Barrick Profit Tops Estimates as Cost Cuts Counter Gold Rout

  • World's largest gold producer posts net loss with impairment
  • Canadian company will use Zaldivar proceeds to pay down debt

Barrick Gold Corp., the world’s largest producer of the metal, reported third-quarter earnings that beat analysts’ estimates as lower costs and higher production helped to mitigate the impact of weak metals prices.

Earnings excluding one-time items were 11 cents a share, Toronto-based Barrick said Wednesday in a statement. That topped the 7-cent average of 21 estimates compiled by Bloomberg. Sales declined 12 percent to $2.32 billion, beating the $2.31 billion average estimate.

Barrick posted a net loss of $264 million, or 23 cents a share, including a $455 million impairment charge mostly related to reclassifying its Zaldivar mine as “held for sale.” That compared to net income of $125 million, or 11 cents, a year earlier.

Barrick has pledged to reduce debt by $3 billion by selling assets and cutting costs after gold prices fell and its shares plunged. In July, the company sold a half stake in its Zaldivar copper mine in Chile to Antofagasta Plc for $1.01 billion.  

Free Cash

Barrick said Wednesday it will use the proceeds from the Zaldivar sale to pay down debt, bringing total repayments to about $2.9 billion. The remaining $100 million would be paid out of free cash flow, it said, at which point its total debt will have been reduced by 23 percent to $10.1 billion.

The company also said it expects to announce the outcome of its process to sell a package of non-core U.S. assets in the fourth quarter.

In addition to $2.46 billion in asset sales, joint ventures and partnerships, the company achieved $282 million in positive free cash flow in the last two quarters, the company said.

Barrick is rated at the lowest investment grade by Standard & Poor’s and Moody’s Investors Service, although both have stable outlooks on the miner. The company’s total debt peaked at $15.8 billion in the second quarter of 2013, according to data compiled by Bloomberg.

Beating Estimates

Barrick produced 1.66 million ounces of gold in the third quarter, compared with 1.65 million a year earlier and the 1.59 million average of 11 estimates compiled by Bloomberg.

The company’s so-called all-in sustaining costs, a measure to compare miners’ performance, were $771 an ounce in the third quarter, better than the $866 average of six estimates, and compared with $834 a year earlier.

The company narrowed its forecast range for 2015 production to between 6.1 million and 6.3 million ounces, from previous guidance of 6.1 million to 6.4 million. It also lowered its cost forecast to $830 to $870 an ounce, from a previous range $840 to $880.

Gold futures averaged $1,123.77 an ounce in the third quarter in New York, 12 percent less than a year earlier.

(The company scheduled a conference call on Thursday at 9:30 a.m. New York time. North American callers can dial 1-866-696-5910. International callers dial 416-340-2217. The pass code is 4479041.)

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