High gold prices mean Barrick is eying record margins in Q4

The group is benefiting not only from higher prices for the yellow metal but also from lowered costs

LONDON (Reuters) - 

Barrick Gold Corp (ABX.TO), the world's biggest gold producer, sees the potential for record margins in the fourth quarter as gold prices hit new peaks and costs are stable or lower, its chief financial officer said on Wednesday.

"At a gold price now over $1,100, we should be looking at record margins, provided the gold price stays high," Jamie Sokalsky told Reuters on the sidelines of the RBC gold conference in London.

"There will certainly be significant margins and in fact could be record margins," he said when asked about the outlook for the fourth quarter.

Costs at Barrick have been stabilizing, with cash costs forecast at $450-$475 per ounce this year and seen declining next year, he added.

Costs will be helped by new lower cost mines such as Cortez Hills, located in the U.S. state of Nevada, coming onstream and hedges on currency and energy.

"We've got some good price protection locked in on some of our inputs and that, combined with a full year of production from the Buzwagi mine in Tanzania and Cortez coming on stream, will allow us to lower our cash costs next year."

Cash costs at Cortez Hills are forecast at $350-$400 per ounce and the Pascua-Lama mine in Chile/Argentina, due on stream in 2013, will have costs of $20-$50.

Financing is progressing well for Barrick's new projects and a $1 billion project finance facility for Pueblo Viejo in the Dominican Republic is due to be agreed by the end of the year.

Another $1 billion facility is being negotiated for the Pascua-Lama project, and that should be finalized late next year, Sokalsky added.

The company, which has a strong balance sheet, with gearing of around 25%, would consider adding more debt, but would like to remain below 30% gearing long-term.

"We'll use leverage when it makes sense, but we're also cognizant of maintaining that strong balance sheet and 'A' credit rating, so we'll be quite prudent."

Barrick was wary of potential acquisitions due to high prices, but if something suitable was found the group would consider paying with shares.

"While we scour the world and look at just about everything out there, we're cautious due to some of the valuations," he said. "There's nothing imminent on that front."

(Editing by Greg Mahlich and Simon Jessop)

© Thomson Reuters 2009 All rights reserved

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