UPDATE 2-African Barrick eyes more cost cuts as impairment hits H1 – by Clara Ferreira-Marques and Sarah Young (Reuters India – July 30, 2013)


LONDON, July 30 (Reuters) – 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 review.

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.

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