April 27, 2011 / 11:42 AM / 6 years ago

UPDATE 5-Surging gold price lifts Barrick profit; shares up

* Q1 EPS $1 vs yr-ago $0.82

* Adjusted EPS $1.01 vs Street view $1.02

* Barrick repeats 2011 output forecast of 7.6-8 mln oz

* Barrick shares close higher following two-day slide (Adds links to graphics, comments from chairman, CEO. In U.S. dollars unless noted)

By Euan Rocha

TORONTO, April 27 (Reuters) - Barrick Gold (ABX.TO), the world’s largest gold miner, reported a 22 percent increase in quarterly profit on Wednesday, driven largely by a surge in bullion prices.

Barrick, which surprised investors this week with a C$7.3 billion ($7.7 billion) bid for copper miner Equinox Minerals EQN.TO, also said it remains on track to meet its full-year gold output forecast of between 7.6 million and 8 million ounces.

The Toronto-based miner said its profit benefited from lower than expected cash costs, primarily due to strong performances at its Cortez and Goldstrike mines in Nevada, as well as its Veladero mine in Argentina.

“It’s a fairly good quarter, costs were very well managed,” said Stifel Nicolaus analyst George Topping. “I think overall it’s a good quarter and comes on the back of several good quarters. This ought to go some way toward stabilizing the ill will that the acquisition of Equinox has brought.”

Barrick’s stock was punished this week on news of its surprise bid for Equinox. The company has lost about $5 billion in market capitalization, or close to 10 percent of its value, since announcing the Equinox deal on Monday.

Critics argue the bid could harm the price-to-cash-flow multiple that investors attach to Barrick’s stock.

Despite the strong quarterly performance, Barrick’s shares continued to trend lower on Wednesday, but finally turned around late in the day after the company assured investors that it remains firmly committed to focusing on gold.

Shares of Barrick ended the day up 1.3 percent at $50.84 in New York and closed up 1.2 percent at C$48.34 in Toronto.

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For analysis on fears around Equinox bid: [ID:nN26262302]

How the Equinox deal will boost Barrick’s copper output:

r.reuters.com/ryp29r

For graphic on gold price vs gold miners performance:

r.reuters.com/wux29r

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GOLD FOCUS

Peter Munk, the founder and chairman of Barrick Gold, told investors at the company’s annual meeting on Wednesday that Barrick remains firmly committed to developing its gold assets and remaining on top in the gold sector. [ID:nN27174350]

“We would be foolish, suicidal and totally wrong to our heritage and to what we believe in, if we ever, ever, ever contemplate letting go for a single second of our primacy in the gold industry,” said Munk, 83, who founded Barrick in the early 1980s.

“Who is so idiotic to kill the goose that laid the golden egg -- and some golden egg this is. We are not going to give it up,” he said.

Barrick Chief Executive Aaron Regent reiterated those views in an interview with Reuters.

“Going forward our focus hasn’t changed on gold,” he said. “We plan to grow output to 9 million ounces, we have increased our exploration budget for gold, and we have got half a dozen projects in the pipeline, all of which are gold.”

“We recognize that gold companies trade at a premium to diversifieds and other base metal companies, so it would be ill conceived to do something that is going to crush your multiples on a permanent basis,” he said. “That is going to be very much a consideration in terms of what we would do.”

STRONG METAL PRICES

Barrick and its peers have reaped rewards from surging metal prices, which have helped reduce operating costs and allowed them to increase output by tapping into lower grade ore that would otherwise be uneconomical to mine.

Both gold and silver prices have surged in recent months on the back of inflation fears, low real interest rates, sovereign debt worries and political unrest in the Middle East and North Africa.

A downward revision in Standard & Poor’s U.S. credit outlook last week helped push gold to a above $1,500 an ounce. Spot gold .XAU touched a record high of $1,529.90 an ounce on Wednesday after the the U.S. Federal Reserve said it was in no rush to raise interest rates. [ID:nLDE73Q0X7]

Copper, widely used in construction and industrial applications, has also benefited from tight supply conditions and building booms in China, India and Latin America.

The metal is an important by-product for many gold miners, including Barrick, which is also moving into pure copper production with its pending Equinox acquisition.

Barrick reported first-quarter gold production of 1.96 million ounces and copper production of 75 million pounds, both of which were in line with expectations.

Net income rose to $1 billion, or $1 a share, compared with a year-earlier profit of $820 million, or 82 cents a share.

Excluding one-time items, earnings in the quarter ended March 31 were $1.01 a share, in-line with the average analyst forecast of $1.02 a share, according to Thomson Reuters I/B/E/S.

$1=$0.95 Canadian Reporting by Euan Rocha; editing by Peter Galloway

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