Barrick Produces 2 Million Ounces of Gold at $313 per Ounce; Corporate Gold Sales Contracts Fully Eliminated
TORONTO, ONTARIO--(CCNMatthews - May 1, 2007) - Barrick Gold Corporation (NYSE:ABX)(TSX:ABX)(LSE:BGD) -
FIRST QUARTER REPORT 2007 - MAY 1, 2007
Based on US GAAP and expressed in US dollars
For a full explanation of results, the Financial Statements and Management Discussion & Analysis, full-year guidance at significant mines, and mine statistics, please see the Company's website, www.barrick.com.
Highlights
- Gold production was 2.0 million ounces at total cash costs of $313 per ounce(1), and copper production was 100 million pounds at total cash costs of $0.81 per pound. Barrick is on track with its 2007 guidance of producing 8.1 to 8.4 million ounces of gold at total cash costs of $335 to $350 per ounce and 400 million pounds of copper at total cash costs of about $0.90 per pound.
- As previously announced, all Corporate Gold Sales Contracts have been eliminated and as of May 1, 2007 the Company can sell all of its production from existing operations at spot prices.
- The Company reported a net loss of $159 million ($0.18 per share) and operating cash flow of $163 million ($0.19 per share). Adjusted earnings of $398 million ($0.45 per share)(2), and adjusted operating cash flow of $727 million ($0.83 per share)(2) reflect the financial impact of $557 million ($0.63 per share) that resulted from the elimination of the Corporate Gold Sales Contracts.
- Barrick advanced its project pipeline, including commissioning the Ruby Hill mine, its fifth mine to commence operations in two years.
- Subsequent to Q1, Barrick entered into an agreement to acquire an additional 20% interest in the Porgera mine from Emperor Mines Limited for cash consideration of approximately US$250 million. Barrick will be entitled to the production and the economic benefit of the additional interest from the effective date of April 1, 2007.
Barrick Gold Corporation reported first quarter production of 2.03 million ounces of gold at total cash costs of $313 per ounce compared to 1.96 million ounces produced at total cash costs of $285 per ounce for the prior-year period.
As a result of Barrick's decision to eliminate its Corporate Gold Sales Contracts, the Company's net income was reduced by $557 million ($0.63 per share) on an after tax basis. Consequently, the Company reported a net loss of $159 million ($0.18 per share) and operating cash flow of $163 million ($0.19 per share). Excluding the impact of the elimination of the Corporate Gold Sales Contracts, adjusted earnings of $398 million ($0.45 per share) and adjusted operating cash flow of $727 million ($0.83 per share) compare to prior year adjusted results of $263 million ($0.33 per share) and $425 million ($0.54 per share), respectively.
"The Company's portfolio of mines had a strong start in 2007", said Greg Wilkins, President and CEO. "Going forward, our operating mines are completely unhedged, able to sell production at spot prices and thereby enjoy expanded margins in this strong gold price environment."
PRODUCTION AND COSTS
In first quarter 2007, Barrick produced 2.03 million ounces of gold at total cash costs of $313 per ounce, and benefited from good performances at its New Generation of Mines, including Lagunas Norte, Veladero and Cowal.
The Company produced 100 million pounds of copper at total cash costs of $0.81 per pound during the first quarter 2007 versus 72 million pounds at total cash costs of $0.77 per pound in the prior year quarter. The average realized price for copper sales in Q1 2007 was $2.77 per pound(3), 8 cents higher than the average spot price, and was enhanced by prices secured from the Copper-Linked Notes.
The North American business unit produced 0.8 million ounces at total cash costs of $352 per ounce. Production is lower year-over-year due to the expected impact of mine sequencing at Goldstrike resulting in the processing of lower grade material. The Ruby Hill mine in Nevada, Barrick's fifth mine to open in the last two years, commenced operations in February. Construction costs were $66 million and were below budget by 10%.
The first quarter benefited from a strong contribution from the South American business unit, which produced 0.6 million ounces of gold at total cash costs of $145 per ounce. Lagunas Norte continues to deliver strong results and produced 0.3 million ounces of gold at a total cash cost of $90 per ounce in the first quarter. The Veladero mine produced 0.2 million ounces at total cash costs of $127 per ounce and benefited from higher recovery rates. The Zaldivar mine in Chile produced 80 million pounds of copper at total cash costs of $0.65 per pound, and had higher leach recoveries than the prior year period due to higher oxide levels.
