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Barrick Gold Looks to 2H15 to Make Up First-Quarter Losses

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Production low, costs  high

Barrick Gold (ABX) gold production in 1Q15 finished 12% lower YoY (year-over-year) at 1.39 million ounce. AISC (all-in sustaining costs) of $927 per ounce were also 11% higher YoY.

The company reported adjusted net income of $62 million, or $0.05 per share. Operating cash flow was $316 million in the quarter.

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Comparable earnings

Goldcorp (GG) pre-released its operating results on April 9 and reported slightly weaker-than-expected production due to ramp-up delays at two of its mines. Newmont Mining (NEM) reported its 1Q15 results on April 23 and delivered a solid beat of the consensus estimates. Yamana Gold (AUY) reported after market close on April 28.

Investors can access the gold industry by purchasing gold-backed ETFs such as the SPDR Gold Trust (GLD) and the VanEck Vectors Gold Miners ETF (GDX). GDX invests in senior and intermediate gold stocks. Combined, ABX, GG, and NEM account for 20.2% of its holdings.

Second-half weighted production

Barrick Gold says that despite a weaker first quarter, its guidance for the full year remains at 6.2 million to 6.6 million ounces. The company believes its production will be 55% weighted to the second half of the year, in line with its plan. Costs are also expected to be 20% lower in the second half.

This should help Barrick achieve its full-year AISC guidance of $860 to $895 per ounce instead of the $927 per ounce it reported in 1Q15. The company expects that its AISC and cash costs will be highest in the second quarter, mainly due to the timing of sustaining capital.

During the earnings call, management elaborated on the reasons for improved performance during the second half of 2015:

  • Cortez mine production will benefit from a transition to higher grades
  • Pueblo Viejo mine production will increase due to higher grades
  • Goldstrike mine production will improve with the ramp-up of the TCM (thiosulfate) circuit
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