16 Oct

Why Barrick suspended Pascua-Lama operations

WRITTEN BY Anuradha Garg

World’s largest resources

Pascua-Lama is one of the world’s largest gold and silver resources, with more than 15 million ounces of proven and probable gold reserves and 675 million ounces of silver reserves. The mining project is located on the Argentine-Chile border. Its mine life is more than 25 years.

Why Barrick suspended Pascua-Lama operations

Temporary mine suspension

During the fourth quarter of 2013, Barrick Gold Corporation (ABX) temporarily suspended construction of its Pascua-Lama project in Chile and Argentina. Only activities required for environmental and regulatory compliance were continued. Construction was partially halted amid the concerns of local groups regarding water contamination.

Positive for financial flexibility

This suspension is positive for Barrick as far as its financial position is concerned. The capital that had been allocated for the development of this project will be used to pay down Barrick’s debt and improve its overall financial condition. According to the company, capital expenditures will be reduced by $1 billion in 2014.

We’ll discuss Barrick’s debt position in the later part of this series.

Negative for production

In contrast, the suspension is negative for the company’s production profile. At the time of suspension, Barrick had already spent $6 billion on Pascua-Lama and completed nearly 50% of the construction.

The project was expected to start production in 2016 with an average production rate of 800 to 850 thousand ounces of gold and 35 million ounces of silver in the first five years. The AISC (or all-in sustaining costs) would have ranged between $50 and $200 per ounce of gold. So obviously, the project would have had a positive impact on Barrick’s production and cash flows.

Barrick may be facing additional cash outflows over Pascua-Lama because of the terms of its silver-streaming agreement with Silver Wheaton Corp. (SLW).

According to Barrick, resumption of activities will depend on future costs, gold prices, and the regulatory and legal outlook. For now, Barrick has missed an opportunity to increase production and reduce costs per unit.

Meanwhile, Pascua-Lama isn’t an isolated case. Citing environmental concerns, the Chilean government has also ordered a stop to the development of the $3.9 billion El Morro mine, owned by Goldcorp Inc. (GG) and New Gold Inc. (NGD).

The VanEck Vectors Gold Miners ETF (GDX) invests in large and intermediate gold companies. The SPDR Gold Trust ETF (GLD) is a good way to gain exposure to the spot gold prices

Latest articles

Broadcom (AVGO) stock fell ~8.5% after markets closed yesterday following the semiconductor giant's fiscal 2019 second-quarter earnings release. It missed analysts' revenue estimate and cut its fiscal 2019 revenue guidance by $2 billion to $22.5 billion due to sluggishness in its semiconductor solutions business.

The SPDR Gold Shares ETF (GLD), which tracks physical gold prices, has underperformed the broader markets year-to-date, rising just 4.4% compared to the S&P 500’s (SPY) gain of 15.9% as of June 14. The sentiment for gold, however, has been turning around.

Safe havens such as Treasuries and gold were back in favor on June 14 as stocks fell due to rising tensions in the Middle East, concerns over growth, and the looming threat of the US-China trade war. The tech-heavy Nasdaq Composite Index fell 0.67% in the first hour of trading.

Lululemon (LULU) stock rose 2.1% on June 13 in reaction to better-than-expected first-quarter results and an upgraded outlook for fiscal 2019 overall. The company's first-quarter adjusted EPS grew 34.5% to $0.74 on revenue growth of 20.4% to $782.32 million. Analysts had expected EPS of $0.70 and revenue of $755.31 million. Here's why the outlook got an upgrade.

14 Jun

IEA Again Slashes Its Oil Demand Growth Estimate

WRITTEN BY Rabindra Samanta

As of 4:40 AM Eastern Time today, US crude oil active futures were at $51.83, ~4% below their closing level in the previous week. If US crude oil prices stay at those levels today, they'll mark their third week of decline in five weeks.

Amazon is discontinuing its Amazon Restaurants service, which has been delivering food for restaurants in parts of the United States. Amazon Restaurants launched in the United States in 2015 and entered the British market the following year. However, it met strong opposition in the British market.

172.31.16.229