Barrick Gold (NYSE: ABX, TSX: ABX) intends to spin-out its African gold mining operations into a newly created subsidiary, African Barrick Gold (NYSE:ABG) which is planned to float on the London Stock Exchange. ABG will hold Barrick's African gold mines and exploration properties. ABG will offer approximately 25% of its equity in an initial public offering (NYSEARCA:IPO) and Barrick will retain the remaining 75% interest.
"ABG will be a leader in the African gold sector, led by an established team of industry operators and mine managers focused on maximising the value of world class assets”, ABG Chief Executive Greg Hawkins commented. “The Company comes to market with a clearly defined growth strategy, a positive market backdrop for gold and a track record of operational success. I am looking forward to working with Barrick and our new investors in the London market to deliver the significant potential of this company".
ABG will be the largest gold producer in Tanzania, under Barrick Gold’s operation the unit produced approximately 716,000 attributable ounces in 2009. According to ABG it intends to increase its 2009 production level by approximately 40% to over one million ounces of gold per year, within four years.
The new company will effectively be one of Africa's five largest gold producers, with four producing mines which are all located in northwest Tanzania the Bulyanhulu, Buzwagi, North Mara and Tulawaka. As at 31st December 2009, the ABG properties had approximately 16.8 Moz of proven and probable reserves and a further 9.1 Moz in measured, indicated and inferred resources.
ABG intends to use the net proceeds to repay outstanding loans to the Barrick group, and if available pay a one-time special dividend to the Barrick Group. ABG’s initial cash balance is anticipated to be approximately US$280 million and it expects that it will be eligible to be considered for inclusion in the FTSE UK Index Series following completion of the IPO. The global IPO is expected to be completed during March 2010.
Also today in North America, Barrick Gold Corporation revealed a 118% increase in adjusted net income in Q4, to a record US$604 million from U$277 million in the same period last year. The word’s largest gold miner benefitted substantially from its widely publicized decision to remove its hedging activities as gold prices have exceeded historic record highs.
Fourth quarter production was 1.90m ounces (Moz) at a total cash cost of US$474 per ounce. Over the course of the full-year, Barrick produced 7.42m ounces at a total cash cost of US$466 per ounce, within original guidance, and continued Barrick's strong track record of meeting its operating targets.
"In addition to meeting our operating targets, we achieved a number of significant milestones which have enhanced the value proposition of Barrick", Barrick President and CEO Aaron Regent commented. "We delivered the Buzwagi mine on time and on budget and with planned new low cost production from Cortez Hills starting in Q1, we expect higher production and lower cash costs in 2010. We moved Pascua-Lama into construction and significantly advanced Pueblo Viejo and both are progressing in line with expectations”.
“We also grew the industry's largest reserves which are now 100% unhedged with the elimination of our Gold Hedges in the last quarter, ahead of the schedule we set for ourselves”. The de-hedging however came at a cost as the company essentially bought-back short future positions, incurring a US$5.22bn cash settlement. Consequently Barrick reported a negative US$4.30bn operating cash flow in the fourth quarter.
Disclosure: The author holds no positions in the company