Barrick Gold shifts into growth mode as output dips

After several years marked by operational difficulties and debt-cutting asset sales, Barrick Gold Corp. had some good news, and some notso good news, for investors on Tuesday.

The Toronto-based miner said gold production hit 1.05 million ounces this quarter. That is down 20 per cent from last year and behind pace to meet its annual target of 4.5 to five million ounces, but in line with guidance. Even if it meets that target, years of declining gold production from its peak of 8.6 million ounces in 2006 means that Barrick may lose its title as the world’s largest gold producer to Colorado-based Newmont Mining Corp.

With less than $100 million in debt due before 2020, Barrick said it’s shifting to a growth strategy, focusing on Nevada and the Dominican Republic. “We now do not intend to sell further assets for the purpose of debt repayments,” Catherine Raw, chief financial officer, told investors during an earnings call Tuesday, a day after reporting its first-quarter earnings.

Proceeds from any asset sales will be plowed into new projects or returned to shareholders, according to the company.

Raw added that the company will use its US$2.4 billion in cash and its free cash flows to further reduce its debt from US$6.4 billion to US$5 billion by the end of the year.

During the past three years, Barrick spent about US$6.7 billion on debt payments, which cut its total load from US$13.1 billion in 2014 to US$6.4 billion — 75 per cent of which is due after 2030, according to a BMO investor presentation earlier this year.

Barrick said Monday its net income fell to US$158 million in its fiscal first quarter, down more than 300 per cent from the same time a year ago.

CIBC rated the stock neutral with a price target of $17 in the next 12 to 18 months. “The continued focus on cost efficiency yielded another solid quarter in earnings,” analysts David Haughton and Terry Hsui wrote in a note to clients. They said it posted adjusted quarterly earnings of 15 cents per share, above their estimate of 10 cents and the consensus of 14 cents.

Andrew Kaip, an analyst at BMO Capital Markets, wrote that while it delivered slightly better-than-expected earnings per share, its cash flow and free cash flow — of US$507 million and US$181 million, respectively — “lagged our expectations.”