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Canada based Barrick Gold, one of the world’s top gold miners by market capitalization, has reduced its key price assumptions for gold, copper and silver in 2013 due to lower than expected prices in Q1 and the downside trend that followed in April.
The price of gold and copper are the main drivers of Barrick's profitability and cash flow, while the silver price is relevant for the economics of its Pascua Lama project on the Chilean-Argentine border.
Gold production fell 4.5% to 1.797 million ounces, while gold sales remained essentially flat at 1.747 million.
Barrick produced 1.80Moz of gold in Q1 at all-in sustaining and had total cash costs of $919/oz and $561/oz, respectively.
Full year gold production guidance is 7.0M-7.4Moz at total cash costs of $610-$660/oz. Full year all-in sustaining cost guidance has been reduced to $950-$1,050/oz from the previous guidance of $1,000-1,100/oz, Barrick said in its results report.
Barrick originally set a gold price forecast of $1,700/oz for this year. The new estimate sees gold averaging $1,450/oz in 2013.
Although silver prices do not significantly impact Barrick's operating earnings, cash flows or gold total cash costs, they will have "a significant impact on the overall economics" of the Pascua Lama project, which is to produce 35Moz of silver in its first five years.
Barrick was expecting an average silver price of $32/oz in 2013 but has lowered the forecast to $24/oz.
Silver averaged $30.11/oz in Q1 but April has seen a steady drop in price. Silver closed at $22.91/oz on Wednesday.
Barrick has hedge protection on 65Moz of silver from 2013-18, inclusive, with an average floor price of $23/oz and an average ceiling price of $53/oz.
Courtesy : Bullionstreet
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