Barrick’s Q1 earnings rise 22 percent to $1.0 billion

Barrick’s Q1 earnings rose 22% to $1.0 billion, up from $820 million a year ago. The company, which released its quarterly financial results on Wednesday, said the rise was due to better than expected production results and higher prices for copper and gold.

Barrick’s earnings per share were an even $1.00.

The total cash cost per ounce of gold is $437 while net cash cost is $308. Barrick said cash costs were ahead of budget due to higher production at its Cortez, Goldstrike and Veladero operations.

The company says production should reach nine million ounces of gold annually within the next five years when Pueblo Viejo and Pascua-Lama come on stream. The Pueblo Viejo project in Dominican Republic is 55% complete and 80% of the $3.3-$3.5 billion budget has been committed. And at the Pascua-Lama project, 45% of the $3.3-$3.6 billion pre-production budget has been committed.

Barrick highlighted some of its Q1 results in its news release:

Financial and Operating Results

• Q1 reported net earnings rose 22% to $1.0 billion ($1.00 per share) from $820 million in the prior year period. Q1 adjusted net earnings increased 32% to $1.0 billion ($1.01 per share)1 from $763 million ($0.78 per share) in Q1 2010, reflecting higher realized prices for both gold and copper and better than expected total gold cash costs. This results in an annualized return on equity of about 20%1. Operating cash flow increased 27% to $1.44 billion from $1.13 billion in the same prior year period.
• Q1 gold production of 1.96 million ounces at total cash costs of $437 per ounce and net cash costs of $308 per ounce1 was ahead of plan primarily as a result of higher production from the Cortez, Goldstrike and Veladero mines. The Company is on track to meet its 2011 guidance of 7.6-8.0 million ounces at total cash costs of $450-$480 per ounce or net cash costs of $340-$380 per ounce2, positioning Barrick as one of the lowest cost senior gold producers.
• Q1 gold cash margins also continued to benefit from higher gold prices and better than plan cash costs increasing 32% to $952 per ounce1 from $722 per ounce in Q1 2010 and net cash margins rose 32% to $1,081 per ounce1 from $821 per ounce in the prior year period. Copper cash margins increased 33% to $3.00 per pound from $2.25 per pound1 in the prior year period on higher copper prices. This significant margin expansion demonstrates the Company’s exceptional leverage to metal prices.

Corporate Development

• On April 25, Barrick announced that it had entered into a support agreement with Equinox Minerals Limited (“Equinox”) for Barrick to acquire, through an all-cash offer of C$8.15 per share, all of the issued and outstanding common shares of Equinox by way of a friendly take-over offer (the “Offer”). The acquisition of Equinox would add a high quality, long-life asset to the Company’s portfolio, and is consistent with the strategy of increasing gold and copper reserves through exploration and acquisitions. The transaction is expected to be accretive to earnings and cash flow on a per share basis.

Increasing Gold and Copper Reserves through Exploration and Selective Acquisitions

• The 2011 exploration budget has been increased by over 50% from the prior year spend to $320-$340 million3 following successful programs in 2010 that replaced gold reserves and increased measured and indicated gold resources by 24% and inferred resources by 18%.

Investing in and Developing High Return Projects

• The recently expanded Cortez mine continued to perform strongly in Q1 with higher than expected production of 366,000 ounces at total cash costs of $220 per ounce.
• The Company continued to advance construction of the Pueblo Viejo and Pascua-Lama projects during the quarter. Once at full capacity, these two mines are anticipated to contribute about 1.4 million ounces of annual production at blended average total cash costs of about $150 per ounce4 at gold and silver prices of $1,100 per ounce and $16 per ounce, respectively.

Maximizing the Existing Value of Mines and Properties

• At the 75%-owned Turquoise Ridge operation in Nevada, a scoping study was recently completed on the potential to develop a large scale open pit, which could significantly increase annual production.
• At the Zaldívar copper mine in Chile, studies are advancing on the potential to significantly increase copper production by investing in a process to treat primary sulfide ore.
• At the Lagunas Norte mine in Peru, the Company is advancing the study of a sulfide project, which could add substantial ounces to the current life of mine plan and extend the mine life.

Continually Improve Corporate Social Responsibility (CSR) Practices

• Barrick has made significant progress on its two new CSR initiatives announced at the end of 2010. The Company expects to have an external CSR Advisory Board established by the end of 2011 and also has nominated an independent Director with a CSR focus for election to the Board of Directors at the Annual General Meeting.

Michael Allan McCrae wrote this story. You can contact him at [email protected] or @michaelmccrae.

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