About a month after announcing its biggest takeover in seven years, Barrick Gold Corp. has announced a hefty write-down on a South American mine and says its full-year gold production will likely be on the lower end of its forecast.
In a release after trading closed on Wednesday, Barrick said it lost US$412-million in the third quarter, driven in large measure by a US$405-million impairment charge at its Lugunas Norte mine in Peru.
Barrick said it had studied whether it could profitably process “refractory” ore, which is a difficult to handle sulphide-rich rock, at Lagunas Norte, but concluded it wasn’t feasible for the time being. In an e-mail, Barrick spokesman Andy Lloyd said it could still be an option at some point in the future.
Toronto-based Barrick produced 1.25 million ounces of gold in the quarter and said that its full-year production will be at the lower end of its predicted range of 4.5 million to 5 million ounces.
On an adjusted basis, Barrick made 8 U.S. cents a share, 3 U.S. cents better than analysts surveyed by Thomson Reuters were expecting.
Barrick generated US$319-million in free cash flow, 42 per cent higher than in the same quarter last year and materially higher than the US$118-million analysts were expecting.
Barrick says its subsidiary, Acacia Mining PLC, is facing an “increasingly challenging operating environment,” and said it is concerned about increasing risks to the safety and security of its staff in Tanzania, where it has a number of gold mines. Last week, Tanzania’s anti-corruption bureau filed charges against a senior Acacia executive, a former vice-president of the company and three of the company’s subsidiaries. The charges include tax evasion, forgery, conspiracy and money laundering. The corruption charges are the latest flare up in a spat that has lasted more than a year and a half. In 2017, the government of Tanzania accused Acacia of defrauding it out of US$200-billion in taxes and imposed an export ban on gold-concentrate shipments. Acacia accounts for about 6 per cent of Barrick’s gold production. Barrick is negotiating with the Tanzanian government to try to end the impasse but has not made any significant headway yet.
In late September Barrick announced the US$6-billion acquisition of African operator Randgold in a first-of-its-kind no-premium deal. By buying Randgold, Barrick keeps its position as the world’s biggest gold miner by production, a distinction it was previously on track to lose to U.S. competitor Newmont Mining Corp. Barrick will also leapfrog Newmont in terms of market capitalization and gold reserves if the Randgold deal closes. Shareholders at both Rangold and Barrick are set to vote on the deal Nov. 5. Shares in Barrick have risen by 25 per cent since the Randgold deal was announced.
With a file by Geoffrey York in South Africa.