Barrick reports strong quarter

Major leaguer Barrick Gold (ABX-T) increased its fourth-quarter earnings by boosting production and lowering cash costs.

In the three months ended Dec. 31, 1997, Barrick earned US$75 million, compared with US$56 million in the corresponding period of 1996, for a 34% increase.

Revenue between the two periods rose to US$356 million from US$330 million.

On the operational side, Barrick produced 846,546 oz. in the recent quarter, up 49,449 oz. from the corresponding period in 1996. At the same time, it only cost the company US$172 to produce one ounce of gold during the fourth quarter, compared with US$203 in the year-ago period.

The success is mostly due to higher output from the Goldstrike property in Nevada, where aggregate production from the Betze-Post and Meikle mines rose to 632,254 from 497,615 oz. between the two periods. Cash costs for the two mines combined fell to US$151 from US$171 per oz.

The year’s financial performance, however, was less than stellar.

The company posted a loss of US$123 million because of a one-time, after-tax writedown of US$385 million recorded in the third quarter. The provision is related to the company’s long-term goal of phasing out higher-cost mines in order to lower cash costs and increase production. Excluding provisions, Barrick earned US$262 million in 1997, compared with US$218 million in 1996.

In 1997, Barrick produced 3.05 million oz. gold at an average cash cost of US$182 per oz. This compares with output of 3.15 million oz. gold and cash costs of US$193 per oz. in 1996.

Gold production in the current year is expected to exceed 3 million oz., rising still further to 3.5 million oz. in 1999. Cash costs are projected at US$170 per oz. for the current year and US$150 per oz. for the next.

The Meikle mine is expected to produce 765,000 oz. this year, while cash costs are anticipated to fall to US$90 per oz.

Farther afield, the Pierina mine in Peru is scheduled to enter production later in the year at an annual rate of 750,000 oz., with cash costs projected at US$50 per oz.

Barrick currently has 10.1 million oz. hedged at US$400 per oz. In 1997, the company sold its gold for US$420 per oz., US$88 higher than the year’s average spot price.

To reflect current market conditions, the company has recalculated its reserves using a gold price of US$350 per oz. Despite this, reserves remained virtually unchanged from 1996 levels, which, based on a gold price of US$400 per oz., were 50.3 million oz.