This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

How Barrick Gold Is Beating Inflation

HOLLYWOOD, Fla. ( TheStreet ) -- Barrick Gold (ABX - Get Report) is proving itself to be the leader among miners when it comes to striking the balance between overcoming rising costs and taking advantage of soaring gold prices.

The company recently reported a killer fourth quarter. The company earned 95 cents a share, declared a 12 cent dividend, posted $2.95 billion in revenue, produced 1.7 million ounces of gold for $486 an ounce, (or $326 if you factor in by-products) and grew measured and indicated resources by 24%.Shares have soared almost 6% since the company reported earnings February 17th.

Barrick chief executive officer Aaron Regent sat down wtih TheStreet during this week's BMO Capital Markets Global Metals and Mining conference here to talk about the headwinds facing the industry in 2011 and his company's strategy for continuing to deliver growth.
Barrick Gold CEO Aaron Regent

The biggest hurdle for the gold industry right now is rising costs as inflation heats up. Most companies are seeing it in higher labor and energy expenditures. Barrick is no exception, but it's how it's managing high costs that counts.

Cash costs are expected to be about 10% higher for the company in 2011 at $450-$480 an ounce. Barrick's total costs, that is, factoring in all the company's expenses not just those associated with production, are $750-$800. The industry average is between $900 and $1,050 an ounce.

In terms of labor costs, there are limited actions a gold miner can take aside from firing people, hiring less qualified individuals or shutting down mines, none of which Barrick is planning to do. Of its overall cost increase of 10%, labor costs make up 5%.

Labor is "a tough one," said Regent. "It's a struggle and there are limitations to what you can do." Labor becomes a particularly difficult issue when it comes to dealing with unions in countries like Argentina, where inflation is 20%. Experts in the mining industry are also in short supply, causing a spike in wages as the leading companies compete for top talent.

Barrick is hoping to offset these non-negotiable costs by bringing lower cost mines on stream. Cortez, for example, in North America, produced 1.1 million ounces of gold in 2010 for under $300 an ounce. Regent expects the mine to produce 1.3 million to 1.4 million ounces in 2011 for under $300. "That'll help pull down our overall costs."
1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
ABX $7.38 0.00%
GG $11.75 0.00%
AAPL $118.03 0.00%
FB $105.41 0.00%
GOOG $748.15 0.00%


Chart of I:DJI
DOW 17,813.39 +1.20 0.01%
S&P 500 2,088.87 -0.27 -0.01%
NASDAQ 5,116.1430 +13.3350 0.26%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs