Mining Journal > Finance > Stockpile: Lower production forecasts hurting African Barrick

A second production cut in three months has caused African Barrick Gold plc, which listed with a £581 million (US$880 million) raising in March, to suffer the biggest fall in its short history on the London market this week.

African Barrick’s share price plummeted 10% after it reduced its guidance for the Buzwagi mine in Tanzania by 30,000oz.

The company has been forced to suspend 60 workers (amounting to 40% of the mining department) at the mine after it uncovered a conspiracy to steal fuel from the site.

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

The company became the largest to float in London since the industry’s downturn in 2008 when it was spun out from Canada’s Barrick Gold earlier this year.
Mining heavyweights Rio Tinto and BHP Billiton made gains despite receiving bad news regarding their proposed iron-ore joint venture in the Pilbara region of Western Australia. Rio Tinto was a healthy 4% higher, while BHPB was marginally ahead.

The joint venture is now looking even more unlikely to be given the green light after the German Federal Cartel Office released a statement indicating it was intending to oppose the proposition.

Away from its relationship with BHPB, Rio Tinto’s advance was assisted by a strong September quarter of production, which included iron-ore output in the Pilbara of 45.32Mt, an improvement on the same period last year.

Gold miner Hochschild Mining plc was one of the week’s top performers, adding more than 10% on news it plans to raise C$392.4 million (US$391.2 million) to fund its Peruvian projects by cutting its stake in Lake Shore Gold Corp to 6%.

Elsewhere in gold, Centamin Egypt Ltd, which operates the Sukari mine, rose by 7.5% as broker Goldman Sachs gave the company a “buy” recommendation after initiating coverage. Goldman said: “We believe this asset could be one of the world’s premier gold mines.”

Namakwa Diamonds Ltd added 5% after unearthing an “exceptionally rare” orange diamond at its South African mine. The 7.53ct “vivid orange” diamond will be sold in Johannesburg this month. Also discovered was a 26.74ct gem, and according to the company both stones have “flawless potential”.

International Ferro Metals Ltd was this week’s biggest riser with a 12% advance despite not making any announcements.

On AIM, exploration company Beowulf Mining plc rallied 25% higher after last week announcing a £400,000 raising to finance further drilling at the Kallak iron ore project in Sweden, and releasing drilling results from the project.

African Eagle Resources plc reported a 13% increase in the nickel resource at the Dutwa project in Tanzania. The news boosted the company’s value by 23%.
The biggest riser of the week was Karelian Diamond Resources, which moved more than 50% higher. Others to make significant gains included Leyshon Resources Ltd and Kefi Minerals plc, each adding about 22%.

Tajikistan-focused miner Kryso Resources plc fell by almost 17% despite releasing what it called “exciting” results of a bankable feasibility study for its Pakrut gold project. The study, albeit based on Chinese-generated resource estimates not compliant with a standard recognised by the London Stock Exchange, showed Pakrut to have a mine life of 14 years with average production of 82,000oz over the first four years.

Also dropping in value was Solomon Gold, which soared more than 300% last month on the back of an encouraging result from a Fauro Island project. The company fell back close to 10%.  

Others to lose ground included Mwana Resources Ltd and Goldstone Resources, which lost 13% and 11% respectively.