Barrick Gold Reports Notable Q1 Results Backed By Higher Gold Prices

by Trefis Team
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Barrick Gold (NYSE: ABX) reported its first-quarter results on April 24. The company reported better than expected results and posted an adj-EPS of $0.15, 7% higher year-on-year (y-o-y) and a revenue of $1.7 billion, 10% lower y-o-y. Higher earnings were largely attributable to higher gold prices and a lower depreciation amount.

The company as per its initial outlook had provided a lower guidance for its production volume partly due to the sale of 50% of its Veladero mine on June 30, 2017. Lower output expectations were reflected in the company’s first-quarter production results, wherein total gold output was lower by roughly 20% y-o-y. However, despite a lower output, the company’s earnings increased y-o-y as a result of higher gold prices. The company’s realized gold price per ounce reflected a 9% growth rate. Gold has been gaining strength as a result of the ongoing trade tension between the U.S. and China and the geopolitical tensions in the Middle East. Additionally, a weaker dollar provided a further buying opportunity for the yellow metal.

Higher gold prices also enhanced the company’s cash flow position and enabled it to meet its debt reduction strategy. The company reiterated its plan to reduce its debt level to $5 billion by the end of 2018. The company does not intend to reduce its debt further than the aforementioned level and plans use its excess cash flow beyond this level, for investment in its project pipeline and to enhance its shareholder return. The company reported a free cash flow of $181 million, 12% higher than the prior year.

The company expects its second half to be stronger than its first half due to higher throughput and access to higher grades, specifically in Barrick Nevada and Pueblo Viejo. The company has kept its 2018 production and cost guidance intact despite the current disruption of operations at Papua New Guinea. We expect the company to have a better than expected 2018 if gold prices continue to endure at its current level. We have kept our base case assumptions unchanged as our current estimates follow the company’s reported results. You can view our base case for Barrick using our interactive dashboard analysis and make changes to our assumptions per your own estimates.


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