Today, Jamie Sokalsky publicly took the lead at Barrick Gold Corp (TSE: ABX).
Barrick is the world’s largest gold company, and it isn’t exactly hale and hearty. Sokalsky replaced Aaron Regent back in June, and he will now have to lead Barrick out of a mess that includes sharply rising operating costs, falling profit margins, and an anemic gold market.
As you’ve all been reading lately, gold hasn’t been doing well amid the storm of global economic slowdowns. And today, Barrick declared yet another quarter of rising gold production costs, making this the fifth straight quarter.
That cost now is between $555 to $575 per ounce, a jump from the previous price of $520 to $560 an ounce and roughly 28% higher than a year earlier. In comparison, the average gold price rose by a mere 7 percent in the same period.
Barrick also declared a higher-than-expected decline in profits. Analysts forecasted a fall of 16 percent from a year ago, but the company reported a drop of 35%.
Bloomberg quotes Jorge Beristain, a Deutsch Bank analyst, on Barrick’s prospects:
“We’ve seen gold prices flatline this quarter, so that does kind of leave the emperor stripped bare in a sense that they really have to deliver on cost control.”
Rising operational costs present a real danger thanks to rapidly increasing wage inflation combined with use of lower-grade gold ores. Despite low fuel prices and a fairly strong U.S. dollar in this year’s second quarter, Barrick’s shares have dropped 25 percent this year alone. The NYSE Arca Gold BUGS Index, representing 16 gold mining firms, saw a similar drop of 20 percent.
As expected, Barrick’s Pascua-Lama mines will encounter heavy cost increases and further delays.
The company opened 7% lower on Monday at $31.84.
