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Barrick now seeks to sell 50 pct stakes at Kabanga

18th February 2013
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  CEO says assets attract interest
Plan officers prepare a resettlement plan to guide the physical and economic displacement of over 300 households directly affected by the Kabanga Nickel Project in Kagera Region in 2009.

Barrick Gold Corporation, the world’s largest producer of the metal, has risen the most in six weeks after it announced that it is open to anything to boost its shareholder value, including selling its stakes at Kabanga Nickel Project in Kagera Region.  

As a result, it has been approached by many buyers interested in its assets.
 
“We continue to actively pursue opportunities to optimise our existing portfolio,” Barrick Chief Executive Officer Jamie Sokalsky said on Friday on a conference call. “We’re open to anything that will increase shareholder value.”
 
Sokalsky, who took over as CEO in June after his predecessor Aaron Regent was fired, has previously said he’s reviewing assets in an effort to improve returns and cash flow as costs soar. 
 
The Toronto-based company is actively seeking to sell Barrick Energy Inc. and Kabanga, its 50 percent-owned nickel project.
 
The latter project is 130 km south west of Lake Victoria near the border with Burundi and owned by Barrick Gold and Xstrata Nickel.
 
“When I started talking about portfolio optimisation, the phone actually started ringing off the wall a bit, with a lot of buyers,” Sokalsky said on the call. “And many of those buyers are serious buyers that are willing to look at paying a fair price for assets.”
The company on Friday posted an unexpected fourth-quarter loss after taking a $3 billion writedown on a Zambian copper mine it bought in 2011.
 
The loss was $3.06 billion, or $3.06 a share, compared with net income of $959m, or 96 cents, a year earlier, Barrick said in a statement. 
 
Earnings excluding the writedown and other one-time items were $1.11 a share, beating the $1.05 average of 22 estimates compiled by Bloomberg. Sales rose 11 percent to $4.19bn.
 
The writedown “was twice as big as we expected,” Pawel Rajszel, an analyst at Veritas Investment Research in Toronto who has a buy rating on the stock, said by phone. “They definitely didn’t do their due diligence.”
 
Barrick is the latest major mining company to take multibillion impairment charges as it grapples with rising production costs. 
 
The gold producer said it now won’t proceed with an expansion at the Lumwana copper mine, acquired as part of its C$7.3bn ($7.29bn) takeover of Equinox Minerals Limited, Barrick’s second-largest acquisition. It doesn’t plan to build any new mines in what is a “challenging environment” for such investments.
 
“When we bought Equinox, our view was that Lumwana was a very long-life mine, with exceptional resource potential,” Sokalsky said in the statement. “Unfortunately, our new mining plan projects mining costs to be higher than we anticipated.”
 
Other miners reporting charges include Kinross Gold Corporation, Canada’s third-largest gold miner, which said on Thursday it took a $3.09bn writedown on its Tasiast mine in Mauritania. Kinross acquired the project when it bought Red Back Mining Inc. for about C$8bn in 2010.
 
Rio Tinto Group, the world’s second-biggest miner, today reported its first full-year loss in at least 21 years after taking a $14 billion charge on the value of its coal and aluminum businesses.
 
Gold, which has risen for 12 straight years, averaged $1,719 an ounce in the fourth quarter on the Comex in New York, 1.9 percent more than a year earlier and 3.8 percent higher than in the previous three months.
 
Asked for comments, Energy and Minerals minister Prof Peter Muhongo said there is nothing to amazing about that. “that is business”.
 
Barrick Gold’s sale of Kabanga nickel mine will be the second in the line up of the company’s mines earmarked for sale in Tanzania.
 
In August last year, the company announced that its African arm, African Barrick Gold (ABG) may pull out of Tanzania and the continent if the deal to sell its 74 percent stakes to a Chinese owned mining giant sails through.
 
China National Gold, the state-owned miner, has been in talks to buy Barrick Gold’s stake in London-listed African Barrick, in a move that could lead to a full takeover.
With about 17million ounces in reserves, the sheer size of Barrick’s resource base could be appealing to possible buyers, as could the miner’s sizeable position in Tanzania to other African miners seeking diversification.
 
According to its half-year report for the six months ended 30 June 2012, ABG produced 297,742 ounces of gold down by 14 percent compared to similar period last year—attributing the low production with lower grade material mined at Buzwagi, waste stripping at North Mara and batch processing at Tulawaka.
 
ABG’s revenue was US$534m, down by 8 percent compared to similar period in 2011.
 If the Chinese deal sails through, ABG will have walked into the path of its predecessors, Placerdome of Vancouver Canada, and Kahama Mining Corporation. 
 
The two companies came to Tanzania, did exploration, established gold mines, but sold everything at a profitable amount and left the Tanzanian government in the cold about six years ago.
 
SOURCE: THE GUARDIAN