John Thornton takes over from Peter Munk as CEO at Barrick Gold Corporation (NYSE:ABX) (TSE:ABX) today. A new report from equity research firm Sterne Agee also highlights that the company’s BoD is also getting four new independent directors, and is in rebuilding mode after an unsuccessful bid for Newmont Mining Corp (NYSE:NEM).
Although Sterne Agee analysts Michael S. Dudas and Satyadeep Jain currently rate Barrick Gold Corporation (NYSE:ABX) (TSE:ABX) as Neutral, they are relatively sanguine on the future prospects for the stock. They summarize their point of view in the overview of the report. “We expect Barrick to be almost free cash neutral in 2014E with potential for almost $1B in free cash generation in 2015E. We believe shares may be range bound near-term, but supported by improving gold prices.”
The ExodusPoint Partners International Fund returned 0.36% for May, bringing its year-to-date return to 3.31% in a year that's been particularly challenging for most hedge funds, pushing many into the red. Macroeconomic factors continued to weigh on the market, resulting in significant intra-month volatility for May, although risk assets generally ended the month flat. Macro Read More
Barrick Gold’s first quarter 2014 earnings
The SA report points out that Barrick Gold Corporation (NYSE:ABX) (TSE:ABX) posted relatively strong Q1 2014 results, including significantly higher than expected earnings. First quarter adjusted earnings for Barrick rose to $0.20 vs. our $0.15 and analyst consensus estimate of $0.17.
The company reported producing 1.6 million ounces of gold in the first quarter at $582/oz cash cost (vs. SA’s $590/oz estimate) as well as 104 million pounds of copper at $2.11/pound. Of note, the first quarter 2014 all-in-sustaining cost of $833/oz (ounces) dropped almost $100/oz year-on-year (y/y). Barrick Gold Corporation (NYSE:ABX) (TSE:ABX)’s five main mines — the Cortez, Goldstrike, Lagunas Norte, Veladero and Pueblo Viejo projects — reported 0.94 million ounces or 60% of first quarter total production at an AISC of just below $672/oz.
Barrick Gold Corporation (NYSE:ABX) (TSE:ABX)’s new management has an opportunity to improve shareholder return simply by getting current operations back on track at full production. Company guidance was for gold production of 6.0-6.5 million ounces in 2014 at an AISC of $920-$980/oz. That is an almost 1 million ounce y/y drop in production. This decline was caused by several factors, including a production decline at Cortez, the closing of Pierina as well as sale of non-core mines during the year.
Despite the worrying decline at Cortez, Barrick Gold Corporation (NYSE:ABX) (TSE:ABX) guided that the five core mines would produce 60% of total 2014E production at an AISC of $750-$800/oz. Regarding Copper, the partial collapse of terminal end of main conveyor at Lumwana caused the company to lower 2014 copper production guidance to 410-440 million lbs (compared to previous guidance of 470-500 million lbs), but management expects copper costs to remain unchanged.