Barrick clears US$46m in quarter

The first quarter of the year was kind to most gold producers, including the company that probably suffered the least in gold’s prolonged slump.

Barrick Gold (ABX-T) recorded a US$46-million profit for the three months ended March 31, the first quarter during which the major sold a significant part of its production at market rather than hedged prices. Its revenues were US$478 million, as rising gold prices offset declining production.

The earnings, which translate into US9 per share, compare with US$88 million, or US16 per share, in the first quarter of 2001, when revenues were US$499 million.

Production from Barrick’s mines was lower, with the decline especially steep at the Goldstrike complex in Nevada. The mines, including those acquired in the Homestake Mining merger, produced 1.4 million oz. gold in the quarter, down from 1.5 million oz. produced by Barrick and Homestake in the comparable period last year. Production at Goldstrike fell 110,208 oz. to 314,438 oz., though this was partly offset by the addition of production from the Bulyanhulu mine in Tanzania.

Overall, total cash costs (including both operating expenses and royalties) rose to US$175 per oz. in the first quarter from US$161 a year earlier.

About half the gold Barrick sold in the quarter was at the spot price, which averaged US$290 per oz. The rest, sold into existing hedge contracts, netted an average US$365 per oz.; if spot and hedged sales are taken together, the average realized price was US$39 above spot. In the comparable period in 2001, when all gold was sold into contracts, Barrick realized an average of US$320 per oz., US$56 above spot.

Half the company’s scheduled production for the rest of 2002 is hedged at an average of US$365 per oz.; Barrick plans to sell the other half at spot prices.

With the large Bulyanhulu underground mine up and running, Barrick’s capital requirements were much lower in the recent quarter than they had been a year earlier. The principal capital cost in the quarter was a US$48-million item for deferred stripping costs at Goldstrike.

Barrick has about US$840 million in cash and short-term paper; a further US$248 million is on the books in inventory and receivables. Against current liabilities of US$502 million, Barrick has working capital of US$338 million. A bank credit facility of US$1 billion, renewed last month for a 5-year term, has not been drawn on, and Barrick expects all this year’s project capital to come out of cash flow.