LONDON, April 18 Miner African Barrick Gold
, the subject of a failed takeover attempt in January,
said that this week's plunge in the price of gold has raised the
stakes for its internal operational review.
The Tanzania-focused company, which has underperformed its
rivals on the stock market and repeatedly cut output forecasts,
initiated the six-month review earlier this year after parent
Barrick Gold's failed attempt to sell the business to a
"The past week, if you like, has given us a little bit more
impetus," Chief Executive Greg Hawkins said when asked about the
review on Thursday.
The price of gold hit a two-year low on Monday with its
biggest one-day drop since 1983, damaging bullion's status as a
safe-haven investment and emphasising the plight of mining
companies battling operational troubles on the ground and
"We kicked that (operational review) off because we knew we
had to restructure the cost of the business to give us some
comfort if the gold price came off, or to create a bigger margin
if they (gold prices) sustained at that level," Hawkins said.
The CEO added that he believed the company had "a head
start" for managing any new gold-price environment because the
review was already under way, helping it to be flexible with its
mining plans should the price continue to fall.
The review is due to be completed in July at the time of the
company's interim results.
African Barrick, which had warned that production would
shrink for a fifth straight year, on Thursday posted
first-quarter production ahead of analyst expectations.
Output in the first three months of the year was 146,105
ounces of gold at a cash cost per ounce of $931, which the
company said was on track for its target of producing 540,000 to
600,000 ounces in 2013 at a cost of $925 to $975 per ounce.
The company's shares, which have lost more than half their
value over the past three months, were down 2.4 percent in
"While African Barrick appears to offer excellent upside
potential, it is also the most leveraged gold company in our
coverage," Investec analyst Hunter Hillcoat said.
Parent company Barrick's talks with China National Gold
Group Corp on the sale of its 74 percent stake in
African Barrick broke down in January after the companies failed
to agree on price.
Hawkins declined to comment on whether the plunge in the
gold price and African Barrick stock meant an acceleration of
the parent's divestment plans.
"They (Barrick) see long-term value in the assets," he said.
"That was their view when they didn't get the deal in the first
place. Their view hasn't changed."