TORONTO, ONTARIO--(Marketwire - July 29, 2010) - Barrick Gold Corporation (NYSE:ABX)(TSX:ABX) -
SECOND QUARTER REPORT 2010
Based on US GAAP and expressed in US dollars
For a full explanation of results, the Financial Statements and Management Discussion & Analysis, and mine statistics please see the Company's website, www.barrick.com.
Highlights
- Reported Q2 net income rose 59% to a record $783 million ($0.79 per share). Adjusted Q2 net income rose 76% to $759 million ($0.77 per share)(1) compared to $431 million ($0.49 per share) in Q2 2009. Operating cash flow rose 42% to $1.02 billion from $718 million in the prior year period and exceeded $2 billion in the first half of 2010.
- Q2 gold production of 1.94 million ounces at total cash costs of $457 per ounce(1) or net cash costs of $358 per ounce(1), was ahead of plan on strong performance from the North and South America regions. Barrick remains on track with its original full year production guidance of 7.6-8.0 million ounces at total cash costs of $425-$455 per ounce or net cash costs of $345-$375 per ounce(2).
- Lower cash costs in 2010 are expected to allow Barrick to fully capture the benefits of higher gold prices. Q2 cash margins increased 56% to $748 per ounce(1) from $479 per ounce in Q2 2009 and net cash margins increased 48% to $847 per ounce(1) from $571 per ounce in the prior year period.
- Cortez Hills continues to exceed plan following its successful ramp-up in Q1. The Cortez property produced 0.29 million ounces at total cash costs of $308 per ounce in Q2 and is on track to exceed its original production guidance for 2010.
- The Pueblo Viejo(3) and Pascua-Lama projects remain in line with their respective pre-production capital budgets with first production expected in Q4 2011 and Q1 2013, respectively. At full capacity and combined with Cortez Hills, these projects are forecast to contribute about 2.4 million ounces(4) of annual production at low cash costs.
- The terms for $1.035 billion (100% basis) in non-recourse project financing for the Pueblo Viejo project were finalized during the quarter and approximately $780 million (100% basis) has been received in the first draw on this financing.
- Barrick's Board of Directors has authorized a quarterly dividend of 12 cents per share, which represents a 20% increase from the previous dividend(5). The Company expects to move from a semi-annual dividend to a quarterly dividend going forward. The Company's positive outlook on the gold price, combined with a strong financial position, quarter-end cash of $3.9 billion and $2.1 billion of operating cash flow in H1 2010, has allowed Barrick to continue to make high return investments in its project pipeline and at the same time increase its dividend. As the gold price has increased in the last five years, Barrick has increased its dividend by almost 120%.
Q2 production of 1.94 million ounces of gold at total cash costs of $457 per ounce or net cash costs of $358 per ounce was ahead of plan primarily due to strong performances from Cortez, Goldstrike, and Lagunas Norte. The realized gold price for the quarter was $1,205 per ounce(1), $8 per ounce above the average spot price of $1,197 per ounce. Cash margins increased 56% to $748 per ounce from $479 per ounce in Q2 2009. Net cash margins increased 48% to $847 per ounce from $571 per ounce in the same prior year period.
Adjusted Q2 net income rose 76% to $759 million ($0.77 per share), reflecting higher production and sales in conjunction with higher realized gold prices, compared to $431 million ($0.49 per share) in Q2 2009. Reported Q2 net income of $783 million ($0.79 per share) before net adjustments of $24 million was a Company record. Operating cash flow rose 42% to $1.02 billion from $718 million in the prior year period.
"We had another good quarter with solid operational and financial results. Our operating costs were stable and when combined with the higher realized gold price led to significant margin expansion, record quarterly earnings and strong cash flow generation," said Aaron Regent, Barrick's President and CEO. "We continued to advance our project pipeline in line with our plans. In particular, Cortez Hills has been completed and is performing exceptionally well and the construction of Pueblo Viejo and Pascua-Lama continue to move forward. The outlook for the price of gold remains very positive and Barrick will continue to be a major beneficiary."
PRODUCTION AND COSTS
Q2 production of 1.94 million ounces at total cash costs of $457 per ounce or net cash costs of $358 per ounce exceeded plan. The Company continues to expect 2010 production to increase to 7.6-8.0 million ounces of gold at lower total cash costs of $425-$455 per ounce or net cash costs of $345-$375 per ounce. Total cash costs are expected to trend toward the higher end of the range primarily due to increased royalties as gold prices have traded higher(6) and as a result of a change in the production mix.
Following a strong Q1, the North America region delivered another quarter of results which were ahead of plan, producing 0.76 million ounces at total cash costs of $506 per ounce in Q2 on continued strong performances from Cortez and Goldstrike. With Cortez expected to exceed its original guidance, full year production for the region is now anticipated to increase to 3.125-3.175 million ounces of gold and total cash costs are anticipated to be at the higher end of the range of $450-$475 per ounce due to increased royalties and production taxes.
