Barrick Gold Corp - Company Review
Barrick Gold 1999 first quarter report
Barrick Gold Corp ABX
Shares issued 401,814,498 Jun 3 close $26.65
Fri 4 Jun 99 Company Review
Mr. Randall Oliphant reviews the company
All figures are in U.S. dollars.
FINANCIAL HIGHLIGHTS
Three months ended March 31
(in millions of dollars)
1999 1998
Revenues $392 $305
Net income 87 75
Operating cash flow 210 135
Net income per share 23 cents 20 cents
Operating cash flow
per share 56 cents 36 cents
Net income for the first quarter increased 16 per cent to $87-million, 23
cents per share, from $75-million, 20 cents per share, in the year earlier
period, on revenues of $392-million, compared with $305-million. Operating
cash flow for the quarter increased 56 per cent to $210-million, 56 cents
per share, compared with $135-million, 36 cents per share, for the first
quarter 1998.
"We have achieved strong, profitable growth despite the gold price because
we have the best assets in the industry, producing gold at the lowest cash
costs. Through our Premium Gold Sales Program, we sell our gold for three
times the cash cost of production," said Randall Oliphant, president and
chief executive officer. "The acquisition of Sutton Resources' high quality
assets further enhances Barrick's new era of growth," added Mr. Oliphant.
Gold production rose 31 per cent to 1,010,913 ounces in the first quarter,
compared with 769,282 ounces in the year earlier period. The Pierina mine
contributed 315,660 ounces, reflecting a smooth production start-up and
high initial ore grades. The Goldstrike Property had another strong
quarter, producing over half a million ounces.
Cash operating costs declined by 25 per cent to $116 per ounce, compared
with $154 per ounce for the year earlier period, with Pierina producing at
a cost of $39 per ounce in its first full quarter of operation.
"Barrick benefited from excellent results at all its mines - we continue to
produce more gold at lower costs and greater profit," said John Carrington,
vice-chairman and chief operating officer. "The Pierina mine further
reinforces the operating strengths of this company to successfully build
and operate mines in new geographic areas," added Mr. Carrington.
In the first quarter, Barrick's Premium Gold Sales Program generated
$99-million in additional revenue. Barrick realized an average price of
$385 an ounce, compared with an average spot price of $287, a premium of
$98 for each ounce of gold sold. Barrick has 12.5 million ounces in the
program at the end of the first quarter. The company's production through
2001 is sold forward at an average minimum price of $385 per ounce.
The company is on track to meet its 1999 operating targets. Cash operating
costs are expected to average $125 per ounce for the year (1998 - $160)
while production should increase to 3.6 million ounces (1998 - 3.2 million
ounces).
Barrick's development team is focused on the company's newest gold
property, Bulyanhulu in Tanzania, acquired through the acquisition of
Sutton Resources Ltd., in March of 1999. Barrick expects to double the
reserve base of this high-quality asset by year-end. It is also planning to
bring the mine into production in late 2000.
Barrick has a balance sheet of unrivaled strength and the industry's only
"A" credit rating. The company has not debt, a cash balance of $554 million
and shareholders' equity of $4-billion at March 31, 1999.
Consolidated Production Costs per Ounce
Three months ended March 31
1999 1998
Direct mining costs $147 $191
Deferred stripping
adjustments (22) (21)
Byproduct credits (9) (16)
---- ----
Cash operating costs 116 154
Royalties 6 16
Production taxes 3 6
---- ----
Total cash costs 125 176
Depreciation and amortization 115 65
Reclamation 6 3
---- ----
Total production costs $246 $244
==== ====
Production and cash costs benefited from an outstanding performance at the
new Pierina mine, which produced 315,660 ounces of gold at a cost of $39
per ounce in its first full quarter of operation.
Goldstrike property : Carlin trend, Nevada
Goldstrike produced 526,302 ounces of gold, or 52 per cent of total company
production, at $141 per ounce. The overall grade processed during the
quarter was 0.40 ounces per ton.
