By Helen Reid and Arunima Kumar
(Reuters) - Barrick Gold (NYSE:GOLD) Corp on Wednesday announced a share buyback of up to $1 billion as the miner's fourth-quarter results beat analysts' estimates following strong production at its Nevada mines and a smaller tax take than expected.
Barrick's U.S.-listed shares rose around 5% at the open. Net earnings more than doubled from the previous quarter to $726 million, while adjusted earnings per share were $0.35, beating expectations of $0.30 from analysts who had anticipated a higher fourth quarter tax rate.
While costs across Barrick's copper and gold operations climbed in 2021 and were forecast to rise further this year, CEO Mark Bristow said the impact of inflation could be mitigated.
"The gold industry is facing inflation, but that's good for gold. It is what it is, we have to manage it," he said in a telephone interview, adding there were "opportunities to mitigate the price increases".
Investors often use gold as a hedge against inflation, and prices of the precious metal have risen slightly since the start of 2022.
Bristow said energy was the biggest driver of cost increases, and Barrick's solar power facilities at mines in Nevada and Mali would help reduce its power costs.
Announcing the share buyback, Bristow said the share price did not reflect the value of the company's assets.
Barrick shares surged in 2020 when gold prices spiked in response to the global pandemic, but the stock has performed less well since, falling 15.6% in 2021.
Asked if Barrick planned to buy back the full $1 billion amount, Bristow said it would depend on the market.
Peer Newmont announced a buyback of the same amount a year ago.
"We believe Newmont has benefited from its capital allocation policy over the past year (in terms of its stock performance), and we think Barrick is trying to receive similar credit," Keybanc Capital Markets analyst Adam Josephson wrote.
The miner declared a dividend of 10 cents per share, an increase of 11% from the previous base quarterly dividend.
PRODUCTION DOWN, COSTS UP
Over the year, Barrick's gold production fell by 6.8% to 4.437 million ounces of gold from 4.76 million ounces in 2020. Copper production was also lower in 2021, at 415 million pounds compared to 457 million pounds in 2020.
Barrick's costs also climbed during 2021.
All-in sustaining costs (AISC) - a measure of total cost of mining - at Barrick's copper mines jumped by 17.5% to $2.62 per pound in 2021 from $2.23 per pound in 2020. Costs at Barrick's gold operations rose by 6.1% to $1,026 per ounce from $967 per ounce in 2020.
Barrick said it expected all-in sustaining costs to climb again to between $1,040 and $1,120 per ounce of gold in 2022, with cash costs between $730 and $790 per ounce.
"Barrick had previously indicated ~3-5% inflation year on year, and the 2022 cash cost guidance implies ~4.8% inflation," Credit Suisse (SIX:CSGN) analyst Fahad Tariq said.