No Earnings Gold for Barrick

Barrick Gold Corp. (NYSE: ABX) reported second-quarter adjusted earnings per share (EPS) of $0.78 on $3.28 billion in revenue this morning. Adjusted EPS were sharply down from $1.12 per share in the same period a year ago, and revenue was also down from $3.42 billion. The results compare to the Thomson Reuters consensus estimates for EPS of $0.95 and $3.5 billion in revenue.

The gold miner maintained its production outlook for the full year at 7.3 to 7.8 million ounces of gold. The annual total cash costs for gold are expected to rise slightly to $550 to $575 an ounce. Barrick expects total cash costs, including copper production costs, to be lower in the second half of the year due to higher production levels and a bigger share of production from lower cost mines. The consensus estimate for third-quarter EPS is $1.15 and the full-year estimated EPS is $4.55.

The company’s new president and CEO — and prior to that its CFO — noted:

Our second quarter earnings reflected lower gold production and higher operating costs as anticipated, but we continue to generate strong financial results and expect to have a stronger second half. … I have also initiated a thorough review of our mines and projects to evaluate their rates of return and ability to generate free cash flow as part of a more disciplined capital allocation framework. In my view, rate of return should drive production, not the other way around.

Barrick’s profit decline reflects higher cost of sales for both copper and gold, lower gold sales volume, and lower realized prices for copper. Higher gold prices and higher copper sales volumes helped offset the cost of sales, but total cash costs for gold production in the second quarter reached $613 an ounce. The lower cash costs estimated for the third quarter and full year really reflect increased production.

Shares are down 2.4% in premarket trading at $33.00, in a 52-week range of $32.88 to $55.95. Thomson Reuters had a consensus analyst price target of $57.29 before today’s results were announced.

Paul Ausick