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Barrick Gold Completes African Barrick Stake Sale

Zacks Equity Research

Barrick Gold Corporation (ABX) announced that it has completed the divestment of 13.5% of its shareholding held indirectly in African Barrick Gold plc (“ABG”). The sale of the 41 million African Barrick shares represents about 10% of the entity’s issued ordinary capital. Barrick Gold has completed the sale at 275 pence per ordinary share, raising gross proceeds of roughly GBP 113 million ($188 million).

Barrick Gold still holds about 64% of the issued ordinary share capital of African Barrick which represents about 262 million ordinary shares of ABG. Barrick Gold will continue to be the controlling shareholder of ABG and with the divestment, Barrick will be able to achieve some liquidity from its stake in ABG. This will enable the company to maintain its capital allocation framework and lower the average cost of its portfolio.

Barrick Gold recently released its fourth quarter results. Attributable production of African Barrick Gold in the fourth quarter was 0.12 million ounces compared with 0.13 million ounces in the year-ago quarter. Attributable production for FY14 is expected to be 0.480–0.510 million ounces.

Barrick Gold’s adjusted earnings (excluding one-time items) for 4Q13 dropped to $0.37 per share from $1.16 in the year-ago quarter. Lower realized gold and copper prices and a decline in gold and copper sales volumes led to the decline in earnings.

Revenues fell around 29.5% year over year to $2,926 million in the reported quarter but exceeded the Zacks Consensus Estimate of $2,815 million. Average realized price of gold decreased 25.8% year over year to $1,272 per ounce. All-in costs declined 8.1% to $1,317 per ounce while all-in sustaining costs fell roughly 14.2% to $899 per ounce in the reported quarter.

For 2014, Barrick expects gold production in the range of 6–6.5 million ounces. The lower production in 2014 manifests the company’s strategy to maximize free cash flow and returns over ounces, the sale of high-cost, short-life mines, lower production from Cortez, and the move to close Pierina.

Currently, Barrick retains a Zacks Rank #5 (Strong Sell).

Some better-ranked stocks in the gold mining industry include AngloGold Ashanti Ltd. (AU), NovaGold Resources Inc. (NG) and Richmont Mines Inc. (RIC). While AngloGold carries a Zacks Rank #1 (Strong Buy), NovaGold and Richmont Mines retain a Zacks Rank #2 (Buy).

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