Reported earnings at African Barrick Gold (ABG) moved back into the black at the half-year mark as the new management team's focus on efficiency and better capital allocation began to bear fruit. Second-quarter production also substantially outstripped analysts' estimates, prompting the Tanzania-focused miner to increase its full-year guidance from 650,000-690,000 ounces to more than 700,000 ounces.
Costs were reduced for the seventh successive quarter as chief executive Brad Gordon grappled further with legacy issues at the mines. Average cash costs came in at $749 (£441) an ounce (oz), placing ABG around the middle of the cost curve for global producers, while all-in costs (including exploration) were down by a quarter on the 2013 half year to $1,118/oz. That leaves plenty of headroom relative to the average London-fix gold price of $1,299/oz over the past year.
Shareholders can expect further progress on costs in the second half. Scale benefits will begin to accrue from the expansion of the Bulyanhulu leaching plant, which only started production in the second quarter. The project will eventually deliver an additional 40,000 ounces a year. The ramp up in production combined with increased efficiency to boost second-quarter operating cash flows by 83 per cent year on year to $76.4m.
Broker Investec Securities anticipates adjusted 2014 EPS of 29.9¢.
| AFRICAN BARRICK GOLD (ABG) | ||||
|---|---|---|---|---|
| ORD PRICE: | 252p | MARKET VALUE: | £1bn | |
| TOUCH: | 251-253p | 12-MONTH HIGH: | 322p | Low: 107p |
| DIVIDEND YIELD: | 0.8% | PE RATIO: | na | |
| NET ASSET VALUE: | 478¢* | NET CASH: | $128m | |
| Half-year to 30 Jun | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (¢) |
|---|---|---|---|---|
| 2013 (restated) | 487 | -857 | -164.0 | 1.0 |
| 2014 | 446 | 62 | 9.6 | 1.4 |
| % change | -8 | - | - | +40 |
Ex-div: 27 Aug Payment: 22 Sep *Includes intangible assets of $211m, or 51p a share. £1=$1.70 | ||||
