Barrick Gold Corporation (USA) Earnings: Will Gold Shine Brighter in 2014?

Barrick Gold (GOLD 1.85%) will release its quarterly report on Thursday, and investors are bracing themselves for continued plunges in earnings and revenue because of the steep drop in gold prices over the past year. Yet even though Barrick shares the same general woes that Goldcorp (GG), Newmont Mining (NEM 3.13%), and other major gold miners face, investors in Barrick also have to be concerned about the status of some major projects that could have a huge impact on the company's earnings-growth prospects in the years ahead.

During gold's bull market years, Barrick took a particularly aggressive stance toward seeking growth, with high-priced asset acquisitions and ambitious mining projects that relied in part on the huge gains in gold prices between the late 1990s and the early 2010s. Yet as many of those projects went over budget, Barrick found itself in a precarious position, and after bullion prices plummeted, the miner has had to make some tough decisions. Could 2014 be a year of recovery for Barrick? Let's take an early look at what's been happening with Barrick Gold over the past quarter and what we're likely to see in its report.

Pascua-Lama. Source: Barrick Gold, Denver Gold Forum Presentation

Stats on Barrick Gold

Source: Yahoo! Finance

Will Barrick earnings keep falling?
In recent months, analysts have kept slashing their views on Barrick earnings, reducing their fourth-quarter estimates by $0.09 and cutting five times that amount from their full-year 2014 projections. The stock, though, has shown signs of bottoming out, rising 7% since early November.

Barrick's third-quarter report didn't get things off on strong footing for the miner, as the company dropped a couple of bombshells on shareholders. Barrick's net earnings predictably dropped by 74% on a 12% decline in revenue, as the average gold prices the company realized fell by more than $330 per ounce. Despite favorable production gains and declines in all-in sustaining costs, the weakness in gold and copper prices held back the company. Moreover, Barrick also said that in order to reduce debt, it would sell 163.5 million shares at $18.35 per share, a dramatic drop from prevailing prices above $20 in the days before the announcement.

But the big news from Barrick was that it would suspend its Pascua-Lama project on the border between Argentina and Chile. The mine was expected to have annual production of 800,000 to 850,000 ounces of gold and 35 million ounces of silver, but local opposition to the project has led to costly delays that have added to Barrick's debt problems. That's similar to the problems that Newmont faced with its Conga project, where Peruvian locals opposed the prospective mining operation and caused delays.

Since then, internal turmoil has also taken a toll on Barrick. In December, the company said that Barrick founder Peter Munk would retire in May, but two of Barrick's independent directors subsequently resigned after concerns that four newly created independent director positions could end up being filled by Munk. With Goldcorp, Newmont, and other miners having plenty of opportunities for smart strategic moves, Barrick can't afford to let discord distract it from its efforts to survive tough times.

In the Barrick earnings report, be prepared for big impairments as a drop in its gold-reserve price will make some of its existing reserves no longer economically viable. Yet the bigger question is whether production gains from Barrick's other mines can pick up the slack from delays of unknown duration at Pascua-Lama, while still keeping costs under control. Gold's recent price increases are definitely helpful, but by themselves they won't be the primary determinant of Barrick's success in the future.

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