Barrick Gold (NYSE:ABX)(TSE:ABX) reported a drop in third quarter profit on last week as the gold miner continued to suffer from lower metals prices and sales volumes, though adjusted earnings beat analysts' estimates.
The world's largest gold miner said it may also need to halt production at its Lumwana copper mine in Zambia if the government goes ahead with a plan to increase royalties.
The Toronto-based company reported net earnings of $125 million, or 11 cents per diluted share, compared to $172 million, or 17 cents per share, in the same period of 2013. On an adjusted basis, excluding unrealized losses tied to foreign exchange and other items, earnings were 19 cents per share, topping the Thomson Reuters mean estimate of 17 cents.
Revenues fell to $2.6 billion from $2.99 billion in the year-ago period.
Gold production was 1.65 million ounces in the latest quarter, down from 1.85 million in the third quarter of 2013, as its Cortez mine in Nevada was hit by lower grades. The average realized gold price came to $1,285 an ounce, lower than the $1,323 an ounce last year.
Barrick said all-in sustaining costs, an industry-wide metric, improved, however, to $834 per ounce from $914 per gold ounce a year earlier.
It also produced 131 million pounds of copper, down from 139 million. The average realized copper price fell to $3.09 per pound from $3.40 per pound.
The company said its solid production and lower than expected costs drove its second reduction to its annual all-in sustaining cost guidance for 2014. It now expects all-in costs of $880 to $920 an ounce, compared to its prior outlook of $900 to $940 an ounce.
Its gold production forecast for the full year was narrowed to between 6.1 to 6.4 million ounces, from 6.0 to 6.5 million ounces previously. It lifted its copper output guidance, however, to between 440 and 460 million pounds, from 410 to 440 pounds previously, mainly because of an earlier-than-expected restart of operations at Lumwana in July.
"We are focused on the best assets in the best regions, where we see the most potential to create value for shareholders, areas where we have already established distinctive geological and technical knowledge and strong partnerships," said co-president of Barrick, Kevin Dushnisky, who took over in July together with co-president Jim Gowans.
"We will only invest in mines and development opportunities that can generate strong returns and free cash flow through commodity cycles."
As a result, Barrick said that opportunities at or near existing operations will be a first priority, minimizing risk and maximizing returns, with the company focusing its exploration and growth efforts in Nevada. Approximately 50% of its 2014 exploration budget is allocated to Nevada, with a large majority to go towards its Goldrush project.
At its Lumwana copper mine in Africa, the gold miner is dealing with a proposed change to Zambia's mining tax regime, which would replace the current corporate income tax and variable profit tax with a 20 percent royalty, which if approved, would take effect in January 2015. The company said this considerable hike from the 6 percent royalty it is currently paying would "challenge the economic viability of the mine."
Its Pascua-Lama project is still on care and maintenance, with a decision to re-start development depending on improved economics and more certainty on legal and permitting matters. The company says it is in the final stages of preliminary engineering for the permanent water management system and is discussing the permitting requirements necessary to obtain approval for construction with Chilean regulators.