By Nicole Mordant
VANCOUVER, British Columbia (Reuters) - Barrick Gold Corp.
A robust gold price meant the Toronto-based producer opted to deliver its product into the spot market, where it got a better price than from its hedge program, under which it has sold forward 16.1 million ounces of gold.
But Barrick admitted again that the size of the hedge book, equal to about three years' worth of mine output, was too big and that it wanted to cut it back by about a third to 20 percent of gold reserves.
"We will continue to look at ways to bring the book into line that makes some sense," Greg Wilkins, Barrick's chief executive, said.
"But we are not going to spend a lot of hard-earned shareholder cash to necessarily do what the market can do for us as quickly," he said on a conference call.
The world's second biggest gold miner by market value said it sold its gold at an average $365 an ounce in the third quarter. The minimum price on its secretive hedge book is $345 an ounce.
The hedging program, vilified by a vocal contingent of investors who oppose any gold firm reducing its exposure to the gold price, is under water to the tune of $1.2 billion -- its unrealized mark to market value at September price levels.
PRODUCTION ON TRACK BUT IS PASCUA LAMA?
Barrick reported earnings of $35 million, or 7 cents a share, for the three months to Sept 30., a touch higher than the $34 million, or 6 cents a share, in the year-ago quarter and in line with the 7 cents a share expected by analysts.
The first of North America's million-ounce-plus gold producers to report results in the current earnings season, Barrick said it produced 1.48 million ounces of gold in the period at a total cash cost of $180 an ounce.
Good performances from Betze-Post mine in Nevada, Australia's Kalgoorlie and Canada's Eskay Creek operations offset poorer performances from Nevada's Meikle mine and the Bulyanhulu site in Tanzania.
Barrick said it was on track to reach its forecast 5.4 million to 5.5 million ounces of gold production this year at an expected total cash cost of between $190 and $195 an ounce.
Canada's biggest gold miner said it expected to receive approval of an environmental impact study on its Veladero project in Argentina "any day," after which it would begin construction.
Veladero is one of four gold projects expected to add 2 million ounces a year to Barrick's production profile, ramping up from 2005 at a development cost of $2 billion.
But comments by Wilkins about Pascua-Lama, a project on the Chile-Argentina border, had analysts concerned that the largest of the planned developments could be delayed or in jeopardy.
The last of the four projects scheduled to start production, in 2008, Pascua-Lama, is expected to produce 800,000 ounces of gold a year. But development costs are dear at over $1 billion, partly due to the mine's high altitude.
"There are a couple of fairly significant technical decisions we have to take ... We are just rerunning the economics. We want to sure we have it right," Wilkins said. He added that a project study was being "refined," not "reconsidered."
Barrick said it had spent $91 million on repurchasing 5.3 million of its shares during the quarter, part of a share buyback program. It had $1 billion of cash at quarter end.
Barrick shares closed lower on the Toronto Stock Exchange on Monday, losing 17 Canadian cents to C$25.43. The company reported its financial results after the market closed.
($1=$1.31 Canadian)
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