In the comparable period of 2001, Barrick earned US$59 million (US11 per share). Revenue between the two periods climbed to US$473 million from US$466 million on higher realized gold prices, while cash flow from operations slipped to US$156 from US$181 million.
For the first nine months of this year, earnings totalled US$139 million (26 a share) on revenue of US$1.4 billion, compared with a year-earlier profit of US$204 million (38 per share) on US$1.5 billion.
The major spent US$38 million on costs associated with its acquistion of the Homestake Mining, and when these are taken into account, cash flow for the first nine months of 2002 totals US$484 million, compared with US$579 million a year earlier.
“A variety of unrelated operating issues from the first half of 2002 proved more stubborn than we’d expected and resulted in a disappointing quarter,” says Chief Executive Officer Randall Oliphant. “But we’ve got the issues in hand, we’ve got our focus on change, and we’ve got a plan in place to make changes happen. These issues in no way detract from the fundamental quality of our asset base or the growth pipeline we have in place.”
The company produced 1.4 million oz. gold in the third quarter, down from 1.5 million oz. a year earlier. The 9-month figures are 4.1 million oz. and 4.6 million oz., respectively. The company realized an average of US$342 and US$338 per oz. in the third quarter and 9-month period, respectively, or US$26 and US$19 per oz. higher than a year earlier.
During the quarter, operating costs and total cash costs rang in at US$173 and US$180 per oz., respectively, up from US$158 and US$165 per oz. the previous year. The 9-month period saw operating and total cash costs both climb US$15, to US$171 and US$178 per oz., respectively.
Says Chief Operating Officer John Carrington: “We’re working on mine sequencing and processing issues at these operations with one aim in mind: producing more gold at lower cash costs.”
Despite its operational problems, Barrick still expects to meet its 2002 production target of 5.7 million oz. at US$178 per oz., up US$11 per oz. from the original plan. Through to 2006, the company expects to average 5.5 million oz. annually at US$175 apiece. It has reiterated its full-year earnings estimate of US33-35 per share.
At the end of the recent third quarter, Barrick’s forward sales position amounted to 16.9 million oz., and the company plans to trim that to 12 million oz. by the end of 2003. Also, variable price sales and call-option contracts fell about 900,000 oz. to 2.2 million oz., and Barrick intends to shed another 700,000 oz.
At the end of September, the mark-to-market value of the gold contracts was minus US$301 million at a spot gold price of US$324 an oz. The company notes that the mark-to-market value would approach zero (break-even) at a gold price of US$307 per oz.
Barrick ended the third quarter with US$988 million in cash, working capital of US$773 million and no net debt.
Over the next five years, the major plans to bring four wholly owned projects on-stream: Alto Chicama in Peru, Cowal in Australia, Veladero in Argentina, and Pascua-Lama in Chile. Combined, these are expected to churn out 2 million oz. of attributable gold at a cash cost of US$125 per oz.
By 2006, net production is expected to rise by 1.2 million oz., or 21%, to 6.9 million oz. at lower costs.
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