The average grade processed for the property is expected to be marginally
lower in the second and third quarters before improving in the fourth
quarter to average 0.39 ounces per ton for the year. In the fourth quarter,
mining activity at Betze-Post is expected to expose higher-grade ore while
at Meikle, the shaft deepening is scheduled to be complete, resulting in
both higher mining rates and grades. These grades are in line with the
company's 1999 production plan for the property. It is on target to produce
2.1 million ounces of gold at a cash operating cost of $133 per ounce in
1999.
The mills and autoclaves treated 1.4 million tones of ore during the first
quarter of 1999, 6 per cent lower than the first quarter of 1998, due to
marginally lower autoclave availability and higher carbonate ores from the
Betze-Post pit. For the year, the mills and autoclaves are expected to
process 6.1 million tons of ore, similar to 1998.
On Feb. 4, 1999, Barrick and Newmont Mining Corp., announced an agreement
in principle on an asset exchange on the North Carlin Trend. The asset
exchange is expected to be completed in early May. Under the proposed
agreement, Barrick receives the land corridor currently separating the
Betze-Post and Meikle mines; the Goldbug deposit with reserves of 1.1
million ounces, adjacent to the Rodeo deposit; Newmont reserves of nearly
900,000 ounces in the Betze-Post pit; and the Banshee Property north of the
Meikle mine.
Exploration along the Meikle corridor was concentrated at Griffin and Rodeo
in the first quarter. At Griffin, two drills are working in the decline
linking the Rodeo exploration shaft to the Meikle mine and an additional
two rigs are at work in the main Rodeo deposit. Initial drill results at
Rodeo confirm the ore grades in the resource model. A second phase
exploration program in 1999 will begin at the Goldbug deposit, once the
asset exchange with Newmont is finalized.
Construction of the 12,000-ton-per-day roaster is on schedule for
completion in mid-2000. The $330-million roaster will be used to treat the
12 million ounces of carbonaceous and high carbonate reserve identified to
date on the property. When completed next year, it will increase processing
flexibility, reduce overall property processing costs by 10 per cent and
begin a new phase of production growth for the Goldstrike property.
Gold Production and Cost Summary
For three months ended March 31
Gold Production
(ounces)
1999 1998
Goldstrike property
Betze-Post mine 288,507 283,319
Meikle mine 237,795 280,704
--------- -------
526,302 564,023
--------- -------
Pierina property* 315,660 -
Canadian properties
Bousquet mine 55,158 45,898
Holt-McDermott mine 27,434 35,678
--------- -------
85,592 81,576
--------- -------
Other properties 86,359 123,683
--------- -------
1,010,913 769,282
========= =======
Cash Operating Costs
(per ounce)
1999 1998
Goldstrike property
Betze-Post mine $184 $188
Meikle mine 83 72
--------- -------
141 128
--------- -------
Pierina property* 39 -
Canadian properties
Bousquet mine 170 188
Holt-McDermott mine 143 128
--------- -------
161 162
--------- -------
Other properties 200 257
--------- -------
$116 $154
========= =======
-----
*Property commenced operations in
November 1998.
Betze-Post mine
The open pit mine produced 288,507 ounces of gold at a cash operating cost
of $184 per ounce. In the first quarter, higher average ore grades of 0.28
ounces per ton offset lower throughput rates compared with the year earlier
quarter. Production should be marginally lower in the second and third
quarters before rising in the fourth quarter to meet the 1999 targets of
1.1 million ounces of gold production at a cash operating cost of $185 per
ounce, as higher-grade ore is mined from the pit. During the past quarter,
Betze-Post achieved its lowest unit mining cost in six years, benefiting
from higher equipment availability and shorter waste hauls. The mine is
purchasing 16 320-ton haul to replace 27 190-ton trucks, which should be
operational in the fourth quarter of 1999. The larger trucks are expected
to lower mining costs by 5 per cent to 10 per cent due to lower diesel fuel
usage and lower labor and maintenance costs.
Meikle mine
The mine produced 237,795 ounces of gold at a cash operating cost of $83
per ounce. The average grade mined during the quarter was 0.93 ounces per
ton. For the year, the grade is expected to average 1.0 ounces per ton.
Higher-grade ore will be mined in the lower portion of the orebody in the
second half of the year, once the shaft deepening has been completed.
