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ABG to rebrand in November following operational sea change

16th September 2014

By: Henry Lazenby

Creamer Media Deputy Editor: North America

  

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DENVER, Colorado – Tanzania-focused gold producer African Barrick Gold (ABG) will rebrand in November, saying its restructuring efforts over the past year under new CEO Brad Gordon had given it renewed confidence in its assets to break the association with parent Barrick Gold Corp.

Having battled to turn a profit after gold recorded the steepest price falls in a generation last year, from which it only marginally recovered during the second quarter, ABG was undergoing a sea change in optimising its portfolio and productivity.

“We will have a new five-year plan for each of our assets by the end of the year,” Gordon told the Denver Gold Forum, adding that the company would reveal details and a new name on November 27.

Toronto-based parent Barrick had unsuccessfully tried to sell ABG to State-owned China National Gold Group, in 2012, but that deal fell apart in January 2013.

Barrick in March offloaded a 13.5% stake in ABG to a third party, reducing its position to about 262-million ordinary shares, or 64% of the issued ordinary share capital of ABG.

Under Gordon, the company was able to deliver free cash flow in the second quarter, ahead of the planned fourth-quarter target.

He had implemented significant changes in ABG's cost structure, which saw a significant staff cut at the Johannesburg office, and reducing the company's overall headcount from about 10 500 employees to about 7 000 at present, with a target of 5 000.

OPTIMISED STRATEGY

Gordon said that the London-listed company’s future strategy would rely heavily on the cornerstone Bulyanhulu project, which Gordon noted had “never really delivered on promises” over the past 14 years. “If you can not make money out of Bulyanhulu, then you should not be in the business,” he said.

Gordon noted that the world-class resource, with about 9.4-million ounces of proven and probable reserves, was the subject of intense optimisation efforts. ABG had brought in an underground-mining contractor to improve a historic development deficit, with results expected to reflect from the fourth quarter onwards.

During the second quarter, ABG had delivered the first ounces from its Bulyanhulu carbon-in-leach expansion project, in Tanzania, with development work on the Bulyanhulu upper east zone and the Gokona underground exploration portal progressing to plan.

The Bulyanhulu upper east zone was expected to produce 1.7-million ounces of gold, averaging 60 000 oz a year, over a life in excess of 25 years, at an all-in sustaining cost below the company’s target run rate for Bulyanhulu for year-end 2015 of $900/oz.

Output from Bulyanhulu was expected to reach more than 350 000 oz/y by 2015.

At the North Mara mine, which had been ABG’s best performer over recent months, the company had been dealing with deterring illegal artisanal miners from entering the property.

“By taking the operation underground, we’re taking the heat out of the social challenges posed by illegal miners,” he said.

According to him, the company had managed to drive the number of incursions down from about 14 000/w to about 2 000/w.

Gordon said that the current reserves could sustain another five to six years of production, while there was significant resources below the current mine plan that the company would focus on adding to the reserve base in coming months.

During 2013, ABG said it had made several changes to the life-of-mine plan to reduce the strip ratio, volume of material to be moved and ultimate footprint of the asset.

North Mara had a ten-year mine life remaining based on proven and probable gold reserves of 2.2-million ounces.

Meanwhile, Gordon noted that, in hindsight, the tired Buzwagi mine should never have been built, despite contributing about 28% of the group’s yellow-metal output. The mine is on its last legs, with the openpit expected to be depleted over the next two years, followed by processing stockpiles for another five years.

The mine plan was recently re-engineered to substantially reduce the required amount of waste movement and to optimise the grades. The mine was now positioned to deliver positive cash flows for the next five years, with ABG expecting life-of-mine output of about 1.1-million ounces.

Edited by Creamer Media Reporter

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