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Barrick Gold’s Production Growth Profile Is Declining

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What affected ABX’s production?

Production growth is a crucial variable for miners. Along with realized metal prices, it drives a company’s top line. Barrick Gold (ABX) produced ~1.07 million ounces of gold in the second quarter, which reflects a decline of ~25.0% YoY (year-over-year).

Part of Barrick Gold’s lower production was expected due to the following factors:

  • lower grades and recovery at the Barrick Nevada oxide mill
  • scheduled maintenance shutdowns at the Barrick Nevada and Pueblo Viejo autoclaves

In addition, ABX sold a 50.0% stake in the Veladero mine on June 30, 2017, which also impacted its YoY production. An earthquake damaged the power infrastructure in Papua New Guinea in late February, which impacted production at Porgera and led to a change to the mine’s full-year guidance.

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Future production

Barrick Gold (ABX) has maintained its production guidance of 4.5 million–5.0 million ounces of gold in 2018. This implies a decline of ~11.0% compared to its actual production in 2017, which was measured at the midpoint. This guidance report marks the company’s eighth straight annual decline in production.

Barrick Gold expects its production to improve steadily over the second half of the year, driven by stronger performance at Barrick Nevada and Pueblo Viejo. The company expects its third-quarter production to reach 1.2 million tons, which implies a sequential improvement of 12.0% and a decline of 2.8% YoY.

Barrick mentioned in its second-quarter earnings call that growth projects in Nevada and Dominican Republic are progressing well. However, until these projects come into commercial production, Barrick’s production growth profile is in a state of decline.

Barrick Gold’s peers

Barrick Gold’s peers (GDX)(GDXJ) are also focusing on maximizing profitable production by optimizing their asset portfolios. Agnico Eagle Mines (AEM) and Goldcorp (GG) have stable and increasing production profiles, respectively. AngloGold Ashanti (AU) and Coeur Mining (CDE), on the other hand, could have some issues replacing their reserves over the long term.

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

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