HOLLYWOOD, Fla. (TheStreet ) -- Barrick Gold (ABX) 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."
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV