* Q2 EPS $1.16 vs $0.86 a year earlier
* Adj EPS $1.12 vs $0.84; Street view $1.09
* Barrick on track for 2011 output of 7.6 mln-8 mln oz
* Company sees sharp increase in capital expenditures
* Shares down at midday on NYSE, TSX (Adds CEO comments, share move. In U.S. dollars unless noted)
By Euan Rocha
TORONTO, July 28 (Reuters) - Barrick Gold (ABX.TO), the world's largest gold miner, reported a 35 percent increase in quarterly profit on Thursday, but its shares dipped after it warned of sizable increases in capital expenditures.
Surging metal prices have improved the payback prospects for several massive gold projects that Barrick is developing, but the company said that currency moves, along with higher labor, material and energy costs have become a concern.
Barrick now expects capital expenditures for its Pascua Lama project on the border of Chile and Argentina to be between $4.7 billion and $5 billion. The midpoint of this range is 40 percent higher than Barrick's earlier estimate.
Goldcorp (G.TO), which is partnering with Barrick on the Pueblo Viejo project in the Dominican Republic, said on Wednesday that the capital cost of the project is expected to rise nearly 10 percent to between $3.6 billion and $3.8 billion. Goldcorp's shares were down more than 4 percent at midday on Thursday in New York and Toronto. [ID:nN1E76Q1O3]
"This rise in capital expenditures is definitely a trend we are seeing from all the miners that have reported so far," said Morningstar analyst Joung Park, discussing the cost increases that gold miner Agnico Eagle (AEM.TO) outlined in its results announcement on Wednesday. [ID:nN1E76Q1YM]
Barrick also said it now expects capital costs of about $6 billion to develop its Cerro Casale project in Chile. The 2009 feasibility study had pegged costs at about $4.2 billion.
"The good thing is the projects that we have are real high-quality ore bodies, so despite the fact that capex is up, the investment returns have risen considerably as well because of higher metal prices," Barrick Chief Executive Aaron Regent told Reuters.
"So the value of these assets has grown quite dramatically, compared to what they looked like when we made the original decisions, so that's a bit of an offset," he said.
Shares of Barrick were down 1.3 percent at $47.92 at midday on the New York Stock Exchange. The Toronto-listed shares were down 1.1 percent at C$45.51.
Barrick's second-quarter net income rose to $1.16 billion, or $1.16 a share, from a year-before $859 million, or 86 cents a share.
Excluding one-time items, earnings rose to $1.12 billion, or $1.12 a share. That compared with a profit of $824 million, or 84 cents a share, a year earlier.
Analysts on average had forecast earnings of $1.09 a share, according to Thomson Reuters I/B/E/S.
Gold production in the quarter rose to 1.98 million ounces from 1.94 million ounces. The company said total cash costs were $445 an ounce and net cash costs were $338 an ounce in the most recent period.
Quarterly revenue rose 31 percent to $3.43 billion, driven largely by a jump in the average realized gold price in the period, which rose 26 percent to $1,513 per ounce.
The euro zone debt crisis, along with mounting fears of a U.S. debt default, have pushed the price of gold to record highs. Spot gold XAU= broke through the $1,600 an ounce level earlier this month and rose to a record high of $1,628 on Wednesday.
Barrick said it remains on track to meet its full-year production forecast of 7.6 million to 8 million ounces at total cash costs of $450 to $480 an ounce.
The company now expects net cash costs of between $290 and $320 per ounce, compared with an earlier forecast of $340 to $380 per ounce. ($1=$0.95 Canadian) (Reporting by Euan Rocha, editing by Frank McGurty Peter Galloway and Rob Wilson)