Barrick Gold's shares drop on weaker Q2 results

Barrick Gold's (TSE:ABX) (NYSE:ABX) shares were falling on Thursday after the world's largest gold producer was still showing a loss in its second quarter on lower gold and copper prices as well as reduced sales volumes and weaker-than-expected production.

For the three months to June 30, Barrick, which reports in US currency, posted a net loss of $269 million, or 23 cents per share, compared to a net loss of $8.56 billion, or $8.04 per share, in the corresponding period of 2013, when markets sustained a sharp drop to gold prices and Barrick was hit by a massive write down on its shelved Pascua Lama project.

The company said the latest period includes, among other items, a $514 million write down of the Jabal Sayid copper project in Saudi Arabia, for which it recently signed a deal to form a 50-50 joint venture with Saudi Arabian Mining Co (Ma'aden) to operate the property. Under the deal, Ma'aden has agreed to pay $210 million for its stake in the venture.

On an adjusted basis, the gold miner reported a net profit of 14 cents per share, down from 66 cents per share in the year-ago period, attributed to lower gold and copper prices as well as lower year-over-year sales volumes. 

It sold 1.5 million gold ounces in the second quarter, at an average realized price of $1,289 an ounce, compared with 1.8 million ounces a year earlier, at an average price of $1,411 per ounce. It produced 1.49 million gold ounces, and 67 million pounds of copper. 

The company improved its cost profile for gold, however, lowering its all-in sustaining costs to $865 an ounce, down from $910 an ounce in the second quarter of 2013.

"Second quarter all-in sustaining costs of $865 per ounce in a lower production quarter clearly demonstrate our ongoing and relentless focus on company-wide cost management," said outgoing president and CEO, Jamie Sokalsky, who is leaving his post in September as part of a new executive management structure Barrick believes will allow it to meet the demands and challenges of the mining industry in the 21st century.

"The commitment by our mine managers to cost reduction and capital efficiency has allowed us to lower our mid-year operating and capital cost guidance for the second year in a row."

Indeed, the company reduced its 2014 guidance for its all-in sustaining costs per ounce to $900 to $940, from $920 to $980 previously, while its adjusted operating cost guidance was also lowered to between $580 and $630 an ounce, down from between $590 and $640. 

Sokalsky, who has presided over the company in one of the toughest times of its history amid a declining gold price, was appointed to the chief executive role after two decades with the company in various positions, following the sudden exit of Aaron Regent in 2012 for failing to boost Barrick's stock price. 

Since 2012, Barrick has reduced the number of mines in its portfolio from 27 to 19 and divested non-core assets for proceeds in excess of $1.3 billion, the majority of which has been used to reduce its debt load. The company said the ongoing process to further improve its portfolio and reduce costs will focus on the "delta between current and optimal performance", and will determine the quickest way to close this gap.

As part of the new management structure, Kelvin Dushnisky, currently senior executive vice president responsible for corporate and government affairs and chairman of African Barrick Gold plc, and Jim Gowans, who is executive VP and chief operating officer, have been named co-presidents. The two men will be responsible for the company's strategic priorities and operating plans going forward, Barrick said, with Sokalsky's leave effective September 15.

The company also lowered late Wednesday its capital expenditure forecast range by $200 million to $2.2 to $2.5 billion, and maintained its full year gold production outlook of 6.0 to 6.5 million ounces.

Barrick is putting a renewed focus on exploration in Nevada, home to some of its largest operations, including its massive Goldstrike and Cortez mines, and an area seen to hold upside production potential for the company.

Shares of the gold miner fell 2.3 percent to C$19.67 in Toronto on Thursday. Its stock is up 5.4 percent so far this year.

Courtesy: www.proactiveinvestors.com.au