Everything you need to know about Barrick Gold’s second quarter 2015 results
Slumping gold prices weighed heavily on Barrick Gold Corp. during the second quarter of 2015. The world’s largest gold miner posted a net loss of $9 million, with adjusted net earnings of $60 million, which were in line with analyst estimates. Revenues for Barrick fell to $2.23 billion from $2.46 billion.
The Toronto-based miner has taken major strides in its debt-reduction goal, cutting its quarterly dividend 60 percent -- which should help save Barrick $140 million a year – as well as signing a $610 million streaming agreement with Royal Gold Inc. for the Pueblo Viejo mine in the Dominican Republic.
The deal with Royal Gold will bring Barrick to 90 percent of its target for reducing its debt load by roughly $3 billion by the end of 2015.
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“The innovative structure of this streaming agreement will allow us to crystallize significant value from Pueblo Viejo in a volatile metal price environment,” Barrick co-president Jim Gowans said in a statement.
Prices for gold have dwindled in recent months, falling below $1,100 an ounce in July for the first time since early 2010.
According to Barrick Gold, the implementation of a lean, decentralized operating model designed to maximize free cash flow and take costs out of the business has helped to mitigate the impact of recent gold price declines.
“We have cut $300 million in capital spending so far this year and are on track to achieve $90 million in reduced general and administrative (G&A) expenditures by 2016. We have also made significant progress on our debt reduction target. Our current focus is on improving productivity and reducing operating costs to ensure our business is robust enough to generate a 10-15 percent return on invested capital through the metal price cycle,” the company said in a press release.
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To further efforts in reducing debt, Barrick announced it will begin formal processes to sell several non-core assets in Nevada and Montana: Bald Mountain, Round Mountain, Springs Valley, Ruby Hill, Hilltop and Golden Sunlight.
Other notable features of the quarter include:
• Free cash flow was $26 million and operating cash flow was $525 million.
• Production in the second quarter was 1.45 million ounces of gold at all-in sustaining costs (AISC) of $895 per ounce.
• Full-year gold production is now expected to be 6.1-6.4 million ounces, reflecting the impact of asset sales.
• All-in sustaining cost guidance for 2015 has been reduced to $840-$880 per ounce.
In Barrick’s latest press release, the company provided operating highlights and guidance for its mines:
The Cortez mine produced 193,000 ounces at AISC of $811 per ounce in the second quarter. Production benefited from positive grade reconciliations in the Cortez Hills open pit and improved underground productivity, as well as from some initial treatment of refractory ore through Goldstrike's thiosulfate (TCM) process. AISC were positively impacted by higher production, lower operating costs and lower sustaining capital. Production in 2015 is forecast to be 825,000-900,000 ounces at AISC of $760-$835 per ounce. Production in the second half is fourth-quarter weighted as the open pit transitions into higher-grade ore and as the ramp-up of the TCM circuit at Goldstrike allows for additional processing of refractory ore from Cortez.
The Goldstrike mine contributed 206,000 ounces in the second quarter, in line with plan. AISC of $732 per ounce were better than expected on higher tons and grades from the underground operation, as well as lower sustaining capital. Grades and recoveries from the TCM circuit continue to be consistent with feasibility results. Several adjustments were implemented to improve the throughput of the circuit during the commissioning phase and the process is expected to ramp up on schedule this year. Production and AISC guidance for 2015 is 1.00-1.15 million ounces and $700-$800 per ounce. The third quarter is expected to be the stronger of the two remaining quarters on higher anticipated open pit grades.
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Barrick's 60 percent share of production from Pueblo Viejo for the second quarter was 131,000 ounces at AISC of $682 per ounce. Production in the quarter was lower than planned due to lower gold recoveries, largely related to a higher proportion of carbonaceous ore. AISC were also impacted by lower silver recoveries associated with a temporary shutdown of the lime boil process during scheduled autoclave maintenance. Recent modifications to the lime boil are showing significantly improved silver recoveries and the first copper concentrate was shipped in the second quarter. Attributable production in 2015 is forecast to be 625,000-675,000 ounces at AISC of $540-$590 per ounce. Production is expected to be higher and costs lower in the fourth quarter compared to the third quarter on higher-expected grades, improved recoveries and better autoclave availability, as maintenance shutdowns were weighted to the first half of 2015.
