Barrick Gold Corporation (NYSE:ABX)(TSX:ABX) today reported net earnings of $0.75 billion ($0.75 per share) compared to net earnings of $1.16 billion ($1.16 per share) in the same prior year quarter.
…
Operating Highlights
• Gold and copper production of 1.74 million ounces and 109 million pounds, respectively
• Gold total cash costs of $613 per ounce1 and net cash costs of $534 per ounce1
…
Pascua-Lama Cost Increase
• Due to lower than expected productivity and persistent inflationary and other cost pressures, as previously disclosed, the company initiated a detailed review of the cost and schedule estimates for Pascua-Lama in the second quarter. Preliminary results currently indicate an approximate 50-60 percent increase in capital costs from the top end of the previously announced estimate of $4.7-$5.0 billion, with first production expected in mid-2014. The company will provide a further progress update with third quarter results.
…
• In light of the current economic environment and Barrick’s increased rigor on disciplined capital allocation, the company has determined that various pipeline projects do not currently meet its investment hurdles. As a result, our gold and copper production base is now expected to be 8+ million ounces by 2015 and 600+ million pounds by 2013, respectively, representing a high quality and profitable core from which to expand further.
…
PROJECTS IN FEASIBILITY AND PERMITTING
Barrick is evaluating its next tier of projects. Cerro Casale and Donlin Gold do not currently meet our investment criteria, primarily due to their large initial capital investments, and under our disciplined capital allocation framework we would not make a decision to construct them at this time. However, they contain large, long life mineral resources in stable jurisdictions, have significant leverage to the price of gold, and therefore represent valuable long-term opportunities for the company. We will maintain and enhance the option value of these projects by advancing permitting activities at reasonable costs which, in the case of Donlin Gold, will take a number of years. During this time, we will monitor the attractiveness of these projects and evaluate alternatives to improve their economics. This will provide the company with the option to make construction decisions in the future should investment conditions warrant.
…
The company has recently launched a full review of its operations and projects to ensure they meet our objective of delivering appropriate risk-adjusted returns and maximizing free cash flow generation. In light of the current economic environment and this increased rigor on disciplined capital allocation, we have determined that various pipeline projects do not currently meet our investment criteria.
[emphasis ours]
I am afraid this is going to be systemic in most of the industry….
@Hans
Well I suppose Newmont’s disappointing Q2 results are another data point in support of your thesis:
http://newmont.q4web.com/Press-Releases/News-Release/2012/Newmont-Announces-Second-Quarter-Net-Income-from-Continuing-Operations-of-056-per-Share1130337/default.aspx
One would think all these delays and production revisions are eventually going to add up to a meaningful shift in the supply/demand dynamic. Just saying it could be a glass half full situation for certain companies given the added price support.
@Hans
Well, let’s add Goldcorps revised guidance from two weeks ago:
Operating issues at the two mines have led Goldcorp to lower its production guidance for the year. It now expects to produce 2.35 to 2.45 million ounces of gold this year, down from its previous forecast of 2.6 million ounces.
Also, as production levels are expected to fall, costs will inevitably rise. Goldcorp now projects total cash cost of $310 to $340 per ounce of gold on a by-product basis, up from the earlier estimate of $250 to $275 per ounce. On a co-product basis, it expects cash cost of $625 to $650 per ounce versus the previous estimate of $550 to $600 per ounce.
Plus today on Cerro Negro:
“Initial gold production is expected in late 2013.”
which seems like a delay to me.
@Zurbo
Dr Zurbo, thank you for the update….It is not what I wanted to hear, nevertheless, it is what I was beginning to fear last March or April…
If two of the best miners in the industry have declining earnings, what does it mean for the rest of the miners? Goodbye to any meaningful dividend increases…
I am still holding out for good news, but if the industry continues to disappoint as it has, there will be few buyers left if and when they do perform…Our position will be in a gold ETN…
I am, personally, getting frustrated with all the ongoing problems the miners are encountering…I just do not want all the headaches anymore…The mount of DD, is becoming a burden…Frankly, it has been more than just a bad quarter or two; it is becoming a trend…
After seven years of investing in gold miming industry, I am within two weeks of exiting and saving both my capital and sanity…
When I speak with my wife about the miners, she gives me the golden finger and says, you have lost us so much money, it is not even worth divorcing you…
Look at the laughable book/price ratio, with AUQ or Gammon Gold trading under book…These miners should, as I thought five years ago, should be trading at 2 to 3 times book…
What the Au miners truly need is overnight $3000 gold…
@Tweetie
Thank you, Tweetie…I posted a link addressing that issue….I wish the industry would stop with the projections, which all to often are wrong…
Frankly, as they would need is a traffic light, which would sign future levels of productions….
regarding Pascua lama that thing may not even ever get finished
http://www.snopes.com/politics/business/pascualama.asp
http://articles.chicagotribune.com/2012-07-03/news/sns-rt-argentina-miningglaciers-update-1l2e8i3emm-20120703_1_mining-industry-glacier-pascua-lama
Seems like a number of big projects are in trouble not just gold but copper and other base metals.
I’m thinking this may affect future supply metrics in silver more so than gold as silver supply is so dependent on these mines and industrial demand takes most of each years mine supply as opposed to gold which just gets stored and all that supply can come to market at the right price.
A bit of good news for some…!
http://www.mineweb.com/mineweb/view/mineweb/en/page34?oid=155825&sn=Detail&pid=102055
Oh, that did not last long….Just made the edit time limit!
http://www.mineweb.com/mineweb/view/mineweb/en/page34?oid=155946&sn=Detail&pid=102055