Meikle mined an average 2,408 tons day and milled an additional 568 tons
per day of stockpiled ore. The mining rate is expected to average 2,700
tons per day in 1999. It will be lower in the first half before rising in
the second half of the year, with the completion of the shaft deepening and
the installation of the new ore pass. The shaft deepening is on schedule
for completion in July 1999. Meikle is on target to produce one million
ounces of gold at an average cash operating cost of $75 per ounce in 1999.
Pierina mine : Pierina belt, Peru
The Pierina open pit mine produced 315,660 ounces of gold, or 31 per cent
of total company production, at a cash operating cost of $39 per ounce in
its first full quarter of operations. The mine benefited from a smooth
start-up of operations and high initial ore grades. Mining in the first
quarter was concentrated in the higher-grade near surface ore. As the year
progresses, mining activity is planned to move into lower-grade ore in a
second lay back. The mine and first leach pad expansions are scheduled to
begin in June with the objective of raising the processing rate to 30,000
tons per day in 2000. For the year, Pierina is expected to produce 835,000
ounces of gold at an average cash operating cost of $45 per ounce.
Holt-McDermott mine : Abitipi belt, Ontario
The mine produced 27,434 ounces of gold in the first quarter at a cash
operating cost of $143 per ounce. The average ore grade was 0.20 ounces per
ton. For the year, the average grade is expected to be 0.22 ounces per ton.
The shaft deepening is scheduled to be completed in the second quarter,
providing access to the deeper reserves and a platform for deeper
exploration mining. The mine is on target to produce 110,000 ounces of gold
at an average cash operating cost of $130 an ounce.
Bousquet mine : Abitibi belt, Quebec
The mine produced 55,159 ounces of gold in the first quarter at a cash
operating cost of $170 per ounce. Bousquet benefited from higher ore grades
at 0.27 ounces per ton and higher mining rates with the completion of the
new 3-1 Zone in January. For the year, the average grade is expected to be
0.24 ounces per ton. The mine is on target to produce 175,000 ounces of
gold at a cash operating cost of $200 per ounce.
Other properties
Other properties, which consist of the El Indio, Tambo and Bullfrog mines,
contributed 86,359 ounces of gold at an average cash operating cost of $200
per ounce. All operations met or exceeded production and cash operating
cost targets. The El Indio mine, in particular, had an excellent quarter,
producing 42,073 ounces at $177 per ounce. The combination of lower unit
costs and the exploration success at El Indio have resulted in the mine
life being extended into 2000. The Bullfrog and Tambo mines will be closed
on schedule later in 1999.
Development and Exploration
Recent exploration results as Pascua have the potential to open up an
entire gold district in both Chile and Argentina. At the same time,
exploration efforts on the North Block at Goldstrike have identified a
highly prospective, mile-long corridor of underground mineralization.
Bulyanhulu project, Tanzania
Barrick acquired Sutton Resources Ltd. on March 26, 1999, for $284-million.
The principal assets of the company include the Bulyanhulu gold project,
the Kabanga nickel property (a joint venture with Anglogold) and a
portfolio of exploration properties, all of which are just south of Lake
Victoria on the Victorian Greenstone Belt in Tanzania, East Africa.
Barrick was attracted to Tanzania for the geologic potential, more than 20
million ounces have been discovered there in the past 10 years, along with
the progressive mining and investment laws of the country. The company
expects to be able to double Bulyanhulu's current reserve base and increase
total reserves and resources to more than 10 million ounces by year-end.
Ten drill rigs will be working on the property by mid-May.
To further augment the company's expansion in this area, Barrick acquired
the Tanzanian exploration portfolio of Randgold of South Africa for
$4.5-million. The portfolio includes a 65 per cent interest in the Golden
Ridge gold project, 20 miles from Bulyanhulu. With a current resource of
1.6 million ounces of gold and the potential to grow, the project will
benefit from its proximity to Bulyanhulu and its infrastructure.
Pascua project, Chile and Argentina
Early results from the 1999 exploration program confirms the main Pascua
orebody extends into Argentina along the Pascua extension. Continued
success under the planned 1999 exploration program would significantly
expand the Pascua pit. Underground and surface exploration programs focused
in the first quarter on the Pascua extension in Argentina. More than half
of the 900-metre exploration tunnel being driven southeast from Chile into
Argentina has been completed. So far, the entire tunnel has been driven
through ore. The remainder of the tunnel will be completed by June.
