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Barrick Gold remains bullish on gold price, affording higher dividend and large capex program

Dorothy Kosich, Mineweb.com

In a conference call with analysts Thursday, Barrick CFO Jamie Sokalsky stressed  The company believes the gold price supportive macroeconomic environment will continue in the future, thanks to monetary reflation, fiscal policies and sovereign debt concerns, and trade and current account imbalances.

Meanwhile, Sokalsky noted investment demand has continued to be strong, and forecast that central banks will continue to be net buyers of gold.

He predicted mine supply will continue to contract despite what he called a "significant upswing in exploration spending."

Barrick CEO Aaron Regent's presentation during the conference call stressed three projects in feasibility: Reko Diq in Pakistan; Donlin Creek in Alaska, and Kabanga in Tanzania, considered one of the world's largest undeveloped nickel sulfide deposits.

Despite the current political turmoil and terrorism in Pakistan, Regent said the initial mine development feasibility study, along with an environmental and social impact assessment are being finalized. The feasibility study indicates pre-production capex of $3.3 billion based on a 120,000tpd processing plant. Barrick's share of average annual production for the first five full years of operations is expected to be 100,000 ounces of gold and 150 million to 160 million pounds of copper.

At the Barrick/NovaGold Donlin Creek joint venture, further optimization studies now primarily focus on the potential to use natural gas as a fuel source in order to reduce operating costs. Feasibility study revisions, which will include the natural gas option, are expected to be completed during the second quarter of 2011.

Barrick says it remains on track with its original full year production guidance of 7.6 million to 8 million ounces of gold.  For the first six months of this year, Barrick reported gold production of 4,005,000 ounces, up from 3.62 million ounces for the first half of 2009.

Copper production for the first half of this year was reported to be 198 million pounds, up from 176 million pounds for the same period of 2009.

Second quarter gold production was reported at 1.94 million ounces was ahead of plan "primarily due to th4e strong performance from Cortez, Goldstrike, and Lagunas Norte," the company said. Copper production was reported at 102 million pounds for the second quarter.

FINANCIALS

Barrick reported a 59% increase in second-quarter net income to a record $783 million or 79-cents per share, up from $492 million and 56-cents a share for the same period of 2009. Adjusted net income for the second-quarter 2010 was reported at $759 million or 77-cents per share, up 76% from the $431 million or 56-cents/sh reported during the second quarter of 2009.

For the first six months of this year, Barrick reported a net income of $1.54 billion or $1.56/sh, up from $863 million or 99-cents/sh reporting during the first half of 2009. Adjusted net income for the first half of this year was reported at $1.5 billion and $1.55/sh, up from $732 million or 84-cents per share a year ago.

Barrick's Board of Directors authorized a quarterly dividend of 12-cents per share, a 20% increase from the previous dividend. "The company expects to move from a semi-annual dividend to a quarterly dividend going forward."

"The company's positive outlook on the gold price, combined with a strong financial position, quarter-end cash of $3.9 billion and $2.1 billion of operating cash flow in H12010, has allowed Barrick to continue to make high return investments in its project pipeline and at the same time increase its dividend," the company said in its financials.