🕐17.08.12 - 10:27 Uhr

INVESTEC: AFRICAN BARRICK GOLD - ABG NOW IN PLAY, BUT IS ANYONE ELSE IS PLAYING? - BUY



African Barrick Gold (ABG.L) Investec Securities Price: 429p | Target: 485p | Rec: Buy African Barrick (ABG) announced yesterday that its parent, Barrick Gold Corp (ABX), was in preliminary discussions with a Chinese gold company regarding ABX’s 73.9% holding in ABG.

While this stake has in theory always been available, the commencement of formal discussions puts ABG officially “in play”.

We do not, however, expect this to trigger a bidding war, although we can see argument for a takeover price around 500p. * AGX has entered preliminary discussions with China National Gold Group Corporation regarding its holding in ABG.

Should China Gold acquire more than 30% of ABG, it would then be required to make a full takeover offer. * The announcement should not be a surprise given that the market had long suspected that AGX would divest of its African interests.

While indications were that ABX wanted to do this at closer to Mar’10 ABG listing price of 575p, the new ABX CEO has the opportunity to clean the slate.

While divesting of ABG would reduce ABX’s production base, it should also reduce its average cash costs and sovereign risk.

* What price could a buyer pay? Around 500p per share appears a reasonable price under various rule-of-thumb methodologies, including: * a 30% premium to a 30-day VWAP =494p, * a 1.5x P/NPV multiple (US$1250/oz long term, 8% DR)= 503p, * a 1.0x P/NPV multiple at US$1600/oz gold and a 10% DR = 509p, * $200/oz reserves (526p) or $100/oz resources (495p) * Our TP of 485p (unchanged) remains based on an equal blend of base case NPV and forward earnings multiples. To access the full note please click here Analyst: Hunter Hillcoat To receive further information or change your Research Preferences please email: South Africa or United Kingdom IMPORTANT NOTICE: This communication forms part of an electronic communication sent to the intended recipient (or such persons authorised representative) for their sole use and is subject to important legal and regulatory restrictions, qualifications and disclaimers ("the disclaimer") that may be accessed and read by clicking on the following hyperlink:http://www.investec.co.uk/about-investec/what-we-do/investment-banking/investec-securities/company-research/morning-meeting-comments.html or copying the address into your Internet browsers address bar.

If you cannot access the disclaimer, please obtain a copy thereof from us by sending an e-mail to in the case of SA or in the case of UK: The disclaimer is deemed to form part of the information in this communication.

This communication is confidential for the information of the addressee only (or such persons authorised representative) and may not be reproduced in whole or in part, copies circulated, or disclosed to another party, without the prior written consent of Investec Securities Limited.

In particular, the Investec Group of companies does not allow the redistribution of this report to non-professional investors and cannot be held responsible in any way for third parties who effect such redistribution.

If you are not the intended recipient of this e-mail (or such persons authorised representative), then: (a) please notify the sender of this e-mail immediately by return e-mail, facsimile or telephone and delete this message from your system; (b) you may not print, store, forward or copy this message or any part thereof or disclose or cause information in this message to be disclosed to any other person.

The information in or attached to this e-mail message is confidential and may be subject to legal privilege and client confidentiality.

Nothing in this message constitutes an offer, warranty or representation from us.

While we are entitled to rely on and hold you to your offers, warranties, representations or other statements made in or attached to this message, our employees or representatives may not conclude agreements or otherwise bind our company via e-mail.

We cannot be held liable for any harm or loss resulting from malicious software code or viruses in this message or attachments, including data corruption resulting therefrom.

None of our employees or representatives are permitted to send unsolicited messages ("spam") and our company cannot be held liable therefore.

If you regard this message as spam, please inform us immediately by sending an e-mail to in the case of SA or in the case of UK: Unless otherwise agreed: (a) We are only deemed to have received an e-mail once we have confirmed receipt thereof to you; (b) We are deemed to have sent an e-mail once reflected as “sent” on our e-mail server.

If this message contains offensive, derogatory or defamatory statements or materials, it means the message has been sent outside the sender’s scope of employment with us and only the sender can be held liable in his/her personal capacity.

Our corporate information and names of our office bearers can be accessed by sending an e-mail to in the case of SA or in the case of UK: This disclaimer applies to our original message, any attachments and all subsequent messages or attachments we may send. ________________________________ Before acting on this e mail or opening any attachment please read the disclaimer which can be accessed at http://www.investec.com/global-email-disclaimer Investec Bank plc is authorised and regulated by the Financial Services Authority.

Calls may be monitored and recorded. This e-mail has been scanned for viruses by MCIs Internet Managed Scanning Services - powered by MessageLabs.

For further information visit http://www.mci.com Investec Bank plc Registered office: 2 Gresham Street, London, EC2V 7QP Company No: 00489604 Incorporated in England and Wales
-------------------------------------------------------------------------------- CONFIDENTIALITY NOTICE AND LEGAL LIABILITY WAIVER: The content of this email and any attachments are CONFIDENTIAL and may contain privileged information.

If you are not the addressee it may be UNLAWFUL for you to read, copy, distribute, disclose or otherwise use the information contained herein.

The content of the message and or attachments may not reflect the view and opinions of the originating company or any party it is representing.

If you are NOT the intended recipient then please email back to ------------------------------------------------------------------------------------






Products & Services | Jobs