Barrick earnings flat (July 29, 2003)

Barrick Gold‘s (ABX-T) earnings came in flat at US$59 million (or US11 per share) for the three months ended June 30.

The latest quarter’s results include a one-time US$21-million tax recovery and US$7 million in after-tax, non-hedge derivative gains. Operating cash flow was more than halved to US$66 million from the year-earlier US$148 million, thanks mostly to higher taxes and working capital adjustments.

Revenue between the two second quarters climbed by US$1 million to US$491 million on slightly lower gold sales of 1.4 million oz. The lower sales were offset by an US$11-per-oz. (or 3%) increase in the average realized gold price to US$352. (The quarter’s average spot price was US$347 per oz.)

For the first half of the year, net income was US$88 million (16 a share) on revenue of US$950 million, compared with year-ago net income of US$105 million (20 a share) on US$968 million. Operating cash flow fell US$71 million to $197 million

During the recent quarter, Barrick produced 1.5 million oz. of gold at total cash costs of US$185 per oz., up from the 1.35 million oz. at US$178 apiece the previous year. Increased production from Betze-Post, Pierina and Kalgoorlie more than offset lower production from Meikle and Bulyanhulu. The increased costs are owing to higher energy and royalty costs and other gold-linked costs.

“Overall, we had a solid quarter, operationally driven by significant contributions from our large open-pit operations,” said Barrick COO John Carrington. “Lower production and higher costs from Meikle during the quarter were due to a reline of the backfill raise which was originally scheduled for the third quarter."

The relining at Meikle has been completed and production and costs are expected to improve in second half.

Improvements at Bulyanhulu in Tanzania are expected to take longer. There, production was off 9% reflecting lower tonnage and grades. A newly installed management team at the mine will look to reduce mining dilution, increase underground equipment availability, and lower overall costs.

Under the plan, Bulyanhulu’s mining rate has been slashed by 34% to 2,100 tons per day. Full-year production estimates have been lowered by 105,000 oz. to 310,000 oz.; cash cost are pegged US$65 per oz. higher at US$240 per oz.

Overall, Barrick figures operation-wide production at around 5.4-5.5 million oz. at US$190-US$195 apiece.

Barrick said that it trimmed its hedge book by 1.2 million to 16.1 million oz. during the quarter. The book’s unrealized mark-to-market value at quarter’s end was minus US$615 million, based on a spot gold price of US$346 per oz. and market rates for LIBOR and gold lease rates.

Barrick’s cash position at the end of June was nearly US$1 billion. The company had 540 million shares outstanding after buying back around 3.5 million shares at an average of US$17.95 per share.