Barrick Gold’s Tulawaka mine in northwest Tanzania.
Barrick Gold Corp. is contemplating getting out of the copper business.
President Kelvin Dushnisky said a sale of the copper assets is a possibility, although the company is not running a sales process at this time.
"Would we consider divestment in some point in time? Yes," Mr. Dushnisky said in an interview with The Globe and Mail.
Barrick acquired its copper assets primarily through its US$7.3-billion purchase of Equinox Minerals Ltd. in 2011. The high-priced acquisition, timed shortly before a global slump in metals prices, proved to be a financial disaster, as Barrick wrote down the value of these assets by US$3.8-billion less than two years later.
Barrick's move into copper irked some investors, who preferred the company's pure focus on gold. Still, with copper prices near a three-year high, those assets have only grown in value lately.
Meanwhile, shares in Barrick slumped on Thursday, after the Toronto-based gold miner said it is facing a double whammy of lower gold production and higher costs over the next few years. The company's forecast for gold production this year likely puts it on track to lose its crown as the world's largest gold producer.
Cost inflation, which ate into corporate profits across the mining industry during the great gold boom of the late 2000s, is back after a period of relative calm.
In a conference call with analysts on Thursday, Barrick's chief operating officer, Richard Williams, outlined a number of inflationary trends "that didn't exist three years ago," which are once again driving up costs: fuel, labour and mine-input expenses such as chemicals.
In addition, Mr. Williams pointed out that Barrick's production profile is shifting this year away from lower-cost mines such as Barrick Nevada, Pueblo Viejo in the Dominican Republic and Veladero in Argentina, toward higher-cost mines.
Last year, Barrick's all-in sustaining costs were US$750 an ounce, an increase of 3 per cent over 2016. The company predicts a range of US$765 to US$815 an ounce for 2018, and an average of US$750 to US$875 for 2019 to 2022.
Barrick's production fell 3.5 per cent last year to 5.3 million ounces of gold, from 5.5 million in 2016. The company encountered temporary production problems at Veladero last year, and its London-based subsidiary, Acacia Mining PLC, has been under an export ban in Tanzania for almost a year.
This year, Barrick expects to produce between 4.5 million and five million ounces of gold, which would likely propel U.S. competitor Newmont Mining Corp. into the top spot worldwide in production.
Mr. Dushnisky said he is not fazed about Barrick potentially dropping to number two in production after about 11 years as the alpha dog.
"Number of ounces and size of the sake of being the biggest producer – it really is not what's driving us," he said.
Barrick predicts further gold production declines after 2018, expecting to average between 4.2 million and 4.6 million ounces a year from 2019 to 2022.
"We are incrementally concerned about Barrick's operational outlook as its assets are in decline and its costs are rising," said Christopher LaFemina, analyst with Jefferies.
Shares in Barrick fell 3 per cent on the Toronto Stock Exchange on Thursday and have lost about a third of their value over the past year.
Next week, Barrick will hold an investor day to outline plans for its future production, which is a large area of concern for the company.
"Ultimately, the company needs to grow its reserves – and this is the challenge," Mr. LaFemina said.
Barrick's total proven and probable gold reserves were 64.5 million ounces as of the end of December, a 25-per-cent drop compared with the 85.9 million in reserves it held 12 months prior and more than 50 per cent lower than the 139.9 million ounces it held at the end of 2011.
Niall McGee