Barrick shares tumble as gold miner sounds cautious tone

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Barrick Gold Corp. shares slid 11 per cent Tuesday as investors reacted to the gold miner's first-quarter results, which missed production and earnings estimates and revealed higher operating costs.

The world's largest gold producer late Monday reported first-quarter net income of $889-million (U.S.) and adjusted net earnings of $162-million, or 14 cents a share, versus the analyst consensus estimate of 20 cents a share.

At the company's annual meeting Tuesday, president Kelvin Dushnisky highlighted Barrick's new era of caution, including cost savings through new joint ventures and debt reduction – having paid down $178-million in the first quarter.

But the market instead focused on Barrick's lowered production forecast for the current year – 5.3 million to 5.6 million ounces, down from the original 5.6 million to 5.9 million range – partly as a result of selling half its stake in the Veladero mine to Shandong Gold Group Co. Ltd. The mine is facing delays after a March cyanide-solution spill, the site's third in 18 months. Federal and provincial authorities in Argentina are reviewing a new plan for the mine's operations, which would come at a preliminary cost of $500-million. That includes the estimated capital to sustain operations over five years, and includes planned expansion and other funding, a spokesperson said.

Shares fell $2.82 to $22.89 on the Toronto Stock Exchange Tuesday.

Barrick spent 2016 rebuilding after being bitten by the commodities slump and ill-fated acquisition spending.

But its new, restrained spending strategy comes at a cost: paring back assets often means lower production.

Last month, Barrick and Goldcorp Inc. announced they would work together to consolidate gold-mine development in Chile's Maricunga Belt in a complex transaction also including Kinross Gold Corp. and a junior mining company – a deal that will see Barrick and Goldcorp split capital and operating costs while sharing infrastructure.

Morgan Stanley & Co. LLC analyst Evan Kurtz said in a note that the quarter's lowered production was "largely expected," but that Barrick will have to play catch-up the rest of the year to meet guidance.

Credit Suisse's Anita Soni, however, said in a note that "the strategic benefits of diversifying exposure from an asset which has had recent operational issues, in addition to partnering with Shandong … outweigh the modest financial dilution on our estimates."

At the annual meeting in Toronto on Tuesday, Mr. Dushnisky called the Veladero spills unacceptable, and reiterated that it was working with local communities to regain their trust. Normal activity is expected to resume in June.

Shareholders at the meeting expressed little concern over the Argentinian mine. One question was raised about standards of community approval for such projects, which the president affirmed was important. Instead, most controversy came from other corners of the world.

Two attendees questioned the environmental impact of the Pueblo Viejo mine in the Dominican Republic.

More prominently, two women from Papua New Guinea who allege to be victims of sexual violence from security staff and police at the Porgera Joint Venture – one of whom was among 119 women who settled with the company through a compensation agreement – attended the meeting and gave statements through Catherine Coumans, a research co-ordinator with MiningWatch Canada.

Unable to speak as proxies at the shareholder meeting, Everlyn Gaupe and Joycelyn Mandi said via Ms. Coumans that they wanted Barrick to better recognize the ill effects from the mine that they see each day, from dealing with mine waste to the threat of sexual violence, which they alleged still exists despite Barrick's efforts. The company introduced a "remedy framework" several years ago to compensate victims of sexual violence in Porgera; Ms. Gaupe and Ms. Mandi also hoped to meet with Barrick while in Canada to discuss it – with requests to examine more cases and to let those women who have been compensated seek greater restitution.

Mr. Dushnisky said Barrick representatives would be happy to meet with them, that he and the company considered all cases of sexual violence to be intolerable, and that its remedy framework was "not perfect" – but did not directly address allegations that such violence from mine security has continued since the remedy framework was put in place, or why other cases, such as Ms. Mandi's, had apparently not yet begun the claim process despite being filed with the mine's grievance office.

Mr. Dushnisky was not available for an interview following the meeting. Barrick regularly faces criticism from human-rights activists, including with MiningWatch, at its annual meetings.

Barrick owns 47.5 per cent of the Porgera Joint Venture, though its stake has been as high as 95 per cent since first buying in a decade ago. In interviews, Ms. Guape and Ms. Mandi said they were happy Barrick agreed to meet, but were still frustrated given how much compensation they believe they and other alleged victims deserve.

"I'm not feeling good, but I'm happy that at least they responded that they'll be having a meeting with us," Ms. Mandi said in an interview. She and Ms. Gaupe alleged that many of the indirect economic compensation that victims were promised, such as education initiatives and business training, have not yet begun. Their troubles, Ms. Gaupe said, are not over: "Our lives in the village community are in danger."