The world’s biggest gold producer, Barrick Gold Corporation (ABX - Analyst Report) announced updates on the Pascua-Lama project in Chile and Argentina. As per the company, construction of the Pascua-Lama mine in the Andes is delayed due to the falling gold prices, rising costs and challenging market conditions. Barrick now expects first production from the Pascua-Lama mine by mid-2016 compared with the previous schedule of the second half of 2014.
In May 2013, Barrick received a resolution from Chile's Superintendence of the Environment (SMA) that imposed a fine of about $16 million on the gold miner for not meeting the environmental control measures at its Pascua-Lama project. Barrick did not abide by the environmental standards, which eventually led the Chilean government to halt the construction on the Chilean side of the project. Barrick stated that it has submitted a plan, subject to an approval by regulators in Chile, to construct a water management system in compliance with permit conditions.
Barrick believes that there will be a significant deferral of planned capital spending in 2013 and 2014 due to the re-sequencing of the project. Barrick expects to reduce capital expenditures at Pascua-Lama in 2013 and 2014 by $1.5-$1.8 billion. The company also expects to reduce staff levels at the mine.
Barrick stated that the delay would result in an after-tax asset impairment charge of approximately $4.5-$5.5 billion in the second quarter. Moreover, it was reviewing the price of its other assets, including goodwill for possible impairment charges in the second quarter.
The Pascua-Lama project is expected to be one of the world’s largest and lowest cost mines in the coming years. The mine’s expected annual gold production in the first five years is 800,000 to 850,000 ounces.
In Apr 2013, Barrick released its first quarter 2013 results. The company’s adjusted earnings (excluding one-time items) fell to 92 cents per share in the quarter from $1.10 per share in the year-ago quarter, but were ahead of the Zacks Consensus Estimate of 86 cents.
On a reported basis, net earnings came in at $847 million or 85 cents per share, down approximately 18% from $1.04 billion or $1.04 per share recorded in the year-ago quarter. Lower gold and copper prices and reduced sales volumes weighed on the bottom line.
Revenues fell 5.7% year over year to $3,437 million in the reported quarter and missed the Zacks Consensus Estimate of $3,649 million. Average realized price of gold decreased 3.7% year over year to $1,629 per ounce.
Total cash costs increased 3.9% to $561 per ounce while all in sustaining costs crept up 1.1% to $919 per ounce in the reported quarter. Barrick currently retains a Zacks Rank #3 (Hold).
Other companies in the mining industry with favorable Zacks Rank are Brigus Gold Corp. , Claude Resources, Inc. and Lake Shore Gold Corp. (LSG). While Brigus Gold retains a Zacks Rank #1 (Strong Buy), both Claude Resources and Lake Shore retain a Zacks Rank #2 (Buy).