The 3 Biggest Takeaways From Barrick’s First Quarter

The last year has brought plenty of surprises to Barrick’s shareholders. Were there any more today?

| More on:
The Motley Fool

On Wednesday morning, Barrick Gold (TSX: ABX)(NYSE: ABX) reported earnings for the first quarter of 2014. And it was not pretty. Net income shrunk by nearly three quarters on an adjusted basis, and 90% on a reported basis. Yet those results were still good enough to beat analyst estimates.

So what should shareholders make of this report? The following are the three biggest headlines.

1. Lower prices are taking their toll

Of course, this is why Barrick was still able to beat estimates. Everyone is well aware of the low gold price environment, and had already factored that into their forecasts for Barrick. For the quarter, the company’s average realized gold price was $1,285, down 21% year over year. Copper prices also slumped, with Barrick’s average realized price decreasing 15% from 2013 levels.

2. The effects of scaling back

As the price of gold has slumped, Barrick has been forced to scale back its operations. Matters have been made worse by the company’s very levered balance sheet. In response, Barrick has divested over $1 billion worth of assets. This included high-cost mines in Australia, a decreased stake in African Barrick Gold, and a sale of the company’s 33% stake of the Marigold mine in Nevada.

As a result, gold production decreased to a little under 1.6 million ounces during the quarter, a 12% decrease year over year. Barrick has reiterated its guidance for 2014 of 6.0-6.5 million ounces. Back in 2011, gold production was nearly 7.7 million ounces. But of course production growth is not top of mind for Barrick’s investors anymore. Thanks to Barrick’s divestures and other cost-cutting efforts, “all-in sustaining costs” decreased by 11% to $833 per ounce.

3. Peter Munk

The results from Barrick’s first quarter will not be enough to overshadow Chairman Peter Munk, who retires today. Mr. Munk should be honoured and congratulated for all the work he’s done over many decades, but he is retiring right in the middle of a firestorm. In a lengthy interview with the Financial Post last week, he blasted the board of Newmont Mining (NYSE: NEM) as merger talks broke down.

He also didn’t mince words about Barrick. When talking about Pascua-Lama, a failed project on the border of Chile and Argentina, he called it “a f—k up of such magnitude that they’ll write books about it.” His candour will be missed.

Foolish bottom line

The results that Barrick posted today are certainly ugly, but not unexpected. Meanwhile, today is more about Mr. Munk, one of Canada’s most remarkable entrepreneurs. Barrick will not be the same without him, although this is not always a bad thing.

Fool contributor Benjamin Sinclair holds no positions in any of the stocks mentioned in this article.

More on Investing

data analyze research
Bank Stocks

1 Cheap Canadian Dividend Stock Down X% to Buy and Hold

Bank of Nova Scotia (TSX:BNS) often doesn't get the love it should from investors. Here's why this stock looks like…

Read more »

Income and growth financial chart
Dividend Stocks

Stock Market Sell-Off: 3 Stocks I’m Still Buying Now

A cautious but opportunistic approach using three TSX stocks can help navigate the current war-driven volatility and ensuing market sell-offs.

Read more »

Person holds banknotes of Canadian dollars
Dividend Stocks

Passive-Income Investors: This TSX Stock Has a 3.38% Dividend Yield With Monthly Payouts

Northland Power's stock price has fallen 36% in three years, providing a rare opportunity to buy this passive-income stock on…

Read more »

pig shows concept of sustainable investing
Investing

An Ideal TFSA Stock With a Steady 5.3% Yield

Here's why Enbridge (TSX:ENB) stands out to me as a key potential winner from ongoing geopolitical issues, and where this…

Read more »

top TSX stocks to buy
Investing

Got $5,000? 2 Top Growth Stocks to Buy That Could Double Your Money

These two stocks have the potential to generate annualized returns exceeding 18.9% over the next four years.

Read more »

Canadian Red maple leaves seamless wallpaper pattern
Stocks for Beginners

5 Canadian Stocks to Buy and Hold for the Next 5 Years

Check out these five top Canadian stocks you can buy and hold for diversification, income, and growth in the coming…

Read more »

space ship model takes off
Investing

3 TSX Superstars That Could Beat the Market in 2026 (Get In Now)

These top TSX stocks have already generated significant returns and the momentum is likely to sustain driven by solid demand…

Read more »

Retirees sip their morning coffee outside.
Investing

Here’s the Average Canadian RRSP at Age 55

Here are three key things to note about the average Canadian's RRSP balance at age 55, and what to do…

Read more »