All amounts expressed in U.S. dollars unless otherwise indicated
- Barrick reported a net loss of $412 million ($0.35 per share), and adjusted net earnings1 of $89 million ($0.08 per share) for the third quarter.
- The Company reported third quarter revenues of $1.84 billion, net cash provided by operating activities (“operating cash flow“) of $706 million, and free cash flow2 of $319 million.
- Gold production in the third quarter was 1.15 million ounces, at a cost of sales applicable to gold3 of $850 per ounce, all-in sustaining costs4 of $785 per ounce, and cash costs4 of $587 per ounce.
- Copper production was 106 million pounds, at a cost of sales applicable to copper3 of $2.18 per pound, all-in sustaining costs5 of $2.71 per pound, and C1 cash costs5 of $1.94 per pound.
- Full-year gold production and cost guidance remains unchanged at 4.5-5.0 million ounces, at a cost of sales3 of $810-$850 per ounce, all-in sustaining costs4 of $765-$815 per ounce, and cash costs4 of $540-$575 per ounce. We expect gold production to be approximately 1.25 million ounces in the fourth quarter.
- We continue to expect full-year copper production in the range of 345-410 million pounds, at a cost of sales3 of $2.00-$2.30 per pound, all-in sustaining costs5 of $2.55-$2.85 per pound, and C1 cash costs5 of $1.80-$2.00 per pound.
- Corporate administration cost guidance for 2018 has been reduced from roughly $275 million to approximately $235 million, reflecting savings associated with decentralization.
- During the quarter, Barrick announced a transformational all-share merger with Randgold Resources Ltd. that will create an industry-leading gold company powered by a common vision of long-term value creation.
- Organic growth projects in Nevada and the Dominican Republic continue to advance according to schedule and in line with cost estimates.
- Infill and step out drilling at the Fourmile discovery in Nevada has identified further high grade mineralization, expanding the potential project footprint.
- In September, the Company signed a mutual investment agreement with Shandong Gold Group Co., Ltd. (“Shandong Gold“), strengthening Barrick’s partnership with one of China’s leading mining companies.
TORONTO, Oct. 24, 2018 (GLOBE NEWSWIRE) -- Barrick Gold Corporation (NYSE:ABX)(TSX:ABX) (“Barrick” or the “Company”) today reported third quarter results for the three-month period ending September 30, 2018. Gold production increased to 1.15 million ounces in the third quarter, while cost of sales on a per ounce basis3 was approximately four percent lower than the second quarter of 2018. All-in sustaining costs and cash costs were down by roughly eight percent and three percent, respectively, over the same period. Third quarter operating cash flow of $706 million, and free cash flow2 of $319 million, was significantly higher than the second quarter of 2018, driven by higher production and lower costs. Copper production and costs also improved in the third quarter, as expected. The Company remains on track to meet its full-year gold and copper production guidance.
During the third quarter, Barrick and Randgold Resources Ltd. (“Randgold”) announced a transformational all-share merger that will create an industry-leading gold company powered by a common vision of long-term value creation. The combined company will have the largest portfolio of tier one gold assets6 in the industry, including five of the world’s top 10 tier one gold mines, and two potential tier one mines under development. With John Thornton as Executive Chairman, and Mark Bristow as President and CEO, the combined company will be led by a proven management team of owners with a successful track record in both complex and established jurisdictions. Superior operating metrics, including the highest adjusted EBITDA margin7 and the lowest total cash cost8 position among senior gold peers9, will support sustainable investment in growth and shareholder returns.
Since the proposed merger was announced, Barrick and Randgold shares have risen by 25 percent and 28 percent, respectively, creating $4.8 billion in combined market value.10 Over the same period, the senior gold peers9 have risen by an average of approximately three percent.10 A special meeting of Barrick shareholders will be held on November 5 to approve the issuance of Barrick common shares in connection with the merger, as well as to approve the continuance of Barrick to the Province of British Columbia. Leading independent proxy advisory firms Institutional Shareholder Services and Glass Lewis have recommended that shareholders of both companies vote in favor of the proposed merger. For more information about the merger, and details on how to vote, please visit www.barrick.com/a-new-champion.
