African Barrick Gold's shares plunged Wednesday after saying it was working to reduce costs following a drop in annual net profits.

Shares fell 8.33% to 312.60p at 8:58 as the FTSE 250 company reported net profits of $48.2m for 2012 - down from $284.7m the year before.

Revenues fell from $1.2bn to $1.1bn, while the cost of sales rose from $704.1m to $802.7m.

"As we progress through 2013, we are focused on reducing our cost base from current levels to ensure the business returns to delivering appropriate levels of free cash flow." said Greg Hawkins, Chief Executive Officer of African Barrick Gold.

"Cash flow generation and improving returns from our assets form a key part of our operational review and we will update on our progress throughout the course of the year. The 2012 dividend is maintained at the 2011 level and this is both an expression of our confidence in the business as well as our commitment to shareholder returns."

The gold mining company said it achieved gold production of 626,212 ounces and cash costs of $949 per ounce sold, within recent guidance.

Earnings per share came to $0.14, down from $0.67 and missing market estimates by Canaccord which maintained its 'hold' rating and 360p share target price.

"Given today's results, our current production forecast is too high and we would expect some pick up in production in 2014 coming mainly from advanced projects - Bulyanhulu CIL [circa 40,000 ounces per annum (ozpa) and Upper-East circa 50,000 ozpa]," the broker said.

"Further growth is likely to be coming from improvements in the existing operations, especially in grades at Bulyanhulu, which achieved only 7.2 grams per tonne (g/t)in the fourth quarter versus the reserve grade of 11.7g/t. An operation review is underway, but we believe it will take a substantial amount of time until results will be evident."

The CIL Expansion and Upper East Acceleration - key projects in Bulyanhulu - made particularly strong progress during the year.

Another highlight for the period included the renewal of the contract for North Mara special mining licences on the existing terms and conditions for 15 years.

The group also acquired an exploration package of 2,800km2 in Kenya for an initial consideration of $22m.s

African Barrick's net cash position was at $401m by the end of the year.

An operational review has been carried out to drive improved returns and free cash flow generation from the existing asset base, the company added.

The miner proposed a final dividend of $0.123 per share, a total dividend for 2012 of $0.163 per share.




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