Barrick Reports Fourth Quarter and Full Year 2012 Results
Barrick Reports Fourth Quarter and Full Year 2012 Results
Disciplined Capital Allocation to Drive Future Direction
Based on IFRS and expressed in US dollars - PDF 241 KB
Webcast (9:30 a.m. EST)
Video: Jamie Sokalsky interview
Full Fourth Quarter and Year-End Report (PDF)
TORONTO, February 14, 2013 — Barrick Gold Corporation (NYSE:ABX)(TSX:ABX) (Barrick or the "company") today reported fourth quarter and full year 2012 results and reinforced a model for stricter, more disciplined capital allocation to improve shareholder returns and drive the future direction of the company.
"Investors are rightfully demanding fundamental change in the gold industry, and Barrick is driving this new paradigm," said Jamie Sokalsky, President and Chief Executive Officer of Barrick. "Rising costs, poor capital allocation and the pursuit of production growth at any cost in the industry have led to declining equity valuations across the sector. The message is clear: the industry must chart a new path forward. Barrick highlighted the need for change last year, and we are increasingly taking strong action and re-focusing our business based on the principle that returns will drive production, production will not drive returns."
FOURTH QUARTER/FULL YEAR 2012 RESULTS AND 2013 OUTLOOK
The company reported a fourth quarter 2012 net loss of $3.06 billion ($3.06 per share), including a $4.2 billion after-tax impairment charge primarily related to our copper business unit. Adjusted net earnings were $1.11 billion ($1.11 per share)(1).
For the full year 2012, Barrick reported a net loss of $0.67 billion ($0.66 per share), including after-tax impairment charges of $4.4 billion. Adjusted net earnings of $3.83 billion ($3.82 per share) were the second highest in the company's history.
We recorded a total after-tax asset and goodwill impairment charge of $3.8 billion for the copper business unit in the fourth quarter, as the new life-of-mine model for Lumwana reflects higher operating and sustaining capital costs and reduced profitability.
Full year 2012 operating cash flow of $5.44 billion was a company record.
Pascua-Lama estimates confirmed: $8.0-$8.5 billion in capex and first production targeted for the second half of 2014.
Pueblo Viejo now in commercial production; ramp up to full production expected in the second half of 2013.
Replaced total gold reserves and doubled the resource at Goldrush in Nevada.
Strong operating results with fourth quarter and full year 2012 gold production of 2.02 million ounces and 7.42 million ounces, respectively.
Gold all-in sustaining cash costs for the fourth quarter and full year 2012 of $972 per ounce(1) and $945 per ounce, respectively. Total cash costs were $584 per ounce(1) for the fourth quarter and full year.
2013 gold production is expected to be 7.0-7.4 million ounces at all-in sustaining cash costs of $1,000-$1,100 per ounce and total cash costs of $610-$660 per ounce. Total capex for 2013 is anticipated to be $5.7-$6.3 billion.
"Barrick's strategy prioritizes shareholder value creation by focusing on maximizing risk-adjusted rates of return and free cash flow through a disciplined approach to capital allocation," Mr. Sokalsky said. "The execution of this strategy will position the company to return more capital to shareholders over time. We made some significant initial progress in the second half of 2012 and we are taking further action in 2013 and beyond."
The company has taken and will undertake the following steps to re-focus the business and adhere to the principles of its disciplined capital allocation framework:
Now reporting an all-in sustaining cash cost measure that is a more meaningful metric and better reflects the total cost of producing gold. This measure also reflects how we manage our business and is more aligned with the generation of increasing returns and free cash flow.
Cut or deferred approximately $4 billion in previously budgeted capital spending.
In today's challenging environment, Barrick has no plans to build any new mines. We have a number of world class ore-bodies around the world which hold sizeable economic potential, but which currently do not meet our investment criteria. In the interim, we will spend the minimum amount of capital required to maintain the economic potential of these assets.
We will also continue to advance our projects in Nevada, which is home to our rapidly expanding Goldrush deposit where we have more than doubled the gold resource over the past year. Nevada is a core operating region for Barrick and is the cornerstone of our success. Nevada contributed over 40 percent of our total 2012 production and represents about a third of our total 2012 reserves.
In light of the impairment and higher than anticipated costs at Lumwana, and in accordance with our rigorous investment standards, we do not intend to proceed at this time with mine expansion plans that were previously under consideration.
Recalibrated long-term gold production to a higher quality, more profitable base of eight million ounces by 2016.
Bringing in about 1.5 million ounces(2) of average annual production from Pueblo Viejo and Pascua-Lama at average all-in sustaining cash costs of $250-$350 per ounce(3) and average total cash costs of $100-$200 per ounce(3). Including depreciation of mine construction capital, costs are expected to be $600-$700 per ounce(3). Some of this new production is additive and contributes to our targeted production base, while some replaces shorter life, higher cost production.
Pursuing and actively engaged in realizing opportunities to rationalize our portfolio, including the sale of Barrick Energy and other non-core assets with short mine lives and high operating costs.
Launched a company-wide overhead review. As an initial step, we have reduced 2013 company-wide overhead costs by over $100 million and expect further reductions through the review process.