FINANCIAL HIGHLIGHTS AND BALANCE SHEET
The Company reported a net loss of $412 million ($0.35 per share) in the third quarter, and adjusted net earnings1 of $89 million ($0.08 per share). The net loss primarily reflects a $405 million impairment charge at the Lagunas Norte mine in Peru (see page 5 for more details). Lower adjusted net earnings compared to the prior-year period primarily reflect lower realized gold and copper prices11, increased direct mining costs primarily due to higher fuel consumption and prices, and planned maintenance activities at Pueblo Viejo during the third quarter. These declines were partially offset by insurance proceeds associated with the KCGM pit wall incident, a reduction in general and administrative expenses, and lower depreciation expense.
Significant adjusting items (pre-tax and non-controlling interest effects) in the third quarter of 2018 include:
- $431 million in net impairment charges primarily related to the asset impairment of Lagunas Norte;
- $62 million in foreign currency translation losses primarily related to the significant weakening of the Argentine peso; and
- $68 million in other expense adjustments, mainly relating to debt extinguishment costs of $29 million and the settlement of a supplier contract dispute of $27 million inherited as part of the Equinox acquisition in 2011.
Refer to page 51 of Barrick’s third quarter MD&A for a full list of reconciling items between net earnings and adjusted net earnings for the current and prior-year periods.
Operating cash flow increased to $706 million, compared to $532 million in the third quarter of 2017, primarily due to a favorable change in working capital, and a decrease in interest expense as a result of debt reduction activities. This was partially offset by lower realized gold and copper prices.11 Stronger operating cash flow drove free cash flow of $319 million—a 42 percent increase compared to the prior-year period.
Over the course of 2018, we have continued to advance the implementation of our decentralized operating model, reallocating roles to operations where appropriate, and eliminating those no longer required (including 235 overhead roles eliminated in 2018 to date). As a result of decentralization efforts, we now expect corporate administration expenses to be approximately $235 million in 2018, including $36 million in one-time severance expenses, compared to our original guidance of roughly $275 million. The indicative annualized savings as a result of this decentralization are approximately $100 million.
As previously reported, during the month of July, Barrick completed a make-whole repurchase of the outstanding principal of approximately $629 million on the Company’s 4.40 percent notes due in 2021. The Company’s total debt is now $5.7 billion, and debt less cash (net debt) is $4.0 billion. Since 2013, Barrick has reduced its total debt by $10 billion. The Company has less than $100 million in debt due before 202012, and more than 85 percent of our outstanding debt matures after 2032. Further debt reduction will depend on cash flows, and will be evaluated against alternative uses of cash.
OPERATING HIGHLIGHTS
Barrick produced 1.15 million ounces of gold in the third quarter of 2018, at a cost of sales3 of $850 per ounce, all-in sustaining costs4 of $785 per ounce, and cash costs4 of $587 per ounce. As anticipated, gold production was higher compared to the second quarter of 2018, primarily driven by improved throughput and grade at Barrick Nevada. We anticipate gold production to be approximately 1.25 million ounces in the fourth quarter, with full-year production at the lower end of our 2018 guidance range of 4.5-5.0 million ounces of gold.
On a per ounce basis, cost of sales applicable to gold3 was four percent higher than the prior-year period, primarily due to the impact of fewer ounces sold, higher direct mining costs attributable to increased fuel consumption and prices, and planned maintenance activities at Pueblo Viejo. A two percent increase in all-in sustaining costs4 compared to the third quarter of 2017 reflects higher direct mining costs, partially offset by lower mine site sustaining capital expenditures.
The Company produced 106 million pounds of copper in the third quarter, at a cost of sales3 of $2.18 per pound, all-in sustaining costs5 of $2.71 per pound, and C1 cash costs5 of $1.94 per pound. Improved copper production compared to the second quarter of 2018 was primarily driven by higher production at Lumwana, reflecting a steady improvement in grade and recovery, and improved crusher reliability.
