How Did Barrick’s South American Operations Perform in 3Q15?



Lagunas Norte

The Lagunas Norte mine is located on Barrick’s Alto Chicama property in north-central Peru. It’s an open-pit operation with an average mining rate of 111,500 tons per day.

This mine contributed to 108,000 ounces of gold to Barrick Gold’s (ABX) overall production volumes last quater. AISC was $581 per ounce, which is in line with expectations. Management has downgraded its production guidance for Lagunas Norte to 570,000 ounces (mid-point) from 625,000 at the end of 2Q15. The AISC guidance, however, has been upgraded from $625 to $575 per ounce. Still, the production in 4Q15 is expected to be higher than 3Q15 due to improved performance at the Phase five leach pad.

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Barrick Gold’s Veladero mine is located in the San Juan province of Argentina. It’s immediately south of Barrick’s Pascua-Lama property in the highly prolific Frontera District. Veladero is a conventional open-pit operation where ore is crushed and transported by overland conveyors and trucks for further processing.

Veladero mine’s 3Q15 production was 143,000 ounces at AISC of $914 per ounce. Its production came in below management’s expectations due to lower grades at Federico Phase Three pit and adverse weather events in August. AISC was also higher than planned due to lower gold sales, the timing of sustaining capital, and lower silver credits.

Restrictions on Veladero’s leaching activities were lifted after the implementation of additional monitoring and corrective actions.

Maintained guidance

Management maintained its production guidance for Veladero for 2015 at 575,000–625,000 ounces. The AISC guidance, however, narrowed to $950–$1,000 per ounce from $950–$1,035 per ounce. The full-year 2015 guidance implies higher production at lower costs for 4Q15, mainly due to better grades, lower capital expenditure, and higher silver credits.

Newmont Mining (NEM) maintained its production guidance for 2015 but reduced its cost guidance. Goldcorp (GG) maintained its guidance for 2015.

Newmont and Goldcorp form 11% of the VanEck Vectors Gold Miners ETF’s (GDX) holdings. Gold-backed ETFs like the SPDR Gold Trust ETF (GLD) and the iShares Gold Trust ETF (IAU) are another way for investors to get diversified exposure to gold prices.


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