Barrick Outlines Growth Strategy For 2000 and Beyond - Enhances Leverage to Gold
All amounts in United States dollars
TORONTO, Feb. 7 /CNW/ - Barrick Gold Corporation announced today an
aggressive growth strategy of increasing profitability, growing production and
reserves, and enhanced leverage to rising gold prices. The Company has made
key adjustments to its Premium Gold Sales Program that benefit earnings and
cash flow beginning at a spot gold price of US$319 for 2000. This upside will
be added to its assured floor price of US$360 per ounce.
Barrick previously reported a record 1999 performance, including a 10%
increase in earnings to US$331 million and a 30% increase in cash flow to
US$702 million.
The Company expects to increase production 35% from 3.7 million ounces to
5 million ounces in 2003 at a US$145 cost level. Barrick should generate over
US$1.5 billion in free cash flow over the next five years, after building
three new mines.
"By focusing on our high quality, low-cost mines, we expect to increase
earnings and cash flow to levels never seen before in the gold industry. And
this dynamic growth strategy will deliver these results based solely on what
we know today," said Randall Oliphant, President and Chief Executive Officer.
"The projects driving our growth have excellent rates of return and exciting
potential for expansion. We are entering a new phase of growth with 40% of our
reserves in development."
RESERVES GROW 15% TO 59.3 MILLION OUNCES
Barrick's overall proven and probable gold reserves rose by 15% at
year-end 1999 to 59.3 million ounces, up from 51.5 million ounces in 1998. The
increase was achieved after producing a record 3.7 million ounces. A major
contributor to the growth in reserves was the Pascua Project, where reserves
grew 22% to 17.1 million ounces from 14.0 million in 1998. Pascua's silver
reserves increased to 560 million ounces from 440 million ounces in 1998. As
well, the Company doubled the reserves at its Bulyanhulu Project to 7.5
million ounces.
To further increase its reserves in 2000, Barrick is planning US$90
million for exploration under its District Development Program. This strategy
focuses exploration on and around existing properties in order to take
advantage of existing processing facilities and infrastructure.
PASCUA TO PRODUCE AT US$60 PER OUNCE
Barrick also announced new operating parameters for its Pascua Mine in
Chile/Argentina, including initial production of 800,000 ounces of gold per
year starting in 2003; production should rise to over 1.0 million ounces after
a Phase II expansion in 2005. Pascua's estimated cash costs are now only US$60
per ounce for the first five years, a reduction from last year's figure of
US$125 per ounce. Its average life-of-mine cash costs are estimated to be
under US$100 per ounce, down from US$150 last year. As part of the
US$950-million capital cost, the Company will spend US$109 million in 2000 to
complete its engineering and infrastructure work.
Pascua is expected to make a 25% contribution to earnings and cash flow
each year; it currently has a 14% rate of return based on a US$300 gold price
and US$5.25 silver price.
"Pascua's robust economics are proving to be tremendously exciting for
us. Our success in increasing gold and silver reserves again this year have
made this project even more compelling - it should be the world's lowest cost
gold mine," said Alan Hill, Executive Vice President, Development. "And its
potential is still unfolding. Our district development program envisions
US$100-$200 million in exploration over the next decade."
MORE LOW-COST PRODUCTION FROM NEW MINES
Additional low-cost production is expected to come from two other new
mines in development: Bulyanhulu in Tanzania, and Rodeo in Nevada, set to
become the third mine on the Goldstrike Property.
The US$280-million Bulyanhulu Mine, starting in the second quarter of
2001, should produce 400,000 ounces per year at a cost of US$130 per ounce
over life-of-mine.
"The Bulyanhulu District is emerging as one with great potential for
reserve and production growth from five reefs on our property as well as our
regional development program," added Alan Hill, Executive Vice President,
Development.
The US$125-million underground Rodeo Mine will contribute 350,000 ounces
at a cost of US$160 per ounce, starting in the second half of 2001. This mine
is the latest example of the potential growth in reserves and production at
the Goldstrike Property; its ore will be processed at the US$330-million
roaster facility that is scheduled for start-up by mid-2000. The roaster will
treat carbonaceous ores at Goldstrike and reduce processing costs by 10%, a
US$500 million saving over the Property's known reserves.
2000 OUTLOOK STRONG - EARNINGS/CASH FLOW TO RISE WITH GOLD
Barrick expects 2000 to be a strong year for both earnings and cash flow
with continued outstanding performance from its Premium Gold Sales Program.
"We remain committed to our strategy of delivering strong, predictable
earnings through our unique hedge program," said Jamie Sokalsky, Senior Vice
President and Chief Financial Officer. "With some key changes to enhance our
leverage to rising gold prices, we will now be able to provide earlier
participation in rallies while maintaining the downside protection."
BARRICK ENHANCES LEVERAGE TO GOLD PRICE
Barrick has 84% of its 59.3 million ounces in gold reserves leveraged to
the price of gold and remains assured of downside protection on 13.6 million
ounces sold forward at a minimum average price of US$360 per ounce. The
Company's Premium Gold Sales Program provides a floor of US$360 per ounce for
100% of production in 2000 and 2001, and approximately 25% for subsequent
years. The total amount of ounces committed in the Program has been reduced
from 18.8 million ounces at the end of the third quarter to a net 9.8 million
ounces at year-end 1999.
Barrick has already enhanced its leverage to the gold price by
implementing three key measures:
1) reduced its long-term call options sold from 4.0 million ounces at
the end of the third quarter to 2.7 million ounces at year end;
2) spread out the delivery schedule of its spot-deferred contracts over
more years, assuring a minimum price of US$360 throughout; and
3) purchased 6.8 million ounces of call options to provide earlier
participation and make more money in gold price rallies.
ASSURED OF US$360 FLOOR PRICE AND UPSIDE FROM US$319 GOLD
The purchased call options, an important new dimension, cover 100% of
production from March 1, 2000 through 2001. They give Barrick the right, but
not the obligation, to purchase gold at US$319 in 2000 and US$335 in 2001. The
calls allow Barrick to realize its floor price of US$360 plus any value over
the call strike prices of US$319 in 2000 and US$335 in 2001.
"Our near-term earnings and cash flow will benefit immediately from these
key adjustments during rising gold prices. Our objective remains the same: to
place a floor on our revenues and also more fully participate in a rising gold
price environment," said Jamie Sokalsky, Senior Vice President and Chief
Financial Officer.
Barrick is the most valued gold producer in terms of market
capitalization and has the strongest financial position in the industry with
the only `A'-rated balance sheet.
Barrick Gold Corporation's shares are traded under the ticker symbol ABX
on the Toronto, New York, London, the Swiss Stock Exchanges and the Paris
Bourse.
Certain statements set forth above regarding realized gold gold prices,
production and costs constitute "forward looking statements" within the
meaning of the United States Private Securities Litigation Reform Act of 1995.
Such statements involve risks, uncertainties and other factors that may cause
the actual results, performance or achievements to differ from those expressed
or implied by such forward looking statements. Such risks and uncertainties
are described in periodic filings made by Barrick with the U.S. Securities and
Exchange Commission and Canadian provincial securities regulatory authorities.
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For further information: Media Contact: Vincent Borg, Vice President,
Corporate Communications, Tel (416) 307-7477, Fax (416) 861-1509, Internet:
barrick.com |
