Barrick Gold Corporation has announced preliminary full year and fourth quarter 2020 results which indicate that it has met its 2020 guidance targets.
According to Barrick, preliminary gold production for the full year of 4.8 million ounces is at the midpoint of the 4.6 to 5 million ounce guidance range, while preliminary copper production of 457 million pounds is also within the guidance range of 440 to 500 million pounds.
The preliminary Q4 results show sales for the quarter of 1.19 million ounces of gold and 108 million pounds of copper, as well as preliminary Q4 production of 1.21 million ounces of gold and 119 million pounds of copper.
The average market price for gold in Q4 was $1,874 per ounce, while the average market price for copper was $3.25 per pound.
Preliminary Q4 gold production was higher than Q3 2020, mainly due to a strong performance from Pueblo Viejo in the Dominican Republic, the ramp-up of mining operations at Bulyanhulu in north-west Tanzania and ongoing improvement at Turquoise Ridge in the State of Nevada, USA.
Preliminary Q4 gold sales were lower than Q3 2020 as third quarter sales included the export of the remaining stockpiled concentrate in Tanzania.
Barrick states that Q4 gold cost of sales per ounce [1] and total cash costs per ounce [2] are expected to be in line with the prior quarter and gold all-in sustaining costs per ounce [2] are forecast to be 3-5 per cent lower than in Q3 2020.
Preliminary Q4 copper production was higher than Q3 2020 following completion of plant maintenance at Lumwana (located in Zambia) in the third quarter.
Preliminary Q4 copper sales were lower than the previous quarter, primarily due to the timing of shipments at Lumwana.
Q4 copper cost of sales per pound [1] is expected to be 4-6 per cent higher, Q4 copper C1 cash costs per pound [2] are expected to be 10-12 per cent higher and copper all-in sustaining costs per pound [2] are expected to be 4-6 per cent higher than Q3 2020.
Driving these changes, noted the company, are higher operating costs at Lumwana and Zaldívar, partially offset by lower depreciation and lower sustaining capital at Lumwana.
Barrick will provide additional discussion and analysis regarding its fourth-quarter production and sales when the company reports its quarterly and full-year 2020 results before North American markets open on 18 February 2021.
The following table includes preliminary gold and copper production and sales results from Barrick’s operations:
[1] Cost of sales applicable to gold per ounce is calculated using cost of sales applicable to gold on an attributable basis (removing the non-controlling interest of 40 per cent Pueblo Viejo, 38.5 per cent Nevada Gold Mines, 63.1 per cent South Arturo, 20 per cent Loulo-Gounkoto, 16 per cent North Mara, Bulyanhulu and Buzwagi and 10.3 per cent of Tongon and including Barrick’s proportionate share of cost of sales attributable to equity method investments (Kibali) in cost of sales), divided by attributable gold ounces.
Cost of sales applicable to copper per pound is calculated using cost of sales applicable to copper including Barrick’s proportionate share of cost of sales attributable to equity method investments (Zaldívar and Jabal Sayid), divided by consolidated copper pounds (including the Company’s proportionate share of copper pounds from its equity method investments).
[2] Total cash costs per ounce, all-in sustaining costs per ounce and all-in costs per ounce are non-GAAP financial measures which are calculated based on the definition published by the World Gold Council (a market development organisation for the gold industry comprised of and funded by gold mining companies from around the world, including Barrick).
The WGC is not a regulatory organisation. Management uses these measures to monitor the performance of Barrick’s gold mining operations and its ability to generate positive cash flow, both on an individual site basis and an overall company basis.
Total cash costs start with Barrick’s cost of sales related to gold production and removes depreciation, the non-controlling interest of cost of sales and includes by-product credits.
All-in sustaining costs start with total cash costs and include sustaining capital expenditures, sustaining leases, general and administrative costs, mine site exploration and evaluation costs and reclamation cost accretion and amortization. These additional costs reflect the expenditures made to maintain current production levels.
The Company believes that its use of total cash costs, all-in sustaining costs and all-in costs will assist analysts, investors and other stakeholders of Barrick in understanding the costs associated with producing gold, understanding the economics of gold mining, assessing its operating performance and also its ability to generate free cash flow from current operations and to generate free cash flow on an overall company basis.
Due to the capital-intensive nature of the industry and the long useful lives over which these items are depreciated, Barrick notes that there can be a significant timing difference between net earnings calculated in accordance with IFRS and the amount of free cash flow that is being generated by a mine and therefore it believes these measures are useful non-GAAP operating metrics and supplement the Company’s IFRS disclosures.
Barrick notes that these measures are not representative of all of its cash expenditures as they do not include income tax payments, interest costs or dividend payments. These measures do not include depreciation or amortization.
Total cash costs per ounce, all-in sustaining costs and all-in costs are intended to provide additional information only and do not have standardised definitions under IFRS and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. These measures are not equivalent to net income or cash flow from operations as determined under IFRS. Although the WGC has published a standardised definition, other companies may calculate these measures differently.
C1 cash costs per pound and all-in sustaining costs per pound are non-GAAP financial measures related to the Company’s copper mine operations. Barrick believes that C1 cash costs per pound enables investors to better understand the performance of its copper operations in comparison to other copper producers who present results on a similar basis.
C1 cash costs per pound excludes royalties and production taxes and non-routine charges as they are not direct production costs. All-in sustaining costs per pound is similar to the gold all-in sustaining costs metric and management uses this to better evaluate the costs of copper production. Barrick believes this measure enables investors to better understand the operating performance of its copper mines as this measure reflects all of the sustaining expenditures incurred in order to produce copper.
All-in sustaining costs per pound includes C1 cash costs, sustaining capital expenditures, sustaining leases, general and administrative costs, mine site exploration and evaluation costs, royalties and production taxes, reclamation cost accretion and amortization and write-downs taken on inventory to net realisable value.
Barrick will provide a full reconciliation of these non-GAAP financial measures when the Company reports its quarterly results on February 18, 2021.
[3] Includes Nevada Gold Mines’ 60 per cent equity share of South Arturo.