TORONTO, ONTARIO--(Marketwired - Oct. 28, 2015) - Barrick Gold Corporation (NYSE:ABX)(TSX:ABX)
The company reported adjusted net earnings of $131 million ($0.11 per share)1and a net loss of $264 million ($0.23 per share) in the third quarter.
Third quarter adjusted EBITDA was $942 million1; EBITDA was $490 million1.
Free cash flow was $866 million1, or $256 million excluding proceeds from the Pueblo Viejo streaming transaction.
Gold production in the third quarter was 1.66 million ounces at all-in sustaining costs (AISC) of $771 per ounce1
Full-year gold production is expected to be 6.1-6.3 million ounces.
Full-year all-in sustaining cost guidance reduced to $830-$870 per ounce from previous range of $840-$880 per ounce.
On track to achieve $2 billion in cash flow improvements by end of 2016.
Total debt reduced by 15 percent year-to-date, on track to achieve $3 billion debt reduction target.
Progressing drilling and feasibility study work to convert resources to reserves over the next five years at Cortez, Goldstrike, Lagunas Norte, Pueblo Viejo, Turquoise Ridge and other sites.
Barrick Gold Corporation (NYSE:ABX)(TSX:ABX) (Barrick or the "company") today reported adjusted net earnings of $131 million ($0.11 per share) for the third quarter and a net loss of $264 million ($0.23 per share). Third quarter adjusted EBITDA was $942 million and EBITDA was $490 million. Free cash flow was $866 million, or $256 million excluding the impact of $610 million in proceeds from the Pueblo Viejo streaming transaction2.
Production in the third quarter was in line with expectations at 1.66 million ounces of gold. All-in sustaining costs were $771 per ounce and cash costs were $570 per ounce1. Full-year 2015 gold production is expected to be 6.1-6.3 million ounces at lower all-in sustaining costs of $830-$870 per ounce.
Our objective is to grow free cash flow per share from a portfolio of high-quality gold assets through disciplined capital allocation and operational excellence. In support of this objective, we have returned to a leaner, decentralized operating model designed to maximize free cash flow and improve execution. Clear capital allocation criteria, including a 15 percent hurdle rate for all investments, are driving greater financial rigor and stronger returns. The divestment of non-core assets has refocused our portfolio and we have formed vital new strategic partnerships that will drive new opportunities in the future.
All of this is driving stronger performance across the business, reflected by two consecutive quarters of positive free cash flow and improved costs. At the same time, we are strengthening our balance sheet and remain on track to reduce debt by $3 billion. This momentum will support our overriding objective of growing free cash flow per share, underpinned by a strong pipeline of organic projects and mine site expansion opportunities in our core regions.
STRENGTHENING THE BALANCE SHEET
Earlier this year, we set a $3 billion debt reduction target for 2015. We said we would achieve this through the disciplined sale of non-core assets, the formation of new joint ventures and partnerships, and by maximizing free cash flow from our operations. Thus far, we have completed or announced asset sales, joint ventures and partnerships valued at $2.46 billion. We have also generated $282 million in positive free cash flow in the last two quarters despite a lower gold price, reflecting the impact of our efforts to maximize free cash flow across the company. Both asset sales and cash flow improvements have been credit positive, and have resulted in improvements to our debt-to-EBITDA ratio. Achieving our $3 billion debt reduction target will also reduce annual pre-tax interest payments by approximately $140 million.
So far this year, total debt has been reduced by 15 percent, from $13.1 billion to $11.2 billion3, significantly reducing our near-term debt repayment obligations. We currently have less than $250 million in debt due before 2018 and approximately $5 billion of our $11.2 billion in outstanding debt matures after 2032. Building on $1.9 billion in repayments already completed this year, we intend to use approximately $1 billion in proceeds from the sale of 50 percent of ZaldÃvar to reduce debt. The sale is expected to close in the fourth quarter. This would bring total debt repayments to approximately $2.9 billion. We intend to use free cash flow to reach our target of $3 billion.
Assuming the completion of $3 billion in repayments, total debt will have been reduced by 23 percent, from $13.1 billion to $10.1 billion.
We also expect to announce the outcome of a process for the sale of certain non-core U.S. assets in the fourth quarter. As we move into 2016 and beyond, we will continue to take prudent steps to strengthen our balance sheet, balancing debt repayments with investments in profitable production that will drive growth in free cash flow and EBITDA.
Our liquidity position continues to improve, with strong cash flow generation, very modest near-term debt repayment obligations, a $4 billion undrawn credit facility and $3.34 billion in cash on hand at the end of the third quarter.
FINANCIAL DISCUSSION
Free cash flow increased to $866 million, or $256 million excluding the impact of $610 million in proceeds from the Pueblo Viejo streaming transaction. This compares to $26 million in free cash flow in the second quarter of 2015. Two consecutive quarters of positive free cash flow after a prolonged period of negative free cash flow reflects our driving focus on maximizing free cash flow through greater capital discipline, operational efficiencies and strong cost management.
