Lower grades, higher costs contribute to lower FY18 adjusted earnings for Barrick

13th February 2019 By: Marleny Arnoldi - Creamer Media Online Writer

Lower grades, higher costs contribute to lower FY18 adjusted earnings for Barrick

Since merging with Randgold Resources six weeks ago, Barrick Gold Corporation on Wednesday said it has made progress in achieving its short-term priority goals and its full-year objectives.

Barrick expects to produce between 5.1-million and 5.6-million ounces of gold and between 375-million and 430-million pounds of copper this year, compared with the 4.53-million ounces of gold and 383-million pounds of copper produced in 2018.

Barrick recorded a net loss attributable to equity holders of $1.5-billion, or $1.32 apiece, for 2018, reflecting the impact of $900-million in impairment charges relating to the Argentina-based Veladero and the Peru-based Lagunas Norte mines, and $742-million in tax adjustments.

Further, it reported adjusted earnings of $409-million, or $0.35 apiece. Earnings were lower than in 2017, primarily owing to the impact of lower grades and recoveries, as anticipated, along with higher direct mining costs driven by increased energy prices and consumption, and the divestment of 50% of the Veladero mine on June 30, 2017.

Additionally, earnings were impacted on by lower throughput at subsidiary Acacia Mining’s Bulyanhulu mine; lower tonnage processed at Lagunas Norte; and increased government imposts at Veladero.

This was partially offset by lower income tax expenditure as a result of lower earnings and sales volumes and lower depreciation.

Meanwhile, Randgold’s gold production for 2018 was up 21% year-on-year to 1.28-million ounces, which was fractionally below guidance, reflecting the impact of a protracted illegal strike at Tongon, in Côte d’Ivoire. Total cash cost of $637/oz was in line with guidance.

Randgold’s dividend for 2018 increased by 35% to $2.69 apiece.

The company reported an operating profit for the year of $295-million, which is lower than the prior year’s $477-million, as a result of lower revenue and higher costs. Costs included those relating to the merger with Barrick.

Lower revenue of $1.1-billion, compared with the prior year’s $1.3-billion, was as a result of lower ounces sold by subsidiaries.

Therefore, basic earnings a share decreased by 32% to $2 apiece, compared with 2017’s $2.96 apiece.

Cost of sales per ounce for the year increased to $873/oz from $762/oz in the prior year, as a result of lower ounces sold by subsidiaries as well as higher input costs.

OPERATIONS

Barrick on Wednesday reported a higher cost of sales guidance for gold in 2019, at between $880/oz and $940/oz and an all-in sustaining cost guidance of between $870/oz and $920/oz, primarily reflecting the planned completion of mining at the comparatively high-grade, low-cost Cortez Hills openpit operation, in Nevada, in the US, in the first half of the year.

Lower costs at Turquoise Ridge, also in Nevada, as well as the addition of lower-cost production from Loulo-Gounkoto, in Mali, and Kibali, in the Democratic Republic of the Congo, are expected to partially offset this impact in 2019.

Higher grades, improved efficiencies and tight cost discipline are expected to reverse this trend over the next two to three years.

Barrick CE Mark Bristow said the Nevada assets, including Turquoise Ridge, were now being operated as a single complex and were already delivering efficiencies. Still in Nevada, the recent Fourmile discovery has now been combined with the nearby Goldrush opeation in a single project which has the potential to become Barrick’s next tier one gold mine.

Shaft sinking and construction at Turquoise Ridge is also on track and, along with a focus on improved efficiencies and cost discipline, it too has the potential for tier one status.

On the new business front, Bristow said Nevada was a destination with enormous upside potential through brownfield extensions, new discoveries and combination opportunities with other operators in the area.