Barrick Gold (NYSE:GOLD) is expected to report its third-quarter earnings on Nov. 6. In the second quarter, Barrick met analysts' expectations on both the top and bottom lines, reporting revenue of $2.1 billion and earnings per share (EPS) of $0.09, respectively. In Q3, analysts expect to see quarter-over-quarter growth regarding both sales and earnings, forecasting sales of $2.7 billion and EPS of $0.12.
Whereas sales and earnings figures are usually the two metrics that most frequently appear in the headlines during earnings season, in-the-know investors recognize the importance of digging past those two items and searching for greater insights regarding the company's quarterly performance. With that in mind, let's get ready for the company's earnings report by taking a look at some other points management will surely discuss.
Measuring the metal heaps
Completing its merger with Randgold Resources in the beginning of the year, Barrick Gold forecast gold production of 5.1 million to 5.6 million ounces for 2019. With the first half of the year under its belt, management says the company is on track to report at the upper end of this range. In terms of Q3, however, investors should look for the company to report gold production of 1.3 million ounces, which would be consistent with what management identified during a mid-October report of its preliminary Q3 results.
But Barrick Gold is more than just a producer of the yellow stuff; the company also produces copper at several of its assets. Similar to the gold production forecast, management remains confident that Barrick will achieve its 2019 copper production forecast of 375 million to 430 million pounds. Based on the preliminary Q3 results, investors should look for the company to report quarterly copper production of 111 million pounds -- a quarter-over-quarter increase over the 97 million pounds reported in Q2 as a result of higher production at Lumwana.
Expectations regarding expenses
While Barrick Gold reported all-in sustaining costs (AISC) of $869 per gold ounce in the second quarter, investors should look for AISC to rise in the third quarter. According to the preliminary Q3 results, the company will report AISC per gold ounce of $974 to $991. Despite the anticipated quarter-over-quarter increase, management maintains its full-year AISC-per-gold-ounce forecast of $870 to $920.
Although Lumwana achieved higher copper production, the company reported that "sales were lower than production levels due to a major refurbishment at one of the third-party smelters that processes a portion of the concentrate produced by Lumwana." Consequently, the company believes the lower copper sales volumes will result in higher copper AISC per pound for the third quarter. Whereas Barrick reported copper AISC per pound of $2.28 in Q2, it expects to report copper AISC per pound of $2.58 to $2.62. Full-year copper AISC-per-pound guidance of $2.40 to $2.90, however, remains unchanged.
Focus on the flow
Besides metals production and the associated costs, one thing I'll be keenly focused on is the company's free cash flow. In July, management announced the launch of Nevada Gold Mines, a joint venture with Newmont Goldcorp, and claimed that one of the benefits of the joint venture would be the generation of higher free cash flow. In light of the fact that Barrick has seen its annual free cash diminish precipitously over the past three years, management's auspicious suggestion should delight shareholders.
It seems as if the merger with Randgold Resources has helped to improve the cash flow statement. Through the first half of the year, Barrick has reported free cash flow of $201 million, representing a considerable increase over the $9 million during the same period in 2018. It will be especially interesting to see how the launch of the joint venture will affect the company's cash flow generation.
What to look for from Barrick Gold
Although investors should be curious to see if Barrick Gold reports mineral production and AISC figures consistent with the preliminary results, the more interesting insight into the company's Q3 performance relates to the company's cash flow. Should the company continue to experience strong cash flow generation, as it has so far in 2019, it may be a harbinger of an increase to the dividend, which dropped from $0.07 per share in Q4 2018 to $0.04 per share in Q1 2019, and has since stayed there.