Investment summary

African Barrick Gold’s (ABG) Q1 results were broadly in line with our forecasts, with the exception of unit working costs which were 9.2% lower than our expectations for the quarter and depreciation, which was 20.7% lower. In its report of 17 April, Edison reduced its Q112 EPS forecasts for ABG from 10.0 US cents to 6.7c as a result of power inconsistency problems in Tanzania, increased maintenance and waste stripping constraints . In the event, ABG’s Q1 EPS was 8.6c – below our original estimate, but above our revised one. In addition, ABG has today announced it has received final, official approval for the PAF waste rock permit (see page 4) at North Mara, which will allow it to progress the major waste stripping programme in the Gokona pit in order to open up higher grades zones in H212, as planned. Notwithstanding the recent drift in the gold price, Edison has revised its earnings forecast for FY12 upward again by 3.7c/share (or 7.2%) to 54.8cps.

Last updated on 01/05/2012

Industry outlook

ABG’s shares have underperformed the gold price significantly, falling 31.1%, from 518.5p on 15 February to 357p currently. As a result, it has become the cheapest of its peers on a number of valuation measurements, including EV/EBITDA (until at least 2014) and yield (until 2013). It is also now the cheapest of the three London gold mining majors in terms of its resource multiple of US$54.50/oz compared to Petropavlovsk (US$94.78) and Randgold Resources (US$302.41), despite having the largest resource base.

Last updated on 23/04/2012