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Barrick Gold Corp
Symbol ABX
Shares Issued 1,167,158,762
Close 2018-10-24 C$ 17.03
Market Cap C$ 19,876,713,717
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Barrick loses $412-million (U.S.) in Q3

2018-10-24 17:47 ET - News Release

An anonymous director reports

BARRICK REPORTS THIRD QUARTER 2018 RESULTS

Barrick Gold Corp. has released third quarter results for the three-month period ended Sept. 30, 2018. Gold production increased to 1.15 million ounces in the third quarter, while cost of sales on a per-ounce basis was approximately 4 per cent lower than the second quarter of 2018. All-in sustaining costs and cash costs were down by roughly 8 per cent and 3 per cent, respectively, over the same period. Third quarter operating cash flow of $706-million and free cash flow of $319-million were significantly higher than the second quarter of 2018, driven by higher production and lower costs. Copper production and costs also improved in the third quarter, as expected. The company remains on track to meet its full-year gold and copper production guidance. All amounts expressed are in U.S. dollars unless otherwise indicated.

During the third quarter, Barrick and Randgold Resources Ltd. announced a transformational all-share merger that will create an industry-leading gold company powered by a common vision of long-term-value creation. The combined company will have the largest portfolio of Tier 1 gold assets in the industry, including five of the world's top-10 Tier 1 gold mines and two potential Tier 1 mines under development. With John Thornton as executive chairman and Mark Bristow as president and chief executive officer, the combined company will be led by a proven management team of owners with a successful record in both complex and established jurisdictions. Superior operating metrics, including the highest adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) margin and the lowest total cash cost position among senior gold peers, will support sustainable investment in growth and shareholder returns.

Since the proposed merger was announced, Barrick and Randgold shares have risen by 25 per cent and 28 per cent, respectively, creating $4.8-billion in combined market value. Over the same period, the senior gold peers have risen by an average of approximately 3 per cent. A special meeting of Barrick shareholders will be held on Nov. 5 to approve the issuance of Barrick common shares in connection with the merger, as well as to approve the continuance of Barrick to the Province of British Columbia. Leading independent proxy advisory firms Institutional Shareholder Services and Glass Lewis have recommended that shareholders of both companies vote in favour of the proposed merger. For more information about the merger, and details on how to vote, please visit the Barrick website.

Financial highlights and balance sheet

The company reported a net loss of $412-million (35 cents per share) in the third quarter and adjusted net earnings of $89-million (eight cents per share). The net loss primarily reflects a $405-million impairment charge at the Lagunas Norte mine in Peru. Lower adjusted net earnings compared with the prior-year period primarily reflect lower realized gold and copper prices, increased direct mining costs primarily due to higher fuel consumption and prices, and planned maintenance activities at Pueblo Viejo during the third quarter. These declines were partially offset by insurance proceeds associated with the KCGM pit wall incident, a reduction in general and administrative expenses, and lower depreciation expense.

Significant adjusting items (pretax and non-controlling interest effects) in the third quarter of 2018 include:

  • $431-million in net impairment charges primarily related to the asset impairment of Lagunas Norte;
  • $62-million in foreign currency translation losses primarily related to the significant weakening of the Argentine peso;
  • $68-million in other expense adjustments, mainly relating to debt extinguishment costs of $29-million and the settlement of a supplier contract dispute of $27-million inherited as part of the Equinox acquisition in 2011.

Refer to page 51 of Barrick's third quarter management's discussion and analysis for a full list of reconciling items between net earnings and adjusted net earnings for the current- and prior-year periods.

Operating cash flow increased to $706-million, compared with $532-million in the third quarter of 2017, primarily due to a favourable change in working capital and a decrease in interest expense as a result of debt reduction activities. This was partially offset by lower realized gold and copper prices. Stronger operating cash flow drove free cash flow of $319-million, a 42-per-cent increase compared with the prior-year period.

Over the course of 2018, the company has continued to advance the implementation of its decentralized operating model, reallocating roles to operations where appropriate and eliminating those no longer required (including 235 overhead roles eliminated in 2018 to date). As a result of decentralization efforts, the company now expects corporate administration expenses to be approximately $235-million in 2018, including $36-million in one-time severance expenses, compared with the company's original guidance of roughly $275-million. The indicative annualized savings as a result of this decentralization are approximately $100-million.

As previously reported, during the month of July, Barrick completed a make-whole repurchase of the outstanding principal of approximately $629-million on the company's 4.40 per cent notes due in 2021. The company's total debt is now $5.7-billion, and debt less cash (net debt) is $4.0-billion. Since 2013, Barrick has reduced its total debt by $10-billion. The company has less than $100-million in debt due before 2020, and more than 85 per cent of the company's outstanding debt matures after 2032. Further debt reduction will depend on cash flows and will be evaluated against alternative uses of cash.

Operating highlights

Barrick produced 1.15 million ounces of gold in the third quarter of 2018, at a cost of sales of $850 per ounce, all-in sustaining costs of $785 per ounce and cash costs of $587 per ounce. As anticipated, gold production was higher compared with the second quarter of 2018, primarily driven by improved throughput and grade at Barrick Nevada. The company anticipates gold production to be approximately 1.25 million ounces in the fourth quarter, with full-year production at the lower end of the company's 2018 guidance range of 4.5 million to 5.0 million ounces of gold.

