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Barrick Announces Conversion of Pueblo Viejo to Natural Gas


Barrick Gold Corporation ABX declared that the operator of the Pueblo Viejo mine — Pueblo Viejo Dominicana Corporation (“PVDC”) — has inked a 10-year natural gas supply contract with AES Andres DR, S.A. in the Dominican Republic. The move will enable the conversion of the Quisqueya I power generation facility to natural gas from heavy fuel oil. Notably, PVDC is a joint venture between Barrick Gold and Goldcorp Inc. GG.

PVDC is owns and operates Quisqueya I and also supplies power to the Pueblo Viejo mine. Converting the facility to natural gas from heavy fuel oil is likely to reduce the mine’s average all-in sustaining costs and cost of sales by roughly $54 per ounce over the life of the mine, which will be partly supported by higher margins on the sale of surplus power to the national energy grid. Moreover, cost savings expected from the move are reflected in Barrick’s most recent consolidated cost guidance for 2019 to 2022.

Additionally, the use of natural gas is also likely to reduce greenhouse gas emissions associated with Pueblo Viejo by roughly 260,000 CO2 equivalent tons per annum. PVDC will invest about $7.5 million for the conversion of Quisqueya I to natural gas, which considerably exceeds Barrick Gold’s hurdle rate of 15%. AES Andres will also build a new gas pipeline to the facility. Commercial gas production is expected to start in the second half of 2019.

Currently, Barrick Gold is advancing prefeasibility-level studies for an expansion at the Pueblo Viejo mine, which has the potential to considerably boost throughput at the operation. The move is also expected to strengthen the economics of the project.

Barrick Gold’s shares have moved up 2.2% in the past three months, outperforming 0.2% gain recorded by its industry.

Zacks Rank & Stocks to Consider

Barrick Gold currently carries a Zacks Rank #3 (Hold).

Better-ranked stocks worth considering in the basic materials space are The Chemours Company CC and Huntsman Corporation HUN, both sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Chemours has an expected long-term earnings growth rate of 15.5%. Its shares have gained 12.3% over a year.

Huntsman has an expected long-term earnings growth rate of 8.3%. Its shares have moved up 20.4% over a year.

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