Canadian gold miners starting to turn a corner

Both Barrick and Goldcorp increase production, cut costs in promising third-quarter

There was a funny sound that hasn’t been heard in several years on Barrick Gold Corp.’s latest earnings conference call: optimism.

Battered by one of the worst bear markets ever for metals, the Toronto-based gold giant reported a second straight quarter of positive cash flow and that it’s well on the way to meeting its massive debt reduction target of $3 billion (U.S.) this year.

“We’re getting Barrick back into a position of financial strength,” said company president Kelvin Dushnisky, who was audibly more upbeat on a call with analysts Thursday.

“We’ve really started to deliver,” he said.

Both Barrick and U.S. bullion giant Newmont Mining Corp. reported earnings that beat analysts’ estimates after both companies produced more gold than expected in the third quarter, helping mitigate a prolonged slide in the price of bullion.

While Vancouver-based Goldcorp Inc., the largest producer by market value, posted a surprise loss on financial items, its third-quarter output and costs were better than analysts’ projections.

Gold miners are fighting to gain back investors’ confidence with prices of the metal headed for a third straight annual decline. Barrick shares jumped 7 per cent by midday on the Toronto Stock Exchange.

“It looks like the supertanker is finally turning around,” said veteran analyst John Ing of Maison Placements Canada Inc. “Everybody was skeptical about whether they could pull off that debt reduction, but they’re showing they’re walking the talk,” he said.

Barrick, the world’s top miner of the precious metal, posted an adjusted profit of 11 cents a share, topping the seven-cent average of 21 estimates compiled by Bloomberg, the company said. Sales fell 12 per cent but still beat expectations.

“We’ve made great strides this year to returning Barrick to a leaner, more nimble company,” noted Dushnisky.

As gold trades about 40 per cent below its 2011peak, miners have been under pressure to slash costs.

At Barrick, the big focus has also been on reducing the company’s debt, which ballooned to $15.8 billion in the second quarter of 2013, according to data compiled by Bloomberg.

In its statement Wednesday, Barrick said it will use approximately $1 billion in proceeds from the sale of a half-stake in its Zaldivar copper mine to pay down debt, bringing it within $100 million of its $3 billion debt-reduction target for the year. It will close the gap with cash flow, it said.

Barrick’s output of the metal climbed to 1.66 million ounces of gold in the third quarter, compared with 1.65 million a year earlier.

At Newmont, production jumped to 1.34 million ounces from 1.15 million a year earlier.

Goldcorp’s production rose to 922,200 ounces from 651,700 ounces a year earlier.

Newmont, which ranks second in global production, earned 23 cents a share, exceeding the 17-cent average estimate of 19 analysts. Sales rose to $2 billion, also topping expectations, according to a company statement.

“In a quarter in which the market was very skeptical as to whether these guys could deliver on earnings, they have far exceeded the markets’ expectations,” Andrew Kaip, an analyst with BMO Capital Markets in Toronto, said in an interview after the results were released.

Goldcorp, which released results Thursday, had a loss of four cents a share, excluding a writedown on stockpiles and other one-time items, compared with a 4-cent average profit estimate. Sales rose to $1.1 billion, beating the $1.05 billion average estimate.

For Barrick, Goldcorp and Greenwood Village, Colorado-based Newmont, one priority continues to be cost cutting.

Newmont’s all-in-sustaining costs, a measure to compare miners’ performance, were $835 an ounce in the third quarter, compared with $995 a year earlier.

Barrick trimmed its cost to produce an ounce of gold to $771 from $866. With files from Bloomberg