African Barrick Gold soars on cheerful HSBC outlook
All that glitters certainly is gold for African Barrick Gold, the FTSE 250-quoted miner that soared over eight per cent this morning.
As well as benefitting from a rise in the yellow metal price today, the company was given a boost by an upgrade from HSBC.
This is an encouraging sign for ABG after a tumultuous year. The company has been blighted by a swathe of management changes, operational issues and – like other gold miners – by a 28 per cent fall in the yellow metal price in 2013.
HSBC has increased its target price to £2.30 from £1.60 and upgraded its rating to neutral, based mainly on ABG’s revised plan for the Bulyanhulu mine in Tanzania, which should simplify and reduce unit mining costs.
The research also said that stronger-than-expected fourth-quarter operating results and assumptions of lower operating costs for 2014 and onwards had led to the upgrade. It is increasing its fourth-quarter earnings per share estimate to $0.04 (£0.02) from $0.02.
Last month, ABG reported fourth-quarter production of 165,000 ounces, well above HSBC’s expectations.
“Strong production results in the fourth quarter are good news, but, more importantly, the change in the Bulyanhulu mine plan, in our view, should improve profitability in the medium term, offsetting the negative news that ABG will likely cut reserves and may take further impairments in the fourth quarter,” said the research.
“Although painful, the changes look positive for the company.”
