Canada miners buoyed by rising gold price

Canada’s gold companies reported large increases in full-year earnings buoyed by the rising price of the metal but highlighted the challenges facing the industry as miners grapple with increasing costs and new development projects.

Barrick Gold, the world’s biggest gold producer, reported record earnings of $4.48bn for 2011, up 25 per cent. But the company’s stock came under early pressure as investors focused on rising costs in the final quarter of the year.

Total cash costs increased to $505 an ounce in the fourth quarter from $440 the previous year, underscoring investor concerns about mounting costs in the industry.

Aaron Regent, Barrick’s chief executive, said that about half of the company’s expected rise in costs for next year, forecast to increase to $520-$560 an ounce, was due to a shift in production towards higher cost assets.

That should be reversed as the company’s Pueblo Viejo project in the Dominican Republic and Pascua-Lama project on the border of Argentina and Chile, two lower-cost deposits, come into production, he added.

The rising cost of labour is another significant component in the miner’s expected cost increases.

Kinross on Thursday sought to calm investor nerves after saying in January that it would take an impairment charge mainly related to its $7bn acquisition of Red Back in 2010.

The charge pushed Kinross to a loss of $2.1bn for the year. But Tye Burt, chief executive, pointed to record production, revenue and cash flow, and that he was “absolutely confident” the company had the right high-grade assets for future growth.

Shares in Kinross, which also unsettled investors in January by announcing a delay in developing its key Tasiast asset in Mauritania, rose almost 7 per cent to C$11.07 after announcing results after Wednesday’s close.

Goldcorp, Canada’s second largest gold company, this week said that net earnings fell about 8 per cent last year. Excluding certain non-cash items and impairment charges, adjusted earnings rose 80 per cent to $1.8bn.

Gold companies have sought to win over shareholders with substantial rises in dividends in the past year. Barrick increased its quarterly pay-out by 25 per cent, while Kinross this week said its semi-annual dividend would increase by 33 per cent.

Shares in African Barrick Gold, 74 per cent-owned by Barrick Gold, fell by 10 per cent in spite of a sharp rise in dividend payments as the London-listed mining group blamed power cuts and wage inflation for lower gold production in Tanzania.

Enjoy the long weekend.

Inca.