Is Barrick Gold on Target to Hit Its 2016 Production Guidance?



Production growth

For miners, production growth is an important variable. Along with realized metal prices, production growth drives a company’s top line. Gold miners are trying to increase their production levels at minimal additional costs through productivity and operational enhancements. Barrick Gold’s (ABX) gold production has been slowly declining since 2011 due to asset sales and maturing mines. In this article, we’ll see how Barrick Gold is driving production growth going forward.

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ABX’s gold production came in at 1.3 million ounces in 1Q16, a decline of 8% year-over-year. The decline was mainly due to asset sales in 2015 and 1Q16. The company’s annualized production for 1Q16 puts it at the lower end of its guidance range for 2016. Management attributed the decline to “small instances of weather.” Going forward, however, the company should be able to catch up on production.

Production guidance

Management maintained its 2016 production guidance of 5.0 million–5.5 million ounces. Its expected production for 2018 is slightly lower at 4.6 million–5.1 million ounces. Based on its current asset mix, the company expects to maintain annual production of at least 4.5 million ounces of gold through 2020.

Barrick Gold’s peers

Barrick Gold’s peers (GDX) (GDXJ) are also trying to increase their production levels. While Agnico Eagle Mines (AEM), Goldcorp (GG), and Eldorado Gold (EGO) have stable production profiles, Kinross Gold (KGC) could have problems replacing its reserves in the long term.

There are various ways to invest in gold, including physically purchasing gold, investing directly in gold miners, and investing in gold ETFs. Those looking for exposure to gold can invest in the SPDR Gold Shares ETF (GLD).

In the next part of this series, we’ll look at Barrick Gold’s financial leverage.


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