Barrick Gold (ABX)

Q1 2011 Earnings Call

April 27, 2011 4:30 pm ET

Executives

Deni Nicoski - Vice President of Investor Relations

Unknown Executive -

Jamie Sokalsky - Chief Financial Officer and Executive Vice President

Robert Krcmarov - Senior Vice President of Global Exploration

Peter Kinver - Chief Operating Officer and Executive Vice President

Aaron Regent - Chief Executive Officer, President, Director and Member of Environmental, Health & Safety Committee

Analysts

Jorge Beristain - Deutsche Bank AG

Steven Butler - Canaccord Genuity

Barry Cooper - CIBC World Markets Inc.

Kerry Smith - Haywood Securities Inc.

Anita Soni - Crédit Suisse AG

Richard Gray - Cormark Securities Inc.

David Haughton - BMO Capital Markets Canada

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Presentation

Operator

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Ladies and gentlemen, thank you for standing by, and welcome to the Barrick Gold Q1 2011 Results Conference Call. [Operator Instructions] I would like to remind you, today's call is being recorded, Wednesday, April 27, 2011. And now, I have the pleasure to turn the call over to Mr. Deni Nicoski, Vice President, Investor Relations. Please go ahead, sir.

Deni Nicoski

Thank you, operator, and good afternoon, everyone. Before we begin, I will bring to your attention the fact that we will be making forward-looking statements during the course of this presentation. For a complete discussion of the risks, uncertainties and factors which may lead to our actual financial results and performance being different from the estimates contained in our forward-looking statement, please refer to our year-end report or our most recent AIF filing.

With that, I will hand it over to Aaron Regent, President and CEO of Barrick.

Aaron Regent

Thanks, Deni, and good afternoon. And thank you for joining our call. I'm joined here today by Jamie Sokalsky, Peter Kinver and Kelvin Dushnisky, as well as other members of our senior management team who will be available to answer questions at the end of the call. What I thought we would do today is cover the highlights of our first quarter results, provide an update on our projects and then of course talk at length about our proposal to acquire Equinox Minerals.

With that said, I'll turn the call over to Jamie who can take us through the financials, as well as provide an outlook on the gold market. After which, we'll be happy to take your questions.

First, looking at the quarter, we had a strong quarter. Net earnings were $1 billion or $1 per share. Adjusted net earnings were up 32% to $1 billion or $1.01 per share. That translates into annualized return on equity of around 20%. Our operating cash flow is up 27% to $1.44 billion. Our cash margins were up 32% to $952 per ounce, and our net cash margins were up 32% to $1,081 per ounce.

We produced 1.96 million ounces in the quarter at a total cash cost of $437 per ounce. And net cash costs were $308 per ounce. Our North American region performed ahead of plan, producing around 862,000 ounces at a cost of $396, mainly due to higher production from Cortez and Goldstrike. The Cortez mine has exceeded plan with production of 366,000 ounces at a cost of $220 per ounce on higher-than-budgeted grades. Both the Goldstrike operation performed strongly, contributing 286,000 ounces at a cost of $461 and also on better-than-expected grades from the open pit and the underground.

On South American region also came in ahead of plan, contributing 498,000 ounces at a cost of $340 per ounce. The Veladero mine produced 260,000 ounces at a cost of $312 due to higher-than-planned drawdown of the leach pad inventory, while Lagunas Norte contributed 193,000 ounces at a cost of $282 per ounce, which is in line with our expectations.

Australia Pacific produced 459,000 ounces at a cost of $585 per ounce, and African Barrick Gold production attributed to us was 129,000 ounces at a cost of $658 per ounce.

To the next slide, our strategy. I'll just like to give you an update on our exploration side. We have a significant exploration program, which has been very successful in adding reserves and resources to the company. I think the success we had last year has caused us to increase the budget by more than 50%. Last year, our budget was around $210 million. This year, our budget is around $330 million. We've had a lot of success. The budget has increased because of the success we've on the exploration front, and we're very optimistic about the results that we will be available to hopefully share with you through the course of the year.

I'll give you a brief update on our projects. The first slide talks about Cortez, which is the newest mine that we brought into production. And as I mentioned earlier, Cortez continues to exceed our expectations, performing ahead of plan and we are already benefiting from its significant attractive cost profile. 2011, we expect to produce about 1.3 million ounces at a cost of around $235 to $265 per ounce. Cortez has been a terrific addition to our portfolio and based on a gold price of $1,500 per ounce, this one mine alone will produce about $1.5 billion of pretax cash flow. I think significantly, the Record of Decision approving the Supplemental Environmental Impact Statement was issued by the BLM in mid-March, which allowed us to revert, allowed this operation to revert to its original scope.

Pueblo Viejo, commissioning -- it continues to be expected in the fourth quarter of this year. Overall, construction is about 55% complete. All 4 of the autoclaves and the oxygen plant have been installed and 2 of the 4 autoclaves, which you can see in this photo, have been brick-lined in preparation for operations. 85% of the planned concrete has been poured and about 85% of the steel has been erected and more than 3.2 million tons of ore have been stockpiled. Our environmental permits for temporary power sources were secured during the quarter and work continues toward achieving key milestones, including the connection of power to the site.

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