TORONTO (Reuters) - 18/02/10 "Barrick Gold Corp (ABX.TO) said on Thursday it will spin off its African gold assets into a new publicly traded company.
Barrick announced the moves as it unveiled a doubling of fourth-quarter operating profit, driven by gold prices that soared to record levels in the final three months of 2009.
The new company, to be called African Barrick Gold (ABG), will list on the London Stock Exchange and will hold Barrick's African gold mines and exploration properties. Barrick plans to retain a 75 percent interest in ABG initially.
ABG also intends to seek a future listing on the Dar es Salaam Stock Exchange in Tanzania.
Barrick, the world's top gold producer, operates four African mines, all in Tanzania.
ABG is expected to produce 800,000 to 850,000 ounces of gold in 2010, with total reserves of 16.8 million ounces as of December 31.
"Size-wise it's bigger than (mid-tier miner) Randgold Resources (RRS.L) and certainly it would be... one of the prime gold listings on the LSE," said Leon Esterhuizen, an analyst at RBC Capital Markets in London.
Due to the spinoff, Barrick trimmed its 2010 production forecast to a range of 7.6 million to 8.0 million ounces from its previous estimate of 7.7 million to 8.1 million ounces.
Barrick said it plans to use proceeds from the ABG spinoff to fund its pipeline of development projects.
PROFIT RISES, TOPS ESTIMATES
Excluding a $241 million charge related to the hedge book buyout and other one-time items, fourth-quarter earnings rose to $604 million, or 61 cents a share, from $277 million, or 32 cents a share, a year earlier.
Analysts polled by Thomson Reuters I/B/E/S had expected, on average, 57 cents a share.
On a net basis, Barrick earned $215 million, or 21 cents a share, compared with a year-earlier loss of $468 million, or 53 cents a share.
Revenue jumped 13 percent to $2.36 billion.
Average realized gold prices in the quarter were $1,119 per ounce, up from $809 a year earlier, as the metal charged to a record price above $1,200 an ounce in the final months of the year. This offset the impact of a 17 percent drop, to 1.8 million ounces, in the amount of gold Barrick sold .
Total cash costs per ounce, which Barrick expects to come down as it opens new lower-cost mines, were little changed at $474.
Barrick expects 2010 gold production costs in a range of $425 to $455 per ounce. In 2009 it produced 7.42 million ounces at a total cash cost of $466 per ounce."
($1=$1.04 Canadian)
The deal, arranged by J.P. Morgan (JPM.N) and Morgan Stanley (MS.N), will run a bookbuilding between March 5 and March 18.

I agree. I usually wait until the sp settles a little before dipping my toes, but this does look tempting. I wonder if us mere mortals are going to be able to get in at the float price, though, before the MMs crank it up?
I am not aware of any broker that will take an order in anticipation of a floatation, so it's a matter of watching a screen at the opening on the correct day.
Also, I presume institutional investors will get first bite at the cherry?

What with only 25% of ABG up for grabs ,we, the "ordinary Joes " could perhaps end up bidding for as little as 5% of the company Harry. . lf floated within the stipulated price range of 550p/650p ,which is calculated to represent a 40% discount to peers RRS and POG ,and 30% to parent outfit BGC; l would suspect mms will pass on a % of discount plus lions share to inst. investors ,then crank up the s/p (thearby erradicating much of that very discount ) and then letting us participate . ,,,ln saying that i managed to get in at a good entry point at the floatations at both GAZ { which u wouldnt expect} and FOGL ages ao { which you would expect } . ,,,,,,,

For anyone who has the time to do a bit more research:
http://www.ft.com/cms/s/0/101b0524-2cad-11df-8abb-00144feabdc0.html?nclick_check=1

Book closes at 14.30 hrs today & is fully covered, but at a price which is unlikely to get them in to the FTSE100 immediately:
"Books close today on the IPO of Barrick (ABX CN) spin-off African Barrick Gold. The deal is priced between 550p and 650p and issues 100m shares. Barrick Gold announced last night that three workers were killed in a collapse at their Bulyanhulu mine activity was suspended yesterday for rescue and recovery and will be suspended today for a period of mourning. Barrick shares fell C$0.06 yesterday. The activity shutdown is too short to be material. "

Broker comment today from FT:
"ABG starts trading today at 575p. 101,082,317 new shares are issued, approx 25% of the companys issued share capital, resulting in a 2.325bn market cap. The deal was priced at the lower end of the 550-650p valuation range, and well within our estimated valuation range (2.2bn-2.47bn). At this level there ABG is likely on the cusp of FTSE 100 inclusion but will definitely qualify for the FTSE 250. Its now up to the company to prove it can deliver in order to attract a premium multiple."

