African Barrick triples dividend but production slows

African Barrick Gold, the Tanzania focused gold producer, is to triple its dividend for 2011 on the back of a 30% increase in earnings and strong cash generation, although production and sales fell dramatically in the final quarter.

Total revenues for the year were $1.218bn, a rise of 25% on 2010, with earnings before interest, tax, depreciation and amortisation (EBITDA) rising 30% to $419m.

Over the three months to the end of December revenues actually dropped 8% against the same period of 2010, with EBITDA also down 14%.

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The full year results have seen the firm decide to alter its dividend policy. The annual dividend will now fall between 15% and 30% of profits after tax and minority interests. The immediate impact of this change is a 208% rise in the dividend over 2010 to 16.1 cents per share.

It has not all been good news for ABG, however.

Attributable sales of gold for the year were 699,539 ounces (oz), 3% down on 2010 while production also fell 2% to 688,278oz. This was mainly due to the unreliable power supply in Tanzania, particularly at the Buzwagi site.

ABG has now installed a 16mw diesel generator which ought to keep the site going during future power cuts.

The production decline was particularly marked in the final three months of the 2011, which fell 11% against the same period of 2010, while sales during the quarter dropped 21%.

Over the whole year the problems with production were generally offset by the increase in the gold price but that has had its own drawbacks.

ABG highlights wage inflation as staff move around Africa choosing the most remunerative contracts. Its answer is to try and increase the number of skilled Tanzanian labourers which the firm thinks will "mitigate fluctuations in personnel turnover".

Overall, the update does not appear to have pleased investors. By 8.52am ABG's stock had declined 8.5%.

BS