Barrick Gold sets bold growth plan
Canadian miner aims to double profit, curb hedge position
>>Barrick plans to reduce its forward sales position by one-third, to 12 million ounces from 17.9 million, by end of 2003. This would equate to 15 percent of the company's current gold reserves as compared to 22 percent today.
"We are further reducing our hedge position for three main reasons: interest rates are at 40-year lows, leading to lower forward premiums; Barrick has never been stronger financially; and the outlook for gold prices is positive," said Jamie Sokalsky, chief financial officer.<<
By Bill Clifford, CBS.MarketWatch.com
Last Update: 4:15 AM ET Sept. 17, 2002
Barrick's long-term plan calls for an average 2 million ounces of additional annual gold production for the next 10 years at expected cash costs of $125 per ounce. That would reflect 29 percent lower costs than its current production base, the company said in a press release Tuesday.
Barrick (ABX: news, chart, profile) said it expects net production to increase by 1.2 million ounces, or 21 percent, to 6.9 million ounces in 2006 at lower costs. As a result, Barrick aims to double its earnings by then, an assumption based on a $325 per ounce price of gold.
Gold futures prices have traded in the $316 to $325.50 range over the past week, and closed Monday at $318.50 an ounce on the Commodities Exchange division of the New York Mercantile Exchange.
Barrick plans to reduce its forward sales position by one-third, to 12 million ounces from 17.9 million, by end of 2003. This would equate to 15 percent of the company's current gold reserves as compared to 22 percent today.
"We are further reducing our hedge position for three main reasons: interest rates are at 40-year lows, leading to lower forward premiums; Barrick has never been stronger financially; and the outlook for gold prices is positive," said Jamie Sokalsky, chief financial officer.
Barrick earned $59 million profit, or 11 cents a share, in the second quarter of 2002, matching Wall Street estimates.
With about 82 million ounces of gold reserves, Barrick is North America's second-largest gold producer, behind Newmont Mining (NEM: news, chart, profile).
Shares of Barrick Gold shed 9 cents on Monday to close at $17.46. Newmont Mining climbed by 53 cents to end at $29.87.
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