sale of African Unit to China
Barrick Gold (ABX) responded to recent media speculation that it is considering selling a majority stake in African Barrick Gold plc (ABG), which it spun out as a separate public company in 2010. The Company announced this morning that “ABG is subject to the UK City Code on Takeovers and Mergers and in accordance with its obligations under the Code, Barrick confirms that it is in preliminary discussions with China National Gold Group Corporation regarding its holding in ABG.”
Barrick Gold currently holds a 73.9% stake in ABG, which as of yesterday’s closing price was worth approximately $1.9 billion. Shares of ABG – which are traded on the London Stock Exchange – climbed 8.0% to 425 pence this afternoon. In the U.S., shares of ABX rose 2.9% to $35.69 per share.
The potential sale of African Barrick represents one of the first major decisions by new CEO Jamie Sokalsky, who was appointed in June following the dismissal of long-time CEO Aaron Regent. Barrick, the world’s largest gold mining company, cited its disappointment “with our share price performance” as a key reason for Regent’s dismissal.
One month later, Barrick Gold delivered a dismal set of quarterly results. The company announced that capital expenditures at its Pascua-Lama project in Chile and Argentina are now expected to run 50-60% above its prior $4.7-$5.0 billion forecast. Barrick cited “lower than expected productivity and persistent inflationary and other cost pressures” as the driving force behind the challenges at Pascua-Lama. In addition, Barrick lowered its 2015/2016 target production rate to 8 million ounces of gold from 9 million.
In addition, Sokalsky stated in July that the Company “initiated a thorough review of our mines and projects to evaluate their rates of return and ability to generate free cash flow as part of a more disciplined capital allocation framework.” In light of that announcement, today’s news suggests that African Barrick may no longer be considered a core asset of the Company.
2012-08-16 13:42:39
Source: http://www.goldalert.com/2012/08/barrick-gold-considering-sale-of-african-unit-to-china/
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