On a per pound basis, cost of sales applicable to copper3 increased compared to the prior-year period, primarily due to the impact of lower sales volume on unit production costs, higher direct mining costs at Lumwana and Jabal Sayid, and lower capitalized stripping at Zaldívar. Higher copper all-in sustaining costs5 compared to the prior-year period primarily reflects higher direct mining costs, and higher mine site sustaining capital expenditures.
Please see page 36 of Barrick’s third quarter MD&A for individual operating segment performance details. Detailed mine site guidance information can be found in Appendix 1 of this press release.
| Gold | Third Quarter 2018 | 2018 Guidance |
| Production13 (000s of ounces) | 1,149 | 4,500 - 5,000 |
| Cost of sales applicable to gold3 ($ per ounce) | 850 | 810 - 850 |
| Cash costs4 ($ per ounce) | 587 | 540 - 575 |
| All-in sustaining costs4 ($ per ounce) | 785 | 765 - 815 |
| Copper | ||
| Production13 (millions of pounds) | 106 | 345 - 410 |
| Cost of sales applicable to copper3 ($ per pound) | 2.18 | 2.00 - 2.30 |
| C1 cash costs5 ($ per pound) | 1.94 | 1.80 - 2.00 |
| All-in sustaining costs5 ($ per pound) | 2.71 | 2.55 - 2.85 |
| Total Attributable Capital Expenditures14 ($ millions) | 346 | 1,400 - 1,600 |
EXPLORATION AND GROWTH
GOLDRUSH CAMP, NEVADA
Fourmile Discovery - Step out and infill drilling identifies further high grade mineralization15
Ongoing drilling at the Fourmile discovery, located approximately two kilometers north of the Goldrush project, continues to intersect high grade mineralization across a number of stratigraphic horizons. Assay results completed during the third quarter have further expanded the project footprint to the north and the south.
Step out drilling to the northwest has returned assay results including 20.4 meters grading 54.1 grams of gold per tonne, and 4.6 meters grading 60.9 grams of gold per tonne. In addition, step out drilling to the south, in the direction of Goldrush, has identified further high grade mineralization, including 39.3 meters grading 25.6 grams of gold per tonne. Infill drilling in the core project area continues to confirm the continuity of high grade mineralization, with recent assay results including 22.9 meters grading 16.5 grams of gold per tonne. Further infill and wide spaced step out drilling will continue for the remainder of 2018, with a modest initial inferred resource expected by the end of the year.
A drill hole to the west of Fourmile has also identified a new, early stage target called Blasdel. Early results are encouraging and demonstrate the potential for a new trend parallel to Goldrush and Fourmile. We have added an additional drill rig in this area to further investigate this prospective target. Please see endnote 15 for a significant intercepts table including recent Fourmile drilling.
Goldrush Project - Decline development advancing according to plan
Decline construction at Goldrush is expected to accelerate following the mobilization of the development contractor on site during the third quarter. As of September 30, we have spent $33 million (including $8 million in the third quarter of 2018) out of a total estimated capital cost of $1.0 billion at Goldrush. Exploration twin declines will provide access to the orebody at depth, which will enable further drilling, as well as the conversion of existing resources to reserves. These declines can be converted into production declines in the future. Goldrush currently has proven and probable gold reserves of 1.5 million ounces16, and measured and indicated gold resources of 9.4 million ounces16, with significant potential to identify additional resources once underground access to drill the deposit is established. When in full operation, the Goldrush underground project is expected to produce approximately 500,000 ounces of gold per year, at a cost of sales3 of roughly $750 per ounce, and all-in sustaining costs4 of approximately $640 per ounce.
TURQUOISE RIDGE, NEVADA (75 PERCENT BARRICK)17
Shaft construction progressing on schedule
Construction of a third shaft at Turquoise Ridge continues to advance according to schedule and within budget. Ground was broken on the shaft site during the third quarter, and the operation is now taking delivery of hoist components. Shaft winches have also been delivered, and fabrication of the shaft headframe has commenced. The construction of a third shaft at Turquoise Ridge is expected to increase annual production to more than 500,000 ounces per year (100 percent basis), at an average cost of sales3 of around $720 per ounce, and average all-in sustaining costs4 of roughly $630 per ounce. As of September 30, we have spent $59 million (including $16 million in the third quarter of 2018) out of a total estimated capital cost of $300-$325 million (100 percent basis) on the construction of the third shaft at Turquoise Ridge. Initial production from the new shaft is expected to begin in 2022, with sustained production from 2023.
