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Broker snap: Nomura sees little incentive to hold African Barrick Gold
Wed, 9th Jan 2013 13:06
Following Tuesday's failure of the negotiations between China National Gold (CNG) and Barrick Gold (ABX), regarding Barrick's 74% stake in African Barrick Gold (ABG), analysts at Nomura see: "little incentive for value investors to hold ABG into results, potentially leaving the shares directionless at around the ~350p/share level."
For starters, there is the operational performance of the business which may have been disrupted by the bid process, as in the third quarter.
More specifically, although management has indicated that it has seen a step-up in fourth quarter production volumes, output will need to increase by 10% quarter-on-quarter just to meet the bottom end of ABG's downgraded guidance.
Despite that, longer-term potential remains; operational review to focus on value accretive production and cash flow generation.
As well, the operational review could also see a change in focus, with central costs rationalised and potential for the marginal Buzwagi mine to be closed, which longer term could be positive.
Nevertheless, the broker thinks that the lack of a near-term catalyst and weak investor sentiment towards the company will likely see the shares languish.
The target price now stands at 435p versus 525 before and the shares are downgraded to neutral, from buy.
AB
For starters, there is the operational performance of the business which may have been disrupted by the bid process, as in the third quarter.
More specifically, although management has indicated that it has seen a step-up in fourth quarter production volumes, output will need to increase by 10% quarter-on-quarter just to meet the bottom end of ABG's downgraded guidance.
Despite that, longer-term potential remains; operational review to focus on value accretive production and cash flow generation.
As well, the operational review could also see a change in focus, with central costs rationalised and potential for the marginal Buzwagi mine to be closed, which longer term could be positive.
Nevertheless, the broker thinks that the lack of a near-term catalyst and weak investor sentiment towards the company will likely see the shares languish.
The target price now stands at 435p versus 525 before and the shares are downgraded to neutral, from buy.
AB
