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
You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn more

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.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

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

More on Investing

funds, money, nest egg
Dividend Stocks

TFSA Passive Income: 2 Great Canadian Dividend Stocks for Retirees to Buy Now

Retirees seeking reliable passive income can now buy top TSX dividend stocks at cheap prices.

Read more »

man window buildings
Stocks for Beginners

Foolish Beginners: 1 Stock Pick to Buy Now for a $6,000 TFSA

Brookfield Asset Management (TSX:BAM.A)(NYSE:BAM) stock looks cheap as shares regain their footing.

Read more »

data analyze research
Dividend Stocks

Earn Monthly Passive Income: 2 Hot Dividend Stocks in Canada to Buy Now and Hold Forever

These two hot dividend stocks could help you to earn stable monthly passive income in Canada.

Read more »

Human Hand Placing A Coin On Increasing Coin Stacks In Front Of House
Dividend Stocks

Be a Landlord: Top 2 REITs (With Monthly Dividends) I’d Buy and Forget

You can be a landlord and earn monthly dividends for the rest of your life. All you need is the…

Read more »

Target. Stand out from the crowd

3 Canadian Stocks to Buy That Beat Their Earnings Expectations This Week

If you're looking for top Canadian stocks to buy, here are three impressive companies that continue to perform well in…

Read more »

A stock price graph showing declines
Energy Stocks

2 Cheap Canadian Stocks That Likely Won’t Be on Sale For Much Longer

These two Canadian stocks are close to returning to all-time highs. Don’t miss your chance to take advantage of these…

Read more »

A worker gives a business presentation.
Dividend Stocks

Got $5,000? 3 Stocks to Hold for the Next 20 Years

New investors don’t need tens of thousands to start a portfolio. Here are three stocks to hold for the next…

Read more »

canadian energy oil
Energy Stocks

3 Rising Energy Stocks to Buy as Oil Hits 6-Month Low

Three rising energy stocks are strong buys today as their upward momentum is likely to continue due to the tight…

Read more »