Barrick Gold’s Q4 2016 Earnings Review: Higher Gold Prices And Success Of Cost Reduction Initiatives Drive Results


Barrick Gold reported a significant improvement in its fourth quarter earnings, driven by higher gold prices and the favorable cost performance of its gold mining operations.

ABX Q4 2016 Earnings Review

Barrick’s Q4 2016 realized gold prices were boosted by the sharp increase in gold prices in the third quarter of last year. Heightened safe-haven investment demand for gold in the wake of the UK’s June 23 EU referendum drove gold prices higher in Q3. Though prices dipped in Q4 in anticipation of the Fed’s December interest rate hike, they still averaged higher as compared to the corresponding period of 2015. Moreover, a combination of non-core asset sales over the course of 2015 and the company’s cost reduction initiatives helped lower the cash costs of the gold mining operations. Though these asset sales helped lower operating costs, they also negatively impacted Q4 shipments and revenue growth.

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Going forward, the company management intends to maintain its thrust on lowering its debt burden, in order to maintain financial flexibility in all gold pricing environments. The management has set itself a target of lowering the company’s outstanding debt to $5 billion by the end of 2018, which represents a 37% reduction from present levels. [1] In addition, increasing automation in Barrick’s mining operations will allow the company to continue to lower operating costs over the next couple of years. The company has partnered with Cisco for increasing the application of technological solutions in order to increase the efficiency of mining operations. [2] This initiative should contribute to the improvement in the company’s operating results going forward.

Have more questions about Barrick Gold? See the links below.

Notes:

1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com
2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for Barrick Gold

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Notes:

  1. Barrick Gold’s Q4 2016 Earnings Call Transcript, Seeking Alpha []
  2. Barrick and Cisco Partner for the Digital Reinvention of Mining, Barrick Gold News Release []