Barrick Gets More Ambitious on Costs With Debt Goal in Sight

  • Earnings excluding one-time items were 11 cents a share
  • Company said it’s on track to achieve $2 billion debt target

Barrick Gold Corp. is accelerating its cost-cutting efforts as the biggest bullion producer strives to lower debt as asset sales curb output.

Reporting first-quarter earnings that beat analysts’ estimates, Barrick reduced its 2016 all-in sustaining cost guidance to a range of $760 and $810 an ounce, down from $775 to $825. The Toronto-based miner is on track to meet an annual debt-reduction goal, it said Tuesday in a statement.

Barrick has been reining in costs and selling assets as part of a strategy to lower debt as gold prices fell for a third year in 2015. While costs are coming down, so too is production. First-quarter output was 1.28 million ounces, compared with 1.39 million a year earlier and the 1.35 million average of nine estimates. Total revenue declined 14 percent to $1.93 billion, less than the $1.99 billion average estimate.

“We measure our production in quality, not quantity,” the company said in the statement. “While we produce fewer ounces than we have in recent years, we are generating significantly more free cash flow per share.”

Spending Lowered

Barrick had average all-in sustaining costs of $706 an ounce of gold in the first quarter, far lower than the $837 that analysts were expecting and is only $6 higher than the company’s 2019 target. It also lowered its full-year guidance for capital expenditures to $1.35 billion to $1.55 billion. Previously it had been a range of $1.35 billion to $1.65 billion.

In February, the miner pledged to reduce total debt by at least $2 billion this year after $3.1 billion in cuts last year brought the total down to $10 billion. On Tuesday, it said it has cut total debt by $842 million so far this year.

Investors have rewarded the company for its efforts, lifting the stock in Toronto by 72 percent in the first quarter. In January, Barrick regained its status as Canada’s biggest gold miner by market value by surpassing Vancouver-based Goldcorp Inc.

The results were released before the start of regular trading in New York, where Barrick fell 1.5 percent to $15.87 at 10:00 a.m.

“We’re seeing gold weaken this morning, we’ve seen a weakening trend over the past couple of sessions,” Andrew Kaip, an analyst at Bank of Montreal, said Tuesday by phone. “Seasonality is weighing on peoples’ minds, I wouldn’t be surprised if we see profit-taking.”

Net Loss

First-quarter earnings excluding one-time items were 11 cents a share, Barrick said in the statement, compared with the 10-cent average of 21 estimates compiled by Bloomberg. It reported a net loss of $83 million on one-time foreign currency losses, compared with net income of $57 million a year earlier.

Gold futures fell 2.7 percent from a year earlier to average about $1,185 an ounce in the first quarter. The price climbed 17 percent within the period, the biggest quarterly increase since 1986.

(The company scheduled a conference call on Tuesday at 4:30 p.m. New York time. North American callers can dial +1-877-648-7976. International callers dial +1-617-826-1698. The pass code is 75138180)

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