African Barrick Gold: Better as she goes! – by Lawrence Williams ( – July 25, 2014)

African Barrick has achieved a seventh successive quarterly fall in AISC and has improved its guidance on both gold output and costs after another positive quarter’s financial and operating results.

LONDON (MINEWEB) – The measures being taken to bring African Barrick Gold (ABG) – Barrick Gold’s London quoted African gold mining arm – back towards decent profitability seem to be working and while there are still some hiccups – notably a fall in grades at its flagship Bulyanhulu gold mine – its Q2 production results showed substantial further improvement beating most analysts’ consensus with gold output of 178,000 ounces at all in sustaining costs (AISC) of US$1105 an ounce.

This compares with production of 168,000 ounces in Q1 and 164,000 ounces in Q2 2013 – while AISC have shown the best improvements down from $1404 an ounce a year earlier. Consequently it is upping its production guidance for the year and maintaining its guidance on cash and all in sustaining costs.

CEO Brad Gordon was obviously pleased with the latest figures, commenting “We are pleased to report strong results for H1 2014, with increased production and continued cost discipline enabling the business to return to cash generation.. We have now delivered our seventh successive reduction in quarterly all-in sustaining costs (AISC) as we continue to drive operational improvements through the business”.

While operating results were a definite improvement, Q2 financials did show a slight downturn on those for previous periods if one strips out impairments and timing of gold sales. This was due to higher taxes and depreciation – and a lower average gold price received in comparison with H1 2013.

Even so ABG reported an improved cash position to $270 million as capital expenditures have been cut sharply as part of the restructuring and anticipates remaining cash flow positive for the remainder of the year..

It should also be noted that timing of gold sales is relevant in making any comparisons between Q2 2014 and a year earlier. In Q2 2013, ABG sold 5,653 more ounces than it actually mined, boosting revenues by around $7.7 million. In Q2 2014 it sold 6,643 ounces less than it produced thus reducing potential revenues for the period by around $8.5 million. This will be clawed back in succeeding quarters. This disparity more than accounts for a perceived fall in revenue between the two corresponding periods.

Overall ABG achieved Q2 Revenue and EBITDA at $229m and US$67m, respectively, while earnings per share was effectively 16% lower compared with a year earlier, when the gold price received was higher and on 10% higher taxes and 2% higher depreciation. It is paying an interim dividend of US1.4 cents per share declared, based on a new cash flow based metric.

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