* Q3 adj EPS $0.85 v Street view $0.98
* Revenue falls 13.5 percent as gold sales, prices sag
* Capital costs at Pascua-Lama rise again
* 2012 copper outlook lowered to 450 million pounds
* Shares fall 9.3 percent to C$36.63 on TSX
(Adds analyst comment, detail)
By Julie Gordon
TORONTO, Nov 1 Barrick Gold Corp
reported a sharp drop in third-quarter profit on Thursday,
nudged back the production date for its massive Pascua-Lama gold
and silver mine and increased its estimate on costs.
Shares of the world's top gold miner dropped more than 9
percent after Barrick delayed the mine's start date to the
second half of 2014 from a previous target of mid 2014.
The cost of building the mine, on the border between Chile
and Argentina, rose to $8 billion to $8.5 billion from an
earlier estimate of $7.5 billion to $8 billion, reflecting
construction delays and higher labor and project-management
It is the second time this year that Barrick has boosted its
cost estimate for Pascua-Lama. Three months ago it raised the
budget by 50 to 60 percent and delayed start-up by a year.
"There's some doubt whether that's the final change or
whether there's even more to come. So that is disappointing,"
said George Topping, a mining analyst at Stifel Nicolaus in
Toronto. "It's a significant bet to make," he added. "They're
betting the company (on Pascua-Lama)."
Once complete, Pascua-Lama will be one of the largest and
lowest-cost gold mines in the world. The mine is expected to
produce some 800,000-850,000 ounces of gold and 35 million
ounces of silver in its first full five years of production.
But the high-altitude project has proved more difficult than
Barrick anticipated and the harsh climate and cross-border
negotiations with the Chilean and Argentine governments
repeatedly held up development over the last decade.
Shares of Barrick dropped C$3.76 to C$36.63 on Thursday
afternoon on the Toronto Stock Exchange. The stock is down more
than 20 percent this year, as uncertainty over Pascua-Lama kept
investors away from the world's No.1 gold miner.
The price of gold is up more than fivefold in the last 10
years, from about $300 an ounce in 2002 to around $1,700,
pushing top gold miners to seek growth at any cost.
But with capital and operating costs slicing into profits,
restraint is the new mantra of the mining industry -- new Chief
Executive Jamie Sokalsky said in June he would take a more
disciplined approach to spending.
Making good on that promise even as Pascua-Lama costs
climbed, Barrick said on Thursday it had deferred some $3
billion in capital spending over four years, with about $1
billion lopped off 2013 spending.
Next year's capital expenditures are now expected to be
largely in line with 2012 spending.
"We will run this company with a goal of optimizing our
overall investment portfolio," Sokalsky said in a conference
call with investors. "Assets that don't generate target returns
or significantly impact our ability to generate long-term cash
flow will be deferred, shelved or divested."
Barrick is in talks with China National Gold Group
Corporation over the sale of its 74 percent stake in African
Barrick Gold, which has struggled with soaring
production costs and lower output.
Barrick lowered its full year outlook for copper production
to 450 million pounds as production was delayed at its Jabal
Sayid project in Saudi Arabia.
Construction is complete at the Saudi mine, but the project,
designed to Australian standards, does not meet Saudi safety and
security rules. The mine is now expected to start up in 2014,
instead of in the second-half of 2012 as originally expected.
Barrick maintained its total capital budget for Jabal Sayid
at about $400 million, with the mine set to produce 100
million-130 million pounds of copper a year.
The company's gold production took a slight hit from lower
output at African Barrick, but Barrick stuck to a 2012
production range of 7.3 million to 7.5 million ounces.
The company nudged up its estimate for total cash costs to
$575 to $585 an ounce from $550 to $575 an ounce.
Barrick's net profit fell to $618 million, or 62 cents per
share, in the quarter ended Sept. 30, from $1.37 billion, or
$1.37 per share, a year earlier.
Adjusted to exclude one-off items, Barrick earned 85 cents
per share, down from $1.38 per share a year earlier. Analysts,
on average, had expected earnings of 98 cents a share, according
to Thomson Reuters I/B/E/S.
Revenue fell 13.5 percent to $3.4 billion on lower gold
sales and a lower realized gold price in the third quarter.
The average realized gold price fell 5 percent to $1,655 per
ounce, while gold sales dropped 6 percent to 1.8 million ounces.
Total cash costs rose 31 percent to $592 per ounce in the
(Additional reporting by Bhaswati Mukhopadhyay in Bangalore;
Editing by Frank McGurty, Peter Galloway, Andrew Hay and M.D.