Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
Canadian Barrick Gold Corp (TSX, NYSE:ABX) said Wednesday its first-quarter net profit fell 90%, due in part to one-time items and as it continued to struggle with lower precious metal prices and a decline in gold sales.
Adjusted earnings and revenue were also well below year-earlier levels, though largely in line with analyst expectations, while cash costs came in almost 11% lower than the year-earlier period.
The world’s biggest gold producer, whose deal to merge with Newmont Mining Corp. (NYSE:NEM) fell apart this month, reported adjusted net earnings of $238 million or $0.20 per share, a dramatic drop from the $923 million or $0.92 per share in the prior year.
With sharp declines in precious metal prices, investors were bracing themselves for the worst, expecting —in average— slightly lower figures, with earnings of $0.19 per share.
Revenue declined to $2.6 billion from $3.4 billion year-over-year, with the company noting it spent only US$833 to produce an ounce of gold, which is $100 less than the previous year and below its $900-plus guidance.
Gold production declined to 1.588 million ounces from 1.797 million ounces. Copper output was 104 million pounds, compared to 127 million pounds last year.
The company said it continues to optimize its portfolio and lower costs. So far it has divested non-core assets for a total consideration of over $1 billion since July 2013, including the sale of the Kanowna and Plutonic mines in Australia and its 33% stake in the Marigold mine in Nevada this year.
“Barrick is a considerably different company today than it was a year ago – leaner, stronger and more financially flexible,” said in a statement Jamie Sokalsky , Barrick’s President and CEO.
The quarterly results comes as Barrick’s founder and chairman Peter Munk (pictured) gets set to retire from his company at its annual meeting of shareholders in Toronto on Wednesday.
Image of Chairman Peter Munk speaking during the annual general meeting of shareholders in 2012.
