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Gold/Mining/Energy : Barrick Gold (ABX)

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To: salva who wrote (1138)	4/11/1999 8:05:00 AM
From: mineman	Read Replies (1) of 3558

Kilborn's April 1998 feasibility report concluded there is 10 million tons containing 3.7 mil ounces in the “ore reserve” category within the main vein (which contains 95% of the gold). This includes 2.8 mil ounces of “proven” and .9 mil ounces of “probable” reserves. Sutton's 1998 releases said they had 7.7 mil ounces of gold, without saying only 50% of this was in the “ore reserve” category and 50% in the “resource” category below 2,000 feet depth that has only been intersected with a few widely-spaced drill holes. Sutton's new supposed 1.1 mil ounce “find” is also in the unproven “resource” category which still leaves the main vein with 95% of the known “ore reserves”. Barrick in announcing the Sutton takeover did not use Kilborn's 3.7 mil ounce figure but rather Sutton's promotional “resource” figure of 7.7 mil ounces plus 1.1 mil ounces of the recently added resource for a total of 9 mil ounces. Barrick announcement made it appear that the deposit had 9 mil ounces of drill-proven ore-reserves ready to mine whereas the true figure is only 3.7 mil ounces with a further 5.3 mil ounces of “indicated” reserves that need to be infill-drilled to up-grade them to the “reserve” category. This is important as the very few drill holes below 2,000 feet depth show that the indicated “resource” below that depth only grades .3 ounces per ton ($90 per ton) over fluxuating widths from 2 to 20 feet. With the high-cost of shaft-sinking and development below 2,000 feet these resources appear to be too low grade to economically mine at $280 per ounce gold. I think Barrick management were persuaded by Sutton managers into accepting Suttons figures rather than having Barrick's own technical people assess the project. Barrick were also persuaded by Sutton to waive the due-diligence clause so Barrick were locked-in and could not change their mind no matter what their technical team uncovered. In contrast to Sutton's veins which do not come to surface the Rangold/Pangea reserves for which Barrick paid only a small percentage of the $520 mil Sutton price, are close to surface and easily extractable. Ashanti did their own in-depth assessment of the Samax project before buying it and they were not “duped”. Only time will tell if Barrick management were “duped” into spending $520 million for this low-grade high-cost underground vein in remote Africa!

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