Solid production and lower costs result in strong 3Q14 earnings
Barrick Gold Corporation (ABX) reported strong third-quarter results with solid production and lower-than-expected costs. The company reported gold production of 1.65 million ounces, compared to consensus of 1.53 million ounces. It reported all-in sustaining costs (or AISC) of $834 per ounce, compared to $914 per ounce for the same period last year. This demonstrates its cost-reduction efforts. Lower costs led the company to guide for a second reduction in the AISC guidance this year. It also reported adjusted earnings of $0.19 versus street estimate of $0.18.
Lower prices weigh on results
The company reported adjusted net earnings of $222 million, or $0.19 per share, compared to $577 million, or $0.58 per share, in the third quarter of last year. The decrease is due primarily to lower copper and gold sales volumes and lower realized prices.
Core mines account for 60% of production
Barrick’s five core mines—Cortez, Goldstrike, Lagunas Norte, Veladero, and Pueblo Viejo—produced ~1.0 million ounces, or 60%, of 3Q14 production at AISC of $696 per ounce. Management expects these mines to contribute to about 60% of production in 2014 at average AISC of $730 to $780 per ounce. This will help maintain Barrick’s position in the first quartile of the industry cost curve. We’ll discuss the results by individual mines in the subsequent parts of this series.
Barrick maintains 2014 production guidance
The company raised its production guidance for copper by 20 to 30 pounds, to 440 to 460 pounds, due to the earlier-than-expected restart of Lumwana mine. Barrick maintained the production guidance of 6.0 to 6.5 million ounces of gold. However, it lowered its AISC guidance for gold to $880 to $920 per ounce, down from $900 to $940 per ounce.
While Newmont Mining’s (NEM) recent results also beat expectations on account of lower costs, results for Goldcorp (GG) were below consensus due to a miss on production expectations. Gold-backed exchange-traded funds (or ETFs) such as Standard and Poors depositary receipt (or SPDR) Gold Shares (GLD) and ETFs that invest in the above stocks, such as VanEck Vectors Gold Miners Index (GDX), are also good ways to access gold.
Before we discuss Barrick’s results in detail, we’ll look at the company’s assets and a brief overview of the company.