Barrick Gold Corp (USA) (ABX) Is Likely to Divest Its Stake in Acacia: Berenberg


Barrick Gold Corp (USA) (NYSE:ABX) disclosed that up to 10% of its attributable output could be affected by the ongoing ban on mineral concentrate exports affecting the operations of its 64% subsidiary Acacia Mining, in Tanzania.

In 2016, Acacia produced 830koz of gold, contributing 9.6% to Barrick’s 2016 attributable gold output, with this expected to rise to c10% in 2017. However, in March the Tanzanian government banned all exports of gold concentrate, and earlier this month officials accused the company of under-reporting its volumes of gold, reiterating the ban.

Berenberg analyst Yuriy Vlasov commented, “We expect Barrick to divest its stake in Acacia for three main reasons: 1) Acacia is a separately listed stock and has no operational synergies with the rest of Barrick’s assets; 2) Barrick has no operational control over Acacia; and 3) Acacia operates in Africa (Tanzania), which does not fit Barrick’s operational profile. However, in our view a divestment will happen after the resolution of the current concentrate exports issue.”

“The ban on gold concentrate exports from Tanzania affects two Acacia mines: Buzwagi and Bulyanhulu. Respectively, 55% and 45% of these mines’ output is made up of gold concentrate. We estimate the respective total gold production for 2017 of Buzwagi and Bulyanhulu to be 285koz and 220koz, including 252koz of cumulative gold concentrate production. Acacia’s current 2017 exposure to the ban on gold concentrate exports is estimated at 210koz, or 23-25% of its 2017 gold production,” the analyst added.

Overall, Vlasov reiterates a Sell rating on shares of Barrick Gold, with a price target of $15.20, which implies a downside of 7% from current levels.

According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Yuriy Vlasov has a yearly average return of 2.4% and a 73% success rate. Vlasov has a 10.3% average return when recommending ABX, and is ranked #2491 out of 4573 analysts.

Out of the 15 analysts polled by TipRanks in the past 12 months, 7 rate Barrick Gold stock a Buy, 7 rate the stock a Hold and 1 recommends to Sell. With a return potential of 41%, the stock’s consensus target price stands at $22.98.

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