Barrick Gold Corporation’s (ABX) adjusted earnings (excluding one-time items) for the fourth quarter of 2013 plummeted to 37 cents per share from $1.16 in the year-ago quarter and missed the Zacks Consensus Estimate of 42 cents. Lower realized gold and copper prices and a decline in gold and copper sales volumes led to the decline in earnings.
On a reported basis, net loss in the fourth quarter was $2.83 billion or $2.61 per share, compared with a net loss of $3.01 billion or $3.01 per share in the prior-year quarter. The loss includes $2.82 billion in impairment charges, mainly associated with Pascua-Lama, Porgera and Veladero mines and the Australia Pacific gold segment; and $176 million in costs associated with temporary suspension of construction at Pascua-Lama.
For 2013, adjusted earnings (excluding one-time items) dropped to $2.51 per share from $3.95 in 2012. The results missed the Zacks Consensus Estimate of $2.55. On a reported basis, Barrick posted a net loss of $10.37 billion ($10.14 per share), including after-tax impairment charges of $11.54 billion, compared with a net loss of $0.54 billion or (54 cents per share) in 2012.
Revenues fell around 29.5% year over year to $2,926 million in the reported quarter but exceeded the Zacks Consensus Estimate of $2,815 million. Average realized price of gold decreased 25.8% year over year to $1,272 per ounce. All-in costs declined 8.1% to $1,317 per ounce while all-in sustaining costs fell roughly 14.2% to $899 per ounce in the reported quarter.
Gold production fell to 1.71 million ounces in the quarter from 2 million ounces a year ago. Copper production increased to 139 million pounds from 130 million pounds in the prior-year quarter.
For full-year 2013, revenues declined 13.1% year over year to $12,511 million, but beat the Zacks Consensus Estimate of $12,393 million.
North America: The Goldstrike mine in the North American region produced 0.24 million ounces of gold in the quarter, down 26.7% year over year, at average all-in sustaining costs (AISCF) of $770 per ounce. The Cortez mine produced 0.24 million ounces, down 29.5% year over year. Production at the Pueblo Viejo increased 29.5% to 157 million ounces. Production at Lagunas Norte and Veladero mines declined 8.9% and 36% year over year, respectively. In North America-Other mines, production increased 7.5% to 0.23 million ounces.
Australia Pacific: The region produced 0.36 million ounces in the quarter compared with 0.47 million ounces in the year-ago quarter. AISC was $966 per ounce, down from $1,217 per ounce in the year-ago quarter.
African Barrick Gold plc. (ABG): Attributable production of African Barrick Gold in the quarter was 0.12 million ounces compared with 0.13 million ounces in the year-ago quarter. AISC was $1,171 per ounce in the quarter, down 30% year over year.
Cash and cash equivalents stood at $2,404 million as of Dec 31, 2013, up roughly 14.6% from $2,097 million as of Dec 31, 2012. Total debt was $12.9 billion, up around 6.7% from $12.1 billion a year ago.
Suspension of Pascua-Lama Mine
Barrick announced, during the reported quarter, that it has temporarily suspended construction activities at the Pascua-Lama mine, barring the requisite activities for environmental protection and regulatory compliance. Earlier in the year, Chile's environmental regulator halted construction on its side of the project, and imposed sanctions citing "serious violations" of its environmental permit.
The ramp-down is expected to be completed by mid-2014. The company expects to incur costs of roughly $300 million in 2014 due to the ramp-down as well as for the environmental and social obligations.
Barrick stated that it will halt work in such a manner that will allow efficient and effective re-start when conditions permit. The decision to re-start will depend on certain factors like improved project economics, outlook for metal prices, and reduced uncertainty associated with legal and other regulatory requirements.
For 2014, Barrick expects gold production in the range of 6–6.5 million ounces. The lower production in 2014 manifests the company’s strategy to maximize free cash flow and returns over ounces, the sale of high-cost, short-life mines, lower production from Cortez, and the move to close Pierina. These declines will be partly offset by an increase in production at Pueblo Viejo. Barrick expects AISC to be $920–$980 per ounce and adjusted operating costs have been projected to be $590–$640 per ounce.
Barrick expects total capital expenditures to decrease by about 50% in 2014 to $2.40–$2.70 billion, a reduction of about $2.5 billion from 2013.
The company expects exploration budget, which remains focused on high quality and priority projects, to be in the range of $200–$240 million. Around 50% of the budget is allocated to Nevada, most of which is targeted for the Goldrush project.
Barrick forecasts higher finance costs of $800–$825 million in 2014 as a result of the decision to temporarily suspend Pascua-Lama, where interest will no longer be capitalized. Effective income tax rate for 2014 is expected to be around 50% assuming average gold price of $1,300 per ounce.
Currently, Barrick retains a Zacks Rank #3 (Hold).