Lower prices hurt Barrick Gold
BARRICK Gold, the world’s largest producer of the yellow metal, is intensifying its efforts to strengthen its balance sheet as slumping metal prices squeeze margins.
BARRICK Gold, the world’s largest producer of the metal, is intensifying its efforts to strengthen its balance sheet as slumping metal prices squeeze margins.
The Toronto-based mining house cut dividends, lowered its gold output forecast and is preparing to sell more US assets as it targets $2bn in reduced expenditure by next year, according to its second-quarter earnings report distributed on Wednesday.
Barrick reported adjusted earnings that missed analysts’ estimates, as previous measures to trim expenses and streamline operations failed to offset the sharp price slide.
“We remain focused on improving productivity and driving down costs to ensure we can continue to generate free cash flow in the current gold price environment,” Barrick wrote.
Gold miners are battling to lower costs and debt levels after prices slumped to five-year lows as dollar gains and the prospect of higher US interest rates reduce demand for alternative investments as an inflation hedge. Barrick shares have lost 38% in the past month, the most among major gold stocks, as its US mines bear the full brunt of the price slump, while mines elsewhere get some relief from weaker local currencies.
Net losses narrowed to $9m, or 1c per share, in the second quarter, from $269m, or 23c, a year ago.
Earnings excluding one-time items were 5c a share, trailing the 6c average of 21 analysts tracked by Bloomberg. Sales fell to $2.23bn from $2.46bn, compared with a $2.25bn average estimate.
Chairman John Thornton has led a strategy to make Barrick a nimbler company more focused on its core gold operations. A former president of Goldman Sachs, he joined Barrick as co-chairman in 2012 and fully replaced founder Peter Munk in April last year.
The company has sold $2.45bn in assets so far this year. In May it sold a 50% stake in its Porgera mine in Papua New Guinea to Zijin Mining for $298m. Two days earlier it agreed to sell its Australian Cowal mine to Evolution Mining for $550m. Last week it announced the sale of a stake in its Zaldivar copper mine in Chile for about $1bn. On Wednesday, Barrick said it had received interest from would-be buyers of noncore assets in Nevada and Montana.
Barrick lowered its quarterly dividend to 2c per share from 5c. The company now expects all-in sustaining costs for gold to be $840/oz$880/oz, compared with previous guidance of $860/oz-$895/oz.
It expects to produce less gold: 6.1million to 6.4-million ounces this year, compared with a previous forecast of 6.2-million to 6.6-million.
Barrick has plunged 64% in New York in the past year and hit a 26-year low on Wednesday.