Barrick reported second quarter net earnings attributable to equity holders of $1.084 billion ($0.93 per share), and adjusted net earnings of $261 million ($0.22 per share).
- The Company reported second quarter revenues of $2.160 billion, net cash provided by operating activities («operating cash flow») of $448 million, and free cash flow of $43 million.
- Gold production in the second quarter was 1.432 million ounces, at a cost of sales applicable to gold of $726 per ounce, and all-in sustaining costs of $710 per ounce.
- Total debt was reduced by $309 million in the second quarter.
- Barrick continues to expect full-year gold production of 5.3-5.6 million ounces, at a cost of sales of $780-$820 per ounce, and all-in sustaining costs of $720-$770 per ounce.
- Normal leaching operations, including the addition of cyanide, have resumed at the Veladero mine in Argentina, following the anticipated ramp up and testing of upgraded leach pad systems.
- The company completed the formation of its strategic partnership with Shandong Gold, a landmark agreement with the potential to create fundamental long-term value for their respective owners, as well as our community and government partners in Argentina.
Barrick Gold Corporation reported second quarter results for the period ending June 30, 2017.
The portfolio delivered higher gold production and a 10 percent decrease in direct mining costs compared to the prior-year period, resulting in lower cost of sales and all-in sustaining costs for the second quarter. A number of factors contributed to lower cash flow over the same period, including higher cash taxes paid, an increase in working capital, and a planned increase in capital expenditures focused on sustaining and growing the value of our operations over the long term.
During the quarter Barrick continued to optimize its portfolio for long-term value creation, completing the formation of a strategic partnership with Shandong that has the potential to unlock the untapped mineral wealth of the El Indio Belt-a highly prospective district on the border of Argentina and Chile that is home to the Veladero mine, Pascua-Lama, Alturas, and other projects.
Financial Highlights
Second quarter net earnings were $1.084 billion ($0.93 per share), compared to $138 million ($0.12 per share) in the prior-year period. This significant increase in net earnings was primarily due to $882 million in gains related to the sale of a 50 percent interest in the Veladero mine, and the sale of a 25 percent interest in the Cerro Casale project.
Significant adjusting items (pre-tax and non-controlling interest effects) in the second quarter of 2017 include:
- $689 million in a gain relating to the sale of a 50 percent interest in the Veladero mine;
- $193 million in a gain relating to the sale of a 25 percent interest in the Cerro Casale project; partially offset by
- $32 million in foreign currency translation losses primarily related to the devaluation of the Argentine Peso on VAT receivables; and
- $26 million in losses on debt extinguishment.
Free cash flow for the second quarter was $43 million, compared to $274 million in the second quarter of 2016. The decrease primarily reflects higher capital expenditures, combined with lower operating cash flows. On a cash basis, capital expenditures for the second quarter were $405 million, compared to $253 million in the second quarter of 2016. This primarily reflects a planned increase in minesite sustaining capital expenditures at Barrick Nevada, relating to higher capitalized stripping costs and the timing of minesite sustaining projects in the current period, as well as greater spending at Veladero relating to phase 4B and 5B of the leach pad expansion and equipment purchases.
Restoring a strong balance sheet
Achieving and maintaining a strong balance sheet remains a top priority for Barrick. The company intends to reduce its total debt from $7.9 billion at the start of 2017, to $5 billion by the end of 2018-at least half of which they are targeting this year. Barrick said it will achieve this by using cash flow from operations, further portfolio optimization, and the creation of new joint ventures and partnerships.
Barrick reduced its total debt by $309 million in the second quarter, or a total of $487 million year to date. On June 30, the Company completed the sale of a 50 percent interest in the Veladero mine in Argentina to Shandong for $960 million, which will be allocated to debt reduction.
Veladero Operational Update
On June 15, San Juan provincial government and judicial authorities lifted operating restrictions that had been imposed at the Veladero heap leach facility in March 2017. Following the lifting of restrictions, Veladero completed a gradual ramp-up of the mine’s upgraded leach pad systems, testing the safety and integrity of the new infrastructure. Normal leaching operations at Veladero, including the addition of new cyanide to the heap leach circuit, resumed in mid-July.
On a 100 percent basis, we continue to expect full-year production at Veladero of 630,000-730,000 ounces of gold, at a cost of sales of $740-$790 per ounce, and all-in sustaining costs of $890-$990 per ounce. Barrick’s share of full-year production, reflecting 50 percent ownership from July 1, is expected to be 430,000-480,000 ounces of gold.
Strategic Cooperation Agreement with Shandong
On June 30, Barrick completed the formation of its strategic partnership with Shandong. The sale of a 50 percent interest in the Veladero mine in San Juan province, to Shandong Gold Mining Co., Ltd, for $960 million was the first of three steps outlined in a strategic cooperation agreement signed by Barrick and Shandong Gold Group Co., Ltd. on April 6. In keeping with the second step in the agreement, the two companies have also formed a working group to explore the joint development of the Pascua-Lama deposit. As a third step, Barrick and Shandong will evaluate additional investment opportunities on the highly prospective El Indio Gold Belt on the border of Argentina and Chile, home to Pascua-Lama, Alturas, and other projects.
Following the closing of the transaction, senior Shandong leaders traveled to Argentina to kick off the new partnership, participating in town hall meetings and welcome ceremonies with employees at the Veladero mine and San Juan offices. The delegation also met with San Juan Governor Sergio Uñac, San Juan Mining Minister Alberto Hensel, and other provincial and federal government officials.