Mine exploration drilling at Turquoise Ridge has continued to expand the deposit in multiple directions, building on high grade results reported in the second quarter, and underscoring the potential for the operation to become a tier one gold mine. Recent assay results from the North Zone Getchell program include 16 meters grading 11.1 grams of gold per tonne, extending mineralization along the fault by 75 meters from the nearest orebody. Additional drilling on the Getchell Fault is slated for 2019.
Earlier this year, the Bas Pond East program extended mineralization to the northeast by 120 meters. Subsequent drilling has encountered significant grades, further extending mineralization to the west by 55 meters. This includes one intercept of 2.7 meters grading 18.2 grams of gold per tonne, and 4.7 meters grading 9.6 grams of gold per tonne. Drilling has also extended mineralization to the north by 35 meters, with an intercept of 3.8 meters grading 13.9 grams of gold per tonne. Follow-up drilling will continue in this area for the remainder of 2018 and in 2019. Please see endnote 17 for a significant intercepts table including recent Turquoise Ridge drilling.
CORTEZ DEEP SOUTH, NEVADA18
Draft Environmental Impact Statement published
The draft Environmental Impact Statement for the Deep South project was published on October 22, and will remain open for public comment until December 5. As of September 30, we have spent $31 million (including $3 million in the third quarter of 2018) out of a total estimated capital cost of $106 million on the Deep South Expansion. Initial production from Deep South is expected in 2022. The project is expected to contribute approximately 300,000 ounces of annual gold production when fully ramped up between 2024 and 2028, at a cost of sales3 of $650 per ounce, and all-in sustaining costs4 of $580 per ounce. Deep South will utilize infrastructure which has already been approved under current plans to expand mining in the Lower Zone of the Cortez underground mine, including the new Rangefront twin declines, and other underground infrastructure already in use and under construction.
PUEBLO VIEJO, DOMINICAN REPUBLIC (60 PERCENT BARRICK)19
Pilot pre-oxidation heap leach in operation, and pilot flotation plant well advanced
Barrick is advancing prefeasibility-level studies for a plant expansion at the Pueblo Viejo mine that could increase throughput by roughly 50 percent to 12 million tonnes per year, allowing the mine to maintain average annual gold production of approximately 800,000 ounces after 2022 (100 percent basis). The prefeasibility study is evaluating options including the addition of a pre-oxidation heap leach pad with a capacity of eight million tonnes per year, a new mill and flotation concentrator with a capacity of four million tonnes per year, and additional tailings capacity. The project has the potential to convert roughly seven million ounces of measured and indicated resources to proven and probable reserves (100 percent basis).16 The pilot pre-oxidation heap leach pad is now in operation, and construction of the pilot flotation circuit is well advanced, including the holding tank and thickener. Both pilots will test metallurgy and recoveries in support of the prefeasibility study for the project.
LAGUNAS NORTE REFRACTORY ORE PROJECT, PERU
In the third quarter of 2018, we updated a feasibility study for proposed projects relating to the processing of carbonaceous materials (“CMOP”) and the treatment of refractory sulphide ore (“PMR”) at Lagunas Norte in Peru. As a result, we are now advancing the CMOP project to detailed engineering, but we are not proceeding with PMR at this time. An impairment assessment was undertaken, and a non-current asset impairment of $405 million was recognized in the third quarter of 2018.
MUTUAL INVESTMENT AGREEMENT WITH SHANDONG GOLD
During the third quarter, Barrick announced a mutual investment agreement with Shandong Gold, further strengthening Barrick’s partnership with one of China’s leading mining companies. Under the Agreement, Shandong Gold will purchase up to $300 million of Barrick shares, and Barrick will invest an equivalent amount in shares of Shandong Gold Mining Co., Ltd., a publicly-listed company controlled by Shandong Gold. Shares will be purchased in the open market. To date, Barrick has purchased approximately $120 million of shares of Shandong Gold Mining Co., Ltd. Over the same period, Shandong Gold had purchased approximately $109 million of shares of Barrick.
