Barrick Gold Shows its True Colors

A hedgeless Barrick Gold zooms past Wall Street targets as it looks to win out over Native American and environmental groups who have sought to block operation of a huge mine in Nevada.
Author:
Publish date:

TORONTO (TheStreet) -- So this is what a hedge-less Barrick Gold (ABX) looks like.

For the first time, the Canadian behemoth, the world's largest miner of the world's favorite precious metal, reported a quarterly result that did not in some way entail the short-position hedges that Barrick had for years used to protect itself against weak gold prices.

But, of course, gold has been on a secular bull run for the last decade, a steady rise that only grew sharper with the financial crisis and the recession. Gold bugs, once a cultish subculture, suddenly went mainstream as gold assumed the apocalyptic aura of a currency of last resort and a safe haven. Just Tuesday, Greek and Portugal solvency fears sparked

another jump in gold prices

.

Gold Prices Eye $1,175

var config = new Array(); config<BRACKET>"videoId"</BRACKET> = 81340161001; config<BRACKET>"playerTag"</BRACKET> = "TSCM Embedded Video Player"; config<BRACKET>"autoStart"</BRACKET> = false; config<BRACKET>"preloadBackColor"</BRACKET> = "#FFFFFF"; config<BRACKET>"useOverlayMenu"</BRACKET> = "false"; config<BRACKET>"width"</BRACKET> = 265; config<BRACKET>"height"</BRACKET> = 255; config<BRACKET>"playerId"</BRACKET> = 1243645856; createExperience(config, 8);

Barrick's hedges, then, amounted to a poisonous drag on its results. Some analysts estimate that they have ultimately wiped out two decades' worth of earnings for the company. Barrick finally unwound the last of these hedges in December.

And so the newly free Barrick reported first-quarter results before the opening bell Wednesday, surpassing Wall Street expectations with an adjusted profit of $741 million, or 75 cents a share, better than the consensus analysts' target of 63 cents, as compiled by

Thomson Reuters

. That's up more than 100% from the year ago period, when Barrick earned $371 million, or 42 cents a share.

Revenue, meanwhile, spiked 44% to $2.56 billion, also better than the sell side forecast of about $2.4 billion.

Aiding the year-over-year rise: a 21% increase in the price of gold, a 19% increase in the amount of metal Barrick took out of the earth, and a 9% reduction in total cash costs, a metric that judges the efficiency of a miner.

Shares of Barrick were trading Wednesday morning at $41.65, up 98 cents, or 2.4%.

Barrick's results echoed those of

Newmont Mining

(NEM) - Get Report

, the Denver-based gold major, which

reported better-than-expected numbers on Tuesday

. Rival Canadian outfit

Goldcorp

(GG)

is slated to release results after the bell Wednesday.

Barrick, which spun off its African gold mines in an IPO earlier this year, raising $882 million, also has faced a snarl of legal issues surrounding its new (and appropriately named) Cortez Hills mine in Nevada, where the Western Shoshone Indians have been fighting to keep the company out of what they consider sacred ground. Environmental groups have also joined the legal battle. A U.S. District court sided with these groups last year, ordering Cortez shut down pending further environmental studies.

Barrick appealed, asking for permission to mine some gold at the site while the studies were being conducted. In April, the court gave the company the OK to proceed with mining while the studies were ongoing, a decision that has emboldened Barrick.

In an update on the situation in the quarterly release, Barrick said, "The entire Cortez property continues to be on track to achieve its original production guidance," which stands at a little more than 1 million ounces of gold in 2010, at a total cash cost of $295 to $315 an ounce.

Much of Barrick's future growth prospects

rest on the success of Cortez

. The company's CEO, Aaron Regent, in his prepared remarks in the press release, focused on Cortez above all its other projects, calling the site an "impressive deposit."

Barrick said that it expects the new studies to come down in its favor and to receive approval from the U.S. Bureau of Land Management by the end of the year, "at which point it is expected that the operation will revert to its original scope."

-- Written by Scott Eden in New York

RELATED STORIES:

>>Newmont Mining Tops Street Views

>>Barrick Outlook Depends on Cortez

Scott Eden has covered business -- both large and small -- for more than a decade. Prior to joining TheStreet.com, he worked as a features reporter for Dealmaker and Trader Monthly magazines. Before that, he wrote for the Chicago Reader, that city's weekly paper. Early in his career, he was a staff reporter at the Dow Jones News Service. His reporting has appeared in The Wall Street Journal, Men's Journal, the St. Petersburg (Fla.) Times, and the Believer magazine, among other publications. He's also the author of Touchdown Jesus (Simon & Schuster, 2005), a nonfiction book about Notre Dame football fans and the business and politics of big-time college sports. He has degrees from Notre Dame and Washington University in St. Louis.