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.
In 2Q16, ABX’s gold production came in at ~1.3 million ounces, a decline of ~7.3% year-over-year. The decline was mainly due to asset sales in 2015 and 1Q16. The company’s production run rate in 1H16 puts in on track to achieve its annual guidance of 5.0 million–5.5 million ounces.
While the company’s management maintained its 2016 gold production guidance of 5.0 million–5.5 million ounces, it increased its guidance for copper production from 370 million–410 million pounds to 380 million–430 million pounds. The higher copper production expectation is on the back of higher contributions from Jabal Sayid project, which reached commercial production in July 2016.
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 further discuss Barrick Gold’s cost guidance.