The Cortez property continued to exceed plan, producing 0.29 million ounces at total cash costs of $308 per ounce on higher than expected grades from the Cortez Hills open pit and underground. Cortez Hills continues to operate under the terms of the tailored injunction issued by the District Court while the Bureau of Land Management completes a Supplementary Environmental Impact Study (SEIS) on three aspects identified by the 9th Circuit Court of Appeals. The Company continues to expect completion of the SEIS and a Record of Decision to be issued by year-end.
The Goldstrike operation also performed ahead of plan, producing 0.30 million ounces at total cash costs of $566 per ounce in Q2 primarily due to better than expected grades from the open pit and higher roaster throughput. As planned, Goldstrike is expected to access higher grade material in the second half of the year.
The South American business unit produced 0.57 million ounces at total cash costs of $233 per ounce in Q2. Lagunas Norte exceeded plan, producing 0.25 million ounces at total cash costs of $163 per ounce due to changes in the mine plan. As a result, production at Lagunas Norte is expected to be lower in the second half of the year, before increasing again in early 2011. The Veladero mine produced 0.26 million ounces at total cash costs of $279 per ounce and is expected to produce over 1.0 million ounces in 2010. Full year production for the South America region is now expected to decrease to 2.05-2.10 million ounces of gold at total cash costs of $240-$270 per ounce, primarily as a result of the changes in the mine plan at Lagunas Norte.
The Australia Pacific business unit contributed production of 0.48 million ounces at total cash costs of $622 per ounce in Q2. The Porgera mine produced 0.12 million ounces at total cash costs of $617 per ounce. The region remains on track with its original production guidance of 1.85-2.00 million ounces of gold at total cash costs of $600-$625 per ounce.
Attributable production from African Barrick Gold plc in Q2 was 0.13 million ounces at total cash costs of $609 per ounce(7). Barrick's share of full year production is now expected to decrease to 0.60-0.64 million ounces at higher total cash costs of $560-$600 per ounce as the Buzwagi mine continues to work through lower grade transition ore. Plant availability in the quarter was also impacted by a series of power outages and equipment issues which are being addressed. Production at Buzwagi is expected to increase in the second half of the year as primary sulfide ore becomes available for processing.
Q2 copper production was 102 million pounds at total cash costs of $1.12 per pound and the Company remains on track with its full year copper production guidance of 340-365 million pounds at total cash costs of $1.10-$1.20 per pound.
Utilizing option collar strategies, we have put in place floor protection on approximately 75% of our expected copper production for the remainder of 2010 at an average price of $2.16 per pound and can participate in copper price upside on approximately 100% of our expected remaining 2010 copper production to a maximum average price of $3.69 per pound. We have also hedged approximately 35% of our expected 2011 production through the use of collars with an average floor price of $3.00 per pound and an average ceiling price of $4.18 per pound.
Barrick's production base is underpinned by the industry's largest, fully unhedged gold reserves of 139.8 million ounces, plus measured and indicated gold resources of 61.8 million ounces and inferred gold resources of 31.6 million ounces(8).
PROJECTS UPDATE
The Pueblo Viejo project in the Dominican Republic is advancing in line with its $3.0 billion capital budget (100% basis) and initial production continues to be anticipated in the fourth quarter of 2011. At the end of the second quarter, overall construction was more than 25% complete, approximately 70% of the capital had been committed and engineering and procurement by major EPCM contractors was about 95% complete. About 92,000 cubic meters of concrete or about 60% of the total have been poured and 5,000 tons of steel, representing about 30% of the total, have been erected. Two of the autoclaves are in country, one of which is expected to arrive on site imminently, and all four mills have been installed on their footings. Work continues toward achieving key milestones including the connection of power to the site, which is necessary to commence commissioning activities in the second half of 2011. The terms for $1.035 billion (100% basis) in non-recourse project financing for the project were finalized during the quarter and approximately $780 million (100% basis) has been received in the first draw on this financing. Barrick's 60% share of annual gold production in the first full five years of operation is expected to average 625,000-675,000 ounces at total cash costs of $250-$275 per ounce(9).
At the Pascua-Lama project on the border of Chile and Argentina, detailed engineering and procurement is nearing completion and the project is on track to enter production in the first quarter of 2013. Major items that have been purchased or are subject to firm pricing include the mining equipment fleet, autogenous grinding (AG) and ball mills, the overland conveyor, and the primary and pebble crushers. The project remains in line with its pre-production capital budget of $2.8-$3.0 billion with over one-third of the capital committed. In Chile, the Barriales camp is essentially complete and substantial progress has been made on the Los Amarillos camp in Argentina. Construction of the Punta Colorada road is progressing well and earthworks have commenced with about 3.0 million tons moved to date. Average annual gold production is expected to be 750,000–800,000 ounces in the first full five years of operation at total cash costs of $20-$50 per ounce(10) assuming a silver price of $12 per ounce. For every $1 per ounce increase in the silver price, total cash costs are expected to decrease by about $35 per ounce over this period.
