Barrick Gold Corp., which failed in an attempt to merge with its biggest rival this month, reported earnings that topped analysts’ estimates as it continues to reduce costs following a plunge in the price of the metal.
The world’s largest gold producer said first-quarter profit excluding impairment charges and other one-time items was 20 cents a share, topping the 19-cent average of 19 estimates compiled by Bloomberg.
Sales fell 23 percent to $2.63 billion, the Toronto-based company said today in a statement, after gold production and prices declined. Revenue was less than the $2.75 billion average estimate and copper output fell more than expected. Barrick cut its 2014 copper production forecast after the partial collapse of a conveyor belt at a Zambian mine.
Since his appointment two years ago, Chief Executive Officer Jamie Sokalsky has overhauled the company’s operations and structure to improve efficiencies and focus on returns rather than volume. Barrick has sold more than $1 billion of assets in the past year and reworked mine plans to focus on the most profitable ore as cost-cutting efforts accelerated following gold’s 28 percent drop last year.
“Barrick is a considerably different company today than it was a year ago,” Sokalsky said in today’s statement. “Our efforts to reduce costs are delivering tangible results.”
The shares dropped 1.1 percent to C$19.13 at the close in Toronto. Gold futures settled little changed at $1,295.90 an ounce in New York.
Barrick’s so-called all-in sustaining cost of gold production fell 11 percent to $833 an ounce in the quarter.
Better-than-expected gold results were offset by weaker copper production and margins, Brian Yu, an analyst at Citigroup Inc. in San Francisco, said in a note.
Barrick and Newmont Mining Corp. identified annual savings of $1 billion as part of a proposed merger in which Barrick was to offer Newmont shareholders a takeover premium of 13 percent, two people with knowledge of the matter said April 19. Barrick and Greenwood Village, Colorado-based Newmont said April 28 that the talks were terminated, with both miners exchanging a series of statements accusing each other of scuppering the talks.
While the Newmont deal made sense, it probably wasn’t “make or break” for Barrick, said Jorge Beristain, a Greenwich, Connecticut-based analyst at Deutsche Bank AG.
“Most people view them as being pretty far along on their cost-cutting and restructuring plans,” Beristain said in a phone interview before the results.
Barrick said today it’s working on scenario plans for a range of market conditions, including downsizing, closing or expanding certain operations.
The company also commented on options to expand its Nevada operations. The state, where both Barrick and Newmont produce more than a third of their gold, would have represented the majority of the cost savings from the merger, the people said April 19.
Barrick’s first-quarter gold production was 1.59 million ounces of gold, compared with 1.8 million ounces a year earlier and the 1.58 million-ounce average of four estimates. The company maintained its 2014 forecast of 6 million to 6.5 million ounces.
Copper production in the quarter fell 18 percent to 104 million pounds. While the accident at the Lumwana mine in Zambia occurred after the end of the quarter, output there during the period was affected by unusually heavy rain.
The company reduced its full-year copper output forecast to 410 million to 440 million pounds, down from $470 million to 500 million pounds previously.
Barrick held its annual shareholders’ meeting in Toronto today, at which founder Peter Munk retired as chairman. He was replaced by John Thornton, a former Goldman Sachs Group Inc. president who had been Barrick’s co-chairman.
(Barrick scheduled a conference call to discuss the results at 4:30 p.m. New York time, accessible in North America at 1-888-789-9572 and for other callers at 1-416-695-7806. The passcode is 6663097.)