Barrick Gold Cuts Staff, Sells Mines Amid Steep 2014 Losses, Puts 2015 Capex at About $2 Billion

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Researched by Industrial Info Resources (Sugar Land, Texas)--Barrick Gold Corporation (NYSE:ABX) (Toronto, Ontario), the largest gold-mining company in the world, recorded steep losses in 2014 following a $930 million writedown on its Lumwana mine in Zambia, which is poised to close, and a $778 million impairment on its Cerro Casale mine in Chile, which has suffered from low metal prices. Still, net losses of $2.91 billion for the full year were far below net losses of $10.37 billion in 2013, as Barrick cut its managerial staff and began streamlining operations. The fourth quarter's net losses of $2.85 billion were slightly higher than fourth-quarter 2013's losses of $2.83 billion.

Industrial Info is tracking $2.15 billion in active projects involving Barrick, including the $250 million expansion of the Bald Mountain gold mines in Ely, Nevada. The project involves expanding North Area operations from 8,899 to 13,631 acres, and South Area operations from 960 to 3,644 acres, by consolidating parts of the mine, expanding disposal areas and adding seven leach pads (four in the North Area, three in the South Area). Barrick expects the project, which is expected to kick off in the second quarter of 2017, to extend the mine life to 2032.

Total revenues stood at $10.24 billion for the year, an 18.26% decrease from 2013, and $2.51 billion for fourth-quarter 2014, a 14.68% decrease from fourth-quarter 2013. In addition to the above-mentioned writedown and impairment, Barrick incurred $1.1 billion in goodwill impairments, particularly on Lumwana and Zaldivar (Chile). The company also suffered from lower gold and copper prices, which have had negative effects across the global Metals & Minerals Industry, and saw a 14.05% decrease in gold sales by ounce. Still, gold production improved at the Goldstrike mine in Nevada and the Pueblo Viejo mine in the Dominican Republic.

Capital expenditures were reported to total $2.18 billion in 2014 and $627 million in the fourth quarter, both of which are less than half of full-year 2013's capital expenditures of $5 billion and fourth-quarter 2013's $1.29 billion.

"We have reduced our head office by almost 50%, and we've eliminated all management layers between Toronto and our mines," said John Thornton, chairman of Barrick, in a conference call.

Capital expenditures are expected to total between $1.9 billion and $2.2 billion in 2015, with the lower median attributed to the recent decision to suspend operations at the Lumwana mine in Zambia and fourth-quarter 2014's commissioning of Goldstrike's thiosulfate project. However, the company expects to increase spending at the Goldstrike, Puebloe Viejo, Cortez (Nevada) and Lagunas Norte (Peru) mines, and increase stripping projects at Bald Mountain (Nevada), Porgera (Papua New Guinea) and Veladero (Argentina) mines.

Gold production is expected to total between 6.2 billion and 6.6 billion ounces in 2015, while copper production is expected to total between 310 million and 340 million ounces. Acacia (Tanzania), Goldstrike and Lagunas Norte are all expected to see stronger gold production, but the suspension of Lumwana is expected to bring down copper results.

Barrick plans to reduce its net debt by at least $3 billion in 2015. The company plans to sell the Porgera (Papua New Guinea) and Cowal (New South Wales) mines as part of this effort.

"First and foremost, our focus is gold. We have no plans to diversify into other metals, and we have no plans to add to our existing copper position," Thornton said in the conference call. "Going forward, we'll focus our investments in our core regions--this means high-quality, long-life assets in attractive jurisdictions. 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 assess it against our hurdle rate of 15%. We will defer, cancel or sell projects that cannot achieve this target."

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