Copper helps boost Barrick profit despite rising costs

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An increase in copper production helped Barrick Gold Corp. boost its profit by almost 19 per cent in the second quarter, meeting analyst expectations.

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The Canadian miner reported Monday that it produced 120 million pounds of copper during the quarter, 25 per cent more than in the same period last year.

Gold production at 1.043 million ounces was about the same as last year, but up five per cent from the previous quarter.

Net earnings increased to US$488 million, or 27 cents per share, for the quarter that ended on June 30, compared to US$411 million in Q2 2021. Adjusted net earnings fell to US$419 million, 18 per cent lower than last year.

Inflation drove up the miner’s costs. All-in sustaining costs per ounce of gold — a measure of cost of production — rose to US$1,212 per ounce compared to US$1,164 per ounce in the previous quarter and US$1,087 per ounce a year ago.

Barrick’s project capital expenditure rose by 11 per cent to US$226 million from last year.

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CEO Mark Bristow said while he was concerned about rising prices, he was confident about “managing” the situation.

“We have taken out so much of costs in Barrick in the last three years and we are still guiding more this year which will offset some of the impacts of inflation,” said Bristow.

“You have to manage…the best way to do it is start with high quality assets. Second, and most important, is good people who act like owners rather than corporate employees, so they worry about efficiency,” he added.

Asked about the impact of inflation on mergers in the gold sector, Bristow said that while “opportunistic” mergers at the “right time” create value, exploration has more potential to create growth than M&A.

“We use very stringent investment filters to manage our strategic growth … we have built a very strong exploration group across the globe and we have got some exciting projects on the way,” he added.

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Investors  got an update on several existing projects on Monday.

Investors also got an update on several of the miner’s projects Monday.

The Dominican Republic government has identified a site for a new tailings facility for Barrick’s Pueblo Viejo project, which could extend the mine’s life to 2040 and surpass the average annual production of 800,000 ounces of gold.

The mine was heading for closure due to limitations on its current tailings storage facility, the company said.

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Barrick also now expects a decision on the public review process for its Goldrush project in Nevada in the first half of 2023, which, according to analysts, was previously scheduled for the end of this year.

Scotiabank analyst Tanya Jakusconek, who follows Barrick, described the company’s latest update as neutral.

“Gold production is expected to improve over the remaining quarters, with Q4/22 forecasted to be the strongest,” Jakusconek wrote in a research note to clients.

“Barrick expects to be either at the top end or slightly above the gold cost guidance ranges for 2022 (we are modeling cost slightly above the top end of the range) given the higher gold and fuel market prices compared to the assumptions used in the original guidance,” the analyst added.

Barrick shares were up 3.9 per cent at $20.96 in the afternoon on the TSX. The company has a market cap of about US$36.85 billion.

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