At the Cerro Casale project in Chile, the review of any additional permitting requirements before considering a construction decision is progressing. Engineering contractors have been selected and basic engineering has commenced. Pre-production capital is expected to be about $4.2 billion (100% basis) and Barrick's 75% share of average annual production is anticipated to be about 750,000-825,000 ounces of gold and 170-190 million pounds of copper in the first five full years of operation at total cash costs of about $240-$260 per ounce(11) assuming a copper price of $2.50 per pound. A $0.25 per pound change in the copper price would result in an approximate $50 per ounce impact on the expected total cash costs per ounce over this period.
At the 50% owned Donlin Creek project, further optimization studies are underway, primarily focused on the potential to utilize natural gas to reduce operating costs. Following completion of a scoping study for the natural gas option, in April 2010, the Board of Donlin Creek LLC approved a supplemental budget to proceed with revisions to the feasibility study to include the natural gas option. The feasibility study revisions are expected to be completed in the second quarter of 2011.
At the Reko Diq project, in which Barrick owns a 37.5% interest, the initial mine development feasibility study together with an environmental and social impact assessment are being finalized. The feasibility study indicates pre-production capital of approximately $3.3 billion (100% basis) based on a 120,000 ton per day processing plant, which is capable of future expansions. Barrick's share of average annual production for the first five full years of operation is expected to be about 100,000 ounces of gold at total cash costs of $420-$450 per ounce and 150-160 million pounds of copper at total cash costs of $1.00-$1.10 per pound(12). Discussions with the Governments of Pakistan and Balochistan continue on such matters as investment protection, the outcome of which will inform the next steps taken by Barrick to advance the project.
FINANCIAL POSITION
At June 30, 2010, Barrick had the gold industry's only 'A' credit rating, a cash balance of $3.9 billion and a $1.5 billion undrawn credit facility. The Company generated over $1 billion in operating cash flow during the quarter and $2.1 billion in operating cash flow in the first half of 2010. With the Company's strong financial position and its positive outlook on the gold price, Barrick's Board of Directors has authorized a quarterly dividend of 12 cents per share, which represents a 20% increase from the previous dividend. The quarterly dividend is to be paid on September 15, 2010 to shareholders of record as of the close of business on August 31, 2010. The Company expects to move from a semi-annual dividend to a quarterly dividend going forward(13).
Barrick's vision is to be the world's best gold company by finding, acquiring, developing and producing quality reserves in a safe, profitable and socially responsible manner. Barrick's shares are traded on the Toronto and New York stock exchanges.
(1) Adjusted net income, total cash costs per ounce, net cash costs per ounce, realized price, cash margins and net cash margins per ounce are non-GAAP financial measures. See pages 38-44 of Barrick's Second Quarter Report.
(2) Based on an expected realized copper price of $3.00 per pound for full year 2010.
(3) Barrick has a 60% share in the Pueblo Viejo project.
(4) 2.4 million ounces of production is based on the estimated cumulative average annual production in the first full 5 years once all are at full capacity, with the Cortez Complex including Pipeline.
(5) Calculated based on converting previous semi-annual dividend of $0.20 per share to a quarterly equivalent.
(6) Based on an increase in the gold price assumption to $1,150 per ounce from $1,050 per ounce.
(7) US GAAP basis. ABG reports under an IFRS basis.
(8) Calculated as at December 31, 2009 in accordance with National Instrument 43-101 as required by Canadian securities regulatory authorities. For United States reporting purposes, Industry Guide 7 (under the Securities Exchange Act of 1934), as interpreted by the Staff of the SEC, applies different standards in order to classify mineralization as a reserve. Accordingly, for U.S. reporting purposes, Cerro Casale is classified as mineralized material. For a breakdown of reserves and resources by category and additional information relating to reserves and resources, see pages 23-33 of Barrick's 2009 Form 40-F/Annual Information Form on file with the U.S. Securities and Exchange Commission and Canadian provincial securities regulatory authorities.
(9) Based on gold price and oil price assumptions of $950 per ounce and $75 per barrel, respectively.
(10) Total cash costs are calculated net of silver credits assuming silver, gold, and oil prices of $12 per ounce, $950 per ounce, $75 per barrel, respectively.
(11) Based on gold price, copper price, and oil price assumptions of $950 per ounce, $2.50 per pound and $75 per barrel, respectively, and assuming a Chilean peso foreign exchange rate of 525:1.
(12) Based on copper and gold price assumptions of $2.20 per pound and $925 per ounce, respectively.
(13) The declaration and payment of dividends remains at the discretion of the Board of Directors and will depend on the Company's financial results, cash requirements, future prospects and other factors deemed relevant by the Board.
