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Barrick to Buy Property in Nevada

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According to Reuters, gold miner Barrick Gold Corporation (ABX - Free Report) intends to buy MillCanyon property in Nevada from Victoria Gold Corp. The move will extend the property in the vicinity of its Cortez mine by about 7,000 acres. The transaction is estimated at $24 million.

Barrick is focusing on building its own pipeline rather than on acquisitions in order to save itself from incurring heavy expenditures and face higher risks. Apart from Cortez, which is Barrick’s largest and lowest cost project, Goldrush is also located in that area. Goldrush is one of Barrick’s promising projects for which ithas already delineated a resource of more than seven million ounces as the company expects to increase its estimate on the size of the asset further in the coming months.

About a month ago, Barrick released its first-quarter 2012 results. The company’s adjusted net earnings (excluding one time items) rose 8% to $1.09 per share in the quarter compared with $1.01 in the prior-year quarter. The EPS was in line with the Zacks Consensus Estimate. The increase in earnings was driven by higher average realized gold price.

Revenues came in at $3,644 million, up 18% from $3,087 million in the year-ago quarter, missing the Zacks Consensus Estimate of $3,758 million. The company produced 1.88 million ounces of gold in the quarter versus 1.96 million ounces in the year-ago period.

Copper production in the quarter amounted to 117 million pounds, a 56% jump from the year-ago production of 75 million pounds. Total gold cash costs jumped 24.7% to $545 per ounce, while total cash cost for copper increased to $2.08 per pound from $1.25 per pound in the prior-year quarter.

Barrick Gold maintained its 2012 production forecast of 7.3-7.8 million ounces of gold and 550-600 million pounds of copper. Total cash costs for gold are expected to be in the range of $520-$560 per ounce and net cash costs are expected to be within the band of $400-$450 per ounce for the year. The company expects copper cash costs of $1.90-$2.20 per pound for 2012. 

Barrick Gold increased its exploration budget to $450-$490 million from $350 million incurred in the prior-year as a result of exploration success in 2011.

The company remains on track to advance construction at Pueblo Viejo and Pascua-Lama, with first production expected in mid-2012 and mid-2013, respectively. Both the projects in combination are expected to generate average annual production of 1.5 million ounces with total average annual EBITDA of approximately $2.5 billion in their first full five years.

The company, which competes with AngloGold Ashanti Ltd. (AU - Free Report) and Newmont Mining Corp. (NEM - Free Report) , maintains a Zacks #3 Rank, which translates into a short-term (1 to 3 months) ‘Hold’ rating. We currently have a long-term (more than 6 months) ‘Neutral’ recommendation on the shares of Barrick Gold.

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