The world's biggest gold miner, Barrick Gold Corp, has doubled its target for spending cuts to $2 billion by 2016, amid plunging bullion prices.
The Canadian miner also plans to sell more of its non-core assets in its efforts to create a leaner, decentralized and more profitable company.
While speaking to investors, Barrick's co-president Kelvin Dushnisky said, ''This is not only about reducing debt. We want a portfolio focused on high quality gold assets and growth projects in our core regions of the Americas.''
Gold prices are hovering at their five-year lows, having fallen over 40 per cent from their 2011 highs of around $1,890 an ounce to $1,094 yesterday. In the past one year, prices for the precious metal have dropped 17 per cent, and global gold producers are looking for ways to cut costs and capital spending to improve their balance sheets.
Last week, Canadian-Australian gold and copper miner OceanaGold Corp struck a deal to buy US-focused Canadian gold developer Romarco Minerals Inc for $658 million in a bid to create the world's lowest cost gold producer. (See: OceanaGold acquires Romarco Minerals for C$856 mn)
According to some industry experts, gold prices could drop further if the US federal reserves take a positive stance on interest rate hike later this year.
For the second quarter, Barrick reported a $9-million loss, compared to a loss of $269 million for the same period last year. Sales dropped 9 per cent to $2.23 billion from $2.46 billion.
The planned spending cuts will be across the board and will include reduction in operating expenses, capital spending and overhead expenses. Barrick said it has already identified $1.4 billion of potential cuts.
Barrick said it will slash dividend to 2 cents a share from 5 cents, representing a 60 per cent reduction.
The 2015 guidance has been reduced to 6.1-6.4 million ounces from 6.2-6.6 million ounces. The company produced 1.45 million ounces of gold an all-in cost of $895 an ounce in the second quarter.
Barrick has also made a streaming arrangement with US miner Royal Gold linked to production from its 60-per cent owned Pueblo Viejo mine in the Dominican Republic,
The deal will provide Barrick with upfront cash of $610 million plus ongoing cash payments for gold and silver delivered under the agreement.
Barrick said the deal will ''strengthen the balance sheet in the short term while preserving material exposure to higher gold and silver prices in the future.''
The gold miner is on course to achieve its $3-billion debt reduction target through asset sales, joint ventures, and streaming. The company already reduced the debt by 250 million in the first half and $2.45 billion in asset sales and joint ventures have been announced so far.
Assets already under sale include its Cowal mine in Australia for $550 million, 50-per cent interest in Barrick (Nuigini) Ltd for $298 million, 50-per cent stake in Zaldivar copper mine in Chile for $1 billion and the latest Pueblo Viejo deal.
Barrick's non-core assets for sale include its Nevada and Montana properties, for which the company said it has received interests from a number of prospective buyers.
Barrick shares have taken a 55-per cent slump in the past one year and are traded at near their 25-year lows. Further to the company's cost-cutting and asset-sale strategy announcement, the stock gained almost 3 per cent to end at C$9.24 yesterday in Toronto.