(1) Production includes equity gold ounces in Highland Gold.
(2) Realized price is a non-GAAP financial performance measure with no standard meaning under US GAAP. See page 43 of the Company's MD&A.
(3) Total cash costs is a non-GAAP financial performance measure with no standard meaning under US GAAP. See page 40 of the Company's MD&A.
(4) Represents equity amortization expense, unrealized losses on non-hedge currency and commodity contracts and inventory purchase accounting adjustments at the Company's producing mines, divided by equity ounces of gold sold or pounds of copper sold.
(5) Net cash costs is a non-GAAP financial performance measure with no standard meaning under US GAAP. See page 40 of the Company's MD&A.
(6) Adjusted net income is a non-GAAP financial performance measure with no standard meaning under US GAAP. See page 38 of the Company's MD&A.
(7) Fully diluted, includes dilutive effect of stock options and convertible debt.
(8) Adjusted debt is a non-GAAP financial performance measure with no standard meaning under US GAAP. See page 44 of the Company's MD&A.
(9) Net debt is a non-GAAP financial performance measure with no standard meaning under US GAAP. See page 42 of the Company's MD&A.
(1) Production includes an additional 50% interest in Hemlo from January 1, 2009 onwards and Barrick's share of total cash costs increased to 100% effective May 1, 2009.
(2) Total cash costs and net cash costs are non-GAAP financial performance measures with no standard meaning under US GAAP. See page 40 of the Company's MD&A.
(3) Represents unrealized losses on non-hedge currency and commodity contracts and the impact of Barrick Energy.
(4) Figures relating to African Barrick Gold are stated at 100% up to March 31, 2010 and 73.9% thereafter.
The notes to these unaudited interim consolidated financial statements, which are contained in the Second Quarter Report 2010 available on our website, are an integral part of these consolidated financial statements.
The notes to these unaudited interim consolidated financial statements, which are contained in the Second Quarter Report 2010 available on our website, are an integral part of these consolidated financial statements.
The notes to these unaudited interim consolidated financial statements, which are contained in the Second Quarter Report 2010 available on our website, are an integral part of these consolidated financial statements.
CORPORATE OFFICE
Barrick Gold Corporation
Brookfield Place, TD Canada Trust Tower
Suite 3700
161 Bay Street, P.O. Box 212
Toronto, Canada M5J 2S1
Tel: (416) 861-9911
Fax: (416) 861-0727
Toll-free throughout North America:
1-800-720-7415
Email: investor@barrick.com
Website: www.barrick.com
SHARES LISTED
ABX – The New York Stock Exchange
The Toronto Stock Exchange
CAUTIONARY STATEMENT ON FORWARD-LOOKING INFORMATION
Certain information contained in this Second Quarter Report 2010, including any information as to our strategy, projects, plans or future financial or operating performance and other statements that express management's expectations or estimates of future performance, constitute "forward-looking statements". All statements, other than statements of historical fact, are forward-looking statements. The words "believe", "expect", "will", "anticipate", "contemplate", "target", "plan", "continue", "budget", "may", "intend", "estimate" and similar expressions identify forward-looking statements. Forward-looking statements are necessarily based upon a number of estimates and assumptions that, while considered reasonable by management, are inherently subject to significant business, economic and competitive uncertainties and contingencies. The Company cautions the reader that such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual financial results, performance or achievements of Barrick to be materially different from the Company's estimated future results, performance or achievements expressed or implied by those forward-looking statements and the forward-looking statements are not guarantees of future performance. These risks, uncertainties and other factors include, but are not limited to: the impact of global liquidity and credit availability on the timing of cash flows and the values of assets and liabilities based on projected future cash flows; changes in the worldwide price of gold, copper or certain other commodities (such as silver, fuel and electricity); fluctuations in currency markets; changes in U.S. dollar interest rates; risks arising from holding derivative instruments; ability to successfully complete announced transactions and integrate acquired assets; legislative, political or economic developments in the jurisdictions in which the Company carries on business; operating or technical difficulties in connection with mining or development activities; employee relations; availability and costs associated with mining inputs and labor; the speculative nature of exploration and development, including the risks of obtaining necessary licenses and permits and diminishing quantities or grades of reserves; changes in costs and estimates associated with our projects; adverse changes in our credit rating, level of indebtedness and liquidity, contests over title to properties, particularly title to undeveloped properties; the risks involved in the exploration, development and mining business. Certain of these factors are discussed in greater detail in the Company's most recent Form 40-F/Annual Information Form on file with the U.S. Securities and Exchange Commission and Canadian provincial securities regulatory authorities.
The Company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise, except as required by applicable law.
