African Barrick Gold Impresses

PUBLISHED: Oct 24 2014 @ 11:28 | Comments (0) | More info about Lou Gutheil

African Barrick Gold (LSE:ABG) released its unaudited results for the third quarter yesterday. Its share price rose from 195.00 to 200.00 on some impressive results. Typically, we (writers) rush to post the same headlines and stories that everyone else is writing. I have been thinking lately that waiting a day or two offers a slightly different perspective. Especially since we know that things can be up one day and down the next.

But check this out. The FTSE is declining today, but ABG’s share price is still trending up. After closing yesterday at 200.00, it opened this morning at 202.60, reaching a high of 210.80 just after 1:00 p.m. Heading toward the close of the day, ABG has settled in at 205.60. ABG is swimming against the tide. Sustaining the increase the morning after may be an indication of indecisiveness, or it could be s sign of judiciously confident investing.

ABG has generally traded above the mining sector as a whole during the past month before the sector began to outpace it on 17 October. Although both ABG and the entire sector have been on the decline, mining stocks declined today whilst ABG has held strong.

ABG may have thrown a bit of a scare into investors when it announced last month that it plans to shed it’s parent company’s name (Barrick Gold) in favor of an entirely new identity. The mining company is facing headwinds with the price of gold continuing to drop and from the fact that its operations are in Tanzania with plans to expand into Kenya. Since Those countries are in Africa and, since Africa has become almost synonymous with Ebola, investors tend to worry.

The report does seem to have engendered a certain level of confidence. It should have. Here is a bullet-point summary of the report.

The target for full-year production was raised for the second time this year.
Third quarter production of 190,986 ounces was enough to prompt the board to announce that it expects to exceed an annual production of 700,000 ounces.
Total production in 2013 was 198,286 ounces.
Last year’s production was attained by the efforts of 3,400 people. This year the headcount is 1,900.
Third quarter profits came is at $28.4 million, up from $17.8 million in Q3 2013.

CEO Brad Gordon, who came on board in 2013 after ABG’s share price had declined severely under prior governance, indicated that his restructuring plans are proving to be successful, as indicated by the entire report. Having accomplished his measures for streamlining the business and cutting costs, he has defined 2015 as a year for some potential M&A. It may have been the way he said it that made his objective clear to shareholders. “When, and if, we do a deal, it will be a transformational deal and it will be in Africa.”

Gordon has demonstrated his leadership ability from the time he assumed his position as CEO. He was previously CEO of Intrepid Mines (ASX:IAU) and of Emperor Mines after holding leadership positions at Placer Dome (NYSE:PDG). The African Barrick website describes him by saying that, “Mr. Gordon has a proven ability to deliver the maximum potential from the operations he has managed, from reducing costs and increasing production to achieving operational efficiencies and extending mine lives.”

Everything rises and falls on leadership. I expect to see continued good things happening at African Barrick, simply because of its effective leadership.

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