African Barrick Gold (ABG) - Cheapest London Major

Research Report from Edison Investment Research

LONDON, March 31, 2011 - African Barrick Gold (ABG) was listed on the London market in its own
right on 19 March 2010 at a price of 575p. Notwithstanding two
production/profits warnings on account of issues associated with the
processing of transitional ore and the discovery of an organised fuel theft
syndicate (both at Buzwagi), ABG's actual FY10 price-earnings ratio of 16.7x
was at a 48% discount to the 32.0x average historic P/E ratio of the NYSE
Arca Gold BUGS index in 2010. Since then it has underperformed the gold price
in US dollar terms (in common with other majors), such that it now trades at
a risk-adjusted discount to its peers.

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On the basis of Edison's earnings expectations to FY14 (excluding growth
projects), ABG is consistently cheap relative to Randgold Resources. To the
extent that it is expensive relative to Petropavlovsk, its premium valuation
is small by FY14, when its EV/EBITDA ratio is 5.3x (vs 4.3x for POG). Given
that ABG has zero commissioning risk inherent within this analysis and only
relatively minor mine life extension risk at Tulawaka, we conclude that, on a
risk-adjusted basis, ABG offers the best value for investors in the London
gold sector. Considered alternatively, ABG only has to produce an additional
163,478oz of gold in FY14 at the same average cost of production as the rest
of its output to render it, definitively, the cheapest London gold major.

African Barrick Gold was historically the Tanzanian gold mining business
of Barrick and is one of Africa's five largest gold producers with output
from four mines, namely Bulyanhulu, Buzwagi, North Mara and Tulawaka.

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+44(0)20-3077-5700