Bar­rick sees drop in gold pro­duc­tion ahead, putting its No. 1 spot at risk

The Globe and Mail (Ottawa/Quebec Edition) - - SPORTS - NIALL McGEE MIN­ING RE­PORTER

Bar­rick Gold Corp. is on track to lose its long-held crown as the world’s largest gold pro­ducer after fore­cast­ing pro­duc­tion for this year that will likely fall short of U.S. com­peti­tor New­mont Min­ing Corp.

In a re­lease an­nounc­ing its fourthquar­ter re­sults after the mar­kets closed on Wed­nes­day, Toronto-based Bar­rick said it ex­pects to pro­duce be­tween 4.5 mil­lion to 5 mil­lion ounces of gold in 2018. In De­cem­ber, New­mont pre­dicted that its 2018 gold pro­duc­tion will be be­tween 4.9 mil­lion to 5.4 mil­lion ounces.

While Colorado-based New­mont had al­ready passed Bar­rick in terms of mar­ket cap­i­tal­iza­tion, it had lagged Bar­rick in pro­duc­tion.

In 2006, Bar­rick be­came the big­gest pro­ducer of gold after it closed the ac­qui­si­tion of fel­low Cana­dian miner Placer Dome Inc. But over the past few years, Bar­rick has been in­creas­ingly fo­cused on prof­itable min­ing through gen­er­at­ing free cash flow, as op­posed to be­ing the top dog in pro­duc­tion. It’s a strat­egy that has seen it sell much of its port­fo­lio of high-cost, non-core mines.

Bar­rick has also been fo­cus­ing on get­ting a han­dle on its pre­vi­ous, pun­ish­ingly high debt load, in­curred in part through a failed cop­per ac­qui­si­tion and by fun­nelling bil­lions of dol­lars into de­vel­op­ing a South Amer­i­can mine that has yet to pro­duce an ounce of gold, and is now in limbo.

Bar­rick has re­duced its to­tal debt to US$6.4-bil­lion from roughly US$13-bil­lion in 2014. Last year, the com­pany paid down US$1.5-bil­lion and plans to get its debt down to roughly US$5-bil­lion by the end of this year.

On an ad­justed ba­sis, the com­pany re­ported a profit of 22 US cents a share in the fourth quar­ter, a penny better than an­a­lysts sur­veyed by Thom­son Reuters had been ex­pect­ing.

How­ever, on a net ba­sis, the com­pany lost US$314-mil­lion in the quar­ter. That was mainly be­cause of a pre­vi­ously an­nounced charge of US$429-mil­lion re­lated to re­clas­si­fy­ing 14 mil­lion ounces of gold at its stalled Pas­cua-Lama pro­ject in South Amer­ica from “re­serves” into“re­sources” – a far-less-cer­tain cat­e­gory of re­cov­er­able gold.

One of the big­gest chal­lenges the com­pany faces now is re­plac­ing its once mam­moth re­serves. Bar­rick said its to­tal proven and prob­a­ble gold re­serves were 64.5 mil­lion ounces as of the end of De­cem­ber, a 25-per-cent drop com­pared with the 85.9 mil­lion in re­serves it held 12 months prior and more than 50 per cent lower than the 139.9 mil­lion ounces it held at 2011 yearend.

Bar­rick’s pro­duc­tion fell last year to 5.3 mil­lion ounces of gold, down from 5.5 mil­lion ounces in 2016. Pro­duc­tion was weaker partly as a re­sult of the sale of 50 per cent of its Ve­ladero mine in Ar­gentina and trou­bles at its Lon­don-based sub­sidiary Aca­cia Min­ing PLC.

Aca­cia has been sub­ject to a gold con­cen­trate ex­port ban in Tan­za­nia after run­ning afoul of the gov­ern­ment there. Aca­cia’s op­er­a­tions sub­ject to the ban ac­count for about 5 per cent of Bar­rick’s gold pro­duc­tion. Bar­rick owns about 64 per cent of Aca­cia.

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