Barrick to Form Jabal Sayid Joint Venture with Ma'aden - Analyst Blog


Barrick Gold Corporation ( ABX ) announced that it has agreed to form a joint venture with a Saudi Arabian Mining Co. (Ma'aden) to operate the Jabal Sayid copper mine in Saudi Arabia.

Both Barrick and Ma'aden will own 50% stake in the joint venture. Ma'aden, which is controlled by the state of Saudi, has agreed to buy 50% interest in the project for $210 million (expected to close in the fourth quarter of 2014). Ma'aden's experience in the Saudi Arabian mining sector and Barrick's technical and operating expertise will facilitate the Jabal Sayid project to move ahead.

According to Barrick, the tie-up with Maaden will move the project along and get the mine into production in late 2015. Once fully operational, the project is expected to produce about 100-130 million pounds of copper in concentrate per year during its first full five years of operation. The mine is anticipated to operate for up to 15 years on the basis of 1.4 billion pounds of copper in proven and probable reserves as of Dec 31, 2013.

Further, the mine is expected to generate considerable cash flows and is expected to be a low cost one which will produce high quality copper. It is also anticipated to be beneficial to the local community by providing training, employment and by helping in economic development.

Barrick released its first-quarter 2014 results in May 2014. The company's adjusted earnings (excluding one-time items) for the quarter plummeted to 20 cents per share from 92 cents in the year-ago quarter but managed to beat the Zacks Consensus Estimate by a penny. Lower metal prices and a decline in gold sales volumes led to the decline in earnings.

Revenues fell around 22.6% year over year to $2,632 million in the reported quarter and missed the Zacks Consensus Estimate of $2,637 million. Average realized price of gold decreased 21.1% year over year to $1,285 per ounce. All-in costs declined 31.5% to $933 per ounce while all-in sustaining costs fell roughly 10.7% to $833 per ounce in the reported quarter.

Gold production fell to 1.59 million ounces in the quarter from 1.8 million ounces a year ago. Copper production declined to 104 million pounds from 127 million pounds in the prior-year quarter.

Currently, Barrick carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the gold mining industry include Trimmins Gold Corp. ( TGD ), Pretium Resources Inc. ( PVG ) and Agnico Eagle Mines Limited ( AEM ). While Trimmins Gold and Pretium Resources sport a Zacks Rank #1 (Strong Buy), Agnico Eagle  holds a Zacks Rank #2 (Buy).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Business , Stocks

Referenced Stocks: PVG , ABX , AEM , TGD

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