Gold majors pump profits as costs fall, output rises
VANCOUVER (miningweekly.com) – Several gold majors reported second-quarter results on Wednesday, showing rising profits amid lower costs and rising or stabilised production profiles.
The world’s largest gold producer by output Barrick Gold reported headline earnings after market close on Wednesday of $261-million, or $0.22 a share, beating Wall Street analysts' forecasts calling for $0.18 apiece. This performance was a significant improvement from the $158-million in headline earning, or $0.14 a share, achieved in the comparable period a year earlier.
Net earnings attributable to equity holders was $1.08-billion, or $0.93 a share, compared with $138-million, or $0.12 a share a year earlier.
The major reported second-quarter revenues of $2.16-billion, up slightly from the $2.01-billion reported a year earlier.
Gold output in the second quarter was 1.43-million ounces, up 7% year-over-year when compared with 1.34-million ounces produced in the same period last year.
The cost of sales applicable to gold of $726/oz was 13% lower year-on-year, and all-in sustaining costs were $710/oz, 9.2% lower than in the comparable period of 2016.
Free cash flow for the second quarter was $43-million, compared with $274-million in the second quarter of 2016. The decrease primarily reflects higher capital expenditures, combined with lower operating cash flows.
Barrick reported that normal leaching operations, including the addition of cyanide, have resumed at the Veladero mine, in Argentina, following the anticipated ramp-up and testing of upgraded leach pad systems. Barrick’s net profit during the quarter was boosted by $689-million gained after selling its 50% interest in the Veladero mine, as well as $193-million gained after selling its 25% interest in the Cerro Casale project, in Chile.
Barrick continued to strengthen the balance sheet, reducing total debt by $309-million in the second quarter. At the end of the second quarter, Barrick had a consolidated cash balance of about $2.9-billion. The company has less than $200-million in debt due before 2020. About $5-billion, or two-thirds of its outstanding total debt of $7.4-billion, does not mature until after 2032.
Barrick affirmed its full-year gold production guidance of between 5.3-million and 5.6-million ounces, at a cost of sales of $780/oz to $820/oz, and all-in sustaining costs (AISC) of $720/oz to $770/oz.
The company said it would start discussions with the Tanzania government next week concerning the concentrate export ban and other issues impacting the operations of its majority-held Acacia Mining.
Barrick has declared a dividend for the quarter of $0.03 a share.
Meanwhile, fellow Canadian gold major Goldcorp reported a quarterly profit of $135-million, or $0.16 a share, in the second quarter ended June 30.
This compared positively with the company’s net loss of $78-million, or $0.09 a share, a year earlier, when production slumped due to a maintenance shutdown and slow restart at its biggest mine, Penasquito, in Mexico.
Goldcorp produced 635 000 oz of gold at an AISC of $800/oz, compared with 613 000 oz at an AISC of $1 067/oz for the second quarter of 2016.
Goldcorp’s plan to deliver a 20% increase in gold production, a 20% increase in gold reserves and a 20% reduction in AISC over the next five years advanced with the formation of a 50/50 joint venture with Barrick Gold in the Maricunga district, in Chile, the divestiture of $500-million of noncore assets in Mexico and Guatemala and strong execution on the company's key growth projects.
The company reconfirmed its gold production guidance of 2.5-million ounces at an improved AISC of $825/oz, from $850/oz previously, reflecting the progress the company has made on its initiative to realise $250-million in sustainable annual efficiencies by the middle of 2018.
Goldcorp also said CFO Russell Ball would step down.
Further, Agnico Eagle reported an adjusted net income of $54.9-million, or $0.24 a share, for the second quarter of 2017, beating Wall Street analysts' estimates of $0.15 apiece.
The company's net income of $61.9-million, or $0.27 a share, was a significant improvement over the net income of $19-million, or $0.09 a share a year earlier.
Payable gold output in the period was 427 743 oz of gold, with AISC being 7% lower at $785/oz in the quarter, compared with $848/oz in the second quarter of 2016. The lower AISC was mainly owing to lower total cash costs per ounce and lower sustaining capital expenditures compared with the second quarter of 2016, the company advised.
Agnico increased its production guidance for the remainder of the year, now calling for output of 1.62-million ounces, compared with a previous guidance of 1.57-million ounces. The AISC is expected to be between $830/oz and $880/oz, down from $850/oz to $900/oz previously.
The company's Meliadine project, in Canada’s Nunavut Territory, continues to progress on schedule and budget, with the underground development being ahead of plan and engineering 80% complete at the end of June.
At Amaruq, infill drilling has been completed on the Whale Tail and V Zone deposits, and other target areas are now being explored. Significant results included 6.9 g/t over 6 m on the western extension of the planned Whale Tail pit and 20.4 g/t gold over 10.4 m at the V Zone, at 225 m depth, beneath the planned pit outline.
The company declared a quarterly dividend of $0.10 a share.
Another Canadian gold producer New Gold reported on Wednesday that its adjusted net earnings climbed to $13.3-million, or $0.02 a share, compared with earnings of $8.6-million, or $0.02 a share, in the same quarter of 2016. Net earnings were $23-million, or $0.04 a share.
Gold production of 105 064 oz reflected an increase of 6% relative to 2016, coupled with copper production of 26.4-million pounds.
An AISC of $737/oz, including total cash costs of $360/oz, was consistent with the prior-year quarter.
The company, which is building the Rainy River mine, in Ontario, said the project schedule and capital cost estimates remain in line with its updated plan announced on January 30.
New Gold reiterated its guidance for full-year gold output of between 380 000 oz and 430 000 oz and an operating expense per gold ounce sold of $630 to $670. The company expects about 40% of the second half gold production to occur in the third quarter, with the remaining 60% in the fourth quarter, benefiting from the start-up of Rainy River.
The full-year AISC is expected to fall to between $760/oz and $800/oz of gold.
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