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Barrick (ABX) Projects Higher Production, Lower Costs in Q3

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Barrick (ABX) Projects Higher Production, Lower Costs in Q3

Buoyed by improved grade and throughput at Nevada, Barrick (ABX) projects higher production and sales in Q3. The company maintains full-year production and cost outlook.

Barrick Gold Corporation ABX released preliminary production results for third-quarter 2018.

Preliminary gold production and sales for the third quarter were 1.15 million ounces and 1.20 million ounces, respectively. Average market price for gold during the quarter was $1,213 per ounce. Preliminary copper production and sales totaled 106 million pounds and 114 million pounds, respectively. Average market price for copper was $2.77 per pound.

Notably, preliminary gold sales and production figures for the third quarter improved roughly 16% and 8%, respectively, from second-quarter figures. The improvement can be attributed to higher grade and throughput at Barrick Nevada.

For the third quarter, Barrick expects cost of sales per ounce for gold to be roughly 3-5% lower, all-in sustaining costs (AISC) per ounce roughly 7-9% lower and cash costs per ounce to be 1-3% lower on sequential comparison-basis.  

The company has maintained full-year 2018 gold production guidance in the range of 4.5-5 million ounces at a cost of sales of $810-$850 per ounce, AISC of $765-$815 per ounce and cash costs of $540-$575 per ounce. It expects gold production to be roughly 1.25 million ounces in the fourth quarter.

Third-quarter preliminary copper sales and production were roughly 54% and 28% higher from second-quarter figures, respectively. The improvement was led by higher production at Lumwana driven by a steady improvement in grade and recovery along with improved crusher reliability.

The company anticipates decline in consolidated copper cost of sales per pound of roughly 10-12% on a quarter-over-quarter basis. AISC per pound for copper is also expected to fall about 10-12% from second-quarter level.

Barrick has maintained copper production guidance for 2018 in the range of 345-410 million pounds. AISC for copper is also pegged at $2.55-$2.85 per pound and at a cost of sales of $2-$2.30 per pound.

The company expects effective tax rate of roughly 59% in the third quarter, higher than the year-to-date effective tax rate due to the adjusting of first-half 2018 tax expense from 44% to 49%. Moreover, it expects an effective tax rate of 48-50% for the full-year 2018 (assuming gold price of $1,200 per ounce for the balance of the year). The current expectation reflects an increase from the prior projection of 44-46% due to lower-than-expected sales from operations in lower-tax jurisdictions regions (particularly Barrick Nevada), while costs in non-tax-effected entities have been comparatively stable.

Barrick’s shares have lost 11.2% in the past three months compared with the industry’s 18% decline.



Zacks Rank & Stocks to Consider

Barrick currently carries a Zacks Rank #3 (Hold).

A few better-ranked stocks in the basic materials space are Methanex Corporation MEOH, Air Products and Chemicals, Inc. APD and CF Industries Holdings, Inc. CF, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Methanex has expected long-term earnings growth rate of 15%. Its shares have surged 50.7% in the past year.

Air Products has expected long-term earnings growth rate of 13.3%. Its shares have gained 4.7% in the past year.

CF Industries has expected long-term earnings growth rate of 6%. Its shares have rallied 40.5% in a year.

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