Barrick, Agnico Eagle rise to the occasion

A slew of mining companies have recently rolled out their third-quarter financials, including Toronto-based gold miners Barrick Gold (TSX: ABX; NYSE: ABX) and Agnico Eagle Mines (TSX: AEM; NYSE: AEM). Both firms published better than expected results during the quarter. Here are some of the highlights:

Barrick, which remains focused on reducing debt and generating free cash flow, recorded adjusted earnings of US$131 million, or US11¢ per share, above analysts’ estimates of US7¢ per share. Net loss totaled US$264 million, or US23¢ per share, largely due to a goodwill impairment at its 50%-held Zaldivar copper mine in Chile.

Quarterly production came in at 1.66 million oz. at all-in sustaining costs of US$771 per oz., with notable performances from its core Cortez and Goldstrike gold mines in Nevada, which contributed nearly 40% of the output. While production stayed relatively flat from the same period last year, costs fell by nearly 8%.

Building upon the second quarter’s US$26 million in free cash flow, Barrick generated US$256 million in free cash flow, excluding US$610 million from the streaming deal on its 60%-held Pueblo Viejo mine in the Dominican Republic with Royal Gold (TSX:RGL; NASDAQ:RGLD).

“We’ve really started to deliver with two consecutive quarters of positive free cash flow,” Barrick’s president Kelvin Dushnisky said on the conference call. The miner is generating free cash flow at US$1,100 per oz., and aims to improve that to reach its targeted US$2-billion cash flow improvement by the end of 2016, he noted.   

On the debt front, Barrick has repaid US$1.9 billion this year and will repay another roughly US$1 billion with the proceeds from the Zaldivar sale to Antofagasta (LON: ANTO). With a cash position of US$3.3 billion, the firm expects to meet its 2015 debt reduction target of US$3 billion.

Haywood Securities analyst Kerry Smith writes Barrick could benefit from further debt reductions, suggesting it should sell its 63.9% interest in Acacia Mining (LON: ACA) — “a position that doesn’t deliver cash to the balance sheet.” The company’s total debt sits at US$11.2 billion, with less than US$250 million due before 2018.

Barrick has tightened its 2015 guidance to 6.1 to 6.3 million oz. at all-in sustaining costs of US$830 to US$870 per oz. Its full-year copper guidance is 480 million to 520 million lb. at slightly reduced C1 cash cost of US$1.60 to US$1.85 per lb. The quarterly dividend remains at US2¢ per share.

Smith maintains a target price of $11 and a buy rating on the stock.

Agnico swung into a profit with record quarterly output and low costs driven by its Abitibi assets, CEO Sean Boyd said on a conference call.

The miner produced 441,124 oz. gold, up 26% from the year ago, largely due to higher throughput and grades at the LaRonde, Goldex and 50%-held Canadian Malartic operations. Including the Lapa mine, all four assets contributed 64% of the ounces.

The Meadowbank mine in Nunavut, however, was the largest gold producer, churning out 99,452 oz.

“Despite the noisy financials, Q3 operating performance was solid,” CIBC analyst David Haughton writes. He maintains a US$39 target and sector performer rating on the stock.

All-in sustaining costs on a by-product basis were US$759 per oz., down US$300 from the same period last year, on the back of higher production, lower operating costs and capital expenditures.

This resulted in adjusted earnings of US$39.2 million, or US18¢ per share, beating analysts’ average estimates of US1¢ per share. Net income was US$1.3 million, compared a net loss of US$15.1 million, a year ago.

 “So, on the back of a very strong quarter we have updated our guidance for 2015,” Boyd said. It now expects to produce 1.65 million oz. gold, up from 1.6 million oz., at reduced all-in sustaining costs of US$840 to US$860 per oz., down US$30 per oz.

Cash flow per share rang in at US$1, ahead of the consensus of US69¢. The beat resulted from a one-time tax credit of US$15.3 million and strong operational results, Desjardins analyst Michael Parkin writes.

Cash, equivalents and short-term investments climbed US$44.1 million over the quarter to end at US$208.1 million, while net debt fell by US$20 million to a little over US$1 billion. Agnico will pay a quarterly dividend of US8¢ per share.

“Agnico is our preferred large-cap name and we have a positive outlook on the company’s 4Q,” Parkin notes. He expects “positive catalysts” over the next year from the company’s Amaruq, Kittila parallel zone and El Barqueno projects. Parkin has a $45 price target and a buy on the stock.