Barrick and Shandong Gold are 50-50 joint venture partners at the Veladero mine in Argentina—the first step in the partnership between the two companies. As a second step, Shandong Gold is currently carrying out an independent evaluation of Barrick’s Lama project, including an analysis of potential synergies between Lama and the nearby Veladero operation. Barrick and Shandong Gold have also created internal working groups to share technical expertise and best practices focused on best-in-class mining practices and innovation.
ARGENTINA IMPORT DUTIES
In the third quarter of 2018, the Argentine government re-established customs duties for all exports from Argentina. Effective for the period of September 2018 to December 31, 2020, exports of doré are subject to a 12 percent duty, capped at ARS 4.00 per USD exported. The Company is currently reviewing these changes in the context of the existing tax stability benefit granted to Veladero, and is engaging in discussions with the federal government to clarify the impact of the export duty on Veladero’s operations. Based on our initial analysis, the re-establishment of the customs duties will not have a significant adverse effect on the long-term fair value of the mine.
ACACIA MINING PLC
Discussions between the Government of Tanzania and Barrick concerning the proposed framework for Acacia Mining plc’s operations in Tanzania remain ongoing. Barrick is conducting these discussions in its capacity as the largest shareholder of Acacia, in an effort to reach a resolution that is agreeable to all parties. Barrick is not negotiating on behalf of Acacia. In order to allow the process to continue in an orderly manner and without an arbitrary deadline, Barrick has not provided a timetable for the completion of the discussions. If Barrick is able to conclude discussions satisfactorily with the Government, the proposal will be provided to the Independent Committee of the Acacia Board of Directors for its consideration. Barrick notes that Acacia has been exposed to an increasingly challenging operating environment in recent weeks. Barrick shares Acacia’s concerns about the increasing risks to the safety and security of its people, and continues to believe that a negotiated resolution is in the best interest of all parties. Barrick holds a 63.9 percent equity interest in Acacia, a publicly-traded company listed on the London Stock Exchange that is operated independently of Barrick.
TECHNICAL INFORMATION
The scientific and technical information contained in this press release has been reviewed and approved by: Geoffrey Locke, P. Eng., Manager, Metallurgy of Barrick; Rick Sims, Registered Member SME, Vice President, Reserves and Resources of Barrick; and Robert Krcmarov, FAusIMM, Executive Vice President, Exploration and Growth of Barrick—each a “Qualified Person” as defined in National Instrument 43-101 – Standards of Disclosure for Mineral Projects.
Appendix 1
2018 Operating and Capital Expenditure Guidance
| GOLD PRODUCTION AND COSTS | ||||
| Production20 (000s ounces) |
Cost of sales3 ($ per ounce) |
All-in sustaining costs4 ($ per ounce) |
Cash costs4 ($ per ounce) |
|
| Barrick Nevada | 2,050 - 2,255 | 760 - 810 | 610 - 660 | 470 - 530 |
| Turquoise Ridge (75%) | 240 - 270 | 750 - 800 | 700 - 780 | 650 - 690 |
| Pueblo Viejo (60%) | 575 - 590 | 760 - 775 | 625 - 645 | 460 - 475 |
| Veladero (50%) | 275 - 330 | 970 - 1,110 | 960 - 1,100 | 560 - 620 |
| Lagunas Norte | 250 - 270 | 720 - 850 | 670 - 780 | 420 - 490 |
| Porgera (47.5%) | 190 - 215 | 1,000 - 1,050 | 1,000 - 1,050 | 740 - 790 |
| Kalgoorlie (50%) | 280 - 330 | 775 - 825 | 825 - 875 | 715 - 765 |