For more information, please contact
INVESTOR CONTACT: Deni Nicoski
Vice President, Investor Relations
(416) 307-7410
Email: dnicoski@barrick.com
or
MEDIA CONTACT: Vincent Borg
Executive Vice President, Corporate Communications
(416) 307-7477
Email: vborg@barrick.com
SECOND QUARTER REPORT 2010
Based on US GAAP and expressed in US dollars
For a full explanation of results, the Financial Statements and Management Discussion & Analysis, and mine statistics please see the Company's website, www.barrick.com.
Highlights
- Reported Q2 net income rose 59% to a record $783 million ($0.79 per share). Adjusted Q2 net income rose 76% to $759 million ($0.77 per share)(1) compared to $431 million ($0.49 per share) in Q2 2009. Operating cash flow rose 42% to $1.02 billion from $718 million in the prior year period and exceeded $2 billion in the first half of 2010.
- Q2 gold production of 1.94 million ounces at total cash costs of $457 per ounce(1) or net cash costs of $358 per ounce(1), was ahead of plan on strong performance from the North and South America regions. Barrick remains on track with its original full year production guidance of 7.6-8.0 million ounces at total cash costs of $425-$455 per ounce or net cash costs of $345-$375 per ounce(2).
- Lower cash costs in 2010 are expected to allow Barrick to fully capture the benefits of higher gold prices. Q2 cash margins increased 56% to $748 per ounce(1) from $479 per ounce in Q2 2009 and net cash margins increased 48% to $847 per ounce(1) from $571 per ounce in the prior year period.
- Cortez Hills continues to exceed plan following its successful ramp-up in Q1. The Cortez property produced 0.29 million ounces at total cash costs of $308 per ounce in Q2 and is on track to exceed its original production guidance for 2010.
- The Pueblo Viejo(3) and Pascua-Lama projects remain in line with their respective pre-production capital budgets with first production expected in Q4 2011 and Q1 2013, respectively. At full capacity and combined with Cortez Hills, these projects are forecast to contribute about 2.4 million ounces(4) of annual production at low cash costs.
- The terms for $1.035 billion (100% basis) in non-recourse project financing for the Pueblo Viejo project were finalized during the quarter and approximately $780 million (100% basis) has been received in the first draw on this financing.
- Barrick's Board of Directors has authorized a quarterly dividend of 12 cents per share, which represents a 20% increase from the previous dividend(5). The Company expects to move from a semi-annual dividend to a quarterly dividend going forward. The Company's positive outlook on the gold price, combined with a strong financial position, quarter-end cash of $3.9 billion and $2.1 billion of operating cash flow in H1 2010, has allowed Barrick to continue to make high return investments in its project pipeline and at the same time increase its dividend. As the gold price has increased in the last five years, Barrick has increased its dividend by almost 120%.
Q2 production of 1.94 million ounces of gold at total cash costs of $457 per ounce or net cash costs of $358 per ounce was ahead of plan primarily due to strong performances from Cortez, Goldstrike, and Lagunas Norte. The realized gold price for the quarter was $1,205 per ounce(1), $8 per ounce above the average spot price of $1,197 per ounce. Cash margins increased 56% to $748 per ounce from $479 per ounce in Q2 2009. Net cash margins increased 48% to $847 per ounce from $571 per ounce in the same prior year period.
Adjusted Q2 net income rose 76% to $759 million ($0.77 per share), reflecting higher production and sales in conjunction with higher realized gold prices, compared to $431 million ($0.49 per share) in Q2 2009. Reported Q2 net income of $783 million ($0.79 per share) before net adjustments of $24 million was a Company record. Operating cash flow rose 42% to $1.02 billion from $718 million in the prior year period.
"We had another good quarter with solid operational and financial results. Our operating costs were stable and when combined with the higher realized gold price led to significant margin expansion, record quarterly earnings and strong cash flow generation," said Aaron Regent, Barrick's President and CEO. "We continued to advance our project pipeline in line with our plans. In particular, Cortez Hills has been completed and is performing exceptionally well and the construction of Pueblo Viejo and Pascua-Lama continue to move forward. The outlook for the price of gold remains very positive and Barrick will continue to be a major beneficiary."
PRODUCTION AND COSTS
Q2 production of 1.94 million ounces at total cash costs of $457 per ounce or net cash costs of $358 per ounce exceeded plan. The Company continues to expect 2010 production to increase to 7.6-8.0 million ounces of gold at lower total cash costs of $425-$455 per ounce or net cash costs of $345-$375 per ounce. Total cash costs are expected to trend toward the higher end of the range primarily due to increased royalties as gold prices have traded higher(6) and as a result of a change in the production mix.
Following a strong Q1, the North America region delivered another quarter of results which were ahead of plan, producing 0.76 million ounces at total cash costs of $506 per ounce in Q2 on continued strong performances from Cortez and Goldstrike. With Cortez expected to exceed its original guidance, full year production for the region is now anticipated to increase to 3.125-3.175 million ounces of gold and total cash costs are anticipated to be at the higher end of the range of $450-$475 per ounce due to increased royalties and production taxes.
