Barrick posts Q1 loss

Barrick Gold (TSX: ABX; NYSE: ABX) swung into the red in the first quarter on the back of declining production due to asset sales in the second half of 2015 and early 2016, combined with lower realized gold prices.

The world’s largest gold producer posted an US$83-million quarterly net loss, down from a US$57-million profit in the same period last year.

Removing one-time items, adjusted earnings were US$127 million, or US11¢ per share, up from US5¢ per share a year ago.

The firm generated US$181 million of free cash flow in the first quarter. While this is an improvement from the negative amount generated in the comparable period, it is down from the US$378 million made in the fourth quarter of 2015.

Haywood Securities analyst Kerry Smith writes that “Barrick continues to make strides, as it reported its fourth consecutive quarter of generating free cash flow.”

On a conference call, Barrick’s departing chief financial officer Shaun Usmar said the company achieved a free cash flow break even of just over US$1,000 per oz. in the first quarter, and is on track to lower that to US$1,000 per oz. for the year. (Catherine Raw replaced Usmar that day.)

The company also lowered its year-over-year cash costs 24%, and all-in sustaining costs 12%, despite lower production.

Quarterly production came in at 1.28 million oz. at all-in sustaining costs of US$706 per oz., down from 1.39 million oz. at all-in sustaining costs of US$927 per oz. the year earlier. Cash costs were US$553 per oz. in the first quarter.

Barrick says these savings came from lower sustaining capital spending and lower operating costs. It also benefitted from lower fuel prices and foreign exchange gains, after the devaluation of the Argentine peso.

Copper output was 111 million lb. at all-in sustaining costs of US$1.97 per lb.

Quarterly sales included 1.31 million oz. gold at an average realized price of US$1,181 per oz. and 103 million lb. copper at US$2.18 per lb.

Compared to the previous year, sales were lower and the average realized price slipped 3% for gold and 14.5% for copper. Revenue dropped 14% to US$1.9 billion.

Barrick has reiterated its 2016 production guidance of 5 million to 5.5 million oz. gold, but now expects all-in sustaining costs of US$760 to US$810 per oz., down US$15 on each end. It aims to bring all-in sustaining costs to below US$700 per oz. by 2019.

The company has also trimmed the top end of its annual capital guidance by US$100 million to US$1.6 billion.

Barrick went on a selling spree last year to help repay its debt, and lowered its total debt in the first quarter by US$842 million to US$9.1 billion. It remains on track to reach its 2016 debt reduction target of US$2 billion. It exited the quarter with US$2.3 billion in cash.