| Acacia (63.9%) | ~325 | 970 - 1,020 | 935 - 985 | 690 - 720 |
| Hemlo | 180 - 200 | 1,110 - 1,170 | 1,135 - 1,235 | 940 - 990 |
| Golden Sunlight | 30 - 50 | 1,510 - 1,620 | 1,640 - 1,810 | 1,510 - 1,620 |
| Total Gold | 4,500 - 5,000 | 810 - 850 | 765 - 815 | 540 - 575 |
| COPPER PRODUCTION AND COSTS | ||||
| Production (millions of pounds) |
Cost of sales4 ($ per pound) |
All-in sustaining costs5 ($ per pound) |
C1 cash costs5 ($ per pound) |
|
| Zaldívar (50%) | 115 - 130 | 2.30 - 2.50 | 2.15 - 2.35 | ~1.80 |
| Lumwana | 190 - 225 | 1.90 - 2.15 | 2.80 - 3.10 | 1.95 - 2.20 |
| Jabal Sayid (50%) | 40 - 55 | 1.85 - 2.50 | 1.70 - 2.30 | 1.40 - 1.80 |
| Total Copper | 345 - 410 | 2.00 - 2.30 | 2.55 - 2.85 | 1.80 - 2.00 |
| CAPITAL EXPENDITURES | ||||
| ($ millions) | ||||
| Mine site sustaining21 | 950 - 1,100 | |||
| Project22 | 450 - 550 | |||
| Total Attributable Capital Expenditures6 | 1,400 - 1,600 | |||
Appendix 2
2018 Outlook Assumptions and
Economic Sensitivity Analysis23
| 2018 Guidance Assumption | Hypothetical Change |
Impact on Revenue (millions) |
Impact on Cost of sales3 (millions) |
Impact on All-in sustaining costs4,5 |
|
| Gold revenue, net of royalties | $1,200/oz | +/- $100/oz | +/- $149 | +/- $4 | +/- $3/oz |
| Copper revenue, net of royalties24 | $2.75/lb | + $0.50/lb | + $52 | + $4 | + $0.04/lb |
| Copper revenue, net of royalties24 | $2.75/lb | - $0.50/lb | - $52 | - $4 | - $0.04/lb |
| Gold all-in sustaining costs4 | |||||
| Oil price25 | WTI: $65/bbl | +/- $10/bbl | n/a | +/- $9 | +/- $6/oz |
| Brent: $75/bbl | |||||
| Australian dollar exchange rate | 0.75 : 1 | +/- 10% | n/a | +/- $6 | +/- $4/oz |
| Argentine peso exchange rate | 30 : 1 | +/- 10% | n/a | +/- $3 | +/- $2/oz |
| Canadian dollar exchange rate | 1.25 : 1 | +/- 10% | n/a | +/- $13 | +/- $9/oz |
| Copper all-in sustaining costs5 | |||||
| Oil price25 | WTI: $65/bbl | +/- $10/bbl | n/a | +/- $1 | +/- $0.09/lb |
| Brent: $75/bbl | |||||
| Chilean peso exchange rate | 625 : 1 | +/- 10% | n/a | +/- $3 | +/- $0.03/lb |
Endnotes
Endnote 1
“Adjusted net earnings” and “adjusted net earnings per share” are non-GAAP financial performance measures. Adjusted net earnings excludes the following from net earnings: certain impairment charges (reversals) related to intangibles, goodwill, property, plant and equipment, and investments; gains (losses) and other one-time costs relating to acquisitions or dispositions; foreign currency translation gains (losses); significant tax adjustments not related to current period earnings; unrealized gains (losses) on non-hedge derivative instruments; and the tax effect and non-controlling interest of these items. The Company uses this measure internally to evaluate our underlying operating performance for the reporting periods presented and to assist with the planning and forecasting of future operating results. Barrick believes that adjusted net earnings is a useful measure of our performance because these adjusting items do not reflect the underlying operating performance of our core mining business and are not necessarily indicative of future operating results. Adjusted net earnings and adjusted net earnings per share are intended to provide additional information only and do not have any standardized meaning under IFRS and may not be comparable to similar measures of performance presented by other companies. They should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. Further details on these non-GAAP measures are provided in the MD&A accompanying Barrick’s financial statements filed from time to time on SEDAR at www.sedar.com and on EDGAR at www.sec.gov.
