Buoyant Gold Price Saves Barrick Gold From Soft Year

By Glenn Dyer | More Articles by Glenn Dyer

Barrick Gold – the world’s second-biggest gold miner — says second-half earnings rose and the dividend is higher but is worried about the growing impact of the closure of its Pogera mine in Papua New Guinea where the company is in a dispute with the government that shows no sign of being resolved.

On top of that and despite management’s confidence about how well Barrick performed in the COVID-19 dominated quarter, the reality is the company has at least three major mines around the world where the virus has hit operation and continued to a 15% slide in production and a surge in costs in the quarter.

It was only the continuing rise in world gold prices that saved Barrick from reporting what would have been a miserable performance in the three months to June.

Gold production fell 15% due to the impact of the coronavirus at its Veladero mine in Argentina and mines in Canada as well as the loss of output from the Pogera mine because of dispute with the Papua New Guinea government.

Barrick halted production at Porgera and sued the government after it refused to extend the mine’s expired lease in April.

PNG Prime Minister James Marape in a radio interview last week said the mine may be closed for up to three years, according to a statement released Monday by the Porgera joint venture, Barrick Niugini Ltd.

“The chances of recovering the mine if it’s closed for three years is quite slim,” Barrick Chief Executive Mark Bristow told Reuters.

(Barrick has a production target of 4.6 million to 5 million ounces of gold this year). Production at the Veladero mine in Argentina fell and its costs climbed materially as a result of the restrictions.

Overall, Toronto-based Barrick reported a net profit of $US357-million for the three months to June 30, compared to $US194-million in the same quarter of 2019.

The quarterly dividend was lifted by a cent to 8 cents a share – that’s a rise of 14%.

Barrick’s realized gold price in the quarter was $US1,725 an ounce, up 31% from the same quarter of 2019, and reflective of the surge in gold prices to record levels.

A sharp rise in costs for the quarter was a big drawback for analysts. The company’s all-in sustaining costs rose by 18% to $US1,031 an ounce. Costs increased materially at Veladero, Nevada Gold mines, Cortez, also in Nevada, and Hemlo in Canada.

Without that strong rise in the price of gold, Barrick would have reported a poor result.

Glenn Dyer

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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