February 20, 2009 / 12:55 PM / in 10 years

UPDATE 3-Barrick takes loss on writedown but output strong

* Takes $468 mln net loss on $773 mln charge

* EPS 32 cents before items; analysts expected 30 cents

* Buys other half of Hemlo gold operation. (Adds CEO comments, details. In U.S. dollars)

By Cameron French

TORONTO, Feb 20 (Reuters) - A $773-million charge to write down assets pulled Barrick Gold (ABX.TO) to a fourth-quarter loss, the gold miner said on Friday, but its core earnings came in around estimates on strong copper and gold output.

Stripping out the writedowns, which covered three mines in Tanzania and Australia as well as last year’s acquisition of Cadence Energy, Barrick, the world’s top gold miner, earned 32 cents a share. This compared with analysts’ forecasts of 30 cents a share, as polled by Reuters Estimates.

The results were released on a day that gold prices GCJ9 topped $1,000 an ounce for the first time in nearly a year, showcasing the metal’s prized status in times of economic turmoil.

Barrick’s stock was up 2.5 percent at C$47.05 at mid-afternoon on the Toronto Stock Exchange.

Gold output topped 2.1 million ounces, easily the strongest quarter of the year for Barrick, and this allowed the company’s production for the year to squeak in at the low end of its forecasts.

Copper production rose 13 percent to 105 million pounds, while hedging protected Barrick from the steep drop in copper prices in the past year. The company realized sales at $3.06 a pound, above average spot copper prices of $1.79.

“The copper hedge position benefited Barrick greatly in the quarter,” Jennings Research analyst Ron Coll said in a note.

While the copper hedges paid off, other hedges on the oil and the Australian dollar forced the company to forecast higher per-ounce extraction costs for 2009, as the rapid fall of both made the hedges a liability.

Cash costs this year should be in a range of $450 to $475 an ounce, higher than the $443 cost last year, while 2009 production should be in a range of 7.2 million to 7.6 million ounces, down slightly from the 7.66 million ounces produced in 2008, due to lower expected output from North American mines.

“The numbers for ‘08 were in line, (but) the guidance for ‘09 is maybe a little bit lower than I would have expected on the production side,” said Kerry Smith, an analyst at Haywood Securities in Toronto.

HEDGING

While hedging for copper and oil affected its results, Barrick unwound the last of its hedges on current gold production two years ago, although it still has 9.5 million ounces hedged — or forward sold — on future output to finance projects.

Speaking on a conference call, newly installed Chief Executive Aaron Regent moved to play down any remaining concerns that Barrick might try to lock in current high gold prices.

“The policy with respect to gold hedging is not to do any more,” said Regent, who took over as CEO in January.

Barrick, which operates nearly 30 mines around the globe, said yearend 2008 gold reserves climbed 11 percent to 138.5 million ounces, while its cash position stood at $1.4 billion, a hoard that puts it in good position to take advantage of cheap valuations among smaller gold players.

The company’s three main development projects — Cortez Hills in Nevada, Pueblo Viejo in the Dominican Republic, and Buzwagi in Tanzania — remain on schedule and on budget, the company said.

Barrick is also developing the 18-million-ounce Pascua Lama project, which straddles the border of Argentina and Chile, but the process has been held up in a tax dispute between the two countries.

Regent said he was encouraged by the progress of talks to resolve the issue, and that Barrick planned to release an update in the second quarter on cash costs expectations and the progress of the discussions.

Barrick also said it agreed to buy Teck Cominco’s TCKb.TO 50 percent stake in the Hemlo gold operation in western Ontario, thereby giving Barrick full control of the asset. Barrick will pay $65 million for the Teck stake.

$1=$1.25 Canadian Reporting by Cameron French; Editing by Peter Galloway

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