Barrick CEO: Gold Will Top $2,000 in Next Year

Gold Will Top $2,000 in Next Year: Barrick CEO (CNBC, Sep 11, 2012):

With more Federal Reserve stimulus coming and central banks around the world turning into buyers, gold prices have room to run higher, Barrick Gold CEO Jamie Sokalsky told CNBC’s “Squawk on the Street” on Tuesday.

The new CEO of the world’s largest precious metals miner is optimistic about the outlook for gold prices, saying, “Gold could definitely surpass previous highs and go above $2,000 and even higher in the next year.”) Barrick  has great leverage to higher gold prices, with every $100 increase in the price of gold adding an additional $500 million to earnings and cash flow, Sokalsky noted.

But gold mining stocks have failed to keep pace with the increase in the precious metal of late. Sokalsky said the industry needs to have more discipline in terms of how capital is invested. “We can’t just rely on gold prices to drive our earnings,” he said.

Barrick has instituted a disciplined capital allocation program focused on risk adjusted rate of returns and free cash flow, so that it can eventually return more cash to shareholders.

“Every dollar we spend earns an acceptable rate of return and increases the quality of our portfolio,” Sokalsky said.

Barrick is opening two new mines that will increase that are going to add about 20 percent more production at attractive rates of return at an average cash cost of $100 per ounce, he said.

The company is focused on paying a progressive sustainable dividend. “We’ve had a good track record of increasing dividends on a yearly basis, but we have a fairly large capital spend ahead of us,” he said. Once the company gets its Pascua-Lama project up and running, it should see increased free cash flow in 2014 that can be used to increase the dividend, Sokalsky said.

“It’s that type of time horizon that we’ll look to increase shareholder returns,” he said.


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