Barrick falls to new 12-month low as Q3 profit drops on lower output, higher cost

Canada’s number-one gold producer Barrick Gold (TSX: ABX; NYSE: GOLD) has reported a sharp drop in third-quarter earnings as lower production and higher costs weighed on its September-quarter financial results.

The Toronto-headquartered major reported headline earnings of US$224 million in the September quarter, compared with $419 million in the previous and corresponding quarters. Adjusted net earnings per share fell to US13¢ apiece, from US24¢ per share a year earlier, and missing average analyst forecasts expecting earnings of US15¢ per share.

Barrick said lower realized gold and copper prices, lower gold sales volume, and higher gold cost of sales per ounce impacted the quarterly performance.

“Of course, we’ve got cost pressures everywhere,” CEO Mark Bristow said in a post-earnings analyst call, adding that the worst-affected mines were Carlin and Cortez in Nevada and Veladero in Argentina.

Barrick Gold CEO Mark Bristow addresses the African Mining Indaba in Cape Town on May 9. Credit: Henry Lazenby.

Gold prices fell 8% during the third quarter as global central banks raised interest rates to battle surging inflation. The company said that Barrick’s average realized gold price fell 2.8% to US$1,722 per oz. from a year earlier.

Barrick’s quarterly production fell 9% to 988,000 oz., from a little more than 1 million oz. in the comparable quarter last year, while all-in sustaining costs (AISC) rose 22.7% to US$1,269 per oz., from US$1,034 per oz. one year earlier.

Copper output rose to 123 million lb., from 100 million lb in the September 2021 quarter.

Bristow said that Barrick remained on track to achieve its 2022 production guidance, despite some “short-term operational challenges and rising input costs.”

Barrick’s attributable production guidance for the year is 4.2 million to 4.6 million oz. gold at an AISC of US$1,040 per oz. to US$1,120 per oz., and its copper guidance is 420 million to 470 million lb. at an AISC of US$2.70 to US$3 per lb.

Larger rival Newmont (NYSE: NEM) on Tuesday reported a 56% drop in quarterly profit, mainly due to lower gold sales volumes and higher labour, energy, and raw materials costs.

Portfolio highlights

During the quarter, Barrick completed the public comment phase of Nevada Gold Mines’ (NGM) Goldrush project and continued advancing the Pueblo Viejo expansion project in the Dominican Republic, designed to extend the life of the mine beyond 2040 at an annual production rate of more than 800,000 oz. gold on a 100% basis.

Further, Barrick says the definitive agreements on Pakistan’s Reko Diq copper-gold project have been finalized. The process will now move onto its legalization and closing stage, with potential production from 2027 to 2028.

Meanwhile, Barrick continues to build its copper portfolio with solid performances from Jabal Sayid in Saudi Arabia and Lumwana in Zambia, where ongoing exploration points to the potential for a super pit that could extend the mine’s life to 2060.

At NGM, the North Leeville target has reported an initial inferred resource of 700,000 oz. on a 100% basis as of Dec. 31, 2021, and is set for further growth.

Bristow says Barrick is looking at other opportunities in Nevada and elsewhere in North America. In Africa, critical structures in the Loulo district demonstrate the potential for further discoveries. In the Democratic Republic of the Congo, Kibali’s prolific KCD structure continues to add to the growth pipeline.

Barrick shares fell 8.5% on Thursday to a new 12-month low at $17.93 per share. The stock has lost 21% over the past 12 months, having touched a high of $33.50. It has a market cap of $31.8 billion.