African Barrick Gold cuts output goal, shares slide

African Barrick Gold cut its 2010 production target for the second time in three months after it said it uncovered fuel theft at its new Buzwagi mine, sending its shares sliding.

Its shares in London dropped 10,5% to 559 pence by 7.45am GMT, making it the bigger loser of the blue-chip FTSE 100 index and underperforming a 1% increase in the British mining index.

The shares have shed nearly a fifth of their value since touching a peak in June.

“We remain cautious in the short term on ABG but still remain firm on the longer term re-rating prospects from a low 1.1xNAV [net asset value], making this one of our key picks in the mid-tier gold sector,” analyst Cailey Barker at Numis Securities said in a note.

The unit of the world’s biggest gold producer, Barrick Gold, said on Thursday full-year production was now expected to be around that of last year’s 716 000 ounces instead of growing to 750 000 to 800 000 ounces.

The previous target itself had been reduced in July from an original estimate of 800 000 to 850 000 ounces due to delays in accessing higher-grade ores from the Buzwagi open pit mine.

The company said it discovered a criminal syndicate had infiltrated its Buzwagi mine and was stealing fuel there. It has suspended 60 employees and contractors, about 40% of the mining staff at the mine, it added.

The suspension meant another delay in accessing the high-grade areas of the Buzwagi mine, cutting 10 000 ounces off the mine’s third-quarter output and about 30 000 ounces from full-year production, the firm said.

“Despite the short-term impact on production, these actions were necessary to maintain the integrity of the operating environment at Buzwagi,” the company said.

African Barrick said it had strengthened management at the mine, appointing Boyd Timler as general manager with 28 years of mining experience.

The company was spun off in March from its Canadian parent Barrick, which retained a 74% stake. – Reuters

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