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3 Things to Look For When Barrick Gold Reports Q3 Earnings

Gold

Gold

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In fact, the second quarter of 2016 marked the fifth consecutive quarter in which Barrick has reported free cash flow. And with the price of gold hovering around $1,300 per ounce in the third quarter, expect Barrick to improve its streak to six consecutive quarters.

Management attributes its free cash flow growth, in large part, to its ability to consistently lower capital expenditures; however, on the Q2 conference call, it indicated that capex spending will rise in the second half of the year. And this won't be the only factor compromising free cash flow growth. Barrick's CFO, Catherine Raw, stated on the call that the third quarter is expected to be the highest in terms of all-in sustaining costs for the year.

Elaboration on digitization

Lastly, investors should expect management to address Barrick's recent partnership with Cisco (NASDAQ: CSCO) to -- as stated in the press release -- "drive Barrick's digital reinvention." Working together at the Cortez mine in Nevada, the two companies will deploy sensing technology throughout the mine to produce real-time operational data.

The digitization of the Cortez mine is expected to improve not only environmental and safety performance but also the management of energy, water, and emissions. Consistent with management's long-term vision for the company, the digital reinvention of Barrick is meant "to help Barrick deliver on its vision of growing free cash flow per share over the long term."

During the Q2 earnings presentation, management provided improved full-year guidance for Cortez, estimating the mine's AISC to fall between $520 and $550 per ounce. It will be interesting to see if management further improves upon the guidance in light of the partnership with Cisco and when it expects to deploy this technology at any of its other mines.

The takeaway

With its eyes on reducing debt and growing free cash flow, Barrick's management is clearly working to secure the company's long-term success, and I'd be surprised if the company's third-quarter earnings don't reflect the fruits of this labor. Though there may be a slowdown in the rate at which the company is growing free cash flow, I expect the company to remain on track to achieve its goal of reducing debt by $2 billion for 2016.

One additional thing I'll be looking for is an update on the temporary closure of the company's Veladero mine. Though it had initially suggested that the closure wouldn't have a material impact on the company's earnings, management has not recently reaffirmed this position, so it'll be interesting to see if management provides further commentary.

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Scott Levine has no position in any stocks mentioned. The Motley Fool recommends Cisco Systems. Try any of our Foolish newsletter services free for 30 days . We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy .

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


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

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