Barrick sees huge jump in mine costs, shares tumble
By Julie Gordon
TORONTO (Reuters) - Barrick Gold Corp (ABX.TO: Quote) reported a 35 percent decline in quarterly profit on Thursday and warned capital costs on one of its biggest growth projects would come in much higher than forecast, driving down shares of the world's largest gold miner.
The company blamed the higher costs for building its massive Pascua-Lama gold mine, straddling the border between Chile and Argentina, on a decision to use an in-house team to manage construction rather than hiring an outside contractor.
Intended to save money, the move backfired, the company said on Thursday, an admission that may shed some light on last month's sudden dismissal of Aaron Regent as CEO.
The original decision to build Pascua in-house was made some five years ago, before Regent joined Barrick. The company had linked his ouster to the lackluster performance of the stock.
"Certainly it is a convenient excuse to say, 'we didn't know about this,' and imply that Aaron had his eye off the ball," said Dahlman Rose mining analysts Adam Graf. "I guess one could say when you're the CEO, in theory, the buck stops with you and ultimately you are responsible."
The price of gold has more than quintupled in the last decade, from about $300 an ounce in 2002 to just under $1,600, a rise that has pushed top gold miners to seek growth at any cost.
But labor and material costs have skyrocketed along with metal prices, and that has weighed on the share prices of gold miners, most of whom have lost value this year even though spot gold is still well above historic levels.
Before Thursday's news, Barrick's Toronto-listed shares had dropped some 26 percent in 2012. By Thursday afternoon, shares were down another 6.4 percent to C$32.27. Continued...