Yahoo Finance Barrick Gold Reports 1st-Quarter Results
- By Alberto Abaterusso
Barrick Gold Corp.(ABX) released its first-quarter 2017 financial and operating results on April 24.
The world's largest gold producer closed the quarter with EPS of 14 cents, a 27.3% increase on a year-over-year basis as a result of higher gold and copper prices.
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On the back of a 3.23% increase in gold prices since the beginning of the year, Barrick sold gold for an average rate of $1,220 per ounce. Supported by an average daily price of $2.654 per pound of copper on the copper futures market, the Canadian miner realized $2.76 from selling one pound of copper. Copper sales represent approximately 15% of the miner's total business.
The positive impact of higher metal prices on adjusted EPS during the quarter were partially offset "by higher depreciation, higher exploration and evaluation expenses and slightly higher direct mining costs.", the company says.
Barrick, however, missed analysts' expectations on earnings by six cents, generating a negative surprise of 30%.
Source: Yahoo Finance
Analyst expectations for first-quarter adjusted EPS ranged between a low of 11 cents and a high of 29 cents. Analysts forecasted the Canadian gold producer would deliver an average adjusted EPS of 20 cents.
Revenue came in at $1.99 billion, a 3.1% increase on a year-over-year basis. Barrick missed revenue expectations by $180 million.
Source: Yahoo Finance
As seen in the chart above, analysts forecasted revenue of $2.17 billion for the quarter. This figure, which was an average of eight analysts' estimates, ranged between a low of $1.74 billion and a high of $2.34 billion.
Higher gold and copper prices, together with less interest expenses accrued on reduced outstanding debt, enabled the company to achieve a 9.8% year-over-year increase for operating cash flow, which came in at $495 million for the quarter. After capital expenditure considerations of $334 million, free cash flow was $161 million.
In line with the company's debt reduction strategy, Barrick further reduced its long-term debt by $150 million, from 7.788 billion in December 2016 to $7.633 billion in March. This reduction improved the company's debt-equity ratio by 9.23 points, from 98.15 in December to 88.92. While this ratio is still higher than the industry average, Barrick's long-term debt has a manageable repayment schedule with less that $100 million maturing before 2019. Approximately 64% of the total outstanding debt will mature after 2033.
Barrick's total debt amounts to $7.753 billion as of March 31, a 2.24% decrease from $7.931 billion on Dec. 31, 2016. The miner hopes to cut down the debt to $5 billion by the end of 2018. By the end of 2017, it hopes to pay off $1.45 billion by the end of 2017. The company says it "will achieve this by using cash flow from operations, further portfolio optimization and the creation of new joint ventures and partnerships."
The company had about $2.3 billion in cash on hand as of March 31.
During the quarter, Barrick Gold produced 1.31 million ounces of gold, a 2.34% increase on a year-over-year basis, at cost of sales of $833 per ounce, a 2.8 % increase from the comparable quarter of 2016. All-in sustaining costs were $772 per ounce of gold sold.
Copper production amounted to 95 million pounds, a 14.4% decrease from the comparable period one year ago when Barrick produced 111 million pounds of copper. For the sale of one pound of copper, the miner sustained a cost of $1.73 (up 29.1% on a year-over-year basis) and an AISC of $2.19 (up 11.2% on a year-over-year basis).
During the quarter, Barrick sold 1.305 million ounces of gold and 93 million pounds of copper. The volume of gold sold was in line with that of the comparable quarter of 2016, while the volume of copper sold was 9.8% lower.
The company lowered its expectations for gold production. For 2017, the company expects gold production of 5.3 million ounces to 5.6 million ounces. Cost guidance was reaffirmed.
The company says about 67% of the reduction in gold production "is attributable to the anticipated sale of 50% of Veladero," an asset in Argentina. At that mine, the company unfortunately had a pipe carrying cyanide solution break on March 28. As a consequence of this incident, the third in 18 months, the company says that "a comprehensive plan to strengthen and improve the Veladero mine's operating systems is now under review by federal and provincial authorities in Argentina." Barrick Gold hopes to resume operations at Veladero sometime in June.
Disclosure: I have no positions in Barrick Gold Corp.
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