UPDATE 2-African Barrick Gold looks beyond savings target

Fri Jul 25, 2014 7:31am EDT

Related Topics

* Raises full-year production target to more than 700,000 ounces

* Aims to save more than $185 mln by year-end - CEO

* First-half net profit $40.8 mln vs year-earlier loss

* Shares rise as much as 5 pct (Adds CEO comments, background, updates share price)

By Karen Rebelo

July 25 (Reuters) - African Barrick Gold Plc expects to push beyond its savings target of $185 million by the end of the year as it cuts costs at its Tanzanian mines in response to low gold prices.

African Barrick's shares, which have more than doubled in the last year, rose as much as 5 percent on Friday after the FTSE-250 company also raised its full-year production forecast.

Many gold and silver miners were forced to shelve new projects and slash costs last year after prices of the precious metals fell to their lowest in a decade. Gold fell 28 percent and silver plunged 36 percent in 2013.

"The new norm for the industry is cost control," African Barrick Chief Executive Brad Gordon told Reuters in an interview.

African Barrick launched an operational review in early 2013, focusing on boosting output and cutting costs after its majority owner, Barrick Gold Corp, was unable to sell the business to a Chinese company.

Gordon said the company was on track to meet, or possibly surpass, its publicly stated cost-savings target of $185 million without the need to sell any of its three operating mines.

"We're on a run rate of $175 million by the end of this year. We expect that that will continue to improve," he said. "The number we are targeting internally is $200 million of saving by the end of this calendar year."

Cost cuts will continue beyond this year.

"There are still some opportunities to reduce our overall workforce," Gordon said.

"There are still improvements to gain from changing the mining methods ... particularly at Bulyanhulu, where we're changing the mine completely to a mechanised system rather than a hand-held system, which is a lot safer."

Expected production from the upper east zone at Bulyanhulu, one of African Barrick's three mines in northern Tanzania, was a factor in the company raising its full-year production forecast to more than 700,000 ounces from 650,000-690,000 ounces.

Production rose 13 percent to 346,581 ounces in the six months ended June 30. The average realised gold price for the six months fell to $1,290 per ounce from $1,480 per ounce a year earlier.

African Barrick posted a profit of $40.8 million for the first half of 2014, compared with a year-earlier loss, when it took a writedown of $727 million on the value of some of its mines.

The company declared an interim dividend of 1.4 cents.

African Barrick's shares were up 3.9 percent at 263.8 pence at 1130 GMT on the London Stock Exchange. (Editing by Ted Kerr, Gopakumar Warrier and Robin Paxton)

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