Barrick Gold Earnings Shine

May 2, 2012 at 16:02

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Barrick Gold, the world’s biggest gold miner by output, overcame a fall in first-quarter production to deliver improved revenues and profits on the back of the high selling price commanded by the precious metal.

The Canada-based miner maintained full-year guidance on gold production of 7.3m-7.8m ounces at a cash cost of $520-$560 an ounce. Last year, it produced 7.68m ounces as cash costs were pegged at $460 a unit.

A jump in the average selling price of gold to $1,691 an ounce, compared with $1,389 in the same quarter last year, saw revenues at Barrick Gold jump from $3.09bn to $3.6bn in the three months to March 31. Production fell from 1.96m ounces to 1.88m in the period.
Net earnings, hit by a $93m loss on the sale of a stake in Highland Gold, a Russian miner backed by billionaire Roman Abramovich, edged up from $1bn to $1.03bn.

Aaron Regent, president and chief executive, warned gold production in the second quarter would be lower than the first. However, output is expected to increase in the second half of the year as its Pueblo Viejo mine in the Dominican Republic comes on stream and production recovers at its Goldstrike site in Nevada and Lagunas Norte in Peru.

The company has raised its annual exploration budget from $350m to up to $490m on the back of booming gold prices and a 25 per cent rise in annual net earnings to $4.48bn on revenues of $14.3bn. Barrick increased its quarterly dividend from 15 cents to 20 cents payable from earnings per share of $1.03 ($1).

Barrick also announced the retirement of Peter Kinver, its chief operating officer, who has been replaced by Igor Gonzales, previously president of Barrick’s South American region. Mr Kinver will remain as adviser during the completion of construction at its Pueblo Viejo project and also Pascua-Lama, a gold and silver mine costing $5bn on the borders of Chile and Argentina that is expected to begin production next year.

Despite Barrick Gold’s record annual earnings announced in February, sentiment towards the stock has been affected by worries that despite the historic high price levels commanded by the commodity, margins are being eroded by higher production costs.

Cash costs rose from $437 to $545 an ounce in the quarter, with total production costs jumping from $595 to $737.

In a note on Wednesday, Citigroup said that the jump in cash costs had been slightly lower than expected, helping to offset the impact of a fall in gold and copper sales which had come in marginally below its forecast for the quarter.