It looks like the breakup of merger talks between Newmont Mining (NYSE:NEM) and Barrick Gold (NYSE:GOLD) has overshadowed the latter company's quarterly results. However, Barrick Gold showed solid performance that is worth noting. The company was successful in executing its strategy and lowered its costs once again.

Exceptional cost performance
Barrick's revenue fell 9% following a 7% reduction in gold production due to the continued sale of non-core assets. Copper production declined as well, hurt by an incident with the company's Lumwana mine. However, the cost performance was exceptional, with all-in sustaining costs of $833 per ounce.

While Barrick took a cautious stance and reaffirmed its 2014 cost guidance at $920-$980 per ounce, there is reasonable hope that this guidance will be beaten given the first-quarter cost performance. The company also targets $500 million of cost reductions this year, part of which have been already implemented.

Reduced capital spending played a key role in increasing the amount of cash on the balance sheet. Barrick's operational cash flow exceeded investment spending, highlighting its transformation from a reckless spender into a more prudent company.

Debt and Pascua-Lama fate continue to worry investors
The generation of free cash flow will be paramount for Barrick given that it still has $13 billion of long-term debt. Importantly, the debt schedule is very easy, with just $300 million of debt to repay over the next two years. Despite this fact, the debt clearly weighs on the company's valuation. Barrick has already lowered its debt by the means of a share offering back in 2013, so this option has already been used. Thus, the generation of free cash flow is probably the only method to push the debt level lower.

Apart from debt, the fate of the stalled Pascua-Lama project has also been pressuring Barrick shares. The company's first-quarter report revealed no news about the possibilities of regulation improvements. Just like before, Barrick stated that it considered different options, including joint ventures as well as royalty and streaming deals.

In my view, a joint venture on Pascua-Lama would be a decent solution to the problem should Barrick obtain mining permits. Newmont Mining is an unlikely partner given the recent breakup of merger talks followed by a public quarrel through belligerent press releases. Goldcorp (NYSE:GG), which has just lost a bidding war for Osisko Mining, could be a better candidate.

Goldcorp is clearly searching to buy an asset in order to take advantage of depressed prices. However, everything will depend on obtaining permits for Pascua-Lama, as no one will take interest in the mine that is banned from work.

Bottom line
Low gold prices continue to pressure Barrick's bottom line. However, improvements on the cost front give reason for cautious optimism. Unfortunately, this optimism will be erased should gold continue its downside and trend closer to $1,200 per ounce. It also looks like the company is not prioritizing the solution of the Pascua-Lama issue. Instead, Barrick puts it to care and maintenance and waits for gold price upside to make the project attractive.

There's still a long way to go for Barrick to transform into a more efficient company, but it seems to have found the right track. Recent developments have certainly been positive. Just one important ingredient is missing, and that's the gold price upside.