Wednesday, October 27, 2010

Barrick Gold Corp. (NYSE: ABX): Q3 Earnings Preview 2010

Barrick Gold Corp. (NYSE: ABX), the world’s biggest gold producer, is scheduled to release its third-quarter earnings before the opening bell on Thursday, October 28, 2010. Analysts, on average, expect the company to report earnings of 76 cents a share on revenue of $2.64 billion. In the year ago period, the company reported earnings of 54 cents per share on revenue of $2.10 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 second quarter quarter, the Toronto, Canada-based company's net income was $783 million, or 79 cents per share, compared to $492 million, or 56 cents per share, in the prior-year quarter. On an adjusted basis, the company earned 77 cents per share in the second quarter. Revenue jumped 34% to $2.64 billion from $1.97 billion. Analysts, on average, expected the company to report earnings of 72 cents per share on revenue of $2.61 billion.

At its last earnings call in July, the company said that continues to be on track to increase production from 2009 to 7.6 to 8 million ounces of gold at lower total cash cost of 425 to $455 per ounce or net cash cost of 345 to $375 per ounce. The company expects production in the second half to be modestly lower relative to the first half as it anticipates lower production from South America. The gold miner expects margin expansion to continue in the second half , which in turn should translate into higher returns on equity.

Gold, up nearly 25 percent this year, is heading for a 10th annual gain, thanks to a sustained weakness in the US dollar. Gold prices averaged $1,227 an ounce in the third quarter, a 28 per cent increase over the same period of 2009, with spot prices climbing to daily highs and hitting a record of high of $1,388.10 on October 14. The precious metal rallied as central banks and governments maintained low borrowing costs and spent trillions of dollars to stimulate economies. Looking ahead, gold demand is likely to strong due to uncertain economic outlook, high unemployment level, speculation of further quantitative easing, monetary reflation, accommodative physical policies, significant trade and current account imbalances and increased jewelry demand in India. Meanwhile,  according to the World Gold Council, central banks are expected to be net buyers of gold in 2011 for the first time in nearly two decades. Central banks had been net buyers of 7.7 tonnes of gold in the second quarter of 2010.

The company's stock currently trades at a forward P/E (fye 31-Dec-2011) of 12.99 and PEG Ratio (5 yr expected) of 1.45. In terms of stock performance, Barrick Gold shares have gained nearly 18 percent since the beginning of the year.

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