🕐22.01.14 - 10:54 Uhr

INVESTEC: AFRICAN BARRICK GOLD : PERFORMING VERY WELL, BUT ALREADY WELL-PRICED - SELL



African Barrick Gold (Price: 201p | Target: 137p | Rec: Sell) African Barrick yesterday delivered a solid 4Q13, continuing a vastly improved run of operating performance and delivering full year production of 642koz, comfortably above the 600koz top end of its guidance, while continuing to reduce its operating cost base.

That said, it remains a high cost producer and the improved operating performance cannot yet offset the decline in the gold price.

In the absence of a recovery in the gold price, we maintain a Sell recommendation. * We have updated our production and earnings forecasts to incorporate the 4Q13 production numbers and the likelihood of a lift in forward production.

This helps to offset, although not altogether ameliorate, the recent reduction in our forward gold price assumptions.

The net result is an 8% improvement in FY13E EBITDA but an 11% reduction in FY14E and FY15E EBITDA.

FY13E also sees a strong lift in EPS, from 14.5cps to 20.8cps, while forward EPS is almost unchanged. * In its 4Q release, the company highlighted the possibility of a couple of issues that could impact earnings forecasts beyond that which we highlight here.

These include changes to the reserves positions for Bulyanhulu and North Mara through applying a $1,300/oz gold price (previously $1,500/oz), which could result in a change in the carrying value of the assets. * Our TP of 132p per share (was 137p per share), is based on an equal blend of NPV (applying a long-term flat US$1,300/oz gold price) and three years forward earnings multiples.

We take nothing away from the good work the company has achieved but cannot justify the current share price under our forward operating and gold price assumptions and while the company continues to reduce its net cash position (net cash now at $140m, versus $401m at the start of FY13).
To access the full note please click here Analyst: Hunter Hillcoat +44 (0)20 7597 5182
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