The Cortez property continued to exceed plan, producing 0.29 million ounces at total cash costs of $308 per ounce on higher than expected grades from the Cortez Hills open pit and underground. Cortez Hills continues to operate under the terms of the tailored injunction issued by the District Court while the Bureau of Land Management completes a Supplementary Environmental Impact Study (SEIS) on three aspects identified by the 9th Circuit Court of Appeals. The Company continues to expect completion of the SEIS and a Record of Decision to be issued by year-end.
The Goldstrike operation also performed ahead of plan, producing 0.30 million ounces at total cash costs of $566 per ounce in Q2 primarily due to better than expected grades from the open pit and higher roaster throughput. As planned, Goldstrike is expected to access higher grade material in the second half of the year.
The South American business unit produced 0.57 million ounces at total cash costs of $233 per ounce in Q2. Lagunas Norte exceeded plan, producing 0.25 million ounces at total cash costs of $163 per ounce due to changes in the mine plan. As a result, production at Lagunas Norte is expected to be lower in the second half of the year, before increasing again in early 2011. The Veladero mine produced 0.26 million ounces at total cash costs of $279 per ounce and is expected to produce over 1.0 million ounces in 2010. Full year production for the South America region is now expected to decrease to 2.05-2.10 million ounces of gold at total cash costs of $240-$270 per ounce, primarily as a result of the changes in the mine plan at Lagunas Norte.
The Australia Pacific business unit contributed production of 0.48 million ounces at total cash costs of $622 per ounce in Q2. The Porgera mine produced 0.12 million ounces at total cash costs of $617 per ounce. The region remains on track with its original production guidance of 1.85-2.00 million ounces of gold at total cash costs of $600-$625 per ounce.
Attributable production from African Barrick Gold plc in Q2 was 0.13 million ounces at total cash costs of $609 per ounce(7). Barrick's share of full year production is now expected to decrease to 0.60-0.64 million ounces at higher total cash costs of $560-$600 per ounce as the Buzwagi mine continues to work through lower grade transition ore. Plant availability in the quarter was also impacted by a series of power outages and equipment issues which are being addressed. Production at Buzwagi is expected to increase in the second half of the year as primary sulfide ore becomes available for processing.
Q2 copper production was 102 million pounds at total cash costs of $1.12 per pound and the Company remains on track with its full year copper production guidance of 340-365 million pounds at total cash costs of $1.10-$1.20 per pound.
Utilizing option collar strategies, we have put in place floor protection on approximately 75% of our expected copper production for the remainder of 2010 at an average price of $2.16 per pound and can participate in copper price upside on approximately 100% of our expected remaining 2010 copper production to a maximum average price of $3.69 per pound. We have also hedged approximately 35% of our expected 2011 production through the use of collars with an average floor price of $3.00 per pound and an average ceiling price of $4.18 per pound.
Barrick's production base is underpinned by the industry's largest, fully unhedged gold reserves of 139.8 million ounces, plus measured and indicated gold resources of 61.8 million ounces and inferred gold resources of 31.6 million ounces(8).
PROJECTS UPDATE
The Pueblo Viejo project in the Dominican Republic is advancing in line with its $3.0 billion capital budget (100% basis) and initial production continues to be anticipated in the fourth quarter of 2011. At the end of the second quarter, overall construction was more than 25% complete, approximately 70% of the capital had been committed and engineering and procurement by major EPCM contractors was about 95% complete. About 92,000 cubic meters of concrete or about 60% of the total have been poured and 5,000 tons of steel, representing about 30% of the total, have been erected. Two of the autoclaves are in country, one of which is expected to arrive on site imminently, and all four mills have been installed on their footings. Work continues toward achieving key milestones including the connection of power to the site, which is necessary to commence commissioning activities in the second half of 2011. The terms for $1.035 billion (100% basis) in non-recourse project financing for the project were finalized during the quarter and approximately $780 million (100% basis) has been received in the first draw on this financing. Barrick's 60% share of annual gold production in the first full five years of operation is expected to average 625,000-675,000 ounces at total cash costs of $250-$275 per ounce(9).
At the Pascua-Lama project on the border of Chile and Argentina, detailed engineering and procurement is nearing completion and the project is on track to enter production in the first quarter of 2013. Major items that have been purchased or are subject to firm pricing include the mining equipment fleet, autogenous grinding (AG) and ball mills, the overland conveyor, and the primary and pebble crushers. The project remains in line with its pre-production capital budget of $2.8-$3.0 billion with over one-third of the capital committed. In Chile, the Barriales camp is essentially complete and substantial progress has been made on the Los Amarillos camp in Argentina. Construction of the Punta Colorada road is progressing well and earthworks have commenced with about 3.0 million tons moved to date. Average annual gold production is expected to be 750,000–800,000 ounces in the first full five years of operation at total cash costs of $20-$50 per ounce(10) assuming a silver price of $12 per ounce. For every $1 per ounce increase in the silver price, total cash costs are expected to decrease by about $35 per ounce over this period.
