* Barrick says no new mine builds now; costs too high
* Earnings before charges beat Wall Street estimates
* Revenue up 11 percent to $4.19 billion
* Shares rise 3.25 percent to C$32.75 by Thursday afternoon
By Julie Gordon
TORONTO, Feb 14 Barrick Gold Corp
posted stronger-than-expected results on Thursday and
boosted confidence in its troubled South American project even
as it booked a $3.8 billion charge to write down the value of an
The world's largest gold miner's shares climbed as much as 5
percent as it offered evidence that it may have turned a page
after a year of struggling with rising costs, project delays and
long-term production cuts as the gold price flattened.
"It's just a company that's been disappointing for several
quarters in terms of expectations," Morningstar analyst
Elizabeth Collins said, explaining the rise in a stock that had
fallen more than 36 percent from the beginning of 2012 until
Wednesday's close. "It's a reversal of the trend."
The writedown on Lumwana, the Zambian copper mine Barrick
acquired in 2011, is the latest in a series of huge charges
taken by miners around the world that spent heavily on boom-year
takeovers that soured as metal prices stagnated and costs
Barrick also said that it will not proceed with an expansion
that would have doubled output at Lumwana, touted as the crown
jewel in the hugely unpopular C$7.3 billion ($7.28 billion)
takeover of Equinox Minerals.
"It's been a disaster from a due diligence point of view.
It's not the copper price - the copper price is doing fine,
thank you very much - but the actual assets that were bought are
not as advertised," said George Topping, an analyst with Stifel
Indeed, Barrick said it had no immediate plans to build any
more mines. A notable - and expensive - exception is the massive
Pascua-Lama mine on the border of Argentina and Chile, where
production is targeted for the second half of 2014.
The company confirmed that development costs there are still
expected to be $8 billion to $8.5 billion, soothing investor
fears of another cost overrun at the embattled mine.
Barrick reported massive capital cost increases at
Pascua-Lama in 2012 and twice delayed the start-up of the mine,
which is expected to be a major new source of gold and silver.
The Lumwana copper writedown was broadly expected by
analysts, and Barrick shares rose 3.25 percent to C$32.75 on
Thursday afternoon on the Toronto Stock Exchange.
FOCUS ON HIGH QUALITY
Over the last three years, gold miners went on an
acquisition tear as rising bullion prices led to soaring
profits, pushing them to seek out new ounces at almost any cost.
But as miners poured money into expansions and new mines,
capital costs soared to the point where shareholders began to
demand companies return more cash flows to them instead of
wasting money on bloated construction budgets.
Barrick, which cut some $4 billion in planned capital
spending last year, has recast its long-term goals to focus on a
higher-quality, more profitable production base of some 8
million ounces of gold a year by 2016.
"The new mantra of trying to repair balance sheets and not
waste shareholder money - it's across the board now," Topping
said. "That's real change in strategy from last year."
While Barrick is putting a new mines development on hold for
now, Pascua-Lama remains a key driver for future growth.
The company said construction at the project was about 40
percent complete. The complex mine requires a 2.5-mile tunnel to
transport ore between Chile to Argentina and has been in
development for more than decade.
While costs are on track, Barrick warned that the suspension
of pre-stripping activities at the site had added some
uncertainty to the second-half 2014 production timeline.
Barrick's fourth-quarter net loss amounted to $3.06 billion
or $3.06 a share, compared with a year-earlier profit of $959
million, or 96 cents a share.
In addition to the huge Lumwana writedown, Barrick booked a
$400 million charge to write down the value of its oil and
natural gas unit and its investment in the Reko Diq project in
Excluding the charges and other one-time items, earnings per
share fell to $1.11 from $1.17, beating the analysts' average
estimate of $1.05, according to Thomson Reuters I/B/E/S.
Revenue rose 11 percent to $4.19 billion on higher
production and a slightly stronger gold price.
Barrick is now combing through its portfolio of assets
around the world to find those that fail to meet its investment
criteria, with a eye toward potential divestment.
Last month, the company started an auction process to sell
its energy unit, and it has long searched for a buyer for its
struggling African Barrick Gold subsidiary.
Barrick's talks with China National Gold Group Corp
on the possible sale of its 74 percent stake in the
Tanzania-focused miner fell apart earlier this year after the
two parties failed to agree on a price.
The company said the Pueblo Viejo mine in the Dominican
Republic, a joint venture with rival Goldcorp Inc, is on
track to ramp up to full capacity in the second half of 2013.
Barrick produced some 7.42 million ounces of gold in 2012,
down 3 percent from 2011. The company expects 2013 gold
production to be in the range of 7 million to 7.4 million