Boston, MA 02/03/2014 (wallstreetpr) – American precious metals miner and the world’s largest gold producer Barrick Gold Corporation (USA) (NYSE:ABX) plans to re-evaluate its current gold reserves using the gold price of $1,100, which could see considerable writedowns in its reserves.
Gold Reserve Erosion and Possible Writedowns
The recent decision for recalculation of its reserves at the substandard rate of $1,100 made public by Barrick Gold Corporation (USA) (NYSE:ABX) CEO Jamie Sokalsky belies the analyst-estimated rate of $1,200 for the process and could see significant erosion in its reserve base for the precious metal. Barrick’s reserves, which currently add up to about 140 million ounces, are considered the largest in the global gold industry with a significant 20-year production vintage. Rise in gold prices in recent years made it viable to extract the precious metal from even lower-grade ores, enabling many players to augment their reserves. However, a 28% decline in gold prices toward 2013 end has posed major roadblocks to the exploration and extraction activities of Barrick, in addition to other industry players.
Sokalsky, who recently said that Barrick had met its 2013 projections for gold production in the range of 7 million to 7.4 million ounces in addition to its predicted costs between $900 and $975 per ounce of gold, envisaged that the recalculation process could render unviable a significant portion of its still-underground reserves of the precious metal. Most mining industry players follow a standard yearly recalculation process for their reserves during the first quarter with updates incorporated into their fourth-quarter or year-end financial results.
Divestment of its Australian equities
In other recent developments, Barrick Gold Corp. (NYSE:ABX) will divest off its interests in its Western Australian mining ventures, the Kanowna Belle and the Kundana mine, to Northern Star Resources Ltd in an all-cash deal considered to be worth AUD 75 million around March 2014. The Kanowna unit produced about 225,000 ounces in 2013. Meanwhile, Barrick will release its upcoming financial earnings report around February 13. Barrick Gold Corp. (NYSE:ABX) shares closed higher at $19.28 in their January 31 trade from the previous $19.22, while after-hours figures dipped to $19.20 last seen.
