Summary

  • Barrick is one of the world’s leading gold mining companies with annual gold production and gold reserves that are among the largest in the industry.
  • Barrick operations and projects in 13 countries in North and South America, Africa, Papua New Guinea and Saudi Arabia.
  • The company has ownership interests in fourteen producing gold mines, including six Tier One Gold Assets and a diversified asset portfolio positioned for growth in many of the world’s most prolific gold districts.

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Company Overview

Barrick (NYSE:GOLD, TSX:ABX) has gold and copper mining operations and projects in 13 countries in North and South America, Africa, Papua New Guinea and Saudi Arabia. The company's diversified portfolio spans many of the world’s prolific gold districts and is focused on high-margin, long-life assets.1

Barrick is one of the world’s leading gold mining companies with annual gold production and gold reserves that are among the largest in the industry. Barrick Gold is principally engaged in the production and sale of gold and copper, as well as related activities such as exploration and mine development. The company hold ownership interests in fourteen producing gold mines, including six Tier One Gold Assets and a diversified asset portfolio positioned for growth in many of the world’s most prolific gold districts. These gold mines are geographically diversified and are located in Argentina, Canada, Côte d’Ivoire, the Democratic Republic of Congo, the Dominican Republic, Mali, Tanzania and the United States. The company's mine in Papua New Guinea was placed on care and maintenance in April 2020. The company's copper mines are located in Zambia, Chile and Saudi Arabia. The company also have exploration and development projects located throughout the Americas and Africa. The company sell its production in the world market through the following distribution channels: gold bullion is sold in the gold spot market or to independent refineries; gold and copper concentrate is sold to independent smelting or trading companies; and copper cathode is sold to third-party purchasers or on exchange

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Operations

In line with its commitment to finding, developing and operating the best assets, Barrick is focused on high-margin, long-life operations and projects clustered in the world’s most prospective gold districts, and supporting these with a robust copper business.2

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Gold Operations

Nevada Gold Mines (United States)

Nevada Gold Mines is a joint venture between Barrick (61.5%) and Newmont (38.5%) that combined its significant assets across Nevada in 2019 to create the single largest gold-producing complex in the world.

Nevada Gold Mines is operated by Barrick.

Bulyanhulu (Tanzania)

Bulyanhulu is situated in north-west Tanzania, in the Kahama district of the Shinyanga region, approximately 55 kilometres south of Lake Victoria and 150 kilometres southwest of the city of Mwanza.

Bulyanhulu is a narrow-vein gold mine containing gold, silver and copper mineralisation in sulphides. The mineralisation of Bulyanhulu is associated with a number of steeply-dipping veins. Bulyanhulu commenced commercial production in 2001.

Hemlo (Canada)

Hemlo has produced more than 21 million ounces of gold, and has been operating continuously for more than 30 years. It consists of the Williams mine—an underground and open pit operation—located about 350 kilometers east of Thunder Bay, Ontario.

Kibali (Democratic Republic of Congo)

The Kibali gold mine is located in the northeast of the Democratic Republic of Congo (DRC), approximately 220 kilometres east of the capital of the Haut Uele province, Isiro, 150 kilometres west of the Ugandan border town of Arua and 1,800 kilometres from the Kenyan port of Mombasa. The mine is owned by Kibali Goldmines SA (Kibali) which is a joint venture company effectively owned 45% by each of Barrick and AngloGold Ashanti, and 10% by Société Miniére de Kilo-Moto (SOKIMO). The mine is operated by Barrick.

Loulo-Gounkoto (Mali)

The Loulo-Gounkoto complex comprises two distinct mining permits, Loulo and Gounkoto, and is situated in western Mali, bordering Senegal and adjacent to the Falémé River.

Société des Mines de Loulo SA (Loulo) owns the Loulo gold mine, and Société des Mines de Gounkoto (Gounkoto) owns the Gounkoto gold mine. Both Loulo and Gounkoto are owned by Barrick (80%), and the State of Mali (20%).