At the Cerro Casale project in Chile, the review of any additional permitting requirements before considering a construction decision is progressing. Engineering contractors have been selected and basic engineering has commenced. Pre-production capital is expected to be about $4.2 billion (100% basis) and Barrick's 75% share of average annual production is anticipated to be about 750,000-825,000 ounces of gold and 170-190 million pounds of copper in the first five full years of operation at total cash costs of about $240-$260 per ounce(11) assuming a copper price of $2.50 per pound. A $0.25 per pound change in the copper price would result in an approximate $50 per ounce impact on the expected total cash costs per ounce over this period.
At the 50% owned Donlin Creek project, further optimization studies are underway, primarily focused on the potential to utilize natural gas to reduce operating costs. Following completion of a scoping study for the natural gas option, in April 2010, the Board of Donlin Creek LLC approved a supplemental budget to proceed with revisions to the feasibility study to include the natural gas option. The feasibility study revisions are expected to be completed in the second quarter of 2011.
At the Reko Diq project, in which Barrick owns a 37.5% interest, the initial mine development feasibility study together with an environmental and social impact assessment are being finalized. The feasibility study indicates pre-production capital of approximately $3.3 billion (100% basis) based on a 120,000 ton per day processing plant, which is capable of future expansions. Barrick's share of average annual production for the first five full years of operation is expected to be about 100,000 ounces of gold at total cash costs of $420-$450 per ounce and 150-160 million pounds of copper at total cash costs of $1.00-$1.10 per pound(12). Discussions with the Governments of Pakistan and Balochistan continue on such matters as investment protection, the outcome of which will inform the next steps taken by Barrick to advance the project.
FINANCIAL POSITION
At June 30, 2010, Barrick had the gold industry's only 'A' credit rating, a cash balance of $3.9 billion and a $1.5 billion undrawn credit facility. The Company generated over $1 billion in operating cash flow during the quarter and $2.1 billion in operating cash flow in the first half of 2010. With the Company's strong financial position and its positive outlook on the gold price, Barrick's Board of Directors has authorized a quarterly dividend of 12 cents per share, which represents a 20% increase from the previous dividend. The quarterly dividend is to be paid on September 15, 2010 to shareholders of record as of the close of business on August 31, 2010. The Company expects to move from a semi-annual dividend to a quarterly dividend going forward(13).
Barrick's vision is to be the world's best gold company by finding, acquiring, developing and producing quality reserves in a safe, profitable and socially responsible manner. Barrick's shares are traded on the Toronto and New York stock exchanges.
(1) Adjusted net income, total cash costs per ounce, net cash costs per ounce, realized price, cash margins and net cash margins per ounce are non-GAAP financial measures. See pages 38-44 of Barrick's Second Quarter Report.
(2) Based on an expected realized copper price of $3.00 per pound for full year 2010.
(3) Barrick has a 60% share in the Pueblo Viejo project.
(4) 2.4 million ounces of production is based on the estimated cumulative average annual production in the first full 5 years once all are at full capacity, with the Cortez Complex including Pipeline.
(5) Calculated based on converting previous semi-annual dividend of $0.20 per share to a quarterly equivalent.
(6) Based on an increase in the gold price assumption to $1,150 per ounce from $1,050 per ounce.
(7) US GAAP basis. ABG reports under an IFRS basis.
(8) Calculated as at December 31, 2009 in accordance with National Instrument 43-101 as required by Canadian securities regulatory authorities. For United States reporting purposes, Industry Guide 7 (under the Securities Exchange Act of 1934), as interpreted by the Staff of the SEC, applies different standards in order to classify mineralization as a reserve. Accordingly, for U.S. reporting purposes, Cerro Casale is classified as mineralized material. For a breakdown of reserves and resources by category and additional information relating to reserves and resources, see pages 23-33 of Barrick's 2009 Form 40-F/Annual Information Form on file with the U.S. Securities and Exchange Commission and Canadian provincial securities regulatory authorities.
(9) Based on gold price and oil price assumptions of $950 per ounce and $75 per barrel, respectively.
(10) Total cash costs are calculated net of silver credits assuming silver, gold, and oil prices of $12 per ounce, $950 per ounce, $75 per barrel, respectively.
(11) Based on gold price, copper price, and oil price assumptions of $950 per ounce, $2.50 per pound and $75 per barrel, respectively, and assuming a Chilean peso foreign exchange rate of 525:1.
(12) Based on copper and gold price assumptions of $2.20 per pound and $925 per ounce, respectively.
(13) The declaration and payment of dividends remains at the discretion of the Board of Directors and will depend on the Company's financial results, cash requirements, future prospects and other factors deemed relevant by the Board.
(1) Production includes equity gold ounces in Highland Gold.
