African BarrickAfrican Barrick says on lookout for deals
LONDON, (Reuters) Posted Thu, 20 Oct 2011A record profit in the third quarter for African Barrick Gold Plc has boosted the London-listed miner's cash pile, allowing it to look for deal opportunities in the current market downturn, its chief executive said.
"The results so far this year, and particularly in the third quarter, means that we have a very strong balance sheet that enables us to be pretty flexible about what we are able to do within the business and also externally," CEO Greg Hawkins said.
"We still look pretty actively around," he told Reuters on Thursday, adding that valuations for many of the projects the group has looked at have fallen a lot over the last year.
Its net cash stood at $525.3 million at end September.
Earlier on Thursday, the company said net profit jumped to $102 million, beating the $99 million consensus supplied by the company, from $40 million in the year earlier.
Revenue surged 61 percent boosted by higher production and all-time high gold prices.
It produced 182,401 ounces of gold in the quarter and said it expects to meet its 700,000 to 760,000 ounce target for 2011.
"If we do a similar quarter to Q3 we will end up at the lower end of that production range, but we didn't see the need to reset it," he said. "We will hopefully do a little better."
African Barrick is looking to shore up investor confidence left shaken after it missed a 2010 production target, even after it cut guidance. Hawkins noted that financial results have always been strong even when production was disappointing.
"This year was all about setting targets and meeting expectations," Hawkins said.
However, the Tanzania-focused miner increased its cash cost guidance amid rising costs for labour and diesel and higher royalty costs resulting from stronger gold prices.
The mining industry as a whole is facing the same pressures and Hawkins noted that while African Barrick's costs have grown they have not risen as quickly as some of its rivals.
"Over the last three years we have moved our way down the industry cost curve pretty dramatically," he said.
African Barrick said it had reached a settlement with the Tanzanian Revenue Authority over some outstanding indirect tax issues and that it has continued to talk to the government about royalty payments.
The government plans to raise royalty payments on gold exports to 4 percent from 3 percent by the end of this year.
"We're on our existing agreements which hold us at three (percent), but they are very keen for us to voluntarily move to the new regime," Hawkins said. "It would be a voluntary move."
African Barrick's existing royalty agreements will last for the life of its current mines, but any new mines would fall under the higher rate.