Barrick takes massive US$2.8 billion charge on mines, lowers gold reserves

Barrick takes massive US$2.8 billion charge on mines, lowers gold reservesCanada’s Barrick Gold (TSX, NYSE:ABX)logged another set of poor results Thursday, marked by a US$2.82 billion impairment charge on mines, a sharp drop in reserves, and a forecast of much lower gold production for the year.

The world's largest gold miner slashed its gold reserves 26%, saying they fell at the end of 2013 to 104.1 million ounces from 140.2 million ounces a year earlier. Barrick explained it calculated its reserves for the year using a gold price assumption of $1,100 an ounce, well below the $1,500 an ounce applied in 2012.

The Toronto-based company also announced capital-spending cuts of about 50%.

"2013 was a tough year for Barrick by any measure," Jamie Sokalsky, president and chief executive, said in a statement.

Barrick takes massive US$2.8 billion charge on mines, lowers gold reservesNo kidding. After stripping all the impairments on its halted Pascua-Lama project and other troubled operations, adjusted earnings were $410 million, or 37¢ a share, lowered than the average analyst estimate of 41¢. Last year the company’s adjusted earnings were $1.16 per share.

And there is more: Net loss for the entire year climbed up to a monster $10.37 billion caused by the numerous writedowns, especially on Pascua-Lama.

Expect less

While Barrick produced 7.2 million ounces of gold last year, it said it expects that number to drop between 6-6.5 million ounces in 2014, significantly lower than the 9 million ounces the miner once aimed to produce.

Analysts have predicted gold miners will be posting lower production. So far, fellow Canadian gold Kinross Gold Corp (NYSE:KGC) said its fourth quarter production was down almost 11% from the same period last year.

Image by Fer Gregory