Third quarter 2015 adjusted net earnings were $131 million ($0.11 per share) compared to $222 million ($0.19 per share) in the prior year period. The net loss for the quarter was $264 million ($0.23 per share) compared to net earnings of $125 million ($0.11 per share) in the prior year quarter. Lower adjusted net earnings reflect lower realized gold and copper prices and higher depreciation compared to the prior year period, partially offset by increased gold and copper sales. Significant adjusting items for the quarter (net of tax and non-controlling interest effects) include:
$455 million in impairment charges primarily related to the reclassification of our ZaldÃvar mine as held-for-sale; and
$29 million in costs arising from the write-down of obsolete supplies inventory; partially offset by
$52 million of gains related to the sale of our Cowal mine and 50 percent of our interest in the Porgera mine; and
$45 million in unrealized foreign currency translation gains.
Third quarter adjusted EBITDA was $942 million compared to $1.1 billion in the prior year period. On an unadjusted basis, EBITDA was $490 million for the third quarter compared to $1.0 billion in the prior year period. Operating cash flow was $1.26 billion compared to $852 million in the prior year period. Higher operating cash flow in the quarter reflects the impact of $610 million in proceeds from the Pueblo Viejo streaming transaction.
OPERATING HIGHLIGHTS AND GUIDANCE
Barrick's operations continued to perform in line with expectations for the year, meeting cost and production targets for the third quarter while generating stronger free cash flow. We have tightened our gold production guidance range for 2015, from 6.1-6.4 million ounces to 6.1-6.3 million ounces, reflecting lower anticipated gold production from Acacia Mining plc.
All-in sustaining cost guidance for the year has been reduced to $830-$870 per ounce from the previous range of $840-$880 per ounce. Average all-in sustaining costs for our five core mines are now expected to be $700-$725 per ounce in 2015, down from $725-$775 per ounce at the start of this year. These mines are expected to account for about 75 percent of free cash flow from operations and 60-65 percent of production in 2015.
Fourth quarter all-in sustaining costs are now expected to be similar to the third quarter while production is expected to be slightly higher, primarily driven by the impact of higher sustaining capital expenditures offset by higher production at Cortez, Pueblo Viejo, Lagunas Norte and Veladero. We expect significantly higher depreciation in the fourth quarter, primarily related to a drawdown in inventory stockpiles at Cortez, Lagunas Norte and Goldstrike and higher sales volumes at Pueblo Viejo.
Total copper guidance for 2015 remains unchanged at 480-520 million pounds. Full-year C1 cash costs are now expected to be $1.60-$1.85 per pound5, down from $1.75-$2.00 per pound, driven by currency impacts and improved costs at Lumwana.
Third Quarter Current Original
Gold 2015 2015 Guidance 2015 Guidance
Production (000s of ounces)6 1,663 6,100-6,3007 6,200-6,600
AISC ($per ounce) 771 830-870 860-895
Cash costs ($per ounce) 570 600-625 600-640
Copper
Production (millions of pounds) 140 480-520 310-340
C1 cash costs ($per pound) 1.53 1.60-1.85 1.75-2.00
Total Capital Expenditures ($millions)8 384 ~1,700 1,900-2,200
Cortez
The Cortez mine produced 321,000 ounces at all-in sustaining costs of $501 per ounce in the third quarter. Production benefited from higher open pit tonnage and improved underground productivity through the implementation of short interval controls, an initiative identified as part of our Value Realization review for Cortez. Higher production, lower operating costs and lower sustaining capital drove improved all-in sustaining costs. Production in 2015 is now forecast to be 900,000-950,000 ounces at all-in sustaining costs of $675-$725 per ounce. Fourth quarter production at Cortez is expected to be slightly higher than the third quarter, at higher costs.
A prefeasibility study for expanded underground mining in an area known as Deep South below currently permitted levels will be completed in late 2015 and results are expected to be disclosed with the company's fourth quarter results. Our Value Realization review at Cortez also identified long-hole stoping as the preferred mining method for the deposit, as compared to the cut-and-fill method previously contemplated for the underground expansion, which could improve the economics of the project. Mineralization in this zone is primarily oxide and higher grade compared to the current underground mine, which is sulfide in nature. The limits of the Lower Zone have not yet been defined, and drilling has indicated the potential for new targets at depth.
With a 382-square-mile land package, Cortez remains a highly prospective district for Barrick.
Goldstrike
The Goldstrike mine contributed 328,000 ounces in the third quarter in line with plan, while all-in sustaining costs of $558 per ounce were better than expected due to lower operating costs and lower sustaining capital. Our innovative thiosulfate (TCM) circuit achieved commercial production in the third quarter, coming in at a capital cost of $610 million. We expect to complete the ramp up of the TCM circuit in the first half of 2016. Goldstrike's production for 2015 is forecast to be 1.00-1.10 million ounces at improved all-in sustaining costs of $650-$700 per ounce. Fourth quarter production is expected to be similar to the third quarter, at slightly higher costs.
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