UK deaths case takes toll on ABC shares

 

IN SUMMARY

Families of the six who were shot dead in controversial circumstances by the police have sued ABG for compensation over its complicity role in the matter that has now sent market jitters among shareholders.

Arusha/London. News of a high court claim against African Barrick Gold over the deaths of Tanzanians at the North Mara Gold Mine a year ago tarnished its shares on a day when it revealed $185m (Over Sh296 billion) of cost cuts.

Families of the six who were shot dead in controversial circumstances by the police have sued ABG for compensation over its complicity role in the matter that has now sent market jitters among shareholders.

The UK’s Independent newspaper reported yesterday that ABG, whose management has vowed to vigorously defend its interests in the case, faced more problems as investors appeared to want to sell out. African Barrick, which said it believes these “proceedings are without merit” and that it “intends to vigorously defend its interests”, has a lot on its plate and investors headed for the exit even though it set out plans to address its financial problems. The shares were marked down 5.4p to 111.4p as it revealed $727m (Sh1.163 trillion) of write-downs,” the Independent reported.

The company has been hit by the falling gold price, and although gold has picked up again in the past month, African Barrick’s shares are still down more than 75 per cent since the start of the year.

The write-downs relate to a reduction in the value of its mines after it completed an operating review this year. It has now confirmed cost-cutting plans that will include closing the Buzwagi mine in less than four years, according to the news report.

Mr Ally Samaje, acting commissioner for Minerals in the ministry of Energy and Minerals, early in the week expressed concern that the ABG financial situation could see up to 1,200 workers at Buzwagi and North Mara mines lose their jobs with the state suffering huge tax losses. He spoke at a public forum in Arusha but was optimistic the trend would be reversed.

ABG’s second-quarter results were positive, with production and costs beating market expectations. But until there are signs of improvement in profits, the City (investors) will remain unconvinced. Investec’s Hunter Hillcoat rated African Barrick a hold with a 135p price target.

The FTSE 100 failed to get past the 6,600 “sticking point” that city analysts have noted as a hurdle at the moment, but it still rose 10.7 points to 6,570.95.

ABG, the biggest investor in Tanzania’s mining sector, posted total revenues of $2.32 billion in 2011 and 2012. Around 91 per cent of ABG’s total workforce of 5,649 employees comprises Tanzanian nationals, with the company aiming to further reduce its expatriate labour in 2013.

“ABG has already expressed concerns to us on the falling price trend in the world market. But, they are yet to decide whether to continue or suspend mining operations in those two sites,” Samaje said.

“But, we still hope that is not going to happen... and Barrick Gold also are still watching the price trend,” he said, attributing the drastic fall of gold price to low demand of the precious metal in the global market.

In 2008, gold was one of the minerals which were not affected by the global economic crisis. Mining contributes 3.5 percent to the GDP of the east African nation and is projected to reach 10 percent by 2025.