Lower production and higher costs at the Meikle mine in Nevada prevented
The major reported a profit of US$59 million (or US11 per share) for the 3-month period. Included in these results were a one-time, US$21-million tax recovery and US$7 million in after-tax, non-hedge derivative gains. Operating cash flow was more than halved to US$66 million, from US$148 million in the corresponding quarter of 2002, owing to higher taxes and adjustments to working capital.
Revenue between the two second quarters climbed by US$1 million, to US$491 million, on slightly lower gold sales of 1.4 million oz. The lower sales were offset by an US$11-per-oz. (or 3%) increase in the average realized gold price to US$352 per oz.
The quarter’s average spot price was US$347 per oz.
For the first half of 2003, net income was US$88 million (16 per share) on revenue of US$950 million, compared with US$105 million (20 per share) on revenue of US$968 million in the initial six months of 2002. Operating cash flow fell US$71 million, to $197 million, between the two periods.
During the recent quarter, Barrick produced 1.5 million oz. gold at a total cash cost of US$185 per oz., up from the 1.3 million oz. at US$178 per oz. a year earlier. Increased production from the Betze-Post, Pierina and Kalgoorlie mines more than offset lower production from the Meikle and Bulyanhulu mines. (Betze-Post and Meikle constitute the Goldstrike property in Nevada; Pierina is in north-central Peru; Kalgoorlie is in Western Australia, and Bulyanhulu is in Tanzania.) The increased costs are owing to higher energy and royalty costs and other gold-linked costs.
“Overall, we had a solid quarter, operationally driven by significant contributions from our large, open-pit operations,” says Barrick COO John Carrington. “The lower production and higher costs from Meikle were due to a re-line of the backfill raise, which was originally scheduled for the third quarter.”
The re-lining is now complete, and production and costs are expected to improve in the second half.
Improvements at Bulyanhulu are expected to take longer. Production was off 9%, reflecting lower tonnage and grades. A newly installed management team at the mine will look to reduce mining dilution, increase underground equipment availability, and lower overall costs.
Under the plan, Bulyanhulu’s mining rate has been slashed by 34% to 2,100 tons per day. Full-year production estimates have been lowered by 105,000 oz. to 310,000 oz., and cash costs are expected to be US$65 per oz. higher at US$240 per oz.
Overall this year, Barrick expects to produce 5.4 million to 5.5 million oz. at US$190-195 apiece.
The major trimmed its hedge book by 1.2 million, to 16.1 million oz., during the quarter. The book’s unrealized mark-to-market value at quarter’s end was minus US$615 million, based on a spot gold price of US$346 per oz.
Barrick’s cash position at the end of June was nearly US$1 billion. The company had 540 million shares outstanding after buying back around 3.5 million shares at an average of US$17.95 per share.
Be the first to comment on "Barrick sees operating cash flow shrink"