(Adds details from conference call. In U.S. dollars unless noted)
By Cameron French
TORONTO, July 31 (Reuters) - Barrick Gold's (ABX.TO) quarterly profit climbed 22 percent as higher gold prices outpaced the rising costs of production, the world's top gold miner said on Thursday, driving its shares higher.
Barrick also warned 2008 production would come in on the low end of its previous range of 7.6 million to 8.1 million ounces of gold due to lower mining rates and grades at some of its mines. A halt in operations at its Getchell gold mine in Nevada in April due to safety concerns also held back output.
"The main challenges that face Barrick, and I think I may as well speak for the industry at large, are the cost factors. They are relentlessly moving upwards," Barrick Chairman and acting Chief Executive Peter Munk said on a conference call.
Net income rose to $485 million, or 55 cents a share, in the second quarter, from $396 million, or 45 cents, in the year-before period.
Analysts had expected a profit of 56 cents a share.
The market seemed comfortable with the results, as Barrick shares rose 76 Canadian cents, or 1.8 percent, to C$44.12 on the Toronto Stock Exchange.
Quarterly revenue climbed to $2 billion from $1.6 billion, as higher gold prices -- $896 an ounce in the quarter, up from $667 a year before -- outpaced cash cost increases.
Costs rose to $417 an ounce from $340 an ounce, driven primarily by a 91 percent year-on-year rise in oil prices.
However, the surge in gold prices allowed the company's cash margins to increase 68 percent to $477 an ounce.
Munk said many of the same pressures that are driving costs upwards are also helping boost gold prices. Gold often rises in times of economic turmoil or when the U.S. dollar falls.
To help offset rising energy prices, Barrick recently offered C$410 million for Cadence Energy Inc. CDS.TO so it can use Cadence's oil production as a hedge against costs.
"The costs seemed OK," said Kerry Smith, an analyst at Haywood Securities in Toronto. "It looked like production in the quarter was a little bit light."
Barrick raised its expectations for 2008 cash costs to a range of $425 to $445 per ounce from its earlier estimate of $390 to $415 per ounce. The change assumes higher prices for energy and other consumable items.
Munk said the key to controlling costs in the future will be opening new mines with "fundamentally different cost structures".
Barrick said it has begun on-site work at the Pueblo Viejo property in the Dominican Republic, and estimated it will cost about $3 billion to bring the mine to full production.
It said initial cash costs at the mine will likely be in the range of $275 to $300 an ounce, up from its previous estimate of $250 an ounce.
Barrick's other big projects include the Buzwagi project in Tanzania, which it said is on track for gold production in mid-2009, and Cortez Hills project in Nevada, which is also on budget and on schedule for production about 15 months after the start of construction, which should start later this year.
The company is also waiting for Argentina and Chile to conclude a tax agreement at Barrick's Pascua Lama deposit, which straddles the border of the two countries.
Barrick, which has 27 operating mines and a rich property pipeline, produced 1.86 million ounces of gold in the quarter at costs of $417 an ounce. That compared with 1.96 million ounces of gold in the same quarter of 2007 at $340 an ounce.
Spot gold XAU= was at $916 an ounce on Thursday.
Copper output was 87 million pounds at a cost of $1.08 a pound, compared with 101 million pounds at 76 cents a pound.
The company is searching for a new chief executive following the resignation of Greg Wilkins, who had been on leave with a serious, but unspecified, medical condition. Company founder Peter Munk has been acting CEO since March 27.
Separately, Barrick said it had agreed to sell certain noncore royalties to Royal Gold Inc RGL.TO for $150 million in cash and a reduction in royalties otherwise payable to Royal Gold on Barrick's Cortez property.
Barrick said it has about $1.9 billion in cash. ($1=$1.02 Canadian) (Reporting by Cameron French; Editing by Peter Galloway)