Australia Pacific: Production down due to asset sales

Barrick Gold: Strong 3Q14 earnings, important opportunities (Part 9 of 16)

(Continued from Part 8)

Australia Pacific's assets

Barrick Gold Corporation's (ABX) Australia Pacific unit includes its 95% interest in the Porgera mine and the Cowal mine, and its 50% interest in the Kalgoorlie mine. The remaining 50% is owned by Newmont Mining (NEM). In its ongoing portfolio optimization efforts, Barrick Gold (ABX) sold Yilgarn South and Plutonic, its other two interests in Australia Pacific, and divested its interest in the Kanowna mine.

Production down due to asset sales

Following the sales of Yilgarn South, Kanowna, and Plutonic assets in this division, Barrick's gold production decreased by 41% in 3Q14 from the third quarter of last year. Production for the remaining sites was higher than the previous corresponding period of 3Q14. Total production for Australia Pacific was 292,000 ounces. All-in sustaining costs (or AISC) was $855 per ounce, a decrease of $65 per ounce due to a decrease in mine-site sustaining capital expenditure.

Improved guidance

Production guidance for 2014 has increased to 1.05 to 1.125 million ounces due to higher production rates at Porgera Mine. This increase was due to higher throughput and processed grade resulting from higher-than-expected ore tons from Stage 5A of the open pit and higher tons from the underground as mining rates continue to ramp up. AISC guidance was also reduced to $885 to $910 per ounce. This is mainly due to the impact of higher production and lower direct operating costs as a result of lower power costs at Cowal and lower open-pit costs at Porgera.

Barrick Gold recently changed the mine plan for Porgera and Kalgoorlie and went for high grading, or mining the higher-grade part of the mine first. Barrick Gold's (ABX) peers, including Newmont Mining Corp (NEM), Freeport-McMoRan Inc (FCX), and Randgold Resources Ltd (GOLD), are also facing increasing costs. As a result, mine-plan changes have been initiated at these companies as well.

The Market Vectors Gold Miners exchange-traded fund (or ETF) (GDX) invests in big gold producers, while the Standard and Poors depositary receipt (or SPDR) Gold Trust ETF (GLD) provides exposure to the spot gold prices.

Continue to Part 10

Browse this series on Market Realist:

• Part 1 – Barrick Gold reports strong 3Q14 earnings
• Part 2 – World's largest gold producer: Barrick Gold
• Part 3 – Barrick's Cortez mine: Production down year-over-year

• Commodity Markets
• Basic Materials Industry
• Barrick Gold
• Newmont Mining