Barrick Gold (ABX) Reports In-Line Q2 EPS, Lowers Dividend 60%, Announce Agreement With Royal Gold

Barrick Gold (NYSE: ABX) reported Q2 EPS of $0.05, in-line with the analyst estimate of $0.05.

The Board of Directors has decided to reduce the company's quarterly dividend by 60 percent, from five cents per share to two cents per share. The Board believes this reduction is a prudent measure to increase financial flexibility in light of current market conditions. The dividend will be paid on September 15, 2015 to shareholders of record at the close of business on August 31, 2015(3).

• Company reported a net loss of $9 million ($0.01 per share) in the second quarter; adjusted net earnings were $60 million ($0.05 per share)(1).
• Free cash flow was $26 million(1) and operating cash flow was $525 million.
• Production in the second quarter was 1.45 million ounces of gold at all- in sustaining costs (AISC) of $895 per ounce(1).
• Full-year gold production is now expected to be 6.1-6.4 million ounces, reflecting the impact of asset sales.
• All-in sustaining cost guidance for 2015 has been reduced to $840-$880 per ounce.
• Total debt reduced by approximately $250 million in first half.
• $2.45 billion in asset sales and joint ventures announced to date.
• Targeting $2 billion in reduced expenditures across the company by the end of 2016.
• Capital and other expenditures reduced by $240 million in the second quarter.
• Lowered quarterly dividend to two cents per share.
• Scenario planning completed for gold prices down to $900 per ounce.
• On track to achieve approximately $50 million in G&A cost savings in 2015, exceeding original $30 million target for the year. Targeting $90 million in annualized savings in 2016, up from original target of $70 million. -- Completed Preliminary Economic Assessments on projects with the potential to significantly extend mine life at Lagunas Norte and Pueblo Viejo.
  

Barrick Gold Corporation (NYSE: ABX) (TSX: ABX) (Barrick or the "company") announced today that it has entered into a gold and silver streaming agreement with RGLD Gold AG, a wholly-owned subsidiary of Royal Gold, Inc. ("Royal Gold") for production linked to Barrick's 60 percent interest in the Pueblo Viejo mine. In return, Royal Gold has agreed to make an upfront cash payment of $610 million plus continuing cash payments for gold and silver delivered under the agreement.

Under the terms of the agreement, Barrick will sell gold and silver to Royal Gold equivalent to:

-- 7.5 percent of Barrick's interest in the gold produced at Pueblo Viejo until 990,000 ounces of gold have been delivered, and 3.75 percent thereafter. -- 75 percent of Barrick's interest in the silver produced at Pueblo Viejo until 50 million ounces have been delivered, and 37.5 percent thereafter. Silver will be delivered based on a fixed recovery rate of 70 percent. Silver above this recovery rate is not subject to the stream.

Ongoing cash payments to Barrick are tied to prevailing spot prices rather than fixed in advance, maintaining material exposure to higher gold and silver prices in the future. Barrick will receive ongoing cash payments from Royal Gold equivalent to 30 percent of the prevailing spot prices for the first 550,000 ounces of gold and 23.1 million ounces of silver delivered. Thereafter payments will double to 60 percent of prevailing spot prices for each subsequent ounce of gold and silver delivered.

"The innovative structure of this streaming agreement will allow us to crystalize significant value from Pueblo Viejo in a volatile metal price environment, strengthening our balance sheet in the short term while preserving material exposure to higher gold and silver prices in the future," said Barrick Co-President Jim Gowans. "We have made substantial progress on our $3 billion debt reduction target, with $250 million in debt retired so far this year, in addition to $2.45 billion raised through asset sales, joint ventures and streaming. Collectively, these actions represent $2.7 billion, or 90 percent of our target."

Barrick will maintain its 60 percent equity ownership interest in Pueblo Viejo and its associated rights under the joint venture agreement with Goldcorp Inc., including operatorship of Pueblo Viejo.

The transaction will be accounted for as a deferred sales contract and will not have any impact on our reported production or all-in sustaining cost metrics. The obligation of Barrick to sell gold and silver under the agreement is serviced using after tax cash flow being remitted from the Dominican Republic. The agreement is unsecured and is not subject to a Barrick guarantee.

The transaction is subject to customary closing conditions and is expected to be completed early in the fourth quarter. Rothschild Inc. is acting as financial advisor to Barrick. Davies Ward Phillips & Vineberg LLP is acting as legal counsel to Barrick.

For earnings history and earnings-related data on Barrick Gold (ABX) click here.

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