By Julie Gordon
TORONTO Aug 1 Barrick Gold Corp posted
an $8.7 billion writedown on Thursday, the largest yet in a
series of charges taken by gold miners, but results were above
expectations, sending its beaten-down shares higher.
The world's largest gold producer also slashed its dividend
by 75 percent on the falling gold price, although cost cutting
paid off as it lowered capital spending forecasts for the year
and cut its production cost estimates.
Gold miners have announced billions in writedowns over the
last two years, as ill-advised deals, underperforming projects
and plunging prices for the metal wreaked havoc on their books.
In the second quarter alone, Barrick rivals Goldcorp Inc
, Newmont Mining Corp and Kinross Gold Corp
have posted a combined $6 billion in impairment charges linked
to the plunging gold price.
But Barrick's charge, just months after it posted a $4.2
billion writedown linked mainly to its Lumwana mine in Zambia,
is the largest for a gold miner in recent years.
About $5.1 billion of the latest charge stems from the
company's delayed Pascua-Lama gold mine in South America, with
the rest linked to other assets and goodwill.
Toronto-based Barrick said in June that Pascua-Lama, on the
border between Chile and Argentina, had been delayed until
mid-2016. Regulators have halted work on the Chilean side until
Barrick completes a new water management system.
The delay helped Barrick reduce capital spending for the
year by about 20 percent, to between $4.5 billion and $5.0
billion, although it warned that the cost of building
Pascua-Lama would likely rise over the current budget of $8.5
It has already spent $5.4 billion on the gold-silver mine,
which is its only new development. The cost update is expected
in the third quarter.
Barrick shares were up 3.1 percent at C$17.52 in afternoon
trading after rising as high as C$17.95 shortly after markets
opened. The stock is down more than 50 percent this year and
near its lowest point since mid-1992.
Barrick and other miners are under intense pressure to
reduce capital and operating costs because gold prices have
fallen more than 20 percent so far this year, hitting a nearly
three-year low around $1,180 an ounce in late June.
Barrick's average realized gold price fell 12 percent to
$1,411 an ounce in the second quarter. That offset higher output
and a 13 percent decline in all-in sustaining costs to $919 an
ounce. The all-in sustaining metric includes sustaining capital,
exploration costs and general expenses to better show the true
cost of mining an ounce of gold.
The miner now expects its all-in sustaining costs to average
$900 to $975 per ounce for the year. Spot gold was around $1,310
an ounce on Thursday afternoon.
Barrick said it is reviewing its higher-cost operations and
could change mine plans, suspend or close operations, or divest
The company announced a deal to sell its energy unit in July
and chief executive Jamie Sokalsky noted efforts to sell certain
Australian mines were "well-advanced."
"Clearly, this is not as good a market to sell in than we've
seen in previous years. It's more of a buyers market than a
sellers market," he said on a conference call. "Having said
that, we are seeing multiple bidders on some of our assets."
Sokalsky was optimistic Barrick would be able to make deals,
although analysts were less upbeat.
"That's going to be a crowded move because most mega-miners
are trying to divest assets now," said Elizabeth Collins, an
analyst with Morningstar. "It's not surprising that they're not
seeing eye-to-eye with buyers on prices."
Barrick's talks to sell its 74 percent stake in African
Barrick Gold Plc to a Chinese buyer fell apart earlier
this year after the parties failed to agree on a price.
As a result of potential asset sales or changes, and the
delay at Pascua-Lama, Barrick said it was no longer targeting
annual production of 8 million ounces of gold by 2016. It gave
no new target.
Barrick reported a loss of $8.56 billion, or $8.55 per
share, in the second quarter, compared with a year-earlier
profit of $787 million, or 79 cents per share.
Excluding one-time items such as the impairment charge,
earnings were 66 cents a share, above the analysts' average
estimate of 56 cents, according to Thomson Reuters I/B/E/S.
Revenue fell 1.3 percent to $3.20 billion.
Gold sales rose 7 percent to 1.8 million ounces in the
second quarter, while copper sales were up 16 percent at 135
Barrick said the performance at the Lumwana copper project
had improved. It now expects copper costs to average $1.95 to
$2.15 a pound in 2013, down from a previous estimate of $2.10 to
The company cut its quarterly dividend to 5 cents from 20
cents a share.