Barrick Gold Corporation (ABX)

Q2 2010 Earnings Call

July 29, 2010 9:30 a.m. ET


Deni Nicoski - VP, IR

Aaron Regent - President & CEO

Jamie Sokalsky - EVP & CFO

Peter Munk - Founder


Haytham Hodaly - Salman Partners

Kerry Smith - Haywood Securities

Greg Barnes - TD Newcrest



Ladies and gentlemen, thank you very much for standing by. And welcome to the Barrick Gold Second Quarter 2010 Results and Conference Call. During the presentation, all participants are in a listen-only mode. Afterwards we will conduct a question-and-answer session. (Operator Instructions) As a reminder, this conference is being recorded on Thursday, July 29, 2010. I would now like to turn the conference over to Deni Nicoski, Vice President of Investor Relations. Please go ahead sir.

Deni Nicoski

Thank you, operator and good morning everyone. Before we begin, I would bring to your attention the facts 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 statements, please refer to our yearend report or our most recent AIF filing.

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

Aaron Regent

Thanks Deni, and good morning, and thank you for joining our call. I'm also joined here today by Jamie Sokalsky, Peter Kinver and Kelvin Dushnisky. There is also other members of our team here as well who will be available to answer questions later on in the call.

I'll start by covering some of the highlights of the quarter and then provide you with an update on our projects. And then I'll turn the call over to Jamie to take you through our financial results in more detail, and our views and the outlook for Gold. Afterwards, we will be happy to take any questions you might have.

Overall, we are pleased with the second quarter results. We had another strong quarter with significant margin expansion driven by solid operating results and a higher realized gold price. Reported net income was a record $783 million or $0.79 per share. On an adjusted basis, net income was $759 million or $0.77 per share.

Our operating cash flow was excellent and exceeded $1 billion. I think that highlights the exceptional leverage that the company has to our gold prices.

Our projects continued to be advance in line with our plans. The Cortez Hills mine continues to perform a health plan, and supplemental EIS and a record of decision is still expected to be issued by yearend. Our two world class low projects which are constructions Pueblo Viejo on the Dominican Republic, and Pascua-Lama on the border of Chile and Argentina remained in line with the respective pre-production capital budgets and initial production expectations.

And with our strong operating results, and positive outlook, the Board of Directors has improved an increase in our common share dividend and authorized a quarterly dividend of $0.12 per share, which represents a 21% increase from the previous dividend. This continues the trend of increasing dividends in line with the rise in the gold price, and growth of our earnings in cash flows. I would like to note that over the past fiver years, Barrick's dividend has increased by almost 120%.

Through to the next slide, operationally we had a good second quarter and a good first half. Second quarter gold production was ahead of plan, and was up 4% from the prior year quarter to about 1.94 million ounces and that's largely due to strong performances from Cortez, Goldstrike and Lagunas Norte.

Total cash cost of $457 per ounce or net cash cost of $358 per ounce were in the similar range to the prior year quarter despite the gold price outage in some $275 per ounce higher which has increased royalties and production taxes and with these results we remain on track to achieve our guidance of higher goal production at lower total cash costs in 2010.

Turning to a regional breakdown of our operating results, our North American region performed ahead of plan produced a 755,000 ounces at a total cash cost of $506 per ounce. A continued strong performance from Cortez and Goldstrike, the Cortez property has continued to perform exceptionally well and produced 294,000 ounces of gold and cash cost of $300 per ounce in the second quarter.

The mine is expected to exceed its original guidance this year on higher than anticipated grades from both the Cortez sales open pit and underground. The Goldstrike operation also performed ahead of plan with production of about 297,000 ounces at a total cash cost of $966 per ounce and that's primarily due to the better than expected grades from the open pit and higher roaster throughput.

Our South American business unit produced 566,000 ounces at a total cash cost of $233 per ounce. Our local cost Lagunas Norte Mine exceeded plan producing 253,000 ounces at a total cash cost of a $163 per ounce probably due to changes in mine sequencing.

As a result production at Lagunas Norte is expected to be lower in the second half of the year before increasing again in early 2011. Veladero mine produced 257,000 ounces at total cash cost of a $279 per ounce and as we expected to produce 1 million ounces in 2010.

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