* H1 net loss of $701.2 mln vs $73.7 mln in last year period
* Hit by $727 mln charge after gold price plunge, review of
* Says cost review identifies $185 mln of savings
* Shares down 2.9 pct
By Clara Ferreira-Marques and Sarah Young
LONDON, July 30 Miner African Barrick Gold
, battling a plunge in the price of bullion, identified
more cost cuts to help engineer a turnaround after sinking to a
first-half loss on the back of a $727 million impairment charge.
African Barrick was under pressure even before a gold price
rout began in April, hit by illegal mining, power generation
problems and strikes, issues which forced it to warn in February
that output would shrink for a fifth straight year.
The company on Tuesday posted a first half net loss of
$701.2 million, against a profit for the year-ago period of
$73.7 million, after a lower gold price and a review of its
lower grade mines forced it to take the $727 million charge.
On a quarterly-basis, however, it beat consensus on a
production and cost basis, helped by actions taken as part of a
The review identified $185 million of potential savings,
with over $100 million of cuts seen in 2013. Initially prompted
by a failed takeover attempt earlier this year, the process was
given fresh impetus by a fall in the price of gold.
"Our track record hasn't been good. We've been thrown around
a bit the last couple of years," conceded chief executive Greg
Hawkins in a telephone interview, adding that the second quarter
results showed a turnaround was underway.
"We've got very, very detailed plans that are actionable. In
order to put these numbers out there, there's a fair amount of
confidence in the numbers."
The price of gold has fallen 22 percent, or nearly $400 an
ounce so far this year, prompting many producers to shelve
projects, reduce overheads and put non-core assets on the block.
Many gold miners have announced billions in writedowns in
recent weeks, with African Barrick - a unit of gold mining giant
Barrick Gold - following on from larger peers such as
Newmont, Goldcorp and Australia's Newcrest
. All of them have either taken charges or warned a hit
is expected after bullion prices tumbled.
African Barrick produced 165,733 ounces of gold in the three
months to June 30, higher than the 140,000 ounces analysts
expected on average, at a cash cost of $879 per ounce sold,
beating a consensus forecast of $960.
African Barrick's first-half all-in sustaining cost,
however, a more widely used measure which includes additional
elements such as exploration, stood at $1,507 per ounce in the
six months - well above a current gold price of around $1,325.
"We think we're on a good trajectory to get ourselves below
the gold price and create a business that can make money and is
profitable and sustainable at this sort of gold price," Hawkins
Shares in African Barrick, which have lost two-thirds of
their value in the last six months, rose as much as 4.8 percent
in early trading, a rare positive reaction to its results. They
later reversed to trade down 2.9 percent at 0943 GMT.
"If African Barrick is able to push these changes through it
should help convince investors of its sustainability under lower
gold prices," Nomura analysts said.
The company's overhaul involves it reducing the life of
operations like its low-grade Buzwagi mine, as well as reducing
maintenance, transport and security costs.
Security at the African Barrick's mines is in focus after
news earlier on Tuesday that the company was being sued by a
group of Tanzanians who say the company was complicit in the
killing by police of villagers in incidents in 2011.
"African Barrick believes that these proceedings are without
merit, and intends to vigorously defend its interests," the
company said in a separate statement.
African Barrick stuck to its full-year cost and production
targets - a 2013 cash cost of $925 to $975 per ounce, above
current levels for the six months, and output of 540,000 to
600,000 ounces for the year.