* Q1 EPS $0.85 vs $1.04 year earlier, revenue falls 6
* Barrick warns of possible suspension at Pascua-Lama
* 85.2 percent of shareholders oppose compensation
* Shares close up 7.6 percent at C$19.38 in Toronto
* Quarterly dividend unchanged at 20 cents a share
(Adds Moody's downgrade)
By Julie Gordon and Euan Rocha
TORONTO, April 24 Barrick Gold Corp,
making a painful adjustment to a sustained slump in bullion
prices, reported progress in controlling costs on Wednesday and
said it planned further cuts in capital spending, sending its
The world's No. 1 gold producer also said it may suspend
development at Pascua-Lama, its newest gold mine, located high
in the Andes Mountains. A Chilean court has halted some work at
the project, which straddles the border of Chile and Argentina.
The Toronto-based miner warned on Pascua-Lama as it reported
an 18 percent drop in first-quarter profit. The decline,
attributed to a slump in gold and copper prices and volumes, was
not as severe as analysts had expected.
Speaking at Barrick's annual general meeting in Toronto,
Chief Executive Jamie Sokalsky said the company could stop
spending on Pascua-Lama if the timetable for resolving
regulatory issues at the project remains unclear.
"We're serious about disciplined capital allocation," he
said. "That means we need to consider all options, including the
possibility of suspending the project."
Sokalsky later told analysts on a conference call that he
expects to have more clarity on a decision in "weeks or months,
as opposed to much longer than that."
Barrick's shares closed up 7.6 percent at C$19.38 on the
Toronto Stock Exchange on Wednesday. The stock has dropped more
than 48 percent this year as the company struggled with setbacks
at Pascua-Lama, the fall of gold prices, and a shareholder
revolt over executive compensation.
Barrick left its quarterly dividend unchanged at 20 cents a
share, helping lift the stock by easing concerns it would cut
the payout in a bid to conserve capital.
While Barrick's move to control costs and cut spending were
welcome, investors may want to see more evidence that the
company is on the mend before making a bigger jump back into the
"The market needs to better calibrate Barrick's progress at
Pascua and how management will navigate capital and operating
decisions at lower than anticipated gold prices," said Sterne
Agee analyst Michael Dudas in a note to clients.
Credit rating agency Moody's downgraded Barrick's senior
unsecured ratings to Baa2 from Baa1, citing the challenges the
miner faces at its Pascua-Lama project and the uncertainty as to
when and how the regulatory issues may be resolved.
A local court suspended work on the Chilean side of
Pascua-Lama earlier this month to allow time to weigh community
claims the development is destroying glaciers and harming the
Barrick gave no update on estimated costs on Wednesday or on
the development timetable for the $8.5 billion project. It said
it was evaluating its options, including a plan to develop only
a smaller pit on the Argentine side for initial production. If
that proves infeasible, it said the mine plan could change,
affecting costs and the production schedule.
George Topping, a mining analyst at Stifel Nicolaus, said
Barrick ought to suspend spending at Pascua-Lama sooner rather
"You really have to minimize the amount of money you're
putting into Pascua-Lama, which they're not doing," he said.
Topping added that the project also faces political risks on the
Argentine side as a congressional election approaches.
Barrick has so far poured $4.8 billion into Pascua-Lama,
which is expected to produce 800,000 to 850,000 ounces of gold a
year in its first five years of full production.
The complex project, on Barrick's books for more than a
decade, has encountered repeated delays in the face of political
wrangling and the challenges of building a mine that is 3,800
meters to 5,200 meters above sea level.
Even so, Barrick is hungry to finish Pascua-Lama to replace
depleted assets at a time when gold miners have little choice
but to tackle deposits in remote and inhospitable areas.
Like its rivals, Barrick is under heavy pressure to cut
costs. Margins have narrowed in recent quarters as gold prices
have dropped and operating and capital costs have risen.
To that end, the company reduced its full-year outlook for
all-in sustaining costs to $950-$1,050 per ounce of gold, down
from a previous forecast of $1,000 to $1,100. Its forecast for
total cash costs, a more traditional measure, remained at
$600-$660 an ounce for 2013.
All-in sustaining costs in the first quarter came in at $919
an ounce, while total cash costs rose slightly to $561, up from
$540 in the year-before period, but down from a full-year
average of $584 in 2012.
Barrick reduced its capital spending outlook for 2013 by
about 10 percent to $5.2 billion to $5.7 billion, down from its
previous forecast of $5.7 billion to $6.3 billion.
The company previously cut some $4 billion in planned
capital spending and 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 company said in February that it would not build any
new mines for now, with the notable exception of Pascua-Lama.
"SIX MORE SHOVELS"
At Barrick's annual meeting in Toronto, held in a packed
downtown convention center, shareholders voted down a nonbinding
company resolution on executive compensation, underscoring broad
opposition to generous bonuses.
A group of Canada's top pension funds rallied last week
against Barrick's $11.9 million signing bonus for co-Chairman
John Thornton, the man tipped as Barrick's next chairman.
Barrick's founder and chairman, Peter Munk, defended the
package, saying the company could spend that much on a handful
of shovels, but that Thornton would "do more for Barrick than
six more shovels".
In a regulatory filing late on Wednesday, Barrick said 85.2
percent of shareholders voted against the resolution. Both of
North America's leading proxy advisory firms, ISS and Glass
Lewis, had advised their clients to vote against the resolution.
While the compensation vote did not pass, the company was
successful in electing all 13 of its nominees to the board.
Outside the conference center, police held off a few dozen
protesters who chanted against Barrick and beat drums.
BY THE NUMBERS
Net profit fell to $847 million, or 85 cents a share, in the
first quarter from $1.04 billion, or $1.04, a year earlier.
On an adjusted basis, it earned $923 million, or 92 cents a
share, ahead of the average analyst estimate of 88 cents a
share, according to Thomson Reuters I/B/E/S.
Revenue fell 6 percent to $3.44 billion as gold production
dropped about 4 percent to 1.8 million ounces in the quarter.
Spot gold slipped into a bear market earlier this
month, plunging to a two-year low below $1,400 per ounce for the
first time in two years. Barrick's average realized gold price
in the first quarter was $1,629 per ounce.
(Additional reporting by Rod Nickel in Winnipeg, Allison
Martell in Toronto and Bhaswati Mukhopadhyay in Bangalore;
Editing by Frank McGurty, Chris Reese, Peter Galloway and Andrew