The world’s biggest gold producer can’t catch a break.
Shares in Barrick Gold Corp. fell 6.3 per cent on Thursday, amid a broad market selloff in the gold sector, after it released weaker-than-expected financial results Wednesday evening, and it failed to provide any new details on a geopolitical stalemate in Tanzania.
Thursday’s session was the second significant selloff in Barrick shares this week and its worst single-day performance in nine months.
The pain in the gold sector wasn’t confined to Barrick.
Goldcorp Inc. lost 5.9 per cent of its value on Thursday, its worst showing in almost a year, after it posted a $131-million net loss in the second quarter. Agnico Eagle Mines Ltd. also had a bad day in the stock market, losing 4.9 per cent of its value, after its quarterly results also fell short of estimates.
Of the three major Canadian gold companies though, Barrick is the one that can least afford to slip up.
The Toronto-based senior gold miner has lost one-fifth of its market value this year, materially underperforming both Agnico and Goldcorp.
In a note to clients, RBC Dominion Securities Inc. analyst Stephen Walker called Barrick’s second-quarter results “noisy,” after it unveiled a number of one-time charges that swung the firm to a $94-million net loss.
Among the charges was about $28-million in severance paid out to laid-off employees, after it trimmed its work force at head office and other regional offices. Spokesman Andy Lloyd declined to specify exact job losses in the quarter, but said Barrick now has about 350 people working in administrative roles, compared with roughly 780 at the end of last year.
Still, it wasn’t all doom and gloom for Barrick. In fact, for the investor looking at the glass half-full, Barrick’s latest quarter did offer one tantalizing nugget.
The company announced a new high-grade gold discovery in Nevada, conveniently only two kilometres from Goldrush, a promising new Barrick mine that holds 1.5 million ounces of gold in reserves, and is set to go into production in 2021.
“We could have a truly remarkable discovery on our hands,” said Rob Krcmarov, executive vice-president of exploration and growth with Barrick, about the Fourmile discovery, during a conference call with analysts on Thursday.
He cautioned that significantly more drilling needs to be done at Fourmile to ascertain its true potential. It will likely be years before the company knows whether any new ore body can be mined economically.
Away from the noise of this quarter though, Barrick faces some other bigger issues that are spooking investors. A geopolitical spat that erupted last year between subsidiary Acacia Mining PLC and the government of Tanzania is showing no signs of being resolved. Barrick was unable to provide even a scrap of new information on why a solution has not yet been found, despite earlier in the year saying an agreement should be reached by mid-year.
Last year, Tanzania accused Acacia of US$200-billion in tax fraud and imposed a gold concentrate export ban on the company. Unusually, Barrick is negotiating on behalf of Acacia, with its own management locked out of the talks.
Another factor weighing on Barrick is leadership uncertainty. On Monday, Barrick shares fell 4.3 per cent after it announced that president Kelvin Dushnisky, the company’s No. 2, is leaving at the end of August to be CEO of South African gold major Anglogold Ashanti.
While not a big charismatic personality like executive chair John Thornton, Mr. Dushnisky is well liked on Bay Street and in many ways is the face of Barrick. While Mr. Thornton makes all of the major strategic decisions at Barrick, it is Mr. Dushnisky who interacts with the public, speaking with institutional and retail shareholders, and going back and forth with analysts on quarterly conference calls.