Barrick Gold (ABX - Free Report) reported net earnings (attributable to equity holders) of $1,084 million or 93 cents per share for second-quarter 2017, compared to $138 million or 12 cents a year-ago.
Barring one-time items, adjusted net earnings were $261 million or 22 cents per share for the quarter. Earnings per share beat the Zacks Consensus Estimate of 20 cents.
Higher adjusted net earnings were mainly due to 10% decrease in direct mining costs, driven by lower costs at Pueblo Viejo and Barrick Nevada, higher sales from low-cost operations at Barrick Nevada and lower relative sales from Turquoise Ridge and Acacia compared to the year-ago quarter. Higher gold and copper sales volumes along with higher copper prices also contributed to robust earnings which were partly offset by higher depreciation, increase in tax expense and increase in evaluation and exploration costs.
Revenues rose roughly 7.3% year over year to $2,160 million in the reported quarter. The figure also topped the Zacks Consensus Estimate of $2,155 million.
Cost of sales fell roughly 4.4% year over year to $1,277 million in the reported quarter.
Total gold production was 1.43 million ounces in the reported quarter, up 6.9% from 1.34 million ounces a year ago.
Average realized price of gold marginally fell to $1,258 per ounce in the reported quarter from the year-ago quarter figure of $1,259. All-in sustaining costs (AISC) decreased to $710 per ounce in the reported quarter from $782 a year ago.
Copper production increased to 104 million pounds in the reported quarter from 103 million pounds in the prior-year quarter. Average realized copper price was $2.60 per pound in the quarter, up from $2.14 per pound a year ago.
Cash and cash equivalents were $2,926 million at the end of first quarter, up roughly 19.9% year over year.
Barrick Gold reduced total debt by $309 million in the second quarter and the company now has less than $200 million debt due before 2020. The company plans to reduce its total debt from $7.9 billion to $5 billion by the end of 2018, half of which have been targeted in 2017. Also, two-third of the company’s $7.4 billion of outstanding debt or roughly $5 billion will not mature until 2032.
On Jun 30, the company completed the sale of 50% interest in Veladero mine in Argentina to Shandong Gold for roughly $960 million. A significant portion of the proceeds from this deal has been allocated to reduce debt.
For 2017, Barrick Gold anticipates gold production in the range of 5.3–5.6 million ounces, at AISC of $720–$770 per ounce and cost of sales of $780–$820 per ounce. The company expects production to be weighted towards the fourth quarter. However, based on the company’s sales mix and capital expenditure expectations, Barrick Gold anticipates higher costs in the third quarter.
The company expects full year copper production in the band of 400–450 million pounds, at AISC of $2.10–2.40 per pound and cost of sales of $1.50–$1.70 per pound.
Shares of Barrick Gold have declined 9.9% in the last six months, underperforming the industry’s 2.9% decline.
Zacks Rank & Key Picks
Barrick Gold currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the basic materials space are The Sherwin-Williams Company (SHW - Free Report) , Ternium S.A. (TX - Free Report) and Hitachi Chemical Company, Ltd. (HCHMY - Free Report) . All three stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks Rank #1 stocks here.
Sherwin-Williams has expected long-term earnings growth rate of 11.4%.
Ternium has expected long-term earnings growth rate of 18.4%.
Hitachi Chemical has expected long-term earnings growth rate of 5%.
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