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What $1,400 Gold Means for Barrick Gold

Stocks in this article: ABX

NEW YORK ( TheStreet ) -- Barrick Gold (ABX) is the big daddy of all gold companies, but maintaining its explosive growth in the face of higher costs for everything from energy to labor will be the challenge going forward.

Barrick is a $52.88 billion company and is the biggest gold miner in the world. While other companies stumbled in the fourth quarter like Newmont Mining (NEM) and Agnico-Eagle (AEM), Barrick shinned.

The gold miner earned 95 cents a share and revenue topped $2.95 billion. Gold production rose to 1.7 million ounces at cash costs of $486 an ounce or $326 if you factor in by-product sales.

In 2011, Barrick hopes to produce between 7.6 million and 8 million ounces of gold, up 2.5% from 2010, at cash costs $450-$480 an ounce. In 5 years, Barrick is planning to produce 9 million ounces of gold and the company only needs gold prices to stay above $1,000 for all its projects to see juicy returns.

The headwinds facing Barrick and the gold mining industry at large include higher input costs, soaring oil prices, rising exploration costs and higher labor wages. This combination is hurting the entire gold mining sector and it's quickly becoming a matter of who will weather the storm best.

Barrick Gold CEO Aaron Regent

I sat down with CEO Aaron Regent during the BMO Capital Markets Global Metals and Mining conference last week to get a full rundown on Barrick's strengths and weaknesses.

Your quarter seemed almost perfect. How did you feel about it?

Regent: We were pleased with the quarter. I don't know if it was absolutely perfect, there's always things you'd like to see have improved somewhat but overall it was a very strong quarter. We had record results, as you would have seen, margins were good, we hit out production targets and capped off a very strong year for the company so we were pretty pleased with the quarter.

So what were the small things that you would have liked to have seen improvement on?

Regent: I can't tell you all those things ... look, overall I think the quarter was pretty strong. Operationally, there are some projects that we are moving along and I'd like to see them perhaps move a bit faster. From a safety perspective, the quarter was strong but I think there's still some work we can do on the safety front ... There are still lots of things we are working on.

How are you working on that for 2011 and how much will it cost you?

Regent: Well, for 2011 I think we are set up to have a pretty strong year as well. Our production profile is comparable to 2010. Our cash costs are up slightly but overall I think we've done a good job of controlling our costs and you compare our costs relative to our peers I think we've done pretty well. So you combine those factors and based where the gold price is today, which is through $1,400, last year the average gold price was around $1,228 so gold price is higher, so combined we should have another strong financial year.

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