East Africa

Barrick Has Surprise Loss on Tanzania Tax as Spat Erodes Output

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(Bloomberg) — Barrick Gold Corp. reported a surprise net loss in the third quarter on a tax provision related to operations in Tanzania.

An export ban at a unit in the African nation amid a contractual dispute also dragged down production and revenue for the world’s biggest gold miner. Barrick lowered the top end of its 2017 production guidance to 5.5 million from 5.6 million ounces, it said Wednesday in a statement.

All-in sustaining costs to produce an ounce of gold were $772 compared with analysts’ expectations for $785 and $704 in the third quarter of 2016.

The third-quarter net loss was $11 million, compared with net income of $175 million a year earlier, Barrick said. Barrick was expected to report net income of $186 million, according to the average estimate of analysts tracked by Bloomberg. Earnings excluding one-time items were 16 cents a share, in line with the average of 14 analysts’ estimates compiled by Bloomberg.

Barrick has repeatedly stressed that improving free-cash flow is more important than adding ounces to its production pipeline. The company produced 1.243 million ounces of gold, in line with lower preliminary production estimates released last week.

The tax dispute between the Tanzanian government and its 64 percent-owned Acacia Mining Plc resulted in a ban on Acacia’s gold and copper exports and lower production. A tentative deal with Tanzania was reached last week. Under the proposed terms, Acacia would pay the government $300 million and split future economic benefits from its mining operations with the country.

In Wednesday’s release, Barrick said it will work with the government of Tanzania on a final agreement to be reviewed and approved by Acacia. “We expect this work to be completed in the first half of 2018.”

“There’s still a ton of open questions in terms of what exactly the economics are going to look at coming out of this negotiating period with the Tanzanian government,” Michael Siperco, an analyst at Macquarie Capital Markets, said by phone from Toronto ahead of the earnings.

Barrick executives also spent part of 2017 dealing with Argentine authorities after a pipe ruptured at the leach pad of its Veladero mine. In June, authorities in San Juan province lifted restrictions on the heap-leach facility.

–With assistance from Aoyon Ashraf

©2017 Bloomberg L.P.

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