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.
Barrick Gold Corp, which has agreed to a $6.1 billion deal to acquire Randgold Resources Ltd, reported a drop in third-quarter adjusted profit and revenue on Wednesday, hit by lower prices for gold and copper alongside higher fuel costs.
As it readies for a November shareholder vote on its no-premium, all-stock transaction with African miner Randgold, Barrick made some modest changes to forecasts.
Barrick said it has eliminated 235 jobs outside of mine operations year-to-date and lowered its forecast for full-year administrative costs to $235 million from $275 million, including $36 million in severance costs.
The Toronto-based company, which had some 780 jobs outside of mines at the end of 2017, sees annual savings from its decentralization push of about $100 million.
Barrick said 2018 gold production is now seen in the low end of a range between 4.5 million and 5 million ounces, with all-in sustaining costs still estimated at $765-$815 per ounce. Fourth-quarter output is expected at approximately 1.25 million ounces.
For the quarter ended Sept 30, Barrick said adjusted earnings were $89 million, or 8 cents a share improving the 5 cent per share profit that analysts, on average, had expected.
Copper output for 2018 is reaffirmed at 345 million to 410 million pounds, at all-in production costs of $2.55 to $2.85 per pound.
Any further debt reduction from its current total of $5.7 billion will depend on cash flows and be considered against alternate uses of cash, Barrick said.
Previously, the company set a debt target of $5 billion by year-end, down from a peak of $15.8 billion in 2013, after costly acquisitions and projects.
Barrick said that talks continue with the government of Tanzania to resolve a tax row affecting its Acacia Mining unit. Barrick, which holds a 63.9 percent stake in the miner, said Acacia’s operating environment has been increasingly challenging in recent weeks.
A third Acacia employee was charged with corruption and money-laundering on Tuesday.
On a net basis, Barrick lost $412 million, or 35 cents a share, reflecting a $405 million impairment charge for a processing project at its Lagunas Norte mine in Peru that it will not advance.
Revenue of $1.8 billion fell from $1.99 billion in the same period last year.
(By Susan Taylor Editing by Tom Brown)
