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Barrick Gold expects growing exposure to copper as price escalation boosts Q1 profits

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TORONTO — The CEO of Barrick Gold Corp. says copper stands to grow in importance for the world's second-biggest gold miner after 10-year-high prices for copper bolstered its first-quarter earnings.

Barrick plans to continue its copper-directed exploration efforts while banking increasing revenue from existing mines as prices rise to more than US$4.50 per pound, Mark Bristow said on a conference call to discuss Barrick's results from the first three months of the year.

"We see our own copper portfolio as a source of differentiation to our gold industry peers, providing shareholders with meaningful exposure from assets that are in production today," he said.

"Based on the current spot pricing, copper is expected to represent at least 20 per cent of our gold-equivalent ounces sold from 2021 to 2025, up from the 16 per cent contribution in 2020, based on actual realized prices."

Toronto-based Barrick on Wednesday reported a first-quarter profit of US$538 million, up from US$400 million a year ago, as revenue rose to nearly US$2.96 billion from US$2.72 billion.

Copper revenues increased 31 per cent compared with the fourth quarter of 2020 as Barrick's realized price rose to US$4.12 per pound from US$3.39 in the previous quarter and US$2.23 in the year-earlier period.

The increase came as copper production slipped to 93 million pounds from 119 million in the fourth quarter and 115 million in the first quarter of 2020, although copper sales were higher at 113 million pounds in the most recent quarter, up from 110 million pound a year ago.

Gold production, meanwhile, fell to 1.1 million ounces from 1.2 million in the year-earlier period but the realized price was US$1,777 per ounce, up 12 per cent from US$1,589.

Last month, Barrick said its suspended Porgera gold mine in Papua New Guinea will resume operations later this year after negotiations to settle a dispute with the national government resulted in the state taking a much larger ownership stake.

The compromise to deliver "a fair split on economics," as well as flexibility in other jurisdictions around the world, are necessary to ensure the mining industry maintains a proper balance of benefits with the countries in which it operates, said Bristow.

"Again, we are going to have to do more of that as an industry if we want to remain relevant and be able to operate across the globe," he said.

Barrick is making good progress in plans to restart the Porgera mine but is not yet prepared to include its production in its annual guidance, Bristow said.

Under the renegotiated agreement, the 95 per cent stake in the mine held by a 50-50 joint venture owned by Barrick and China's Zijin Mining Group Ltd. drops to 49 per cent and the government's ownership jumps from five per cent to 51 per cent.

The economic benefits generated over the life of mine are to be split on a 53-47 per cent basis with the larger share going to the government.

On Tuesday at its annual general meeting, Barrick shareholders voted 99 per cent in favour of a US$750-million return of capital. The first US$250-million tranche is to be paid on June 15 to shareholders of record on May 28, the company announced.

By Dan Healing in Calgary.

This report by The Canadian Press was first published May 5, 2021.

Companies in this story: (TSX:ABX)

The Canadian Press

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