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Barrick Gold’s Costs Are Expected to Rise in 2019

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Barrick Gold’s AISC

Barrick Gold (GOLD) reported an AISC (all-in sustaining costs) of $788 per ounce and a cost of sales of $980 per ounce in the fourth quarter. The company’s AISC was 4.2% higher YoY (year-over-year) due to lower ounces sold. Barrick Gold’s AISC for 2018 was $806 per ounce, which was within the guidance range of $785–$815 per ounce. However, the cost was $56 per ounce higher than in 2017. Lower grades and recoveries were responsible for the company’s higher costs.

Barrick Gold is competitive in terms of the AISC compared to its peers. The company is the lowest-cost senior gold producer. Barrick Gold costs less than major peers (GDX) including Newmont Mining (NEM), Agnico Eagle Mines (AEM), and Kinross Gold (KGC).

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Cost guidance

Barrick Gold has guided for an AISC of $870–$920 per ounce for 2019. At the midpoint, the guidance implies a rise of 11% for 2019. The major reasons for the higher expected costs in 2019 are:

  • cessation of comparatively higher-grade and low-cost Cortez Hills open pit in the first half of 2019
  • higher sustaining capital expenditure

Exploration expenses

Barrick Gold is also guiding for $160 million–$170 million of exploration and evaluation expenditures in 2019. About 80% of the expenditure will be allocated to the Americas.

Due to these efforts, the company’s corporate administrative expenses were $212 million—compared to its original guidance of $275 million for 2018.

Due to Barrick Gold’s merger with Randgold Resources (GOLD), its costs per unit are expected to decline more.

Next, we’ll discuss Barrick Gold’s financial leverage.

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