Barrick CEO charts fresh course with potential African sale

Thu Aug 16, 2012 5:37pm EDT
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By Euan Rocha

TORONTO (Reuters) - Barrick Gold Corp's (ABX.TO: Quote) plan to off-load some or all of a big but underperforming asset sends a clear message about new CEO Jamie Sokalsky: the former number-cruncher means business and is serious about abandoning the grow-at-all-costs mantra.

Sokalsky, who took over at Barrick in June, says he will rein in growth and invest only in assets that promise sizable returns, a relief for investors weary of the sector's almost single-minded focus on production growth, regardless of cost.

Barrick, the world's top gold miner, said on Thursday it is in talks to sell all or a part of an interest in its African Barrick Gold ABGL.L subsidiary to China National Gold Group.

"This is Jamie saying I'm serious about this. We are going to be looking at this hard and if we can derive better value out of assets from, let's say, a divestment, then we will do it," said a source familiar with Barrick's boardroom discussions.

Sokalsky, a Barrick veteran, is tasked with turning around the miner's fortunes and reigniting its share price. Its plan to sell the African unit is one small step in that direction.

Although the price of gold has risen more than five-fold in the last 10 years, Barrick's shares and those of its peers have failed to shine, mainly because of ballooning capital costs and soaring operating expenses.

Barrick produced some 7.7 million ounces of gold in 2011 at total cash costs of $460 an ounce. Output from African Barrick accounted for 509,000 of those ounces, but total cash costs for these ounces was $692 per ounce.

Hiving off the African arm, 74 percent owned by Barrick, would reduce the miner's gold output in the short term but also lower its average operating costs.   Continued...