Barrick Gold’s (ABX) adjusted earnings (excluding one-time items) for the third quarter of 2014 plummeted to 19 cents per share from 58 cents in the year-ago quarter but beat the Zacks Consensus Estimate of 16 cents per share. Lower pricing and volumes for both gold and copper led to the decline in earnings.
On a reported basis, profit for the third quarter was $125 million or 11 cents per share, down 27.3% from $172 million or 17 cents per share in the prior-year quarter. The results include $51 million in unrealized losses on non-hedge derivative instruments and $42 million in unrealized losses related to foreign currency translation.
Revenues fell around 13% year over year to $2,598 million in the reported quarter and missed the Zacks Consensus Estimate of $2,479 million. Average realized price of gold decreased 2.9% year over year to $1,285 per ounce. All-in costs declined 17.5% to $975 per ounce while all-in sustaining costs fell roughly 8.8% to $834 per ounce in the reported quarter.
Gold production fell to 1.6 million ounces from 1.8 million ounces a year ago. Copper production declined to 131 million pounds from 139 million pounds in the prior-year quarter.
Regional Results
North America: The Goldstrike mine in the North American region produced 239,000 ounces of gold in the quarter, up 2.6% year over year, at an average all-in sustaining cost (AISC) of $921 per ounce. Production increased due to higher processed grades. AISC were better than expected due to lower processing costs.
The Cortez mine produced 273,000 ounces, down 18% year over year. Production at Pueblo Viejo increased 48.7% to 168,000 ounces. Production at Lagunas Norte mine increased 15.4% to 157,000 ounces due to processing higher grade material and a faster leach cycle from stacking ore on the new area of the leach pad. Production at Veladero increased 15.6% year over year to 178,000 ounces, led by higher grades on positive grade reconciliations.
Australia Pacific: The region produced 292,000 ounces compared with 497,000 ounces in the year-ago quarter. AISC was $855 per ounce, down from $920 per ounce in the year-ago quarter.
African Barrick Gold plc. (ABG): Attributable production of ABG in the quarter was 122,000 ounces, flat compared with the year-ago quarter. AISC was $1,098 per ounce in the quarter, down 13.5% year over year.
Copper
Copper production in the third quarter was 131 million pounds, down 5.8% year over year. C1 cash cost was $1.82 per pound in the quarter, up from $1.69 per pound in the year ago quarter.
Financial Position
Cash and cash equivalents were $2,705 million as of Sep 30, 2014, down roughly 18.5% from $2,283 million as of Sep 30, 2013. Long-term debt was roughly $12.9 billion, down from $14.6 billion a year ago.
Update on Pascua-Lama Mine
During fourth-quarter 2013, Barrick temporarily suspended construction activities at the Pascua-Lama mine, barring the requisite activities for environmental protection and regulatory compliance. The ramp-down was completed on schedule and budget and the mine is now under care and maintenance. The decision to re-start will depend on certain factors like improved project economics, and legal and other regulatory requirements.
Barrick is in the final stages of preliminary engineering for the permanent water management system and is discussing the permitting requirements necessary to obtain approval for construction with Chilean regulators.
Barrick has entered into a Memorandum of Understanding (MoU) with a group of 15 Diaguita indigenous communities and associations in Chile's Huasco province. As part of the MoU, Barrick is providing technical and environmental information about the Pascua-Lama project available to the communities along with financial resources and materials required to support analysis of this information.
Joint Venture
Barrick, on Jul 13, 2014, agreed to form a joint venture with a Saudi Arabian Mining Co. (Ma’aden) in order to operate the Jabal Sayid copper mine in Saudi Arabia. Both Barrick and Ma’aden will own 50% stake in the joint venture. Ma’aden, which is controlled by the state of Saudi, has agreed to buy 50% interest in the project for $210 million (expected to close in the fourth quarter of 2014). First shipments of concentrate are expected in early 2016.
Guidance
For 2014, Barrick reduced its forecast of AISC, which is now expected to be between $880 and $920 per ounce versus earlier expectations of between $900 and $940 an ounce. The company reiterated its capital expenditure guidance range of $ $2.2-$2.5 billion.
Barrick, also changed its full-year guidance for gold production to 6.1-6.4 million ounces from previous expectation of 6-6.5 million ounces. Copper production guidance has been increased to 440-460 million pounds from earlier expectation of 410-440 million pounds. C1 cash cost guidance has been revised to $1.90-$2 per pound from the earlier outlook of $1.90-$2.10 per pound.
Five cornerstone mines are expected to contribute about 60% to the total production in 2014 at an average AISC of $730-$780 per ounce.
Currently, Barrick carries a Zacks Rank #3 (Hold).
Other mining companies with favorable Zacks Rank include Pretium Resources Inc. (PVG), Lake Shore Gold Corp. (LSG) and U.S. Silica Holdings, Inc. (SLCA). While Pretium Resources sports a Zacks Rank #1 (Strong Buy), both Lake Shore Gold and U.S. Silica hold a Zacks Rank #2 (Buy).
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