Barrick cuts gold output forecast in eighth straight decline

By Bloomberg News / January 01, 1970 / business.financialpost.com / Article Link

Barrick Gold Corp., the bullion producer that once towered over rivals, continues to shrink.

The Toronto-based miner is predicting its eighth straight decline in annual production as it takes less gold out of the ground at its main mines. The company expects to produce 300,000 fewer ounces in 2018 than it had previously forecast. It now projects total production will be 4.5 million to 5 million ounces this year, compared with a previous forecast of 4.8 million to 5.3 million ounces. Total gold output in 2017 was 5.32 million ounces.

Barrick also raised its forecast for all-in-sustaining costs to a range of US$765 to US$815 an ounce this year, compared with previous guidance of US$710 to US$770.

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“Higher cost guidance for 2018 primarily reflects lower anticipated gold production from Barrick Nevada, Pueblo Viejo and Veladero, increased processing of higher-cost inventory, and higher costs at Acacia,” the company said Wednesday in a statement.

Barrick’s Nevada operations will experience lower grades in 2018, although they are benefiting from operational efficiencies and improved throughput, the company said. Pueblo Viejo in the Dominican Republic will be affected by planned maintenance. Previous 2018 guidance didn’t take into account the sale last year of half of its Veladero mine in Argentina to China’s Shandong Gold Mining Co.

Impairment Charges

The statement was released after the close of regular trading in New York. Barrick’s shares were little changed at 7:46 a.m. on Thursday, before the start of regular trading. The stock has declined 5.7 per cent this year.

The company booked US$908 million in net impairment charges in 2017, partly related to a protracted dispute between the Tanzanian government and Acacia Mining Plc, of which Barrick is a majority shareholder. Shares of Acacia plunged earlier this week after the London-based company said production will fall sharply this year. It cancelled its dividend and interim Chief Executive Peter Geleta said it hasn’t received any new details since Barrick announced a preliminary agreement four months ago.

“Barrick has continued to engage with independent directors of Acacia throughout this process, and members of Acacia management are supporting ongoing discussions,” the Toronto-based company said in Wednesday’s statement.

Pascua-Lama

The almost US$1-billion impairment also included a charge related to Barrick’s Pascua-Lama gold-and-silver deposit. Earlier this month, the company said it will take a US$429-million pretax charge at the project on the border of Chile and Argentina as it reclassifies the deposit.

Barrick has been studying the possibility of building an underground mine to ease environmental concerns in Chile, but was surprised by a January decision by the country’s environmental authority to order the shutdown of all infrastructure on the Chilean side. The company is appealing, but has reclassified the deposit in the meantime.

The company’s total proven and probably gold reserves dropped to 64.5 million ounces, from 86 million ounces at the end of 2016, primarily because of the Pascua-Lama reclassification.

Partly because of the impairments, Barrick posted a net loss in the fourth quarter.

Catching Up

Competitor Newmont Mining Corp., which has already leapt ahead of Barrick in terms of market value, said in December it expects to produce 4.9 million to 5.4 million ounces of gold this year, meaning there is now only a narrow margin by which Barrick can maintain its title of world’s largest miner. Newmont is scheduled to release its fourth-quarter and full-year earnings and production guidance Feb. 22.

Barrick also cut its 2019 gold production guidance, saying it will produce 4.2 million to 4.6 million ounces a year from 2019 to 2022. Its previous 2019 forecast had been 4.6 million to 5.1 million.

The company said it’s advancing a pipeline of projects “with the potential to contribute more than 1 million ounces of annual production to Barrick, at costs well below our current portfolio average,” but did not give a timeline.

Bloomberg.com

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