(2) Realized price is a non-GAAP financial performance measure with no standard meaning under US GAAP. See page 43 of the Company's MD&A.
(3) Total cash costs is a non-GAAP financial performance measure with no standard meaning under US GAAP. See page 40 of the Company's MD&A.
(4) Represents equity amortization expense, unrealized losses on non-hedge currency and commodity contracts and inventory purchase accounting adjustments at the Company's producing mines, divided by equity ounces of gold sold or pounds of copper sold.
(5) Net cash costs is a non-GAAP financial performance measure with no standard meaning under US GAAP. See page 40 of the Company's MD&A.
(6) Adjusted net income is a non-GAAP financial performance measure with no standard meaning under US GAAP. See page 38 of the Company's MD&A.
(7) Fully diluted, includes dilutive effect of stock options and convertible debt.
(8) Adjusted debt is a non-GAAP financial performance measure with no standard meaning under US GAAP. See page 44 of the Company's MD&A.
(9) Net debt is a non-GAAP financial performance measure with no standard meaning under US GAAP. See page 42 of the Company's MD&A.
(1) Production includes an additional 50% interest in Hemlo from January 1, 2009 onwards and Barrick's share of total cash costs increased to 100% effective May 1, 2009.
(2) Total cash costs and net cash costs are non-GAAP financial performance measures with no standard meaning under US GAAP. See page 40 of the Company's MD&A.
(3) Represents unrealized losses on non-hedge currency and commodity contracts and the impact of Barrick Energy.
(4) Figures relating to African Barrick Gold are stated at 100% up to March 31, 2010 and 73.9% thereafter.
The notes to these unaudited interim consolidated financial statements, which are contained in the Second Quarter Report 2010 available on our website, are an integral part of these consolidated financial statements.
The notes to these unaudited interim consolidated financial statements, which are contained in the Second Quarter Report 2010 available on our website, are an integral part of these consolidated financial statements.
The notes to these unaudited interim consolidated financial statements, which are contained in the Second Quarter Report 2010 available on our website, are an integral part of these consolidated financial statements.
CORPORATE OFFICE
Barrick Gold Corporation
Brookfield Place, TD Canada Trust Tower
Suite 3700
161 Bay Street, P.O. Box 212
Toronto, Canada M5J 2S1
Tel: (416) 861-9911
Fax: (416) 861-0727
Toll-free throughout North America:
1-800-720-7415
Email: investor@barrick.com
Website: www.barrick.com
SHARES LISTED
ABX – The New York Stock Exchange
The Toronto Stock Exchange
CAUTIONARY STATEMENT ON FORWARD-LOOKING INFORMATION
Certain information contained in this Second Quarter Report 2010, including any information as to our strategy, projects, plans or future financial or operating performance and other statements that express management's expectations or estimates of future performance, constitute "forward-looking statements". All statements, other than statements of historical fact, are forward-looking statements. The words "believe", "expect", "will", "anticipate", "contemplate", "target", "plan", "continue", "budget", "may", "intend", "estimate" and similar expressions identify forward-looking statements. Forward-looking statements are necessarily based upon a number of estimates and assumptions that, while considered reasonable by management, are inherently subject to significant business, economic and competitive uncertainties and contingencies. The Company cautions the reader that such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual financial results, performance or achievements of Barrick to be materially different from the Company's estimated future results, performance or achievements expressed or implied by those forward-looking statements and the forward-looking statements are not guarantees of future performance. These risks, uncertainties and other factors include, but are not limited to: the impact of global liquidity and credit availability on the timing of cash flows and the values of assets and liabilities based on projected future cash flows; changes in the worldwide price of gold, copper or certain other commodities (such as silver, fuel and electricity); fluctuations in currency markets; changes in U.S. dollar interest rates; risks arising from holding derivative instruments; ability to successfully complete announced transactions and integrate acquired assets; legislative, political or economic developments in the jurisdictions in which the Company carries on business; operating or technical difficulties in connection with mining or development activities; employee relations; availability and costs associated with mining inputs and labor; the speculative nature of exploration and development, including the risks of obtaining necessary licenses and permits and diminishing quantities or grades of reserves; changes in costs and estimates associated with our projects; adverse changes in our credit rating, level of indebtedness and liquidity, contests over title to properties, particularly title to undeveloped properties; the risks involved in the exploration, development and mining business. Certain of these factors are discussed in greater detail in the Company's most recent Form 40-F/Annual Information Form on file with the U.S. Securities and Exchange Commission and Canadian provincial securities regulatory authorities.
The Company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise, except as required by applicable law.
For more information, please contact
INVESTOR CONTACT: Deni Nicoski
Vice President, Investor Relations
(416) 307-7410
Email: dnicoski@barrick.com
or
MEDIA CONTACT: Vincent Borg
Executive Vice President, Corporate Communications
(416) 307-7477
Email: vborg@barrick.com
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