North Mara (Tanzania)

The North Mara gold mine is located in north-west Tanzania in the Tarime district of the Mara region. It is around 100 kilometres east of Lake Victoria and 20 kilometres south of the Kenyan border.

North Mara started commercial production in 2002. The mine is a combined open pit and underground operation from two deposits, Gokona (underground) and Nyabirama (open pit). The process plant has the capacity to process an average of 8,000 tonnes of ore per day.

Porgera (Papua New Guinea)

The Porgera Joint Venture is an open pit and underground gold mine located at an altitude of 2,200-2,600 meters in the Enga Province of Papua New Guinea, about 600 kilometers north-west of Port Moresby.

Pueblo Viejo (Dominican Republic)

Pueblo Viejo is located in the Dominican Republic, approximately 100 kilometers northwest of the capital city of Santo Domingo, and is operated by the Pueblo Viejo Dominicana Corporation — a joint venture between Barrick (60%) and Newmont (40%). Construction of the project started in 2008, and first production occurred in 2012.

Tongon (Côte d’lvoire)

The Tongon gold mine is located within the Nielle mining permit, 628 kilometers north of the Côte d’lvoire port city of Abidjan, and 55 kilometers south of the border with Mali. The Tongon gold mine and associated mining permit is owned by Société des Mines de Tongon SA (Tongon), in which Barrick has an 89.7% interest, the State of Côte d’lvoire 10%, and 0.3% is held by Ivorian investors.

Veladero (Argentina)

The Veladero mine is located in San Juan Province, Argentina, in the highly prospective Frontera District. The property is located at elevations of 4,000 to 4,850 meters above sea level, approximately 374 kilometers northwest of the city of San Juan. Veladero is a 50/50 joint venture operation with Shandong Gold.

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Copper Operations

Jabal Sayid (Saudi Arabia)

The Jabal Sayid copper operation is located 350 kilometers north-east of Jeddah in the Kingdom of Saudi Arabia. It’s a 50/50 joint venture operation with Ma’aden. The first shipment of copper concentrate occurred in December 2015, and the mine commenced commercial production in July 2016.

Lumwana (Zambia)

The Lumwana copper mine is a conventional open pit (truck and shovel) operation. It’s located about 100 kilometers west of Solwezi in Zambia’s Copperbelt — one of the most prospective copper regions in the world. Lumwana ore, which is predominantly sulfide, is treated through a conventional sulfide flotation plant, producing copper concentrate.

Zaldívar (Chile)

The Zaldívar copper mine is a 50/50 joint venture with Antofagasta Plc, the operator of the mine. It's located in the Andean Precordillera in Region II of northern Chile, approximately 1,400 kilometers north of Santiago and 196 kilometers southeast of the port city of Antofagasta.

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Industry Overview

Gold market overview

Gold prices performed historically well in 2020, reaching an alltime high spot price of $2,075/oz on the back of strong investor interest due to global economic uncertainties, primarily from the impact of the spread of Covid-19, reductions in short- and longterm interest rates and large-scale fiscal stimulus measures in major economies, a weakening of the trade-weighted US dollar, and a search for safe haven assets.3

2020 was a challenging year on many fronts, but the strength of the gold price during such difficult times has helped to underscore its value as a safe haven investment. The economic consequences of the pandemic are likely to continue for some time and the related monetary and fiscal stimulus measures put in place by global central banks and governments is expected to result in a continuation of low interest rates and large fiscal deficits though 2021, providing a conducive environment for continued robust gold price performance.

The average price of gold in 2020 was $1,770/oz, a 27% increase over the $1,393/oz average in 2019. This $1,770/oz average was a new record high, surpassing the previous high of $1,669/oz reached in 2013, and represented the fifth straight year of annual average price increases.

Gold prices ended 2020 at $1,888/oz, representing an increase of 25% since the end of 2019.

