WIRE:02/07/2000 18:30:00 ET
FOCUS-Barrick Gold unveils aggressive growth plan (Changes throughout, adding quotes and background. Updates stock price. Adds byline) (All figures U.S. except where indicated)
TORONTO, Feb 7 (Reuters) - Barrick Gold Corp. < >ABX.TO>, North America's second-largest producer, underscored its bullish outlook for the gold market on Monday, unveiling an aggressive growth strategy that includes boosting output and scaling back its extensive hedging program. In a slick presentation that linked analysts around the world with company executives, the company said it expected to increase production to 5 million ounces in 2003 at a cash cost of $145 an ounce, up from 3.7 million ounces last year. Barrick's increased output will come from three new mines that will generate $1.5 billion in free cash flow. Barrick's Pascua Mine in Chile is expected to contribute substantially when it comes into production in 2003. It is forecast to produce 800,000 ounces of gold a year in its initial year, rising to 1 million ounces by 2005. Cash cost is expected to be $60 an ounce for the first five years. Barrick's Bulyanhulu project in Tanzania is expected to produce 400,000 ounces a year at a cost of $130 an ounce over the life of the mine. And the Rodeo mine at its massive Goldstrike project in Nevada is expected to add 350,000 ounces at a cost of $160 an ounce, starting in the second half of 2001. Barrick, which blasted on to the gold mining scene in the late 1980s with an aggressive and innovative gold hedging strategy, said it remains committed to the practice, but plans to reduce the number of ounces covered. 'Waiting passively for increases in gold prices is not a strategy,' Barrick President and Chief Executive Randall Oliphant said. 'It is our responsibility to deal with the situation here and now. At Barrick we proactively manage our future with strategies that provide certain growth. Investors expect certain growth and Barrick will deliver.' Barrick's hedge program provides a floor of $360 per ounce for 100 percent of production committed to the program in 2000 and 2001, and about 25 percent in subsequent years. The company said 9.8 million ounces were committed to the hedging program at the end of 1999, down from 18.8 million ounces at the end of the third quarter. 'The adjustment to this fundamental hedging program, this brilliant adjustment that allows us participation, reflects our increased view and our tactical realignment of our view today of the gold price,' said Barrick's flamboyant chairman, Peter Munk. 'What we have done today reconfirms our confidence in where we see our gold market today.' Barrick's changes to its hedging position were announced just days after rival Placer Dome Inc. < >PDG.TO>, the world's fifth-largest gold producer, said it plans to suspend its hedging position in expectation of an improving gold market and suggested other producers follow suit. Shares in North American gold companies rallied early on Monday as bullion climbed to a three-month high, driven by Placer's action and speculation that other miners may follow suit. The Toronto Stock Exchange's gold and precious minerals index, home to some of the world's biggest gold mining companies, jumped 4.7 percent on bullion's surge in early trading on Monday, but it took a turn for the worse in afternoon trading soon after Barrick's announcement, ending down 3 percent. Gold for April delivery on the COMEX division of the New York Mercantile Exchange closed down $8.50, almost three percent, at $304.50 an ounce. John Ing, president at Maison Placements Canada, said investors were disappointed with Barrick's decision, but 'you can't please everybody at the same time. The fact is they were quite frank about it and I thought it was pretty positive for them.' Barrick shares closed 50 Canadian cents lower at C$25.80 on the Toronto Stock Exchange on Monday. ($1=$1.45 Canadian)
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