🕐15.01.13 - 10:00 Uhr

INVESTEC: AFRICAN BARRICK GOLD - REFLECTING THAT 2012 IS NOW A BASE TO GROW FROM - BUY



Resource_Email_Banner.jpg African Barrick Gold In a recent update, with the announcement that takeover discussions with China National Gold had ended, ABG highlighted that its 2012 operating performance (Q4 result out this Thursday) should be regarded as a base for the business going forward.

We had previously seen 2012 as an anomaly and had expected a robust recovery in 2013.

While ABG is still conducting a full operational review, with an update due in mid-February, we have now taken the precaution of reducing our forward assumptions. * We had expected a robust recovery in 2013, driven to a large extent by grade improvements across all three of the key operations, but particularly at North Mara.

It now appears that this may no longer be the case. * The company is conducting a full operational review, with the aim of “recalibrating” its operations in order to improve returns and provide more deliverable targets.

In the meantime, we have made our own alterations and have reduced our total FY13-16E production by a total of 310koz (down 10%), primarily through reducing our forward grade profiles.

As a result, average cash cost have increased by US$76/oz to US$870/oz (up 10%). * The net impact is a considerable reduction in our earnings assumptions, with FY13E and FY14E earning reduced by 30% and 25% respectively.

Our target price (TP), which is based on an equal blend of NPV and forward earnings multiples, has reduced accordingly, from 526p per share to 405p per share. * Notwithstanding the reduction in TP, following its recent severe share price fall ABG now offers reasonable upside potential against our TP, on what we believe are now conservative forward assumptions.

We have therefore lifted our recommendation to Buy.
To access the full note please click here Analyst: Hunter Hillcoat
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