Barrick Gold’s ABX third-quarter 2015 adjusted earnings per share (excluding one-time items) of 11 cents beat the Zacks Consensus Estimate of 6 cents. Earnings, however, declined from the year-ago quarter figure of 19 cents due to lower realized gold and copper prices.
On a reported basis, loss for the third quarter was of $264 million or 23 cents per share as against earnings of $125 million or 11 cents per share in the prior-year quarter.
Barrick met cost and production targets for the third quarter and also generated healthy free cash flow.
Revenues fell around 11.8% year over year to $2,315 million in the reported quarter and missed the Zacks Consensus Estimate of $2,353 million.
verage realized price of gold decreased 12.5% year over year to $1,125 per ounce. All-in costs decreased 16.4% to $815 per ounce, and all-in sustaining costs (AISC) fell roughly 7.6% to $771 per ounce in the reported quarter.
Gold production rose to 1.66 million ounces from 1.65 million ounces a year ago. Copper production rose to 140 million pounds from 131 million pounds in the prior-year quarter.
Barrick Gold Corp. (ABX) - Earnings Surprise | FindTheCompany
Gold
The Goldstrike mine, in the North American region, produced 328,000 ounces of gold in the quarter, up 37.2% year over year, at an average all-in sustaining cost of $558 per ounce. Barrick’s thiosulfate (TCM) circuit attained commercial production in the third quarter at a capital cost of $610 million. The company expects to complete the ramp up of the TCM circuit in the first half of 2016.
The Cortez mine produced 321,000 ounces of gold in the quarter, up 17.6% year over year, at an average all-in sustaining cost of $501 per ounce. The third quarter gained from higher open pit tonnage and increased underground productivity through the implementation of short interval controls, an initiative identified as part of Barrick’s Value Realization review for the mine. Increased production, reduced operating costs and lower sustaining capital led to improved all-in sustaining costs.
Production at Pueblo Viejo rose 2.4% to 172,000 ounces. Production was modestly below plan due to decreased gold grades and recoveries from a higher proportion of carbonaceous ore.
Production at Lagunas Norte mine declined 31.2% to 108,000 ounces. Production at Veladero decreased 19.7% year over year to 143,000 ounces. The Turquoise Ridge produced 55,000 ounces in the quarter, up 1.9% year over year. The Porgera mine produced 134,000 ounces, down 2.9% year over year.
Copper
Copper production in the third quarter was 140 million pounds, up 6.9% year over year. C1 cash cost was $1.53 per pound in the quarter, down from $1.82 per pound in the year-ago quarter.
Financial Position
Cash and cash equivalents were $3,317 million as of Sep 30, 2015, up roughly 22.6% from $2,705 million as of Sep 30, 2014. Long-term debt was roughly $11.3 billion, down from around $12.9 billion a year ago.
Free cash flow increased to $866 million, or $256 million barring the impact of $610 million in proceeds from the Pueblo Viejo streaming transaction. This compares with free cash flow of $26 million in the second quarter of 2015. The company’s focus on greater capital discipline, operational efficiencies and strong cost management led to the generation of solid free cash flow.
Debt Reduction
The company reduced its total debt by 15% from $13.1 billion to $11.2 billion, till the end of third-quarter 2015, thereby considerably reducing its near-term debt repayment obligations. Currently, the company has less than $250 million in debt due before 2018 and roughly $5 billion of its $11.2 billion outstanding debt will mature after 2032.
Building on $1.9 billion in repayments already completed in 2015, the company plans to use about $1 billion in proceeds from the sale of 50% of Zaldívar to cut debt. The sale is expected to complete in the fourth quarter. This would bring total debt repayments to about $2.9 billion.
Barrick has announced or completed asset sales, joint ventures and partnership worth $24.6 billion. The company also remains committed to achieve its debt reduction target of $3 billion for 2015. Barrick plans to use the free cash flow to reach this target.
Guidance
The company trimmed its gold production guidance for 2015 from the range of 6.1-6.4 million ounces to 6.1-6.3 million ounces, reflecting lower expected gold production from Acacia Mining plc.
All-in sustaining cost guidance for the year has been cut to $830-$870 per ounce from the earlier guidance range of $840-$880 per ounce. Average all-in sustaining costs for its five core mines are expected to be $700-$725 per ounce in 2015, down from $725-$775 per ounce. These mines are expected to represent around 75% of free cash flow from operations and 60-65% of production in 2015.
For the fourth quarter, all-in sustaining costs are now anticipated to be at par with the third quarter. Production is expected to be modestly higher, mainly due to the impact of higher sustaining capital expenditures, offset by increased production at Cortez, Pueblo Viejo, Lagunas Norte and Veladero.
The company anticipates significantly higher depreciation in the fourth quarter, mainly associated with a drawdown in inventory stockpiles at Cortez, Lagunas Norte and Goldstrike and higher sales volumes at Pueblo Viejo.
The company reiterated its copper production guidance of 480-520 million pounds for 2015. Full-year C1 cash costs are, however, expected to be $1.60-$1.85 per pound, down from $1.75-$2.00 per pound, due to currency impact and improved costs at Lumwana.
Currently, Barrick carries a Zacks Rank #2 (Buy).
Some better-ranked mining companies are NovaGold Resources Inc. NG, Asanko Gold Inc. AKG and Primero Mining Corp. PPP. While NovaGold carries a Zacks Rank #1 (Strong Buy), Asanko Gold and Primero Mining hold a Zacks Rank #2 (Buy).
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Click to get this free report BARRICK GOLD CP (ABX): Free Stock Analysis Report PRIMERO MINING (PPP): Free Stock Analysis Report NOVAGOLD RSRCS (NG): Free Stock Analysis Report ASANKO GOLD INC (AKG): Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research