What To Expect From Barrick Gold’s Q3 Results


Barrick Gold (NYSE: ABX) will report its third-quarter results on October 24, 2018 and conduct a conference call with analysts on the following day. The company is expected to post weak quarterly results as the consensus market expects the company to post an EPS (Non-GAAP) of $0.05 as compared to an EPS (Non-GAAP) of $0.16 reported a year ago. The market expects revenue of $1.86 billion, which is 6.6% lower than the figure posted a year ago. Lower sales are a result of a trailing lower investment demand for gold. Though a higher price realized by the company towards the end of the quarter will offset the decrease in sales.

We have a price estimate of $11 per share for the company, which is lower than the current market price. View our interactive dashboard –Q3’18: What To Expect From Barrick Gold In 2018 – and modify the key drivers to visualize the impact on its valuation.

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The recent production report released by the company stated that the company’s gold shipments were lower by 2.5% compared to the same period last year. The copper shipments were up by 6.5% but the lower realized average price per pound for copper could offset the increase in shipment volume. Gold sales were reported at 1.20 million ounces and copper sales were reported at 114 million pounds. The decline in gold sales aligns with the company’s overall lower guidance for the year reflecting its declining reserves and continued instability in its African operations. Copper sales were up 56% sequentially as well as 6.5% y-o-y but the average price per pound shipment of copper came in at $2.77/pound, 15% lower sequentially and 4% lower y-o-y, thus offsetting the increased shipments. Higher production at the Lumwana mine, driven by steady improvement in grade and recovery, helped the company to achieve higher copper shipments.

Gold prices have shown weakness in the third quarter, having fallen by 7% sequentially and 5% y-o-y, respectively. The average realized price per ounce gold shipment stands at $1,213/ounce for this quarter. Although the global trade war has stirred geopolitical tensions and increased the demand for safe-haven assets, the impact on gold has been minimal in the third quarter. Going forward, the company could experience higher average realized prices for both gold and copper in the next quarter and could experience higher shipments in the next quarter.

Additionally, the company expects the effective tax rate to be 48-50% for the rest of the year. The increase in the tax rate from previous guidance range of 44-46% is due to lower sales from operations in lower-tax jurisdictions, specifically, Barrick Nevada. The company expects an effective tax rate of around 59% in the third quarter, quite higher than the year-to-date effective tax rate and as result of adjusted tax rate of 44-49% in H1.

Further, the company has maintained 2018 consolidated gold production guidance of 4.5-5.0 million ounces, at a cost of sales of $810-$850 per ounce, cash costs of $540-$575 per ounce, and AISC (All-In-Sustaining Costs) of $765-$815 per ounce. Furthermore, Barrick expects approximately 1.25 million ounces of production in the next quarter.

 

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