Barrick earnings recover as production costs fall

Cash flow and earnings were both higher for Barrick Gold (ABX-T) in the first nine months of 1998, as the company benefited from a rationalization program begun in 1997.

Barrick made US$218 million (58 cents per share) on revenue of US$928 million in the nine months ended Sept. 30. In the corresponding period of 1997, Barrick earned less — US$187 million — on higher revenue of US$936 million.

So far this year, the company has realized an average US$400 per oz. for its gold. In the first three quarters of 1997, it had averaged US$420. In part, the decline in the realized price was offset by increased production (2.3 million, versus 2.2 million in the first nine months of 1997), and the premium over the spot gold price actually rose, to US$105 from $80.

The best cost performers in the Barrick stable are two underground mines: Meikle, in Nevada, where cash production costs this year have fallen to US$74 per oz. from US$106, and Holt-McDermott, in Ontario, which has seen its costs decline US$31 to US$135 per oz. Meikle, in its second full year of production, has exceeded all the projections made in its feasibility study.

Costs across the company fell to US$160, putting it well on the way to meeting a goal of US$170 set last year. The company has targeted costs of US$150 per oz. for 1999.

Production is imminent at the Pierina gold mine in Peru, where construction is on budget and on schedule.

Costs are estimated at US$50 per oz. and the operation should produce 750,000 oz. annually.

For the third quarter, Barrick showed a profit of US$76 million, up from US$70 million in the third quarter of 1997. Revenues were US$327 million, up from US$316 million during the same stretch in 1997.

Barrick has also seen increases in its operating cash flow this year, which increased to US$390 million from $350 million in the first nine months of 1997. Higher cash flow permits Barrick to fund new capital expenditures without increasing its debt.