Barrick Gold (ABX) is a major global gold producer. During 2010, Barrick made the decision to spin off the high cost African operations into a separately traded vehicle while continuing to retain a significant ownership stake.
Gold production for the 4th quarter came in at 1.7 million ounces and copper production of 82 million pounds. Realized prices were $1,368 per ounce and $3.99 per pound respectively.
Production for 2010 came in at 7.8 million ounces of gold at total cash costs of $457 per ounce. Net income for 2010 was $3.3 billion or $3.32 per share and adjusted operating cash flow was $4.8 billion.
Barrick increased the dividend by 20% as a sign of its strong balance sheet and confidence in the future price of gold.
Proven and probable reserves were replaced for the second year straight at 139.8 million ounces and MII reserves grew to 113.5 million ounces from 93 million ounces in 2009.
Cortex Hills was built on schedule and on budget. 2010 operations exceeded expectations with 1.14 million ounces mined at total cash costs of $312 per ounce. 2011 guidance is for 1.3-1.45 million ounces of production at total cash costs of $235-265 per ounce.
The Pueblo Veijo project is expected to be commissioned in the 4th quarter of 2011 with production beginning in the first quarter of 2012. Construction is 50% complete with 75% of the capital committed. 600,000 tons of ore have been stockpiled so far.
The Pascua-Lama project on the Argentina-Chile border is over 90% complete in terms of engineering and procurement. Pre-production capital is expected to range from $3.3-3.6 billion dollars, an increase of 10% from the previous estimate, with production commencing in 2013. When production starts it is estimated that Pascua-Lama will produce 750-800,000 ounces of gold in the first five years at a total cash cost of $20-50 per ounce net of byproducts (silver).
Approximately 60% of the estimated copper production for 2011 is hedged at a floor of $3.00 per pound and 70% is hedged to a ceiling price of $4.85 per pound.
For 2011 the production forecast is 7.6-8 million ounces of gold production at a net cash cost of $340-380 per ounce with production forecast to reach 9 million ounces within 5 years.
The 2011 exploration budget is being expanded to $340 million dollars.
Capex for 2011 is expected to be in the $4.2-4.65 billion dollar range with capital projects coming in at $2.1-2.3 billion and $1.35-1.5 billion for mine sustainment and expansion. Capex is expected to decrease in 2012.
Barrick’s 2010 earnings were strong on all fronts and the stock has responded accordingly. Capex is high but as massive low cost projects like Pascua-Lama come online over the next few years replacing higher cost production Barrick looks to continue its growth in the coming years.
Once looked at as a high cost, hedged producer with difficulty in replacing reserves, Barrick has transformed itself over the few years. Production for 2011 will likely be flat but gains are coming as new, massive mines come online. While there are still concerns surrounding the buildout of new mines, Barrick is a stock investors should consider on a potential breakout.
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