The Lagunas Norte mine contributed 155,000 ounces at AISC of $509 per ounce in the second quarter. Production was in line with expectations while AISC were better than plan on lower sustaining capital. Production in 2015 is anticipated to be 600,000-650,000 ounces at AISC of $600-$650 per ounce.
The Veladero mine produced 151,000 ounces of gold in the second quarter, in line with plan. AISC of $961 per ounce benefited from higher than expected sales and lower sustaining capital. Production guidance for 2015 is 575,000-625,000 ounces at AISC of $950-$1,035 per ounce, with second half costs expected to be highest in the third quarter related to capitalized stripping and sustaining capital, as well as lower byproduct credits.
The Turquoise Ridge mine contributed 52,000 ounces (75 percent basis), in line with expectations. AISC of $780 per ounce reflect higher sustaining capital associated with the focus on growing production and improving ventilation. Costs are expected to be highest in the third quarter related to these efforts as well as to feasibility and detailed engineering work for the second shaft project. The mine is forecast to produce 175,000-200,000 ounces (75 percent basis) in 2015 at AISC of $775-$825 per ounce.
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The Porgera mine produced 118,000 ounces (95 percent basis), slightly below plan on lower open pit grades. AISC of $1,128per ounce were lower than expected as a result of lower capitalized stripping costs due to fewer waste tonnes mined and lower sustaining capital. Reflecting the partial divestiture, attributable production in 2015 is now expected to be 400,000-450,000 ounces at AISC of $1,025-$1,125 per ounce.
Barrick's other mines — consisting of Bald Mountain, Round Mountain, Golden Sunlight, Ruby Hill, Hemlo , Cowal, KCGM and Pierina — contributed 320,000 ounces at AISC of $895 per ounce in the second quarter. An improved closure plan at Pierina is expected to contribute approximately 270,000 ounces over the next three-and-a-half years for minimal capital.
Barrick's share of second quarter production was 119,000 ounces at AISC of $1,149 per ounce. Attributable 2015 production from Acacia is anticipated to be 480,000-510,000 ounces at AISC of $1,050-$1,100 per ounce. Production will be weighted to the second half of 2015, driven by operational improvements and a planned ramp-up at Bulyanhulu.
Vale invests $150mn to extend life of Manitoba operations
Vale has announced a $150mn CAD investment to extend current mining activities in Thompson, Manitoba by 10 years while aggressive exploration drilling of known orebodies holds the promise of mining well past 2040.
Global energy transition is boosting the market for nickel
The Thompson Mine Expansion is a two-phase project. The announcement represents Phase 1 and includes critical infrastructure such as new ventilation raises and fans, increased backfill capacity and additional power distribution. The changes are forecast to improve current production by 30%.
“This is the largest single investment we have made in our Thompson operations in the past two decades,” said Mark Travers, Executive Vice-President for Base Metals with Vale. “It is significant news for our employees, for the Thompson community and for the Province of Manitoba.
“The global movement to electric vehicles, renewable energies and carbon reduction has shone a welcome spotlight on nickel – positioning the metal we mine as a key contributor to a greener future and boosting world demand. We are proud that Thompson can be part of that future and part of the low carbon solution.”
Vale continues drilling program at Manitoba
Coupled with today’s announcement, Vale is continuing an extensive drilling program to further define known orebodies and search for new mineralization.
“This $150mn investment is just one part of our ambitious Thompson turnaround story. It is an indicator of our confidence in a long future for the Thompson operations,” added Dino Otranto, Chief Operating Officer for Vale’s North Atlantic Base Metals operations.
“Active collaboration between our design team, technical services, USW Local 6166, and our entire Thompson workforce has delivered a safe, efficient and fit-for-purpose plan that will enable us to extract the Thompson nickel resources for many years to come.”
The Thompson orebody was first discovered in 1956 by Vale (then known as Inco) following the adoption of new exploration technology and the largest exploration program to-date in the company’s history. Mining of the Thompson orebody began in 1961.
“We see the lighting of a path forward to a sustainable and prosperous future for Vale Base Metals in Manitoba,” said Gary Annett, General Manager of Vale’s Manitoba Operations.