"today"???? ...... i thought trading started on monday, which would certainly make more sense

anyway, i would have thought a good one to buy at the open

Cant disagree there Harry ..... l made a vain attempt to get in @ the very start OF trading > The previous evening l phoned a friend @ Teathers to get me in at the VERY start of trading..He could indeed,But a derisory amount and by 8-01 and before i could even reply to the the offer the s/p had been cranked up from 550p to a tad shy of 590 upon farcical volume . So i waited. Sure enough, and as l fully anticipated, as i suspect you did , the quick profit banditos starting selling and the s/p fell back.Was fun - reminded me of one of the brits 80,s privitizations when i was ay school in UK. Anyway i confidentally dipped in the big toe @ 575p - After what highly foccussed research i had time to do l formed the conclusion that even 590p was splitting hairs in relationship to its fair worth. lf ABG deliver it will equal POG as a bellweather -At least !! Anyway forget my blatent ramping- but i do believe its worthy of your investigation .....ONE for after the election Harry Only unpredictability ahead mon pote ..lncidentally, since taking a position, and thus given more time to research ABG the more and more confident i have become. And what with Barricks Corps holding 75% of stock its hardly going to be in fiscal trouble - touring the city .,,@+.J

why did the SP dive after what looked like a good update? is it just following market sentiment or have i missed something?
If i haven't missed anything then looks a nice price to dip ones toes.
As always DYOR
Alex

Keep on selling ABG to 300p... now 398p.

chart is a stinker ..... what did ABG do wrong?

Lots of operational problems including theft of deisel from a mine site on an industrial scale!

sounds like the site management should be sacked

cynic

Heard anything from TFC ?

Short this with all u can

currently in Rio on biz ..... no, not heard a peep ... wonder what has happened to him and ditto tabby

Citigroup note:
When is a Super Tax not a Super Tax? Tanzanias parliament yesterday approved a 5-year development plan backing the proposed introduction of a super-profit tax on mining companies. On Sunday, the country's mining minister clarified that Tanzania would not impose the new tax (no details provided) on existing companies but would negotiate with the companies to have them pay voluntarily. Both Anglogold and African Barrick have recently argued that their tax agreements with the state are watertight and should not be subject to the super tax

The government seems to have acknowledged this and said it wont impose a super tax but will enter into discussions with miners about a voluntary tax payment. The government statement said, "We will not impose the proposed super profit tax on existing mining companies. If implemented, we will have to negotiate it with the companies because they already have agreements in place with the government." There is much confusion.

Our estimated NPV (10% WACC, gold declining to $950 over the next few years) for ABG is 4.14 and ABG is currently trading at 3.99, well below its IPO price 14 months ago of 5.75 (when gold was trading at $1350, not todays $1520). This process of consultation between the government and the miners is likely to drag on and until then ABG will likely trade at a discount to the 1.5x P/NPV that we think it deserves. However, a discount to NPV seems excessive to us, even in the light of the tax.

Buy ABG at 454p... very cheap now.

Selftrade have a 705p price target, which looks a bit optimistic, imo.

.

Nows the time to get on board ABG as it falls back a little, wont last. Itl be well up by the days end. P/E of just over 10 to 2012, totaly barmy.

Full Broker backing....

African Barrick Gold PLC

FORECASTS 2011 2012
Date Rec Pre-tax () EPS (p) DPS (p) Pre-tax () EPS (p) DPS (p)

SG Securities
27-07-11 BUY 42.03 5.86 65.98 6.71
Westhouse Securities
27-07-11 ACCU 275.80 42.60 11.30 306.30 49.70 9.70
Broker Name Withheld 3
26-07-11 BUY 226.62 39.55 3.38 300.93 52.88 3.38
Numis Securities Ltd
26-07-11 BUY 241.36 39.92 4.30 289.87 49.13 5.53
Canaccord Genuity Ltd
25-07-11 BUY
Edison Investment Research
11-07-11 None 229.58 38.94 242.50 41.14
Charles Stanley
08-03-11 HOLD

2011 2012
Pre-tax () EPS (p) DPS (p) Pre-tax () EPS (p) DPS (p)
Consensus 244.07 40.68 6.22 287.04 52.20 6.33

1 Month Change 8.62 -2.04 3.00 23.01 3.70 2.60
3 Month Change 0.43 -3.06 2.62 14.16 2.40 2.31


GROWTH
2010 (A) 2011 (E) 2012 (E)
Norm. EPS 281.53% 15.97% 28.33%
DPS % 503.40% 1.92%

INVESTMENT RATIOS
2010 (A) 2011 (E) 2012 (E)

EBITDA 199.39m 314.39m 402.19m
EBIT 199.39m 239.45m 320.33m
Dividend Yield 0.19% 1.16% 1.18%
Dividend Cover 34.05x 6.54x 8.24x
PER 15.31x 13.20x 10.29x
PEG 0.05f 0.83f 0.36f
Net Asset Value PS 351.18p 411.90p 471.55p

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