The Australia-Pacific business unit produced 0.5 million ounces at $426 per ounce. The Porgera mine was adversely impacted by power limitations which curtailed production levels. Electrical facilities have been repaired and operations have returned to normal levels. There was also a slower ramp up of underground production at the Granny Smith mine that resulted in lower grades being processed for the quarter. The Cowal mine in Australia completed its first year of operation, and production has increased as it processed softer oxide ore.
Production from the African business unit was 0.2 million ounces at total cash costs of $328 per ounce, and was impacted by heavy rainfall at Tulawaka and the processing of lower grade ore at Bulyanhulu. Production at North Mara was impacted by a pit wall failure that has resulted in a change to the mine plan. The shortfall in production at North Mara for the quarter is expected to be recouped by year-end.
The Company is on track to meet its full year production guidance of 8.1 - 8.4 million ounces of gold and 400 million pounds of copper. Total cash costs of $313 per ounce of gold in the first quarter 2007 are below full year guidance due to mine sequencing at Lagunas Norte, Veladero and Goldstrike. For the full year, total cash costs are expected to be $335 - $350 per ounce for gold, and $0.90 per pound for copper.
PROJECTS UPDATE
At Cortez Hills, advance engineering and procurement activities are more than 50% complete and early infrastructure design is proceeding on schedule. Delivery of mining equipment continues to plan. The cross valley dewatering pipeline is complete and the freshwater pipeline is ready for testing. Decline development has advanced approximately 3,400 meters to date and is proceeding ahead of schedule. EIA approval continues to be targeted for early 2008 followed by a 15 month construction period.
At Pascua-Lama, mining and plant designs continue to be optimized and engineering efforts continue in support of securing sectoral permits. Work continues to conclude agreements with the Chile and Argentine governments on cross border tax matters.
At Pueblo Viejo, EIA approval for the mine site and facilities was received in the first quarter. Work is continuing to finalize the process and flowsheets for zinc, copper and silver recovery in addition to gold production. Plant designs are being optimized, including expansion potential, consistent with recent exploration success. The 2007 drill program continues to find additional mineralization. Recent results include intercepts in a new area on the north-east edge of the Monte Negro pit, which is open to the north, east and south.
At Buzwagi, the fiscal stability agreement was received in February, and approval of the EIA is expected in the second quarter. Detailed engineering is proceeding on plan and is approximately 18% complete and procurement of mining and processing equipment is underway.
At the Donlin Creek project the feasibility study is progressing according to schedule for completion prior to November 12, 2007.
The Scoping study has commenced for Reko Diq and is expected to be completed in the last quarter of 2007. The test work program has commenced to determine a process flowsheet. The drill program continues with 69,000 meters planned to upgrade the resource at the Western Porphyries in 2007. Over 18,000 meters have been drilled to date, and results continue to confirm the expected grade and continuity of the copper-gold mineralization. In addition, results from two deep test holes suggest excellent potential to extend the mineralization at depth.
EXPLORATION UPDATE(4)
Barrick's 2007 exploration budget is $170 million, which is weighted towards resource additions and reserve conversion at and around minesites. With approximately 40% of the total budget to be spent in North America, Barrick's primary focus remains Nevada where over 30 drill rigs were active this quarter.
At the Cortez property, drill programs are directed at the Cortez Pits and the Cortez Hills Lower Zone in order to expand and upgrade the mineral inventory to resource status. Step out drilling along the 3,000 feet of strike length in the Lower Zone continues to expand the zone to the south.
Resource definition drill programs are underway at Goldstrike, to further evaluate the potential of the mineralization defined at Deep North Post and Banshee.
Drift development is underway at Turquoise Ridge in preparation for a drill program to commence in the second quarter to test the High Grade Bullion zone. The objective of the drill program is to upgrade the current inferred resource.
At Bald Mountain, exploration drilling during the first quarter is focused on evaluating the potential for pit expansion at Top/Sage Flats and Saga/Bida as well as testing additional targets on the property.
In Tanzania, three rigs are currently testing the mineralization at the Gokona Deeps target beneath the Gokona pit. The 2007 program is testing the down plunge extension of the new zone outlined last year.
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