On a per-ounce basis, cost of sales applicable to gold was 4 per cent higher than the prior-year period, primarily due to the impact of fewer ounces sold, higher direct mining costs attributable to increased fuel consumption and prices, and planned maintenance activities at Pueblo Viejo. A 2-per-cent increase in all-in sustaining costs compared with the third quarter of 2017 reflects higher direct mining costs, partially offset by lower mine site sustaining capital expenditures.

The company produced 106 million pounds of copper in the third quarter, at a cost of sales of $2.18 per pound, all-in sustaining costs of $2.71 per pound and C1 cash costs of $1.94 per pound. Improved copper production compared with the second quarter of 2018 was primarily driven by higher production at Lumwana, reflecting a steady improvement in grade and recovery, and improved crusher reliability.

On a per-pound basis, cost of sales applicable to copper increased compared with the prior-year period, primarily due to the impact of lower sales volume on unit production costs, higher direct mining costs at Lumwana and Jabal Sayid, and lower capitalized stripping at Zaldivar. Higher copper all-in sustaining costs compared with the prior-year period primarily reflect higher direct mining costs and higher mine site sustaining capital expenditures.

Please see page 36 of Barrick's third quarter management's discussion and analysis for individual operating segment performance details.

Technical information

The scientific and technical information contained in this press release has been reviewed and approved by: Geoffrey Locke, PEng, manager, metallurgy, of Barrick; Rick Sims, registered member SME, vice-president, reserves and resources, of Barrick; and Robert Krcmarov, FAusIMM, executive vice-president, exploration and growth, of Barrick -- each a qualified person as defined in National Instrument 43-101 (Standards of Disclosure for Mineral Projects).

                                   KEY STATISTICS
                                 (in U.S. dollars)
                                                   Three months ended       Nine months ended
                                                         Sept. 30,               Sept. 30,
                                                     2018        2017        2018        2017
Financial results (millions)
Revenues                                           $1,837      $1,993      $5,339      $6,146
Cost of sales                                       1,315       1,270       3,643       3,889
Net (loss) earnings (1)                              (412)        (11)       (348)      1,752
Adjusted net earnings (2)                              89         200         340         623
Adjusted EBITDA (2)                                   749         930       2,201       2,963
Total capital expenditures -- sustaining (3)          233         248         699         830
Total project capital expenditures (3)                126          53         332         192
Net cash provided by operating activities             706         532       1,354       1,475
Free cash flow (2)                                    319         225         328         429
Per share data (dollars)
Net (loss) earnings (basic and diluted)             (0.35)      (0.01)      (0.30)       1.50
Adjusted net earnings (basic) (2)                    0.08        0.17        0.29        0.52

Operating results
Gold production (thousands of ounces) (4)           1,149       1,243       3,265       3,984
Gold sold (thousands of ounces) (4)                 1,204       1,227       3,312       3,930
Per-ounce data
Average spot gold price                             1,213       1,278       1,282       1,251
Average realized gold price (2, 4)                  1,216       1,274       1,284       1,250
Cost of sales (Barrick's share) (4, 5)                850         820         859         791
All-in sustaining costs (2, 4)                        785         772         813         750
Cash costs (2, 4)                                     587         546         588         520
Copper production (millions of pounds) (6)            106         115         274         314
Copper sold (millions of pounds) (6)                  114         107         273         298
Per-pound data
Average spot copper price                            2.77        2.88        3.01        2.70
Average realized copper price (2, 6)                 2.76        3.05        2.92        2.81
Cost of sales (Barrick's share) (6, 7)               2.18        1.67        2.22        1.72
C1 cash costs (2, 6)                                 1.94        1.56        1.97        1.64
All-in sustaining costs (2, 6)                       2.71        2.24        2.76        2.27

(1) Net (loss) earnings represent net (loss) earnings attributable to the equity 
holders of the company.
(2) Adjusted net earnings, adjusted EBITDA (earnings before interest, taxes, 
depreciation and amortization), free cash flow, adjusted net earnings per share, 
realized gold price, all-in sustaining costs, cash costs, C1 cash costs and 
realized copper price are non-generally accepted accounting principle financial 
performance measures with no standardized meaning under international financial 
reporting standards and therefore may not be comparable with similar measures 
presented by other issuers. For further information and a detailed reconciliation 
of each non-GAAP measure to the most directly comparable IFRS measure, please see 
pages 49 to 62 of the company's third quarter management's discussion and 
analysis.
(3) Amounts presented on a consolidated accrued basis. Project capital 
expenditures are included in the company's calculation of all-in costs, but not 
included in the company's calculation of all-in sustaining costs.
(4) Includes Acacia on a 63.9-per-cent basis, Pueblo Viejo on a 60-per-cent 
basis, South Arturo on a 60-per-cent basis and Veladero on a 50-per-cent basis 
from July 1, 2017, onward, which reflects the company's equity share of 
production and sales.
(5) Cost of sales per ounce (Barrick's share) is calculated as cost of sales -- 
gold on an attributable basis, excluding Pierina divided by gold ounces sold.
(6) Amounts reflect production and sales from Jabal Sayid and Zaldivar on a 
50-per-cent basis, which reflects the company's equity share of production, and 
Lumwana.
(7) Cost of sales per pound (Barrick's share) is calculated as cost of sales -- 
copper plus the company's equity share of cost of sales attributable to 
Zaldivar and Jabal Sayid divided by copper pounds sold.

We seek Safe Harbor.

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