Hot Features
Premium
Level up your trading with our powerful tools and real-time insights all in one place.
The share price of African Barrick Gold (LSE:ABG) continued to gain ground on the London Exchange today. A 9.9% increase over yesterday’s close to 186.70 continues a recovery that began on 13 July, when the share price was at 105.10, and an unabated upward trend that commenced on 14 October. ABG shares were valued at 147.80.
A key catalyst to today’s increase was the highly anticipated release of the company’s third quarter results. Freshman CEO, Brad Gordon said, “I am delighted to present a strong set of operational results in my first report as CEO of ABG. The continued focus on operational delivery and the implementation of cost saving programmes across the group has resulted in our strongest quarter this year.“
Based on the results thus far, Gordon said that “We now expect to exceed the upper end of the production guidance range of 600,000 ounces for 2013, with the resultant cash cost per ounce being below the lower end of guidance of US$925 per ounce sold.”
There is nothing easy about gold mining, especially when the market price is volatile, which is, well, always. The recent declines in the price of gold put a great deal of pressure on miners to lower costs in order to be profitable. Just because “there’s gold in them there hills,” doesn’t mean that it is possible to recover it and also make a profit. Not too many years ago, I was in the famous Cripple Creek gold mine in Colorado. It is no longer operational – not for lack of gold, but because it cannot be extracted profitably.
The average realized price of gold has dropped by 22% this year, but ABG may be about to get some help in that realm. The price of gold has risen this week from $1,316 to $1,350 per troy ounce. There is, of course no promise that the price will continue to rise, but ABG clearly understands that. Gordon said, “We need to continue [to] deepen this operational discipline to ensure that we achieve sustainable cash generation.” Whilst all companies must focus on deepening operational discipline, mining companies must stay focused on the task.
Operational Hihlights
- Net earnings for the quarter dropped by 25% compared to the Q3 2012, from $23.5 million to $15.3 million. The redeeming factor for the third quarter is that the $15.3 million has reduced the YTD loss to $698 million.
- A contributing factor to a return profit in Q3 was the off-loading of one of its burdensome operations in Tulawaka.
- ABG was able to partially offset the 22% decline in gold prices with an increase in gold sales. Of course, the increase in sales volume was due, at least in part, to the lower selling price.
- Gordon expect that the company will achieve its goal of $100 million of operating cost reductions by year end.
It’s really too soon to tell, but the real gold at African Barrick may be the new CEO having a firm handle on the course of the company. There are a lot of factors to consider as well as unforeseen obstacles yet to come, but Gordon’s plan is to fortify the company against those. By doing so, he may well be able to lead ABG back to its former glory with a share price in the 500.00 pence range.