The 1999 exploration program calls for 7,000 metres of underground drilling
in the tunnel on the Pascua extension in Argentina and, in addition, 40,000
metres of surface drilling primarily on the Pascua extension, Morro Oeste
and Penelope targets in Argentina.
North Carlin trend, Nevada
At Rossi, the Storm decline advanced 70 feet in the first quarter. The
decline is scheduled to be completed by year-end and an underground drill
program will follow to further delineate and expand the known resource. At
both Dee and Rossi surface drill programs are scheduled to start in the
second quarter.
Financial Review
The Premium Gold Sales Program generated $99-million in additional revenue
on gold sales of 1,012,543 ounces of gold. Barrick realized $385 per ounce
compared with an average spot price of $287, a premium of $98 per ounce for
every ounce gold. Barrick has 12.5 million ounces in the program at the end
of the quarter. Production through the year 2001 has been sold forward at
an average minimum price of $385 per ounce.
Cash operating costs declined 25 per cent to $116 per ounce compared with
the year earlier quarter. The decline in cash operating costs was due to
the smooth start-up of the Pierina Mine in Peru and strong contributions
from all the mines. Total cash costs including royalties and production
taxes were $125 per ounce, reflecting lower royalties at Goldstrike and new
royalty-free production from Pierina. For the year, cash operating costs
are expected to average $125 per ounce and total cash costs including
royalties and production taxes $137 per ounce.
Reclamation for the quarter was $6-million or $6 per ounce. For the year,
reclamation is expected to average $5 per ounce.
Depreciation was $117-million, due to the increase in production and the
higher depreciation charge associated with the Pierina mine. For the
quarter depreciation was $115 per ounce, overall for the year depreciation
is expected to be $103 per ounce.
Exploration for the quarter was $14-million, of which approximately half
was spent in South America, the balance was spent largely in North America.
Reserve development was $12-million primarily for Pascua in Argentina. The
acquisition of Sutton Resources in the first quarter will result in an
increase to reserve development by $10-million to a total of $50-million
for 1999.
The $3-million in interest expense relates to the bonds due in 2007. The
bonds bear interest at the rate of 7.5 per cent, and interest is paid
semi-annually. A portion of the interest is being capitalized to projects
in development, primarily Pascua and the roaster on the Goldstrike
property. For the year, approximately $10-million is expected to be
expensed.
The tax rate for the first quarter was 25 per cent and is expected to
remain at that level for the remainder of the year.
Capital expenditures for the quarter were $91-million, primarily for
roaster construction and deferred stripping at the Goldstrike property. For
the year, capital expenditures were expected to be $520-million, before the
acquisition of the Bulyanhulu gold project through the purchase of Sutton
Resources Ltd. As a result, capital expenditures are expected to be higher
with construction of the Bulyanhulu scheduled to start in the second
quarter. The company expects to finance capital expenditures from internal
cash flow.
CONSOLIDATED STATEMENT OF INCOME
Three months ended March 31
(in millions of U.S. dollars)
1999 1998
Revenues
Gold sales $ 390 $ 302
Interest and other income 2 3
----- -----
392 305
----- -----
Costs and expenses
Operating 133 135
Depreciation and
amortization 117 49
Administration 8 10
Exploration 14 11
Interest 3 -
Gain on sale of mining
property - (42)
----- -----
275 163
----- -----
Income before taxes 117 142
Income taxes (30) (67)
----- -----
Net income for the
period $ 87 $ 75
===== =====
Net income per share 23 cents 20 cents
The company continues to maintain a strong balance sheet with the
industry's only "A" credit rating. The quarter-end cash balance increased
to $554-million and shareholders' equity increased to $4-billion. The
company has no net-debt and a debt-to-total-capitalization ration of 0.11
to 1.
Barrick acquired 97 per cent of Sutton Resources on March 26, 1999, the
remaining 3 per cent will be acquired in June under compulsory acquisition
procedures. Approximately 17 million Barrick shares have been issued in
exchange for the Sutton shares. The value assigned to properties acquired
will be approximately $270-million.
(c) Copyright 1999 Canjex Publishing Ltd. canada-stockwatch.com |
