Barrick Keeps Eye on Debt With New $2 Billion Reduction Target

  • Miner says goal in `medium term' is debt below $5 billion
  • Company posts fourth-quarter earnings that exceed estimates

Barrick Gold Corp. intends to keep debt in its crosshairs with a plan to cut at least $2 billion this year as the world’s largest producer of the metal seeks to shore up its balance sheet following three annual gold-price declines.

The miner reduced total debt by $3.1 billion last year to $10 billion through measures that included asset sales and cost cuts. In 2016, it may sell additional non-core assets and create new joint ventures and partnerships to help meet its new debt-reduction target, the Toronto-based company said Wednesday in a statement.

“In the medium term, we aim to reduce our debt to below $5 billion,” the company said in the statement. “Philosophically, our goal is to have no debt at all.”

Investors will likely be encouraged by the debt-reduction goal, as well as by progress the company has made reducing its costs, said Michael Siperco, an analyst with Macquarie Capital Markets, said Wednesday by phone from Toronto. “Two billion seems to be in the right range. The question now is going to be how they do it. It will be interesting to see if equity is a part of that, especially after that run-up the stock has had so far year-to-date.”

59 Percent

Barrick is the third-best-performing stock on the Standard & Poor’s/TSX Composite Index this year, with a 59 percent gain. Last month it regained its status as Canada’s biggest gold miner by market value by surpassing Vancouver-based Goldcorp Inc.

The miner has been aggressively working to cut debt and streamline its operations around roughly half a dozen mines in the Americas. President Kelvin Dushnisky said last month he intends to structure operations to be sustainable “at virtually any foreseeable gold price.”

Barrick said Wednesday it narrowed its fourth-quarter net loss to $2.62 billion, or $2.25 a share, from $2.85 billion, or $2.45, a year earlier. Earnings excluding impairment charges of $2.6 billion and other one-time items were 8 cents a share, topping the 6-cent average of 22 estimates compiled by Bloomberg.

Sales Beat

Sales decreased 11 percent to $2.24 billion, beating the $2.17 billion average estimate.

Gold futures fell 8 percent from a year earlier to average $1,104.58 an ounce in the fourth quarter. The price has risen 14 percent in 2016 following three annual losses.

Barrick expects to produce 5 million to 5.5 million ounces of gold in 2016, compared with 6.12 million last year. Based on its current asset mix, and subject to potential divestments, it expects to maintain annual production of at least 4.5 million ounces through 2020.

‘Quality, Not Quantity’

“Our production will be measured by quality, not quantity,” Barrick said. “While we are producing fewer ounces today than we have in recent years, we are generating significantly more cash.” The company posted positive free cash flow in 2015 -- $471 million for the full year -- for the first time in four years.

The company said it will continue to cut expenses and expects all-in-sustaining costs of $775 to $825 an ounce this year. The costs fell to $831 in 2015 from $864 a year earlier, Barrick said.

Earlier Wednesday, Newmont Mining Corp., the world’s second-biggest gold producer, reported fourth-quarter earnings that missed estimates as gold prices fell.

The company reported a net loss of 50 cents a share, compared with net income of 3 cents a year earlier, Greenwood Village, Colorado-based Newmont said in a statement. Earnings excluding one-time items were 4 cents a share, less than the 13-cent average of 19 estimates compiled by Bloomberg.

Delayed Exports

Newmont’s revenue and earnings were impacted by lower shipments of metal from Indonesia after an export permit for copper from its Batu Hijau mine was delayed, the company said in its statement. Sales fell 10 percent to $1.8 billion from a year earlier.

(Newmont scheduled a conference call to discuss the results on Thursday at 9:30 a.m. New York time. U.S. and Canadian callers can dial +1-800-857-6428, and international callers +1-517-623-4916. The passcode is Newmont. Barrick scheduled a conference call on Thursday at 11 a.m. North American callers can dial +1-877-648-7976. International callers dial +1-617-826-1698. The pass code is 22861420)

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