African Barrick latest to cut ties with CEO

With relatively new CEOs in place at Kinross Gold (TSX: K; NYSE: KGC), Newmont Mining (TSX: NMC; NYSE: NEM) and Barrick Gold (TSX: ABX; NYSE: ABX), it was perhaps only a matter of time before one of the poorest performing of the gold miners, African Barrick Gold (LSE: ABG; US-OTC: ABGLF), saw its CEO replaced. 

Greg Hawkins — who has been at the helm since the company was spun out of its parent Barrick Gold in 2010 — has resigned.

Back when the company was first spun out, talk concerned the benefits of focusing on its Tanzanian assets, and Hawkins proclaimed that the company would, in short order, produce at a rate of 1 million oz. gold annually.

Fast-forward three years and the company’s stock has been decimated and production is stuck in the low 600,000 oz. per year range, and falling.

Take up the reins as CEO is Bradley Gordon, who has been in the gold-mining business for 30 years, and was most recently the CEO of Intrepid Mines (TSX: IAU; ASX: IAU). Gordon has some expertise in politically sensitive jurisdictions, as Intrepid has key assets in Indonesia, and he helped run Barrick’s Porgera gold mine in Papua New Guinea when he was with Placer Dome.

This experience will be useful at African Barrick’s three gold mines in Tanzania. The mines produced a combined 626,212 oz. gold last year. Its fourth mine, Tulawaka, was closed earlier this year.

The assets have been hit by illegal mining, power issues, strikes and thefts. These challenges, combined with rising costs, led the company to announce in February that output would shrink for the fifth year in a row.

Two of its mines in particular have been trouble spots over the years. The company has been working with the Tanzanian government to address community issues regarding the North Mara gold mine, which has been a site of conflict with locals where multiple deaths have occurred, while at the Buzwagi mine the company tightened security and suspended almost half of its staff after realizing that fuel thieves had worked their way onto the mine’s staff.

On the mundane side of operations, Hawkins had been presiding over an operational review to drive down costs and increase efficiencies. Out of that review came a $50-million reduction in sustaining capital, a $25-million reduction in exploration spending and $8 million in savings in corporate overhead.

In a release in May, Hawkins conceded that 2012 was a rough year, but said the company had made strides at Buzwagi and North Mara and that Bulyanhulu, its third mine, was on the track to recovery.

The market, however, was slow to pick up his cause. After closing as high as £6.70  in 2010, its stock has been on a steady decline and was trading for just £1.80 (US$2.79) in London on Aug. 28.

The poor performance was also tied to writedowns to the tune of US$727 million and a first-half net loss of US$701.2 million, compared with a year-earlier profit of US$73.7 million.

Barrick Gold has a 74% stake in African Barrick, but has been looking to sell. It came close, but its negotiations with state-owned China National Gold Group broke down in January.