Monday, February 15, 2010

Barrick Gold Corp. (NYSE: ABX): Q4 Earnings Preview 2009

Barrick Gold Corp. (NYSE: ABX), the world’s biggest gold producer, is scheduled to release its fiscal fourth-quarter 2009 financial results on Thursday, February 18, 2010. Analysts, on average, expect the company to report earnings of 59 cents a share on revenue of $2.39 billion. In the year ago period, the company posted earnings of 32 cents per share on revenue of $2.11 billion.

Barrick Gold Corporation primarily engages in the exploration, development, production, and sale of gold worldwide. It also produces copper and silver; holds interests in a platinum group metals development project and a nickel development project; and has interests in oil and gas properties.

In the preceding third quarter, the Toronto, Canada-based company gold miner posted a net loss for the third quarter, compared to a profit in the same period last year, reflecting a US$ 5.7 billion charge related to the windup of its gold hedging program. Net loss totaled US$ 5.35 billion or US$ 6.07 per share, compared to net profit of US$ 254 million or US$ 0.29 per share in the year-ago quarter. The loss for the quarter included a non-cash accounting charge of US$ 5.7 billion related to Gold hedging program. Net income, excluding charges for the quarter rose to US$ 473 million or US$ 0.54 per basic share from US$ 404 million or US$ 0.46 per basic share in the year-ago quarter. Revenue rose to US$ 2.10 billion from US$ 1.88 billion. Analysts, on average, expected the company to earn US$ 0.47 per share on revenue of US$ 2.15 billion.

Operating cash flow for the quarter was US$ 911 million, up 67% from US$ 544 million in the corresponding quarter last year, reflecting higher adjusted net income and lower income taxes paid as a result of the production mix and the use of tax loss carry-forwards.

For fiscal year 2009, Barrick said in November that it is on track with its full year production guidance of 7.2 to 7.6 million ounces of gold at total cash costs of US$ 450 to US$ 475 per ounce or net cash costs of US$ 360 to US$ 385 per ounce.

For 2010, the company expects production to increase to around 7.7-8.1 million ounces at lower total cash costs than in 2009.

In December, Barrick Gold announced that it has completed the elimination of all of its Gold Hedges and now has full leverage to the gold price on the industry's largest gold production and reserves. To fund the elimination of the Gold Hedges and a substantial portion of the Floating Contracts liability, Barrick issued new equity in September for net proceeds of $3.9 billion and in October issued $1.25 billion in new long-term debt securities for total net proceeds of $5.1 billion.

Gold rallied for a ninth straight year in 2009 as the Federal Reserve kept interest rates close to zero and as the U.S. Dollar Index, a six-currency gauge of the greenback’s value, lost 4.2 percent. Gold prices hit record $1,226.56 on Dec. 3. The long-term prospects for gold remains bright. In recent times, gold prices have been boosted by persistent weakness in US dollar.The value of the dollar has fallen 35% since 2002 and 9% in the past 12 months. At the same time, financial markets worldwide continue to be on shaky ground. Supply constraints too are expected to help prices World gold production has fallen every year since 2001. Meanwhile, central banks have now become net buyers of gold after over 30 years of selling. Meanwhile, global investment demand has more than tripled in the past few years and continues to spike higher. However, prices may face pressure in the near term due to interest rate outlook.

The company's stock currently trades at a forward P/E (fye 31-Dec-10) of 13.80 and PEG Ratio (5 yr expected) of 0.61. In terms of stock performance, Barrick Gold shares have lost 5 percent over the past year.

Full Disclosure: None.
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