April 27, 2010 / 6:38 AM / in 8 years

UPDATE 3-African Barrick Gold Q1 EBITDA more than doubles

* Q1 EBITDA $100 million vs $41 million

* Attributable production 177,095 ounces vs 126,860 ounces

* Expects to produce about 800,000-850,000 ounces this year

* Looking to replace $100 mln credit facility by year end

* Shares fall 2.3 pct, but outperform sector

(Adds interview with CFO, updates shares)

By Julie Crust

LONDON, April 27 (Reuters) - African Barrick Gold Plc (ABG) ABGL.L said first-quarter earnings jumped 143 percent in its first results since being spun off from parent firm Barrick Gold Corp ABX.TO, the world’s largest gold miner, last month.

EBITDA increased to $100 million from $41 million in the year-earlier period as the start of production from the Buzwagi mine helped lift attributable gold production by 40 percent to 177,095 ounces and on higher gold prices.

It expects to produce about 800,000 to 850,000 ounces this year at a cash cost of $450 to $500 an ounce.

At 0950 GMT, the shares were down 2.3 percent at 552 pence, taking them below the initial public offering price of 575 pence, valuing the company at 2.3 billion pounds ($3.6 billion). The UK mining index .FTNMX1770 was down 2.7 percent.

ABG has four producing gold mines in Tanzania of which Bulyanhulu, an underground mine, is the biggest and seven main exploration prospects. Production rose almost 5 percent at Bulyanhulu even after operations were suspended for three days following a fatal rock fall incident.

Tanzania’s parliament passed a new mining law on Friday that increases the royalty paid on minerals such as gold to 4 percent from 3 percent and requires the government to own a stake in future mining projects. [ID:nLDE63N047]

ABG said on Tuesday that it does not believe the new law will affect its current mines in the country and expects to continue to pay 3 percent royalty on existing projects according to its current agreements. The company produced 716,000 ounces of attributable gold last year and aims to boost annual output by 40 percent to over 1 million ounces within four years.

African Barrick joins Randgold RRS.L and Petropavlovsk POG.L as cashed up gold miners targeting circa 1 million ounces of production by 2013,” said Liberum Capital in a research note.

The growth in production will be supported by all four mines.

“Each project has approximately 50-70,000 ounce incremental production increase,” Chief Financial Officer Kevin Jennings told Reuters in an interview.

The company has about $320 million in cash, part of which will be spent on expanding its four producing mines and the $75 million purchase of Tanzanian exploration company Tusker Gold Ltd, as well as a $100 million credit facility.

ABG is looking to replace the current credit facility with Barrick Gold before the end of the year with a third party banks facility to give it greater independence and to establish a credit history, Jennings said.

“We have the financial flexibilty to execute on any value enhancing opportunities. We’ve got a lot to do in 2010, but beyond that if there are any opportunities we’ll be looking at them.”

He said the group would look at potential acquisitions in Africa but he declined to specify which countries it favours.

Barrick Gold continues to retain a 75 percent stake in ABG.

On the outlook, ABG, which has not hedged any of its production, said it is bullish on gold prices XAU=.

“We believe in the current market conditions that gold is a hedge against falling currencies and a real store of value,” said Jennings.

(Editing by Erica Billingham, Mike Nesbit)

$1=.6469 pounds

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