When Barrick Gold Corp. spun its African properties into a new company last year, investors knew they were being sold high-risk assets that had their share of problems.
But they didn’t imagine this.
On Tuesday, African Barrick Gold PLC reported details of a horrifying incident at its North Mara mine in Tanzania. According to the company, about 800 “criminal intruders” armed with machetes, rocks and hammers broke into the mine site and tried to steal gold ore. The Tanzanian police were called in and were forced to open fire after being attacked by the intruders. Seven people were killed and another 12 injured.
“The police are making an investigation, so more details will come from them in the days and weeks to come,” a spokesman for London-based African Barrick said.
This is the worst incident yet at North Mara, which has been plagued with security problems for years. The mine is located in a difficult border region near Kenya, and attracts transients and other illegal miners.
Unfortunately for African Barrick, the violence is just one of several problems the company has encountered. It has been a major disappointment since going public in March of last year.
“It’s been one issue after another. They’ve failed to execute,” said one analyst, who asked not to be named.
Just a day before African Barrick announced the incident at North Mara, the company reported a mill failure at the Buzwagi mine. And prior to that, there were problems with fuel theft and unplanned power outages (also at Buzwagi), along with other cost inflation issues. African Barrick produced just over 700,000 ounces of gold in 2010, well below its initial target of as much as 850,000 ounces.
As a result of its problems, the company has failed to capitalize on the phenomenal bull market for gold. The stock has dropped nearly 20% since the initial public offering.
Barrick, the world’s biggest gold miner, decided to spin off the Tanzanian assets because they are relatively small compared to the company’s massive operations in the Americas. Chief executive Aaron Regent thought they could do better on their own as a high-growth company than in Barrick as a whole, where they were overshadowed.
In hindsight, experts said that taking capital out of Tanzania was probably a good move by Barrick. However, the company still owns about 74% of African Barrick.
For the rest of this article, please go to the National Post/Financial Post website: http://business.financialpost.com/2011/05/17/seven-intruders-killed-at-african-barrick-mine/