By Kitco News

Wednesday July 27, 2016 18:15

(Kitco News) - Barrick Gold Corp. (NYSE, TSX: ABX) reported a big jump in second-quarter adjusted earnings Wednesday even though production fell, as the company continued to cut costs and lowered its guidance for all-in sustaining costs for the full year.

Adjusted net earnings were $158 million, or 14 cents, compared to $60 million, or 5 cents, in the prior-year period.

Net earnings were $138 million, or 12 cents per share, a turnaround from a net loss of $9 million, or a penny, in the same period a year ago. Barrick said the increase reflects a decrease in operating costs, particularly lower fuel and energy prices, favorable foreign-exchange movements, reduced royalty expense, and the impact of the company’s “best-in-class” initiatives, including lower labor, contractor and consumable costs. In addition, earnings benefited from lower exploration, evaluation and project expenses.

The company generated $274 million in free cash flow during the April-June period, marking five consecutive quarters of positive free cash flow.

Barrick produced 1.34 million ounces of gold in the second quarter, compared to 1.45 million ounces in the prior-year period. All-in sustaining costs in the second quarter were $782 per ounce, compared to $895 per ounce in the second quarter of 2015. Excluding the impact of divested mines, production for the second quarter increased by 126,000 ounces, Barrick said.

All-in sustaining cost guidance for 2016 has been reduced to between $750 and $790 per ounce, down from $760 to $810 per ounce at the end of the first quarter and below Barrick’s original 2016 guidance of $775 to $825 per ounce.

“Our aspiration is to achieve all-in sustaining costs below $700 per ounce by 2019,” Barrick said in its earnings report.

Officials said the company still expects gold production of 5 million to 5.5 million ounces for the year.

Average realized gold prices climbed to $1,259 an ounce from $1,190 in the same quarter a year ago.

“Our operations continued to deliver robust performance in the second quarter, demonstrating capital discipline, improved operational efficiency and productivity, and stronger cost management as we target best-in-class performance,” Barrick said. “This is driving growing margins and profitability across the entire business, in support of our overriding objective to grow free cash flow per share.

“At the same time, we continue to strengthen our balance sheet with nearly $1 billion in debt repayments completed so far this year, or roughly half of our $2 billion debt reduction target for 2016.”

Officials said Barrick will continue to pursue non-core asset sales but will “only proceed with transactions that make sense for the business, on terms we consider favorable to our shareholders.” The company said it intends to explore the sale of its 50% stake in the KCGM operation in Western Australia.

Copper production in the second quarter was 103 million pounds at all-in sustaining costs of $2.14 per pound. Meanwhile, commercial production has begun at the Jabal Sayid copper mine in Saudi Arabia. As a result, Barrick lifted 2016 copper guidance to between 380 million and 430 million pounds, up from original guidance of 370 million to 410 million pounds.

Barrick also announced that its board of directors maintained the quarterly dividend at 2 cents per share, payable on Sept. 15 to shareholders of record at the close of business on Aug. 31.

Source:Kitco