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Barrick's (ABX) Veladero Mine Operations Halted, View Intact

Barrick Gold CorporationABX recently said that the government of San Juan province, Argentina, has temporarily restricted operations at the Veladero mine. The provincial authorities have restricted the addition of cyanide to the mine's heap leach facility pending the verification that remedial works have been completed.

On Mar 28, the monitoring system at Veladero discovered a rupture in the pipelines carrying gold-bearing solution on the leach pad. Barrick promptly notified San Juan provincial authorities that all the solution was contained within the operating site and did not reach any watercourse or diversion channel.

Barrick assured that the incident did not damage the environment, community or the health of employees. The affected area in the heap leach area is now remediated for the safety of the environment and employees.

The production of gold at Veladero mine increased about 11.3% year-over-year to 177,000 ounces in the fourth quarter of 2016 at an average all-in sustaining cost (AISC) of $905 per ounce. The overall cost of sales increased year-over-year to $892 per ounce, compared with $785 per ounce reported in the year-ago quarter.

Veladero accounted for almost 10% of Barrick's total gold production in 2016. The company does not anticipate any material impact on Veladero's 2017 production guidance due to the temporary suspension. Barrick estimates Veladero to produce 770,000 to 830,000 ounces of gold in 2017.

Barrick Gold Corporation Price and Consensus

Barrick Gold Corporation Price and Consensus | Barrick Gold Corporation Quote

Barrick reported net profit of $425 million or 36 cents per share in the fourth quarter of 2016. In the year-ago quarter, the company had incurred a net loss of $2.6 billion or $2.25 per share. Barring one-time expenses, the adjusted earnings of the company were 22 cents per share, which marginally beat the Zacks Consensus Estimate of 21 cents.

Revenues also improved 4% year-over-year to $2,319 million in the fourth quarter, beating the Zacks Consensus Estimate of $2,204 million. Initiatives such as reduction in overhead expenses, headcount reduction and portfolio optimization improved operational efficiency.

Barrick outperformed the Zacks categorized Mining-Gold industry in the last three months, partly driven by its cost and debt reduction actions. While the company's shares gained 11.1% over this period, the industry suffered a loss of 1.2%.

However, Barrick is exposed to a volatile gold pricing environment. The proposed tax-cuts and fiscal stimulus by President, Donald Trump, are likely to spur economic activity and trigger inflation, prompting U.S. Federal Reserve to raise interest rates further this year. The prospects of more rate hikes this year are likely to remain a major source of headwind for gold in the near term.

Barrick currently carries a Zacks Rank #3 (Hold).

Stocks to Consider

Better-ranked companies in the basic materials space include ArcelorMittal MT , Lundin Mining Corp. LUNMF and Kronos Worldwide Inc KRO , all sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here .

ArcelorMittal has an expected long-term growth of 10.9%.

Lundin has an expected long-term growth of 34.1%.

Kronos has an expected long-term growth of 5%.

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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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