11 February 2013

Tanzania: DSE Performance Shrinks After ABG Shares Decline

Dar es Salaam — The Dar es Salaam Stock Exchange (DSE) market capitalization has shrunk by almost 20% following a decline of African Barrick Gold (ABG) share prices after China Gold backed out of sales talks fortnight ago.

The stockbrokers have it that the bourse market capitalization has gone in similar percentage the ABG share price tumbling down from 444 pence ($7.110) to 356.80 pence ($5.714) of last week since the buy-off deal dematerialized.

The ABG market cap sunk to Tsh3.804trn ($2.34bn) last week from Tsh4.734trn ($2.92bn) a fortnight ago, plummeting the DSE market cap by Tsh930bn ($572.84m) from total of Tsh13.213trn ($8.14bn), the miner's share controlling over one-third of total Dar bourse market cap.

Tanzania Securities Chief Executive Officer Mr. Moremi Marwa told East African Business Week in Dar es Salaam last week that ABG share price has had a negative impact on the DSE's market cap since the deal was put-off.

"ABG has a bigger volume, thus its fluctuation on (FTSE 250) London affected the market capitalization of DSE, Marwa said, adding that even though little trading is happening at the country's bourse."

ABG share are seldom trading at the DSE, but its prices kept reflecting the happening at the LSE--London Stock Exchange, which a featured on the FTSE 250.

International analysts, fortnight ago, did project the deal may reach over 500 pence a share.

But minutes after the market opened in London, shares have dropped over 21% to as low as 347.80 pence, some 96 pence less than last week's 444 pence close.

Barrick Gold Corporation (BGC), the parent company of ABG, said in a statement that there would be no sale of the Tanzania's largest gold mine to China's state-owned China National Gold Corporation (China Gold).

Thus dashing all hope for those who thought they will be able to make really good money with the sale of ABG, at least for those who bought the shares after Tanzania's largest gold producer announced talks for a potential offer to sell the company off five months ago.

In the statement by BGC, the effective owner of ABG for a 73.9% stake, it hinted that the collapse of the talks boiled down to money.

It seemed the buyer, China's state-owned China Gold, did not offer as much as what the directors of ABG asked.

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