A reduction in global interest rates during 2020, including 150bps of benchmark rate cuts by the US Federal Reserve during March 2020 to a range of 0% to 0.25% and a continuation of negative 10-year yields in parts of Europe, helped to increase gold prices by reducing the opportunity cost of holding gold. Investor demand from gold was exceptionally strong in 2020, with the World Gold Council (WGC) reporting that collective ETF gold holdings grew by a record 877 tonnes during the year and reached an all-time high of approximately 3,752 tonnes in the fourth quarter of 2020. COMEX net long positions also reached all-time highs during 2020, a significant reversal of sentiment from the net short position that existed in late 2018.

While there was an exceptionally strong appetite for gold from the investment community, overall demand for gold in ounce terms fell in 2020, as the global pandemic and rising prices that reached all-time highs in US dollars, as well as in many non-US currencies, including in Euro, Pound sterling, Japanese yen, Indian rupee and Chinese yuan, reduced both consumer demand for jewellery and net purchases by central banks. In particular, global jewellery demand was down 34% versus 2019, with China and India – responsible for over half of jewellery demand – down 35% and 42%, respectively.

Gold demand for electronics and other industrial uses fell by 7% in 2020 as the spread of Covid-19 reduced manufacturing activity and demand for electronics. A continued increase in demand for 5G infrastructure could help to reverse this trend going forward.

Central bank purchases of gold slowed in 2020 after 2018 and 2019 represented the two highest years of net purchases in the last 50 years. The WGC reports that central banks still added 273 tonnes to their reserves during 2020, even after experiencing a quarter of negative net accumulation in Q3 2020. Some Central Banks looked to their holdings of gold as a source of liquidity in difficult economic times as a result of the global pandemic – with their ability to do so providing a strong statement as to why gold is a valuable reserve asset. Russia suspended its purchases of gold in March 2020, taking a significant buyer out of the market during the remainder of the year. Overall though, central banks have now been net purchasers of gold for 11 straight years as they look to gold as a source of reserve diversification.

Overall supply of gold in 2020 decreased by 4%, the first annual decline since 2017, mainly attributable to a 4% reduction in global mine production tempered by a modest rise in recycled gold and net de-hedging by producers. Global mine production fell for the second straight year, further confirming that the mining industry may have reached peak gold production for the foreseeable future. As gold prices have increased and capital has become more readily available in recent years, there is evidence of increased spending on exploration by mining companies, but the costs of mine construction and the time required for environmental studies and permitting activities before reaching the production stage means that a return to sustained global production growth could be delayed accordingly.

The supply of recycled gold, which is historically positively correlated with the gold price, only increased by 1% in 2020 despite record high gold prices, as the pandemic likely limited the ability of potential sellers to access the market.

Copper market overview

Copper prices were negatively impacted early in 2020 from the global reduction in manufacturing and economic activity resulting from the spread of Covid-19, falling to a 4-year low of $1.98/lb in March. Subsequently, copper prices recovered strongly and steadily over the remainder of 2020, reaching a 7-year high of $3.64/lb in December as mine supply was impacted by the pandemic, global economic activity recovered from its initial drop, especially in China, monetary and fiscal stimulus measures were put in place in the world’s largest economies, the US dollar weakened, Covid-19 vaccines were approved and started being distributed, and global copper stockpiles remained low.

China’s GDP grew at a rate of just 2.3% in 2020, its lowest level of growth in decades. As China is by far the world’s largest consumer of copper, an expected rebound in China’s GDP growth rate in 2021, as global economic activity recovers from pandemic-led disruptions, is positive for copper demand prospects in the near term.

In the longer run, the increase in the volume of copper that is used in the manufacture of electric vehicles versus those with combustion engines bodes well for copper demand, as electric vehicles are poised to comprise a growing share of all vehicles produced over the next decade.

