Barrick rebounds from failed merger with record earnings

A 46% leap in first half earnings helped American Barrick Resources (TSE) rebound from the initial effects of its failed merger discussions with Newmont Mining (NYSE).

When talks aimed at combining the assets of both companies into an entity capable of producing more than two million ounces gold annually broke off last week, Barrick shares immediately fell $1.37 to $25.75 in Toronto. But as investors anticipated the strength of Barrick’s first half financial results, the shares advanced the following day by $1.12 to $26.87. For the six months ended June 30, Barrick reported net earnings of US$40.2 million or 30 US cents per share on revenues of US$163.2 million compared with US$27.5 million or 21 US cents per share on revenues of US$114.3 million in the same period last year.

Barrick’s share of production at six U.S. and Canadian gold mines climbed to 373,675 oz. in the first six months of this year, compared with 274,196 oz. in the equivalent period last year.

As the grade of ore mined at Goldstrike in Nevada has been consistently higher than expected, Barrick has raised its production target to 700,000 oz. this year from its earlier estimate of 625,000 oz.

Analysts believe vast differences in the corporate culture and operating philosophy at Newmont Mining and Barrick were responsible for a mutual agreement between the two companies to terminate merger discussions. But in a telephone interview with The Northern Miner, Barrick President Robert Smith said he wasn’t in a position to give reasons why joint talks had broken down.

While a merger would have solved a problem created by the location of the rich Post deposit which straddles the boundary separating Goldstrike from ground held by Newmont, Smith is optimistic that an agreement can be reached on how to mine the deposit.

As mining crews probably won’t be in a position to begin extracting ore from the Post deposit until 1998, Smith says Barrick still has plenty of time to look at the benefits to be derived from some sort of mutual association. He also expects the Purple Vein deposit, one mile north of Goldstrike’s Betze pit, to be producing approximately 400,000 oz. annually by 1995. Meanwhile, Goldstrike is consistently returning higher gold content, achieving record mill and autoclave production, and generating strong leach output, he added. The company has also received its final clearance from the U.S. Bureau of Land Management and the Nevada Department of Mines for its US$440-million Goldstrike expansion plan.

After releasing the final Environmental Impact Statement (EIS), the Land Management Bureau is requiring Barrick to post a US$20.7-million bond to cover future reclamation costs at the Goldstrike mine.

In other news, Barrick’s 45% owned Renabie, Ont., operation, which contributed 12,760 oz. to the company’s first half gold output, is expected to close by Sept. 30 at the lastest and could close as early as Aug. 4.