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Barrick stumbles on lower prices, higher costs

Mining major Barrick Gold (NYSE:ABX) has reported a surprise September-quarter profit despite headline earnings sliding 53% year-on-year.
Barrick stumbles on lower prices, higher costs Barrick stumbles on lower prices, higher costs Barrick stumbles on lower prices, higher costs Barrick stumbles on lower prices, higher costs Barrick stumbles on lower prices, higher costs

Barrick has booked a $405M third-quarter impairment charge on the Lagunas Norte mine, Peru

The Toronto-based miner's third-quarter adjusted earnings of US8c a share beat market forecasts calling for 5c profit a share, on a forecasted $1.86 billion of gold sales. Revenues came in light at $1.83 billion, down from $1.99 billion.

Barrick booked a $405 million impairment charge on the Lagunas Norte mine, in Peru, which resulted in a $431 million quarterly net loss.

The company fingered falling gold and copper prices for weighing down the bottom line.

Barrick said its total debt had fallen to $5.7 billion, from about 5.8 billion in 2013. It's still short of its $5 billion target by year-end. It said further debt repayment would depend on cash flows and be considered against alternative uses of cash.

Barrick was unable to provide a timeline for when it expected to resolve a dispute between 63.9% subsidiary Acacia Mining (LSE:ACA) and the Tanzanian government. It said talks regarding the proposed framework for Acacia Mining plc's operations in Tanzania were ongoing.

It noted Acacia had been exposed to an "increasingly challenging" operating environment in recent weeks, and flagged concerns about the increasing risks to the safety and security of its people.

It stressed a negotiated resolution remained in the best interest of all parties.

Barrick said it was also making progress on its decentralisation strategy. It has eliminated 235 overhead roles to date.

Barrick has paid $36 million in one-time severance expenses this year, which ultimately helped lower the corporate administration expenses to $235 million from the $275 million budget. The decentralised operating model would result in annualised savings $100 million, Barrick said.

Gold production fell 7.6% year-on-year to 1.15Moz, at slightly higher all-in sustaining costs of $785/oz. Barrick Nevada put in a solid performance.

Copper output fell 7.8% to 106Mlb, at C1 costs of $1.94/lb, which was 38c more than the year-earlier period.

Barrick said full-year gold output was expected near the low end of a range between 4.5-5Moz, with all-in sustaining costs confirmed at $765-$815/oz. Fourth-quarter output is expected at about 1.25Moz.

Copper production was expected at 345-410Mlb, at all-in production costs of $2.55-$2.85/lb.

Barrick said since the proposed, $6.1 billion merger with Randgold Resources (LSE:RRS) was announced, the two respective partners' shares had risen by 25% and 28%, creating $4.8 billion in combined market value. The senior peer index rose over the same period by an average of only 3% over the same period.

The company is preparing for a shareholder vote in November on the proposed all-scrip, no-premium merger.

The results were generating some investor interest in after-market trading on the NYSE Wednesday evening, gaining 2.59% to US$13.45 from the earlier closing price of $13.11, or 1.72% lower for the day. Barrick has a market capitalisation of $15.3 billion.