8 Jan 2013 07:07
8th January 2013
African Barrick Gold plc (the "Company" or "ABG")
Update on Potential Offer
·; Discussions between Barrick and CNG ended
·; ABG no longer in offer period
·; Operational Review initiated
·; 2011 total dividend of US$67 million to be maintained for 2012
Further to our announcement of 16 August 2012 confirming that Barrick Gold Corporation ("Barrick") had entered into discussions with China National Gold Group Corporation ("CNG") regarding a potential sale of its 73.9% stake in ABG, we have been informed by Barrick that it has now ended discussions with CNG. As a result, ABG is no longer in an offer period under the Takeover Code.
Given the direct nature of the discussions between Barrick and CNG, this has meant an extended period of uncertainty for ABG as well as significant extra work. Throughout this period, our focus has been on ensuring the ongoing integrity and stability of our operations, and our employees have made an important contribution towards achieving this. At the same time, Barrick has made it clear that it sees considerable long-term value in the ABG asset base. Barrick remains committed to supporting ABG in fully realising the potential of the business.
In this respect, ABG will continue to build on its progress over the past two years:
·; our flagship mine, Bulyanhulu, has been a strong performer and we are targeting further production growth as we move forward
·; at North Mara we have renewed our mining licence and are improving our social licence to operate, while delivering on the mine plan
·; targets have not been met at Buzwagi, but we are now seeing greater consistency of performance following a range of initiatives
·; we have advanced a number of growth projects whilst our investment in exploration has delivered a 20% increase in our reserves and resources and we have acquired an extensive and highly prospective land package in Kenya
·; over $100m has been returned to shareholders by way of dividends
·; all of the above has been achieved while strengthening the balance sheet
We believe the operating performance in 2012 is a base for the business going forward, and are reassured to see the step-up in production volumes in the fourth quarter, as expected. Nonetheless, the Board and management are committed to delivering better results and driving greater value for all our stakeholders. As a result, the Board of ABG has asked management to conduct a full Operational Review of the business with the aim of recalibrating our operations so as to drive improved returns from the asset base whilst enhancing the certainty of delivery.
The Operational Review will be guided by the following principles:
·; Focus on value accretive production in order to drive returns
·; Asset review based on cash flow generation not scale
·; Cost and organisational structure appropriate to the scale of the business
·; Organic growth capital driven and prioritised by returns
·; Commitment to delivering capital distributions to shareholders
·; Social licence to operate a pre-requisite for all assets
·; Continuing disciplined approach to targeting gold assets across Africa
We will provide further detail on specific initiatives at the time of the preliminary results in mid-February with regular updates thereafter.
Commenting on the update, the CEO of ABG, Greg Hawkins, said: "Whilst the discussions between CNG and Barrick have not led to a transaction, the process has re-emphasised the fundamental long-term value of ABG's portfolio and the scarcity of large scale producing opportunities to enter the gold market in Africa. We have demonstrated the ability of this business to generate significant cash flows and believe that the Operational Review will create the opportunity to further improve the return profile of the business."
Acting Chairman of ABG, Derek Pannell, added: "The Board is confident in the ability of the management team to deliver significant value from our high quality asset base to the benefit of all stakeholders. While our operational and financial performance in 2012 has been lower than the previous year, we are positive on the future potential of the business, we have built up a strong balance sheet and we recognise the ongoing support of our shareholder base. For this reason, the Board intends to recommend at the time of our full year results that the total dividend for 2012 be maintained at the 2011 level of US$67 million."
ENQUIRIES
For further information contact:
African Barrick Gold plc +44 (0)207 129 7150
Andrew Wray, Head of Corporate Development & Investor Relations
Giles Blackham, Investor Relations Manager
RLM Finsbury +44 (0)207 251 3801
Faeth Birch
Charles Chichester
About ABG
ABG is Tanzania's largest gold producer and one of the five largest gold producers in Africa. We have four producing mines, all located in northwest Tanzania, and several exploration projects at various stages of development. We have a high-quality asset base, solid growth opportunities and a clear strategy.
The key pillars to our strategy are:
·; driving operating efficiencies to optimise production from our existing asset base;
·; growing through near mine expansion and development of advanced-stage projects; and
·; organic greenfield growth and acquisitions in Africa.
Maintaining our licence to operate through acting responsibly in relation to our people, the environment and the communities in which we operate is central to achieving our objectives.
ABG is a UK public company with its headquarters in London. We are listed on the Main Market of the London Stock Exchange under the symbol ABG and have a secondary listing on the Dar es Salaam Stock Exchange. Historically and prior to our initial public offering (IPO), our operations comprised the Tanzanian gold mining business of Barrick Gold Corporation (Barrick), our majority shareholder. ABG reports in US dollars in accordance with IFRS as adopted by the European Union, unless otherwise stated in this announcement.
Forward-looking statements
This announcement is for information purposes only and does not constitute an invitation or offer to underwrite, subscribe for or otherwise acquire or dispose of any securities of ABG in any jurisdiction.
This announcement includes "forward-looking statements" that express or imply expectations of future events or results. Forward-looking statements are statements that are not historical facts. These statements include, without limitation, financial projections and estimates and their underlying assumptions, statements regarding plans, objectives and expectations with respect to future production, operations, costs, products and services, and statements regarding future performance. Forward-looking statements are generally identified by the words "plans," "expects," "anticipates," "believes," "intends," "estimates" and other similar expressions.
All forward-looking statements involve a number of risks, uncertainties and other factors, many of which are beyond the control of ABG, which could cause actual results and developments to differ materially from those expressed in, or implied by, the forward-looking statements. Factors that could cause or contribute to differences between the actual results, performance and achievements of ABG include, but are not limited to, changes or developments in political, economic or business conditions or national or local legislation in countries in which ABG conducts or may in the future conduct business, future industry trends, competition, fluctuations in the spot and forward price of gold or certain other commodity prices, changes in regulation, currency fluctuations (including the US dollar, South African rand, Kenyan shilling and Tanzanian shilling exchange rates), ABG's ability to successfully integrate future acquisitions, ABG's ability to recover its reserves or develop new reserves, including its ability to convert its resources into reserves and its mineral potential into resources or reserves, and successfully and in a timely manner process its mineral reserves, risk of trespass, theft and vandalism, changes in its business strategy as well as risks and hazards associated with the business of mineral exploration, development, mining and production. Although ABG's management believes that the expectations reflected in such forward-looking statements are reasonable, ABG cannot give assurances that such statements will prove to be correct. Accordingly, investors should not place reliance on forward looking statements in this announcement. Any forward-looking statements in this announcement only reflect information available at the time of preparation. Subject to the requirements of the Disclosure and Transparency Rules and the Listing Rules or applicable law, ABG explicitly disclaims any obligation or undertaking publicly to release the result of any revisions to any forward-looking statements in this announcement that may occur due to any change in ABG's expectations or to reflect events or circumstances after the date of this announcement. Nothing in this announcement should be construed as a profit forecast or estimate.