Barrick Gold (NYSE:ABX) (TSE:ABX) has reported a multi billion-dollar net loss in the fourth quarter, pointing to massive impairment charges on mine projects in Africa and Chile, but adjusted earnings beat expectations.
Canada's second-largest gold miner by market capitalization is also putting its Porgera and Cowal operations up for sale and setting a major debt reduction target for 2015 as the company starts to implement a long-discussed strategy to become leaner and less centralized.
The Toronto-based company’s U.S.-listed shares advanced as much as 3.1 percent in New York trading today. The stock has lost 35 percent over the past six months, but is up 14 percent so far this year.
Net loss was $2.85 billion, or $2.45 per share, in the October-to-December quarter, compared a net loss of $2.83 billion, or $2.61 billion, Barrick said in a statement late yesterday.
The quarterly loss reflected the impact of booking $2.8 billion in after-tax impairment charges related mostly to its Lumwana mine in Zambia and its Cerro Casale project in Chile.
Some $930 million of the impairment charge related to Lumwana, where Barrick plans to suspend operations following legislation that raises the royalty rate to a level the company says makes the mine uneconomic.
Another $778 million was related to Cerro Casale.
Barrick posted stronger-than-estimated adjusted earnings of $174 million, or $0.15 per share. Analysts predicted $0.136 per share, according to Capital IQ data.
Revenue fell to $2.51 billion from $2.94 billion year-over-year as the company sold fewer ounces of gold -- 1.57 million compared with 1.83 million -- at an average realized price of $1,204 per ounce compared with $1,272 in the 2013 quarter.
Gold futures averaged $1,202 an ounce in the quarter on the Comex in New York, 5.6 percent less than a year earlier.
Moving forward, Barrick said it expects to produce 6.2 million to 6.6 million ounces of gold in 2015 at all-in sustaining costs of between $860 and $895 per ounce. In 2014, Barrick produced 6.25 million ounces of gold at all-in sustaining costs of $864 per ounce.
Barrick's in-the-ground gold reserves fell to 93 million ounces at end-2014 from 104.1 million a year ago.
Describing its strategy as going "back to the future," Barrick said it was returning to its roots of being lean, nimble and entrepreneurial to an environment where operational heads had greater autonomy and responsibility.
Barrick said it will sell its Porgera mine in Papua New Guinea and its Cowal mine in Australia to help reduce net debt by at least $3 billion by year-end.
It also said it was reducing the size of its Toronto head office by close to half from 260 positions in 2014 to 140 in 2015, so lowering its administration costs. Net debt stood at $10.4 billion at the end of 2014, Bloomberg reported, citing a report on its website.
The announcement included details on how 35 high-level employees will be compensated.
In the past 10 months, several key positions at Barrick, including the chief executive and the miner's corporate development team, have been eliminated.
Barrick also said it will defer, cancel or sell projects that do not return at least 15 percent on invested capital.
Barrick Gold also declared a quarterly dividend of $0.05 per share, payable on March 16 to stockholders of record on February 27. The ex-dividend date is February 25.