Gold mines never cheaper, Barrick spinoff says
‘Now is the time’ for investors with cash and courage to acquire assets
Barrick Gold Corp.’s African spinoff says gold mines have never been cheaper as it seeks to take advantage of an industry slump to expand its business.
The biggest miners racked up $30 billion of debt in a 12-year bull run for gold that spurred new mines and acquisitions. Those investments have turned to millstones for many after costs jumped and gold prices sank almost 40 per cent from their peak. That’s an opportunity for those with cash and courage.
“If you’re looking for producing assets, they’ve never been cheaper,” said Brad Gordon, head of African Barrick Gold, just renamed Acacia Mining.
“Now is the time to be contrarian and pick up some of the best ground in Africa.”
Acacia’s chief executive isn’t the only one on the prowl.
Randgold CEO Mark Bristow said last week his company had a war chest of more than $500 million to spend on deals, a figure Gordon said Acacia could match for the right asset.
His confidence may have its roots in the earlier woes of a company that lost more than 80 per cent of its value after being spun off from Barrick in 2010. Gordon set about turning around operations after he was hired in August 2013, firing workers, cutting costs for eight straight quarters and raising output. The stock is up almost 50 per cent since he was appointed.
“The past has been less than glorious, but there’s been a lot of change in this business,” Gordon said Thursday of the Londonbased company that’s still 64 per cent-owned by Barrick. “We’re in a very strong position. We have a strong balance sheet and very little debt.”
Acacia, which Thursday unveiled a first foray in West Africa in a deal to explore in Burkina Faso with Sarama Resources, is seeking further expansion beyond its base in Tanzania.
“There are other provinces in West Africa that we want to be in,” Gordon said. “You will see us being very active in picking up highly prospective exploration ground.”
Acacia may also invest in existing mines, with potential for output at its Bulyanhulu operation in Tanzania of 600,000 ounces a year, up from 350,000 to 400,000 ounces now. “That’s going to compete very strongly with any external M&A opportunity,” Gordon said.