Barrick Gold (ABX-T, ABX-N) has ended talks with China National Gold regarding the potential sale of its 74% interest in African Barrick Gold (ABG-L), putting off hopes that the major could distance itself from its underperforming projects in Tanzania.
Investors unhappy with the news pushed African Barrick shares down 21% to £3.52. The firm, which has four mines in northwest Tanzania, has faced operational setbacks since going public in March 2010. Its shares have spent the majority of the past two years trading below its initial public offering of £5.75.
Barrick Gold shares remained mostly unmoved on the announcement, slipping 1.3% to $33.14.
The discussions appear to have collapsed because the two parties couldn’t agree on a price.
“We are approaching this in a prudent and disciplined manner, and will only proceed with opportunities that generate acceptable value for Barrick,” company president and CEO Jamie Sokalsky says, suggesting the firm is still open to selling all or part of its African Barrick stake.
Barrick’s sister company anticipates a full operational review of its assets to boost cash flows and shareholder returns, noting that more details about initiatives would be provided in mid-February.
The gold major — as part of its own strategy to trim its portfolio and pare-down costs to optimize its asset base — confirmed last August that it was in early discussions to sell its majority stake in its African assets to the Chinese firm.Analysts estimated that Barrick could net up to US$3 billion from the potential ABG sale, strengthening the company’s balance sheet and lowering its overall cash costs. But BMO analyst David Haughton writes in a note that “in addition to the loss of share-price floor following the potential deal falling through, BMO Research worries that the discussions and due diligence process might have distracted management from focusing on optimizing and developing ABG’s assets during that period.”
Despite having an overall lacklustre performance in 2012, African Barrick intends to keep the total dividend for that year at US$67 million, the same figure as in 2011.
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