China National Gold to buy a stake in African Barrick Gold
As demand for gold in China is surging, China’s state-owned miner, China National Gold, is in talks with African Barrick Gold (ABG) to buy a big chunk of African assets.
The deal could fetch as much as about USD 3.9 billion to ABG- one of Africa’s largest gold miners- in a bid to boost its shareholder value.
The production of the firm has been declining in recent due to several factors.
Last year, the company produced almost 688,000 ounces of gold. That was down from 701,000 ounces in 2010 and 716,000 ounces the year before.
Several factors have caused the poor production of the firm.
The cost of production went up by more than 20% in 2011 from last year. It has also been hurt by issues such as power cuts as well as theft of fuel.
According to Hunter Hillcoat an analyst with Investec, despite its high risks, the firm looks valuable to get a reasonable set of assets for a good price.
While some analysts find investment in ABG not very fruitful.
“They’ve made a massive loss on these investments, so if the Chinese came in with a massive offer I think they’d bite their hand off,” said Cailey Barker, a mining analyst at Numis Securities.
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