Gold Miners Deliver July Coal for Christmas (ABX, GG)

So much for high gold prices translating to earnings.  Barrick Gold Corp. (NYSE:ABX) and Goldcorp Inc. (NYSE:GG) both reported second quarter numbers before market open today, and both reports were on the weak side. Barrick reported net income of $485 million, or EPS of $0.56, up from $336 million and EPS of $0.39 in the same period a year ago. Barrick’s revenue for the quarter was $2.0 billion, below analyst estimates of $2.11 billion. EPS matched analyst estimates.

Goldcorp reported a net loss of $9.2 million, or -$0.01 EPS, on revenueof $631.7 million. The company attributed the negative number to a"non-cash foreign exchange loss on the revaluation of future income taxliabilities." Excluding the loss, Goldcorp posted earnings of $83.2million, or EPS of $0.12, down from $95.3 million and EPS of $0.14 inthe year-ago period. Analysts were looking for EPS of $0.21 on revenueof $655 million.

Barrick produced 1.86 million ounces of gold at a cash cost of$417/ounce and a realized price of $894/ounce. In the second quarter of2007, the company produced 1.96 million ounces of gold at a cash costof $340/ounce and a realized price of $624/ounce.

Goldcorp produced 556,200 ounces of gold in the quarter, a 19% increaseof the same period a year ago. The cash cost was $308/ounce and therealized price was $897/ounce.

Both companies pulled back slightly on guidance for the rest of 2008.Barrick expects gold production in line with the lower end of itsprevious guidance of 7.6-8.1 million ounces. The company also expectscosts for the remainder of the year to be in the range of$425-$445/ounce, up significantly from the original guidance of$390-$415/ounce. Goldcorp did not provide specifics, but the CEO said,"While we expect improvements in the second half, the delayed goldproduction, industry-wide cost pressures and a previously reportedshortfall in ounces at our Canadian mines have led to a revision ofguidance for 2008."

Barrick opened higher this morning by 2.6% after about 20 minutes oftrading and Goldcorp opened lower but is also now up 2%.  These mightbe up, but it it’s shocking that gold companies would be rewarded forproblems with commodity prices still at such levels.

Paul Ausick
July 31, 2008