July 30 (Bloomberg) -- African Barrick Gold Plc, a producer of gold in Tanzania, wrote down the value of its mines by $727 million after the precious metal’s steepest quarterly drop in at least 90 years and said it will reduce costs.
African Barrick has identified savings of $185 million, $100 million of which can be made this year, the company said in a statement today. The producer will shorten the life of its Buzwagi mine to 6 1/2 years, with mining ceasing in 3 1/2 years and ore stockpiles at the site processed after that.
Gold mining companies have announced at least $15 billion in charges during the past two months after the drop in gold prices. Bullion has declined more than 20 percent in 2013 and is headed for its first annual loss in 13 years after some investors lost faith in gold as a store of value.
“We have taken decisive action at all of our mines, including the reshaping of the life of mine at Buzwagi, in order to adapt to the lower gold price environment,” Greg Hawkins, chief executive officer of African Barrick, said in the statement. “Having taken these steps, we remain confident in the ability of our asset base to deliver shareholder value.”
African Barrick gained 1.9 percent to 119 pence in London trading at 8:09 a.m.
Newmont Mining Corp., the second-largest gold producer, said July 26 it will take a $1.77 billion writedown on the value of two Australian mines and stockpiles. Goldcorp Inc. said July 25 it took a writedown of $1.96 billion. Barrick Gold Corp., the biggest producer by sales, said June 28 it expects to write down the value of a project on the border of Chile and Argentina by as much as $5.5 billion. Newcrest Mining Ltd. said June 7 it may take a charge of as much as A$6 billion ($5.6 billion).
African Barrick, which produced 311,838 ounces of gold in the first half, reiterated its full-year target of 540,000 ounces to 600,000 ounces at a cost of $925 to $975 an ounce.
The company posted a first-half net loss of $701.2 million, compared with a year-earlier profit of $73.7 million, on sales of $499.8 million.
African Barrick, which has been dogged by operational setbacks since it was spun off from Toronto-based Barrick Gold in 2010, has forecast its lowest annual production since it first sold shares. The company has slumped 73 percent this year.
The Philadelphia Stock Exchange Gold and Silver Index of 30 companies operating from Canada to Tanzania tumbled 46 percent in the first six months and is heading for a third straight annual decline. The precious metal lost 23 percent in the second quarter, reaching a 34-month low of $1,180.50 an ounce on June 28.
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