Barrick boosts earnings, gold production in 1990

The average gold price may have fallen last year by 12% from 1988 levels, but Torontobased producer American Barrick Resources (TSE) just keeps on churning out record profits. Thanks largely to the continuing expansion of its Goldstrike mine in Nevada and a shrewd hedging program, Barrick reported net earnings of US$58.2 million or 45 cents per share on revenues of US$251.6 million for the year ended Dec. 31.

That amounts to a 73% increase from 1989 profit levels when Barrick had net earnings of US$33.7 million or 28 cents per share on revenues of US$206.1 million.

Having reached the halfway stage of its 4-year Goldstrike development plan, Barrick increased its gold output in 1990 by 27% to 596,220 oz. from 467,837 oz. a year ago.

According to Barrick, the cost of removing overburden from the Goldstrike property pushed its 1990 cash costs up to US$343 per oz. from US$307 a year ago.

The company says production levels from six U.S. and Canadian gold mines should accelerate to 625,000 oz. in 1991 and advance still further to 1.1 million oz. by 1992. Through a combination of gold loans, forward sales, put options and spot deferred contracts (a forward sale without a firm delivery date), Barrick will realize a minimum of US$427 per oz. for its 1991 output.

In 1990, the hedging policy enabled Barrick to realize an average of US$437 per oz. on the 575,565 oz. sold, while the New York Commodities Exchange price averaged US$384 per oz.

During the three months ended Dec. 31, Barrick reported net earnings of US$15.1 million or 12 cents a share on revenues of US$71.9 million, compared with earnings of US$10 million or 8 cents a share on revenues of US$63.7 million in the equivalent 1989 period. The Goldstrike mine in Nevada is by far the largest in Barrick’s portfolio of gold mines. It produced 352,880 oz. in 1990, up from 207,264 oz. a year ago. However, the Mercur mine in Utah, currently the subject of a lawsuit launched by Utah exploration company Gold Standard (NASDAQ), also had an outstanding year. It produced a record 122,043 oz. of the yellow metal. The holder of a 15% net profits interest in Mercur, Gold Standard has launched a lawsuit against Barrick, Texaco Inc. and Getty Oil in a bid to winfull control of the mine. But no trial date has not yet been set.

Meanwhile, the news wasn’t quite so good at Barrick’s Holt-McDermott mine near Kirkland Lake, Ont., where production dropped last year to 59,164 oz. from 63,354 oz. in 1989. While Holt-McDermott was expected to produce 70,00 oz i 1990 th compan attribute th shortfal to low-grade ore that was mined from underground stopes. Output from the stopes lowered the average mined grade at Holt-McDermott last year to 0.124 oz., compared with a reserve grade of 0.136 oz.

Spokesman Belle Mulligan said mine production should reach planned levels when the new Mattasaga zone east of the mine shaft comes on stream in mid-1992. Drilling on the new zone has so far outlined a deposit containing two million tons of grade 0.18 oz.

Barrick’s 132.1 million shares outstanding were trading recently at $22 in a 52-week range of $18.50-28.25.