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.
Shares of Barrick Gold Corporation (NYSE:ABX)(TSX:ABX) slid further after hours after falling nearly 4% in regular trading on Wednesday after the gold miner, the world’s largest in terms of output, cut its dividend by 60% despite reporting a narrower second quarter loss.
Barrick’s market value is down 50% over the last three months and is now worth some $8 billion in New York. That compares to a $64 billion capitalization when gold was at $1,900 in 2011.
Barrick cuts its gold production forecast to between 6.1m – 6.4m ounces as it disposes of assets including 50% of its Zaldivar copper mine in Chile for $1 billion, the Cowal mine in Australia for $550 million in cash and $298 million for its Porgera mine to tackle its crippling debt-load of more than $13 billion.
The company announced additional disposals on Wednesday announcing that in the next few weeks, it will start a process to sell its Bald Mountain, Round Mountain, Spring Valley, Ruby Hill, Hilltop and Golden Sunlight assets in Nevada and Montana.
Other notable features of the quarter and outlook include further cost and capex cuts, but the $250 million debt reduction is some way off Mr Thornton’s target of $3 billion in 2015.
The scenario planning for a $200 an ounce fall in the price of gold include even more divestments and these strategies:
7 Comments
M
How did Barrick get into $10bn debt, what was the strategy at the time?
Lionel
It was because of all their insanely overpriced acquisitions (part of which occurred due to their desired entry into the copper space)
Brian
If the all-in sustaining costs are really $895 per ounce then why was the Free cash flow only $26 million? Surprising that the debt is only down $250 million even with all the asset sales
Gene Byrge
We need more people mining gold instead of manipulating and juggling stock prices, The industry is not mining, its a stock market.
ThaOracle
What if I were to tell you that …….. “reducing mining/processing rates” has exactly the opposite effect on cash cost, and only a fool would not utilize sunk capital.
Jag Patel
Barrick is taking the damage control steps which are welcome. But in my opinion, the giant mining house like Barrick should have Proactive measures in place so that share holders does not get hurt
Minerals Africa
1.45mil oz. is nothing in the global perspective…. this amount of gold can be eaten up in a matter of hours not days or weeks. Global demand for gold is actually so nebulous that the reduction in price is only a product of (papering over) the demand.