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Barrick Reports 4Q, Full-Year Net Losses, Cites Impairment Charges

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Editor's Note: Updating earlier story to report adjusted earnings a penny above expectations, 2019 guidance and Randgold results.

(Kitco News) - Barrick Gold Corp. (NYSE: GOLD; TSX: ABX) Wednesday reported a net loss for the fourth quarter and full-year 2018 due in large part to impairment charges, but listed an adjusted profit for both periods.

The financial results exclude those from newly acquired Randgold Resources Ltd., as the merger between the two gold-mining companies did not go into effect until the start of this year. However, officials did list 2019 production guidance for the newly merged company, projecting somewhere between 5.1 million and 5.6 million ounces.

Barrick listed a fourth-quarter net loss of $1.2 billion, or $1.02 per share, compared to a net loss of $314 million, or 27 cents, in the same quarter a year earlier. The full-year net loss was put at $1.55 billion, or $1.32 per share, compared to a 2017 profit of $1.44 million, or $1.23 per share.

Excluding special items, adjusted earnings in the fourth quarter were $69 million, or 6 cents per share, down from $253 million, or 22 cents, in the same quarter of 2017. The October-December adjusted earnings beat the consensus estimate of around 5 cents.

Full-year adjusted net earnings were $409 million, or 35 cents, down from $876 million, or 75 cents, in 2017.

For 2018, Barrick listed net impairment charges of some $900 million for the Veladero and Lagunas Norte mines, plus $742 million in significant tax adjustments.

During the fourth quarter, the company decided that the carbonaceous material project at Lagunas Norte does not currently meet Barrick’s investment criteria, resulting in an inventory impairment of $166 million, the company said. Barrick previously reported an asset impairment of $405 million at Lagunas Norte in the third quarter, following a decision not to proceed with the refractory sulphide ore project.

An asset impairment of $246 million and a goodwill impairment of $154 million were also recorded at the Veladero mine in the fourth quarter, reflecting an increase in the mine’s cost structure due to increased government imposts and higher energy costs, Barrick said.

The average realized gold price fell to $1,223 an ounce in the fourth quarter from $1,280 in the year-ago period. The average copper price fell to $2.76 a pound from $3.34. All-in sustaining costs per gold ounce rose to $788 an ounce from $756.

The company, which had already reported output in January, produced 1.26 million ounces of gold in the fourth quarter, plus 109 million pounds of copper in the fourth quarter at AISC of $2.95 per pound.

Full-year gold production was 4.53 million ounces, within guidance, while AISC came in at $806 per ounce. Full-year copper production was 383 million pounds, also within guidance, at AISC of $2.82 per pound.

Total debt was reduced by $685 million, or 11% in 2018, Barrick said. The company ended the year with a $1.6 billion cash balance.

“Reflecting our commitment to shareholder returns, we increased our annual dividend by 33%, from 12 cents per share in 2017 to 16 cents per share in 2018,” Barrick said. “In addition, we continued to strengthen our balance sheet with the repurchase of $629 million in outstanding notes in July, bringing the company’s total debt repayments to roughly $10 billion over the past five and a half years.”

Meanwhile, Randgold had a cash balance of some $0.7 billion and no debt, Barrick said. Thus, the combined cash position of the combined company was put at $2.3 billion as of Jan. 1.

Barrick’s listed proven and probable gold reserves of 62.3 million ounces as of Dec. 31, compared to 64.4 million at the end of 2017. These were calculated at a $1,200 gold price, the same as in 2017.

“While 5.4 million ounces of reserves were depleted through mining and processing, the company added 3.2 million ounces of reserves at an average grade of 4.7 grams per tonne, significantly higher than our overall reserve grade of 1.56 grams per tonne,” Barrick said. “Reserves at our underground operations, where the majority of the company’s future production will come from, were replaced, with additions at Turquoise Ridge, Goldstrike, Hemlo and Porgera.”

Barrick’s copper proven and probable reserves were 10.6 billion pounds as of year-end.

Production Guidance Listed For 2019

The merged company said it projects 2019 production guidance of between 5.1 million and 5.6 million ounces of gold and copper output of between 375 million and 430 million pounds. AISC for gold are seen between $870 and $920 an ounce.

Over the course of the year, the company will be combining the reserves and resources of the old Barrick and newly acquired Randgold based on common calculation criteria, the company said. These will be reported at the end of the year.

Mark Bristow, the president and chief executive officer, said one of his first priorities was to establish executive teams in North America, Latin America, Africa and the Middle East, with these now in place.

Randgold Earns Profit In Fourth Quarter

Meanwhile, the portion of Barrick that previously was Randgold posted a profit in the final quarter prior to the merger. Randgold earned $29.3 million in the fourth quarter, down from $73.2 million a year earlier.  Earnings per share fell to 19 cents from 65 cents.

The full-year profit was $227.3 million, down from $335 million the prior year. Earnings per share fell to $2 from $2.96 in 2017.

The company reported gold production of 1.28 million ounces last year that was slightly below guidance, blaming this on a protracted strike at Tongon in the Côte d’Ivoire. Randgold also listed record production by Kibali in the Democratic Republic of Congo, which at 807,000 ounces of gold was above guidance. 

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