TORONTO (miningweekly.com) – The world’s largest gold producer, Barrick Gold, on Thursday reported a significant fourth-quarter loss as several impairment charges, lower realised gold and copper prices and reduced sales volumes weighed on the balance sheet.

For the fourth quarter ended December 31, TSX- and NYSE-listed Barrick reported a narrower – yet significant – net loss of $2.83-billion, or $2.61 a share, compared with a net loss of $3.01-billion, or $3.01 a share, in the comparable year-earlier quarter, owing to booking $2.82-billion in impairment charges.

These were mainly related to temporarily suspending the roughly $8.5-billion Pascua-Lama gold mine project that straddles the Argentine/Chilean border; changing the mine plan through high-grading the Porgera mine, in Papua New Guinea, and reducing the mine life from 13 years to 9; lower gold price assumptions and rising costs at Veladero, in Argentina; a lower net present value and delayed first production at the Jabal Sayid copper project, in Saudi Arabia; and as part of its yearly goodwill impairment test, the company recognised a goodwill impairment charge of $551-million for its Australia Pacific gold segment.

Suspension-related costs at Pascua-Lama also totalled $176-million in the period.

For the three months, the adjusted net earnings totalled $406-million, or $0.37 a share, compared with adjusted earnings of $1.16-billion, or $1.16 a share, in the same period of 2012, reflecting the decrease in realised gold and copper prices and a decline in gold and copper sales volumes.

Wall Street analysts had on average expected adjusted earnings of $0.41 a share on revenue of $2.84-billion.

For the full year 2013, Barrick reported a net loss of $10.37-billion, or $10.14 a share, including after-tax impairment charges of $11.54-billion. This followed $4.4-billion in charges in 2012. The adjusted net earnings were $2.57-billion, or $2.51 a share.

"2013 was a tough year for Barrick by any measure, but with a renewed focus on capital discipline and operational excellence across the board, we have reset our focus and revitalised the company's prospects. We will not veer from this course, which has delivered solid results, reduced costs and improved financial flexibility,” Barrick president and CEO Jamie Sokalsky told an analyst telephone conference.

During the quarter, gold output declined 15% to 1.71-million ounces, and gold sales declined 10% to 1.82-million ounces. The average realised price declined 26% to $1 272/oz, while the volatile average spot gold price similarly declined to $1 276/oz.

During the period, the company’s all-inclusive sustaining costs declined 14% to $899/oz, as the company’s cost-cutting initiatives paid off.

Copper output rose 7% to 139-million pounds, but a 13% drop in sales at 134-million pounds was compounded by a 6% drop in the average realised price of $3.34/lb.

Barrick’s fourth-quarter revenues slid 29% to $2.92-billion.

The company expected 2014 gold output of between 6-million and 6.5-million ounces, lower than the full-year 2013 gold output of 7.16-million ounces.

Sokalsky said the lower output in 2014 reflected the company's strategy to increase its free cash flow and his philosophy of “returns over ounces”.

The company would also continue to divest high-cost, short-life mines, lower production from Cortez, in Nevada, where grades were expected to fall this year, and close the Pierina mine, in Peru. These production declines would be partially offset by an increase in output at Pueblo Viejo, in the Dominican Republic.

The all-in costs per ounce were, however, expected to rise to between $920/oz and $980/oz.

Barrick also slashed its 2014 capital budget to between $2.4-billion and $2.7-billion, down from the $5-billion it spent in 2013.

PASCUA-LAMA UPDATE

During the fourth quarter, Barrick temporary suspended construction at its Pascua-Lama project, except for those required activities for environmental and regulatory compliance.

The ramp-down was reported on schedule to be complete by midyear. The company expected to incur costs of about $300-million this year for the ramp-down and environmental and social obligations.

Barrick stressed that a decision to restart development of the project that had to date cost it more that $5-billion, would depend on improved economics and reduced uncertainty related to legal and regulatory requirements.

The company revealed that the remaining development would take place in distinct stages with specific work programmes and budgets, which it believed would facilitate more efficient planning and execution and improved cost control.

However, in the near term, Barrick would explore opportunities to improve the project's risk-adjusted returns, including strategic partnerships or royalty and other income streaming agreements intended to preserve the option to resume development of the asset, which has an expected mine life of 25 years.

FEWER RESERVES

Meanwhile, Barrick announced that it had recalculated its gold reserves using a more conservative gold price assumption of $1 100/oz, compared with $1 500/oz in 2012.

While this was well below the company's stated outlook for the gold price and below current spot prices, it reflected Barrick’s focus on producing profitable ounces with a solid rate of return and the ability to generate free cash flow.

Gold reserves declined 26% to 104.1-million ounces at the end of 2013, down from 140.2-million ounces at the end of 2012. The company noted, however, that excluding the ounces mined and processed last year and divestitures, all of the ounces were transferred to the resources category, thereby preserving the option to access it in the future at higher gold prices.

Measured and indicated gold resources increased to 99.4-million ounces at the end of 2013, up from 83-million ounces at the end of 2012. Resources were calculated based on a gold price assumption of $1 500/oz, as compared with $1 650/oz for 2012. In the inferred category, gold resources decreased to 31.9-million ounces at the end of the year, down from 35.6-million ounces at the end of 2012.

Copper reserves increased slightly to 14-billion pounds based on a copper price assumption of $3/lb.

Barrick’s NYSE-listed stock early on Thursday reached a peak of $19.74 a share, before settling back at $19.50 apiece, up 2.79%.