Barrick Gold plans to sell, close or curb production at 12 of its 27 mines as the world’s largest gold producer tries to bolster profitability after reporting the industry’s biggest write-off.

Barrick wrote down $8.7-billion of the value of global assets, slashed its dividend by 75% and cut 30% of corporate office staff, the Toronto-based miner said last week in its second-quarter earnings statement.

CEO Jamie Sokalsky is attempting to restore profit margins after gold tumbled 22% this year and had its steepest quarterly drop in London in more than nine decades.

Operations from Peru to Papua New Guinea that have costs higher than $1 000/oz will undergo mine plan adjustments or be closed or sold, Sokalsky says. The 12 mines under review account for about 25% of Barrick’s output.

“If you have a number of assets that aren’t making money at a certain gold price, then you have to deal with them, and that does mean less production,” Sokalsky says.

His stance that every mine must be profitable at lower gold prices is positive for the company, says Kerry Smith, a Toronto-based analyst at Haywood Securities, who rates the shares a buy.

“The guys at the corporate level are saying, ‘You know what, we want these mines to make money and if they’re not, we’re going to do something – we’re going to shut them down’,” says Smith. “They’re making the hard decisions and they’re doing what needs to be done.”

Sokalsky’s efforts are starting to pay off. Production costs have declined year-on-year and beat analysts’ estimates. Barrick has reduced its capital spending budget by about $1-billion and also cut its forecasts for costs this year.

Gold, which rose for 12 consecutive years, slipped into a bear market in April. Prices may average $1 358/oz next year and decline to $1 335/oz in 2015, according to the average of analysts’ estimates compiled by Bloomberg.

Sokalsky says gold prices are bound to rise.

“We’re forming a base here that the funda-mentals can now build on to ultimately get the price moving back up,” he says. “Maybe not in the short term but, over time, I think we can start to trend back up. I think the funda-mentals are still there for that.”

Valuations for gold mining companies also probably “can’t get much lower”, says Sokalsky.

Even after gold’s decline, producers are trading near their cheapest relative to the metal in at least 29 years, according to data compiled by Bloomberg.

“I’m a buyer of gold mining companies because they’re dirt cheap,” says Ned Goodman, CEO of Toronto-based holding company Dundee. Barrick is “the largest producer in the world – it has a very low cost of production, and it is really under new management”.

Since taking over as CEO in June 2012, Sokalsky’s mantra has been a focus on returns and free cash flow. Returns will drive produc-tion, not the other way around, he emphasises.

Barrick says it has abandoned a production target of eight-million ounces a year by 2016 because of a delay at its Pascua-Lama project, in the Andes, expected mine plan changes and potential asset sales.

While some of the company’s mines operate at higher costs, 57% of Barrick’s gold output comes from five mines with production costs less than $700/oz and another 18% is produced at a cost below $1 000%, says Sokalsky.

“Our core assets are very, very strong,” he says. “I’m very optimistic about what our under- lying business can do in this environment.”

Output cuts are most likely to come from the 12 mines that have forecast all-in sustaining costs this year above $1 000/oz. The company is reworking mine plans at several operations, including Bald Mountain, in Nevada, and Hemlo, in Canada, to focus on the most profitable ounces.

It is also evaluating options for the Porgera mine, in Papua New Guinea, and will optimise mine plans or sell some Australian mines. At Pierina, in Peru, the company is assessing options to close the mine.

Barrick would also consider taking on a partner to help finance its delayed Pascua-Lama project, on the border of Chile and Argentina, Sokalsky says. While there have been conceptual discussions in the past, there are no talks currently, he adds.

The company says it expects increased capital costs for Pascua-Lama. Construction on the Chilean side has been halted since April, after a court accepted an injunction filed by indigenous communities and the country’s environmental regulator later ordered work to protect water supplies before the project could restart.

Barrick, which raised the cost estimate for the mine twice last year, to as much as $8.5-bil- lion, said on June 30 it now expected first production from the mine in mid-2016, com-pared with a previous target of the second half of 2014.

While Sokalsky is taking steps to adjust Barrick’s portfolio, the company remains burdened by high debt, and capital spending will remain high for several years while Pascua-Lama is built, says Greg Barnes, a Toronto-based analyst at TD Securities. The company’s net debt as of June 30 was $13.4-billion.

“If the gold price takes another step lower to the sub-$1 200/oz range, concerns about liquidity are likely to resurface,” Barnes says.

Barrick posted a second-quarter net loss of $8.56-billion, or $8.55 a share, compared with net income of $787-million, or 79c a share, a year earlier. Profit excluding impairments and other one-time items was 66c a share, ahead of the 56c average of 17 estimates compiled by Bloomberg. The miner also reduced its quarterly dividend to 5c a share from 20c to improve liquidity.

Barrick is not the only producer making adjustments in response to lower gold prices. Kinross Gold, Canada’s largest producer by revenue after Barrick and Goldcorp, said on July 31 it had reduced its capital and exploration budgets, closed an office in Vancouver and reduced staff at its Toronto head offices by 7% this year.

Yamana Gold, Canada’s fourth-largest gold miner, also cut production forecasts in an effort to reduce costs.

While Barrick and its competitors have been talking about improving margins for some time after years of rising costs, the changes are starting to gain momentum, Smith says.

“Everybody has a sense of urgency – it’s not just Barrick,” Haywood’s Smith says. “The gold price tanking gave people a lot more urgency in terms of we’ve got to get this done; we’ve got to get it done now.”