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Barrick (ABX) Beats Q4 Earnings, Plans to Cut Debt - Analyst Blog

Barrick Gold 's ( ABX ) adjusted earnings (excluding one-time items) for the fourth quarter of 2014 plummeted to 15 cents per share from 37 cents per share in the year-ago quarter but beat the Zacks Consensus Estimate of 12 cents. Lower pricing for both gold and copper along with the impact of 257,000 fewer ounces sold in the quarter led to the decline in earnings.

On a reported basis, loss for the fourth quarter was $2.85 billion or $2.45 per share compared with a loss of $2.83 million or $2.61 per share in the prior-year quarter. The results include $138 million in unrealized losses on non-hedge derivative instruments and $2.8 billion in after-tax impairment charges.

For 2014, adjusted earnings came in at $793 million or 68 cents per share compared with $2,569 million or $2.51 per share in 2013. It beat the Zacks Consensus Estimate of 66 cents. On a reported basis, net loss was $2,907 million or $2.50 per share in 2014 compared with a loss of $10,366 million or $10.14 per share in 2013.

Revenues fell around 14.7% year over year to $2,510 million in the reported quarter and missed the Zacks Consensus Estimate of $2,534 million. Average realized price of gold decreased 5.3% year over year to $1,204 per ounce. All-in costs declined 16.9% to $1,094 per ounce, while all-in sustaining costs (AISC) rose roughly 2.9% to $925 per ounce in the reported quarter.

For 2014, revenues fell 18.3% year over year to $10,239 million, missing the Zacks Consensus Estimate of $10,474 million.

Gold production fell to 1.5 million ounces from 1.7 million ounces a year ago. Copper production declined to 134 million pounds from 139 million pounds in the prior-year quarter.

Regional Results

Gold

The Goldstrike mine, in the North American region, produced 187,000 ounces of gold in the quarter, down 22.7% year over year, at an average all-in sustaining cost of $877 per ounce. The fourth quarter reflected lower expected grades and a shutdown of the autoclave facility to complete the transition to thiosulfate processing.

The Cortez mine produced 185,000 ounces, down 24.2% year over year. Production at Pueblo Viejo increased 12.7% to 177,000 ounces. Production at Lagunas Norte mine decreased 9.7% to 176,000 ounces due to higher grade material and a faster leach cycle from stacking ore on a new area of the leach pad. Production at Veladero increased 38.7% year over year to 197,000 ounces, led by positive grade reconciliations and a reduction in capitalized stripping costs.

The Turquoise Ridge produced 39,000 ounces in the quarter, down 26.4% year over year. The Porgera mine produced 126,000 ounces, down 3.8% year over year.

Copper

Copper production in the third quarter was 134 million pounds, down 3.6% year over year. C1 cash cost was $1.78 per pound in the quarter, down from $1.81 per pound in the year-ago quarter.

Financial Position

Cash and cash equivalents were $2,699 million as of Dec 31, 2014, up roughly 12.3% from $2,404 million as of Dec 31, 2013. Long-term debt was roughly $12.7 billion, down from $12.9 billion a year ago.

Update on Pascua-Lama Mine

During fourth-quarter 2013, Barrick temporarily suspended construction activities at the Pascua-Lama mine, barring the requisite activities for environmental protection and regulatory compliance. The ramp-down was completed on schedule and budget and the mine is now under care and maintenance. The decision to re-start will depend on certain factors like improved project economics, and legal and other regulatory requirements.

Pascua-Lama's Executive Project Director, and his team are assessing the mine's economics going forward. The company must permit and build a new water management system in Chile. It will submit the application for the new system by mid-2015, with permitting expected to take two years.

Guidance

For 2015, Barrick forecasts AISC to be between $860 and $895 per ounce. The company expects gold production to be in the range of 6.2-6.6 million ounces, with increased contributions from Goldstrike, Lagunas Norte and Acacia. This is, however, expected to be offset by lower production from Veladero and the sale of Kanowna, Plutonic and Marigold in 2014.

Barrick projects copper production in the range of 310-340 million pounds at C1 cash costs of $1.75-$2.00 per pound, which mainly reflects the planned suspension of the Lumwana mine in Zambia, partly offset by higher expected production from Zaldivar.

The company's five cornerstone mines are expected to contribute 60% of overall production at AISC of $725-$775 per ounce in 2015.

Total capital expenditures in 2015 are anticipated to be in the range of $1.90-$2.20 billion compared with $2.18 billion in 2014. The lower expenditure forecast mainly reflects reduced expansion capital due to the commissioning of the Goldstrike thiosulfate project in the fourth quarter of 2014 and reduced sustaining and development capital at Lumwana following the decision to suspend operations.

The company expects higher depreciation expense of $240-$260 per ounce in 2015 due to rise in depreciation costs at Lagunas Norte, Goldstrike, Cortez and Pueblo Viejo.

Moroever, Barrick intends to cut its net debt by at least $3 billion by the end of 2015 and has a number of options to achieve this target. These include maximizing free cash flow by implementing a leaner, decentralized operating model that reflects its original culture with more efficient capital spending, lower general and administrative expenses, and profitable growth; non-core asset sales starting with a process to sell the Porgera Joint Venture and Cowal mine; and forming appropriate joint ventures and strategic partnerships.

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

Other mining companies with favorable Zacks Rank include Golden Star Resources Ltd. ( GSS ), Lake Shore Gold Corp. ( LSG ) and Newmont Mining Corp. ( NEM ). All of these hold 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 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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