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Financial Highlights

Gold production for the quarter of 1.09 million ounces and 3.23 million ounces for the year to date. Attributable copper production for the quarter was 100 million pounds and 289 million pounds for the year to date. Net earnings per share were 20 cents and adjusted net earnings per share1 were 24 cents.4

Presenting the results, president and chief executive Mark Bristow said the operating cash flow of $1,050 million and the free cash flow2 of $481 million for Q3 would further support an already strong balance sheet and the funding of Barrick’s capital allocation priorities. He noted that the sustainable quarterly dividend of 9 cents per share and the payment of the final $250 million3 tranche of the $750 million return of capital distribution would combine to lift the total cash return to shareholders to a record level of approximately $1.4 billion during 2021.

“More than two years after the merger, Barrick Gold is getting to where the company want to be, with the industry’s best asset base in the form of six Tier One13 gold mines and a well-balanced portfolio of high-quality growth opportunities. In Nevada, the publication of an official Notice of Intent marks another advance in the development of the world-class Goldrush project, where the successful processing of the first bulk samples points to an additional reserve conversion by the end of the year,” he said.

“In Argentina, the commissioning of the new heap leach facility at Veladero, defined as an at-risk asset at the time of the merger, has put the mine back on track to get back to its past performance as it ramps up production. In Tanzania, Barrick Gold has completely revived the moribund Bulyanhulu mine and it too is now back in business and ramping up production. In Alaska, the 2021 drilling program has been completed at Donlin, one of the largest undeveloped gold deposits in the world, and we’re now updating its models and preparing for an early start to the next phase.”

The Pueblo Viejo expansion project in the Dominican Republic is at the permitting stage for the new tailings storage facility. The project is expected to extend the Tier One mine’s life to beyond 2040 and has the potential to convert approximately 9 million ounces of measured and indicated resources to proven and probable reserves.14

Bristow said results from successful brownfields exploration, particularly in North America and Africa, indicated that the group is on track to replace its gold reserves net of depletion in 2021. The drive to expand its portfolio and extend its global footprint has added new exploration projects in five countries.

Barrick has also been advancing its greenhouse gas (GHG) reduction strategy with NGM starting construction of its solar power plant with initial capacity of 100MW and the permit received to double this to 200MW, and Veladero completing construction of its cross-border link-up with the Chilean national power grid — a global leader in renewable energy.

“Barrick is driven by value creation and by any measure we’ve been successful so far. But ours is a long-term vision which looks far beyond its major operations’ current 10-year business plans and its ceaseless pursuit of new opportunities is continuing to deliver exciting future prospects,” Bristow said.

Net earnings attributable to equity holders of Barrick ("net earnings") for the three months ended September 30, 2021 were $347 million compared to $411 million in the prior quarter. The decrease was primarily due to a lower realized gold price of $1,771 per ounce in the three months ended September 30, 2021 compared to $1,820 per ounce in the prior quarter, and a lower realized copper price of $3.98 per pound in the three months ended September 30, 2021 compared to $4.57 per pound in the prior quarter. This was combined with higher cost of sales per ounce/pound, and partially offset by higher copper sales volume.

After adjusting for items that are not indicative of future operating earnings, adjusted net earnings of $419 million for the three months ended September 30, 2021 were 18% lower than the prior quarter. The decrease was primarily due to lower realized gold and copper prices1 , as described above, and slightly higher gold cost of sales per ounce than the prior quarter, mainly due to the impact of lower grades primarily at Loulo-Gounkoto and lower byproduct credits at Phoenix resulting from a weaker copper price. This was further impacted by higher copper cost of sales per pound2 of 6% primarily due to higher depreciation, combined with slightly higher C1 cash costs1 , mainly due to lower mill and equipment availability at Lumwana and lower gold by-product credits at Jabal Sayid. This was partially offset by lower maintenance costs at Zaldívar. Gold sales volume remained relatively in line with the prior quarter, while copper sales volumes were higher due to incremental increases across all sites.

Net earnings for the nine months ended September 30, 2021 were $1,296 million compared to $1,639 million in the same prior year period.

