Barrick Gold Corp.‘s (ABX) adjusted net earnings rose 15% to $1.17 billion or $1.17 per share in the fourth quarter of 2011 compared with $1.02 billion or $1.02 per share in the prior-year period, missing the Zacks Consensus Estimate of $1.26 per share.
The year-over-year increase in profit was led by higher realized gold prices and increased copper sales volumes. For full-year 2011, adjusted net earnings came in at $4.67 billion or $4.67 per share compared with $3.52 billion or $3.56 per share in 2010.
Revenue
Revenues were $3.8 billion in the quarter compared with $3.0 billion in the year-ago quarter. The company produced 1.81 million ounces of gold in the quarter versus 1.7 million ounces in the year-ago period.
Total gold cash costs amounted to $505 per ounce, up from $440 per ounce in the year-ago quarter. Copper production in the quarter jumped 74.4% to 143 million pounds at total cash costs of $1.99 per pound.
For the full year, revenues came in at $14.3 billion compared with $11.0 billion in 2010. Total gold production in the quarter decreased to 7.68 million ounces from 7.8 million ounces in 2010. Copper production increased by 22.6% to 451 million pounds in 2011.
Regional Results
North America: North America region produced 0.76 million ounces of gold at total cash costs of $498 per ounce compared with 0.69 million ounces at total cash costs of $437 per ounce. Strong performances by Cortez and Goldstrike mines led to the growth in production.
The Cortez property contributed 0.28 million ounces at total cash costs of $331 per ounce for the quarter on higher tonnage from the open pit. Production at Cortez is anticipated to be in the range of 1.20-1.25 million ounces at total cash costs of $300-$350 per ounce in 2012, reflecting higher proportion of underground ounces and lower open pit grades as part of planned mine sequencing.
The Goldstrike operation performed strongly, producing 0.25 million ounces at total cash costs of $570 per ounce in the quarter, primarily due to more underground tons and higher open pit grades than anticipated. Production at Goldstrike is expected to be in the range of 1.25-1.30 million ounces in 2012 as the open pit moves back into a higher ore phase.
For full-year 2012, production for the North America business unit is expected to be in the range of 3.425-3.600 million ounces at total cash costs of $475-$525 per ounce.
South America: This business region performed as expected, with production of 0.45 million ounces at total cash costs of $357 per ounce compared with 0.38 million ounces at cash costs of 251 per ounce. The Veladero mine produced 0.23 million ounces at total cash costs of $355 per ounce in the quarter. The Lagunas Norte operation contributed 0.18 million ounces at total cash costs of $268 per ounce.
Production from South America in 2012 is expected to be in the range of 1.550-1.700 million ounces at total cash costs of $430-$480 per ounce, primarily due to lower grades at Veladero and lower grades and recoveries at Lagunas Norte as anticipated in their mine plans.
AustraliaPacific: This business region produced 0.49 million ounces in the quarter, in line with the year-ago quarter. Total cash costs were $677 per ounce in the reported quarter compared with $602 per ounce in the year-ago quarter.
The Porgera mine produced 0.12 million ounces at total cash costs of $679 per ounce. Australia Pacific is expected to produce 1.800-1.950 million ounces in 2012 at total cash costs of $700-$750 per ounce, primarily reflecting higher power costs for Porgera.
African Barrick Gold plc. (ABG): Attributable production from ABG in the fourth quarter of 2011 was 0.12 million ounces at total cash costs of $779 per ounce compared with 0.13 million ounces at total cash costs of $622 per ounce in the prior-year quarter.
Lumwana mine produced 60 million pounds from the Lumwana mine at total cash costs of $2.47 per pound. Lumwana is expected to produce 230-260 million pounds of copper in 2012 at total cash costs of $2.40-$2.75 per pound.
Zaldivar mine in Chile produced 83 million pounds at total cash costs of $1.65 per pound in the fourth quarter and is expected to produce approximately 285-300 million pounds of copper at total cash costs of $1.45-$1.75 per pound in 2012. Barrick’s share of 2012 production is expected to be 0.500-0.535 million ounces at total cash costs of $790-$860 per ounce.
Financial Position
Cash and cash equivalents stood at $2.7 billion at the end of December 31, 2011 compared with $4.0 billion at the end of December 31, 2010. The company’s debt increased to $13.2 billion at the end of December 31, 2011 compared with $6.6 billion at the end of December 31, 2010.
In the fourth quarter of 2011, operating cash flow increased 41% to $1.22 billion. In 2011, operating cash flow increased 23% to $5.32 billion, setting a record for the company.
Outlook
The company expects 2012 gold production in the range of 7.3-7.8 million ounces on lower than expected grades and production at Cortez and Veladero. Total cash costs are expected to be in the range of $520-$560 per ounce and net cash costs in the range of $400-$450 per ounce for 2012. The cash costs reflect a change in the production mix, smaller amounts of capitalized waste stripping and higher labor and other inflationary costs.
Copper production is expected to be in the range of 550-600 million pounds at total cash costs of $1.90-$2.20 per pound in 2012. The cash costs assume that Lumwana mine will produce for entire 2012. It also takes into account higher sulfuric acid costs in Chile, higher royalties in Zambia and the second half start up of Jabal Sayid.
Capital project expenditures for 2012 are expected to be in the range of $2.60-$2.75 billion primarily related to construction activities at Pueblo Viejo and Pascua-Lama.
Barrick retains a Zacks #3 Rank, which translates into a short-term (1 to 3 months) Hold rating. We have recommended the shares of the company as Neutral for the long-term (more than 6 months). The company faces stiff competition from AngloGold Ashanti Ltd. (AU) and Newmont Mining Corp. (NEM).
BARRICK GOLD CP (ABX): Free Stock Analysis Report
ANGLOGOLD LTD (AU): Free Stock Analysis Report
NEWMONT MINING (NEM): Free Stock Analysis Report
