Barrick's 1Q Earnings Beat, Sales Miss - Analyst Blog

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Barrick Gold Corporation 's ( ABX ) adjusted earnings (excluding one-time items) fell to 92 cents per share in the first quarter of 2013 from $1.10 per share in the year-ago quarter, but were ahead of the Zacks Consensus Estimate of 86 cents.

On a reported basis, net earnings came in at $847 million or 85 cents per share, a roughly 18% fall from earnings of $1.04 billion or $1.04 per share recorded in the year-ago quarter. Lower gold and copper prices and reduced sales volumes weighed on the bottom line.

Revenues fell 5.7% year over year to $3,437 million in the reported quarter and missed the Zacks Consensus Estimate of $3,649 million. Average realized price of gold decreased 3.7% year over year to $1,629 per ounce. Total cash costs increased 3.9% to $561 per ounce while all in sustaining costs crept up 1.1% to $919 per ounce in the reported quarter.

Gold production declined to 1.80 million ounces in the quarter from 1.88 million ounces a year ago. Copper production, on the other hand, increased to 127 million pounds from 117 million pounds in the prior year. All-in sustaining and total cash costs benefited from strong performances at Goldstrike, Cortez, and Veladero.

Regional Results

North America: Barrick's North American unit produced 0.87 million ounces of gold in the quarter compared with 0.89 million ounces in the prior-year quarter.  All-in sustaining and total cash costs stood at $770 per ounce and $487 per ounce, respectively, in the reported quarter.

Production at Cortez and Goldstrike was higher, reflecting higher-than-expected grades and recoveries. The Pueblo Viejo mine, which achieved commercial production in January, produced 96,000 ounces of gold.

South America: Production from South America in the quarter was 0.37 million ounces compared with 0.45 million ounces in the year-ago quarter. All-in sustaining and total cash costs were $638 per ounce and $405 per ounce, respectively.

Australia Pacific: The region produced 0.45 million ounces in the quarter, compared with 0.43 million ounces in the year-ago quarter. All-in sustaining and total cash costs were $1,096 per ounce and $785 per ounce, respectively.

African Barrick Gold plc. (ABG): Attributable production from African Barrick Gold in the quarter came in at 0.11 million ounces, almost at par with the year-ago quarter. All-in sustaining and total cash costs were $1,561 per ounce and $931 per ounce, respectively, in the quarter.

Financial Position

Cash and cash equivalents stood at $2,342 million as of Mar 31, 2013, compared with $2,665 million as of Mar 31, 2012. Net debt was roughly $14.1 billion as of Mar 31, 2013, versus $12.1 billion as of Mar 31, 2012. First quarter operating cash flow was $1.09 billion compared with $1.37 billion in the first quarter of 2012.

Project Updates

Barrick said that the Pascua-Lama mine, which is the highest gold mine in the world, will produce an average of 800,000-850,000 ounces of gold and 35 million ounces of silver in its first full five years of operation at all-in sustaining and total cash costs of $50-$200 per ounce and negative $150 to $0 per ounce, respectively.

Barrick, earlier this month, announced that it is halting construction work at the Pascua-Lama mine in Chile after a Chilean court issued a preliminary injunction citing environmental concerns. Barrick's Pascua-Lama mine overlaps the border of Chile and Argentina and the court ruled in favor of indigenous communities who complained that the project threatens their water supply. Barrick is working to address the environmental and other regulatory requirements on the Chilean side of the project.

Outlook

Barrick reiterated its 2013 gold production guidance of 7-7.4 million ounces at total cash costs of $610-$660 per ounce. The company reduced its full year all-in sustaining cost guidance to $950-$1,050 per ounce from the previous guidance of $1,000-$1,100 per ounce.

Barrick will curtail its capital spending to the range of $5.2 billion and $5.7 billion from $5.7 billion to $6.3 billion expected earlier. Barrick is also reducing exploration spending to a range of $300 million to $340 million, which is $100 million lower than earlier expectations. The company is taking these measures to ensure that production results in returns for investors.

For 2013, production for the North American region is expected in the range of 3.55-3.70 million ounces at all-in sustaining and total cash costs of $820-$870 per ounce and $495-$545 per ounce, respectively. The company expects ramp up of Pueblo Viejo to full production in the second half.

Production from South America is expected to be in the range of 1.25-1.35 million ounces in 2013. The all-in sustaining and total cash costs are expected to be in the range of $875-$925 per ounce and $550-$600 per ounce, respectively.

Australia Pacific is expected to produce 1.70-1.85 million ounces this year for at all-in sustaining and total cash costs of $1,200-$1,300 per ounce and $880-$950 per ounce, respectively.

Barrick's share of production at African Barrick Gold is expected to be in the range of 0.40-0.45 million ounces at all-in sustaining and total cash costs of $1,550-$1,600 per ounce and $925-$975 per ounce, respectively, in 2013.

We believe that higher costs may affect Barrick's results moving ahead. Moreover, challenging economic conditions remain a concern for the company along with the limited supply of gold as new deposits.

Another copper and gold company Freeport-McMoRan Copper & Gold Inc ( FCX ) recently released its first quarter results. The company's adjusted earnings (excluding one-time charges) of 73 cents per share for the quarter beat the Zacks Consensus Estimate by a penny but trailed the year ago earnings of 96 cents.

Other gold mining companies, Newmont Mining Corporation ( NEM ) and Goldcorp Inc. ( GG ) are slated to release their results on Apr 29 and May 2, respectively.

Currently, Barrick retains a Zacks Rank #5 (Strong Sell).



BARRICK GOLD CP (ABX): Free Stock Analysis Report

FREEPT MC COP-B (FCX): Free Stock Analysis Report

GOLDCORP INC (GG): Free Stock Analysis Report

NEWMONT MINING (NEM): Free Stock Analysis Report

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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 , Earnings , Stocks

Referenced Stocks: ABG , ABX , FCX , GG , NEM

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