Focus on Gold, not Diversifying

(Kitco News) - Barrick Gold Corp.’s (TSX:ABX)(NYSE:ABX) executive team left little doubt that the gold mining giant’s focus is firmly on the yellow metal.

Speaking during the company’s fourth-quarter and full-year conference call, John Thornton, chairman of the company, clearly said where Barrick’s allegiances lie, as speculation in the sector suggested the company was looking to diversify.

“First and foremost, our focus is gold,” he said. “We have no plans to diversify into other metals and we have no plans to add to our existing copper position. Going forward, we will focus our investments in our core regions – this means high quality, long life assets in attractive jurisdictions.”

Thornton towed a strong line regarding the company’s assets, and the expectations Barrick is putting on them, regardless of their standing as core or non-core assets.

“We expect our portfolio to deliver a 10% to 15% return on invested capital through the metal price cycle, and as such, any individual project, we will look at and asses a hurdle rate of 15%,” he said. “We will defer, cancel or sell projects that cannot achieve this target. 

“Of course we recognize that achieving our target hurdle rates will require relentless outstanding execution,” he added. “As such we will be applying far more rigor to ensuring that we meet our cost and schedule commitments, and we will conduct post investment reviews to evaluate how we’ve lived up to our original investment promises, using what we learned to improve execution on future projects.”

Barrick said it would be looking to sell non-assets, highlighting their Porgera joint venture, located in Papua New Guinea, and its Cowal mine, located in Australia.

Thornton also touched on investment into the company’s operations and stated that Barrick would not distribute cash evenly across the portfolio, but that the operations “must compete for it…we’re not going to subsidize loss-makers.”  

Barrick Reports 4Q, Full-Year Loss On $2.8 Billion Impairment Charge

Barrick reported a net loss of $2.85 billion, or $2.45 per share, during the fourth quarter due to a $2.8 billion after-tax impairment charges, stemming from a $930 million hit on its Lumwana mine and a $778 million knock on its Cerro Casale project.

Adjusted net earnings totaled $174 million, or 15 cents per share, while operating cash flow was $371 million, they said.

Full-year 2014 net loss totaled $2.91 billion, or $2.50 per share, with the loss attributed to $3.4 billion in after-tax impairment charges. Adjusted net earnings in 2014 were $793 million, or 68 cents per share, while operating cash flow was $2.30 billion.

Revenues in the fourth quarter and in 2014 were both down to $2.5 billion and $10.2 billion, respectively.

Gold production totaled 6.25 million ounces in 2014 at all-in sustaining costs (AISC) of $864 per ounce. Gold production guidance for 2015 is expected to be between 6.2 million and 6.6 million ounces at AISC ranging from $860 to $895.

Prior to reporting their fourth-quarter and full-year earnings, the company declared a 5-cent dividend payable on March 16, 2015 to shareholders of record at the close of business on February 27, 2015.

The company said they plan to reduce debt by $3 billion by the end of 2015.

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