For miners, production growth is an important variable. Along with realized metal prices, production growth drives a company’s top line. Gold miners aim to increase their production levels at minimal additional costs through productivity and operational enhancements. In this part of the series, we’ll see how Barrick Gold (ABX) is driving production growth.
In 4Q16, ABX’s gold production was ~1.5 million ounces, a fall of 11.0% year-over-year. The fall was mainly due to asset sales in 2015 and 1Q16.
The company’s 4Q16 revenue was $2.3 billion compared to $2.2 billion in 4Q15. That’s impressive since it comes on the back of an 11.0% fall in production over the same period. It was helped by higher gold prices, which rose ~10.0% in 4Q16 compared to 4Q15.
Barrick’s gold production guidance for 2017 is 5.6 million–5.9 million ounces compared to an actual production of 5.5 million ounces in 2016. That implies a year-over-year growth of 4.2%.
Guidances for 2018 and 2019 are 4.8 million–5.3 million ounces and 4.6 million–5.1 million ounces, respectively. Barrick mentioned in its press release that subject to potential divestments, it intends to maintain annual volumes of at least 4.5 million ounces through 2021.
Barrick Gold’s peers (GDX) (GDXJ) are also trying to raise their production levels. Agnico-Eagle Mines (AEM), Goldcorp (GG), and Eldorado Gold (EGO) have stable production profiles. Kinross Gold (KGC) could have problems replacing its reserves in the long term.
There are various ways to invest in gold, including physically purchasing gold, investing directly in gold miners, and investing in gold ETFs. If you’re looking for exposure to gold, you can invest in the SPDR Gold Shares (GLD).
In the next part of this series, we’ll take a look at Barrick Gold’s cost guidance.