HSBC cuts its 2014 price target for gold to $1,292/oz. from $1,435 and its 2015 forecast to $1,310 from $1,395, downgrading Barrick Gold (ABX -2.1%), Yamana Gold (AUY -2.6%) and African Barrick Gold (ABGLF, ABGLY) in the process.
ABX may benefit this year from new mine plans which could radically improve near term cash flow, but this likely will come at the expense of reserves and mine life, the firm says in cutting shares to Underweight with a $16.50 price target (from $19.60).
AUY enjoys low average costs but the firm believes this is more than factored in, and cites the relatively small production base and concerns about long-term sustainability of profitability at El Penon in lowering shares to Underweight with an $8.20 target (from $9.60).
More on Barrick Gold (ABX +1.4%) at the Denver Gold Forum: Jamie Sokalsky says the miner is in talks on further asset sales, especially mines that are relatively high cost, have shorter mine lives and limited opportunity to expand through exploration; some of its remaining assets in Australia fit that profile, the CEO says. (earlier)
Though some analysts have suggested ABX should spin off assets instead of selling them into a tough market, Sokalsky says more spinoffs are not on the agenda, due to tax considerations and administrative requirements.
On African Barrick (ABGLF.PK, ABGLY.PK), Sokalsky says he is focused on improving operations there and not on a quick sale, and that ABX does not have a timetable for selling its stake.
Barrick Gold's (ABX -1.8%) African Barrick subsidiary is sued in a U.K. court by a group of Tanzanian villagers who allege the miner was complicit in the killing of six locals by police over the last three years as they looked for gold at or around the North Mara mine.
The news comes as ABX looks to sell its controlling 74% stake in African Barrick amid a declining gold price and high debt burden.
As cheaper gold makes South African mines unprofitable to operate, Goldman Sachs slaps Sell ratings on AngloGold (AU -1.2%) and Sibanye (SBGL -5.1%) due to their high exposure to the country. The firm also thinks attempts to reduce costs by reducing labor or closing mines could be met with strikes or government interference. Goldman's best rating - Neutral - is saved for Randgold (GOLD -0.2%).
African Barrick Gold (ABGLF.PK) plummets 21% in London after parent company Barrick Gold (ABX) ends talks to sell the unit, in which it owns 74%, to state-owned China National Gold. Barrick Gold "will only proceed with opportunities that generate acceptable value," CEO Jamie Sokalsky said. African Barrick, which is worth $1.4B, will now conduct a review of its operations in order to improve returns. (PR)