Return of Capital

Barrick announced that the third $250 million3 tranche (approximately $0.14 per share4) of the return of capital distribution totalling $750 million will be paid on December 15, 2021 to shareholders of record at the close of business on November 30, 2021.

This will complement the $0.09 per share dividend declared by the Barrick Board of Directors for the third quarter, which will also be paid on December 15, 2021 to shareholders of record at the close of business on November 30, 2021.12

This follows the approval by shareholders at Barrick’s Annual and Special Meeting on May 4, 2021 of the total $750 million return of capital distribution. The first $250 million tranche was paid on June 15, 2021 and the second $250 million tranche was paid on September 15, 2021.

“Barrick Gold is pleased that the combination of its quarterly dividend and the $750 million return of capital distribution have provided its shareholders with a record level of cash returns totalling approximately $1.4 billion during 2021 whilst its strong operational and financial performance during the year has allowed it to continue to invest in its business and has set it up well to continue to provide meaningful returns to shareholders going forward,” said senior executive vice-president and chief financial officer Graham Shuttleworth.

Recent developments

Barrick’s Bulyanhulu Acquires Highly Prospective Licences in Tanzania

DECEMBER 07, 2021; Twiga Minerals Corporation (“Twiga”), a joint venture between Barrick and the Government of Tanzania, has announced the acquisition of new prospecting licences in Tanzania by Bulyanhulu Gold Mine Limited (“Bulyanhulu”), a subsidiary of Barrick.5

Bulyanhulu has entered into a binding agreement with Barrick Gold Corporation (NYSE:GOLD)(TSX:ABX) (“Barrick”), Tembo Gold Corp. (“Tembo”), the Mineral Industry Promotion and Consulting Company Limited (“MIPCCL”), a wholly-owned subsidiary of Tembo, dated December 7, 2021 (the “Purchase Agreement”) in respect of the acquisition of certain prospecting licences. Pursuant to the Purchase Agreement, Bulyanhulu will acquire from MIPCCL a 100% interest in six prospecting licences (the “Licences”) held by MIPCCL. The Licences are located in areas adjacent to the Bulyanhulu mine and have the potential to add significant mineral reserves to Barrick’s asset base in Tanzania.

Under the terms of the Purchase Agreement, the consideration payable by Bulyanhulu is $6 million (the “Purchase Price”), plus certain other contingent payments (the “Transaction”). Such contingent payments will be calculated based on the inferred, indicated and measured gold mineral resources identified in the areas of land which are covered by the Licences (the “Licence Area”) using Barrick standards for determining mineral resources. Bulyanhulu is required to invest a minimum of $9 million in the Licence Area over the course of the four years following the closing of the Transaction. Concurrently with the execution of the Purchase Agreement, Bulyanhulu has agreed to subscribe for, on a non-brokered private placement basis, 5,518,764 of common shares of Tembo at a price of C$0.27 per common share (the “Private Placement”).

The Transaction and the Private Placement are subject to the approval of the TSX Venture Exchange, certain regulatory approvals in Tanzania, and other closing conditions customary in transactions of this nature. Closing of the Transaction and Private Placement is expected to occur in the first quarter of 2022.

Barrick president and chief executive Mark Bristow said the acquisition was a significant step forward in the company’s strategy of increasing its investment in new growth opportunities in Tanzania and a further demonstration of the value-creation potential of its partnership with the government.

References

  1. ^ https://www.barrick.com/English/about/default.aspx
  2. ^ https://www.barrick.com/English/operations/default.aspx
  3. ^ https://s25.q4cdn.com/322814910/files/doc_financial/annual_reports/2020/Barrick-Annual-Report-2020.pdf
  4. ^ https://www.barrick.com/English/news/news-details/2021/q3-2021-results/default.aspx
  5. ^ https://www.barrick.com/English/news/news-details/2021/barrick-bulyanhulu-acquires-highly-prospective-licences-in-tanzania/default.aspx
Tags: US:GOLD CA:ABX
Created by Asif Farooqui on 2022/01/04 05:43
     

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