Barrick Gold in 2015: Growth Prospects Could Be Significant



Plans for the future

Barrick Gold (ABX) touched upon its near-term project pipeline during its 1Q15 earnings call. It has completed a pre-feasibility study at Turquoise Ridge and expects to complete three more pre-feasibility studies on Nevada-based projects in 2015. Most of these are for higher-grade underground mines, which should help the company generate stronger margins along with volume growth.


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New discovery at Alturas

The company says that it has discovered a potentially attractive gold deposit at Alturas in Chile. It’s located in one of company’s core areas, the Andean region of Chile. The reserve is primarily oxide, similar to Barrick’s Veladero mine. It could, however, have significantly higher grades. The company says that given its significant potential, it’s moving quickly on the discovery and expects to report an initial resource estimate with its 2015 full-year results.

Lumwana mine restart drives copper guidance upgrade

Barrick Gold previously reported that due to an increase from 6% to 20% in the tax regime of Zambia, its Lumwana copper mine might have to be put on care and maintenance. The mining economics there had become uneconomical. But it turns out that the Zambian government has proposed amendments that will replace the 20% rate with a rate of 9%. At this revised rate, Barrick Gold says it can generate positive free cash flow at current copper prices.

As a result of this development, management has increased its 2015 guidance for copper production to between 480 million and 520 million pounds, up from between 310 million and 340 million pounds.

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Prospecting in Northern Chile

Barrick is also partnering with QPX (Quantum Pacific Exploration), a company that uses innovative strategies to increase the probability of copper discovery. With the help of QPX, Barrick wants to explore for copper deposits in the highly prospective areas of northern Chile. Barrick could see added production as a result of any copper discoveries that QPX makes.

Other mining projects

Other miners have projects in the pipeline too:

  • Newmont Mining (NEM) – Waihi Correnso, the Turf Vent Shaft, and Merian Penasquito
  • Goldcorp (GG) – Éléonore and Porcupine expansion
  • Kinross Gold (KGC) – La Coipa
  • Agnico Eagle Mines (AEM) – Meliadine

These projects should be positive for the respective production profiles of these companies.

KGC and AEM respectively form 2.9% and 4.8% of the VanEck Vectors Gold Miners ETF (GDX). The SPDR Gold Trust ETF (GLD) tracks spot gold prices.


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