Barrick Gold Production Seen Hitting Nine-Year Low – by Liezel Hill (Bloomberg News – February 11, 2014)

Barrick Gold Corp. (ABX) is poised to cut output to a nine-year low, a sign the world’s largest gold miner is making headway on its plan to put profits before growth.

Barrick may produce 6.3 million ounces of gold this year, based on the average of four analysts’ estimates compiled by Bloomberg. That would be as much as 15 percent less than last year and the lowest since the company became the gold industry leader in 2006.

The Toronto-based miner, which is expected to issue 2014 forecasts when it reports fourth-quarter earnings Feb. 13, isn’t alone in its strategy. Gold producers have cut budgets, sold mines and curtailed operations after the metal plunged last year by the most in more than three decades.

“Barrick represents a turnaround situation,” Robert Gill, who helps manage C$3.3 billion ($3 billion) including Barrick shares at Lincluden Investment Management, said yesterday by phone. “It’s a different company now than what it was for much of its existence.”

The miner led an industrywide pursuit of expansion over the past decade as gold producers sought to capitalize on prices that rose for 12 straight years. A shift began in 2012 after money-losing multibillion-dollar takeovers, overbudget projects and relentlessly rising costs pushed the companies to focus on returns.

Changing Landscape

Gold futures in New York fell 28 percent in 2013, the biggest annual decline since 1981. The metal has pared some losses this year, increasing 6 percent to settle at $1,274.70 an ounce yesterday.

The changing industry landscape will be further delineated this week as four of Canada’s five largest gold miners report earnings. Producers will probably announce further writedowns — potentially $2 billion to $3.5 billion in Barrick’s case — and declines in gold-reserve estimates as they adjust assumptions, Royal Bank of Canada analysts led by Stephen Walker said in a Feb. 5 note.

Barrick may report fourth-quarter earnings excluding one-time items of 41 cents a share, the average of 21 analysts’ estimates compiled by Bloomberg. That compares with adjusted profit of $1.11 a year earlier.

‘Better Company’

Barrick, which fell 46 percent in Toronto last year, has increased 14 percent since the start of 2014 while the Philadelphia Stock Exchange Gold and Silver Index of 30 companies has risen 13 percent.

Andy Lloyd, a Barrick spokesman, declined to comment on the production outlook or potential writedowns ahead of the earnings report.

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