Ms. Kathy du Plessis reports
BARRICK REPORTS 2018 FULL YEAR AND FOURTH QUARTER RESULTS
Barrick Gold Corp. has provided its fourth quarter and full-year results for the period ending Dec. 31, 2018. In 2018, the company's operations produced 4.53 million ounces of gold, at a cost of sales of $892 per ounce, and all-in sustaining costs of $806 per ounce -- among the lowest of the senior gold peers.
All amounts are expressed in U.S. dollars unless otherwise indicated.
The company generated annual revenue of $7.24-billion, operating cash flow of $1.77-billion and free cash flow of $365-million. In 2018, the company's focus on capital discipline allowed it to increase investments in organic growth and significantly reduce its debt, while also increasing returns to shareholders.
SUMMARIZED 2018 FINANCIAL AND OPERATING RESULTS
Financial results First quarter Second quarter Third quarter
Average realized gold price ($ per ounce) 1,332 1,313 1,216
Net earnings ($ millions) 158 (94) (412)
Adjusted net earnings ($ millions) 170 81 89
Operating cash flow ($ millions) 507 141 706
Free cash flow ($ millions) 181 (172) 319
Net earnings per share ($) 0.14 (0.08) (0.35)
Adjusted net earnings per share ($) 0.15 0.07 0.08
Total attributable capital expenditures ($ millions) 326 332 346
Operating results -- gold First quarter Second quarter Third quarter
Production (000s of ounces) 1,049 1,067 1,149
Cost of sales applicable to gold ($ per ounce) 848 882 850
Cash costs ($ per ounce) 573 605 587
All-in sustaining costs ($ per ounce) 804 856 785
Production (millions of pounds) 85 83 106
Cost of sales applicable to copper ($ per pound) 2.07 2.45 2.18
C1 cash costs ($ per pound) 1.88 2.10 1.94
All-in sustaining costs ($ per pound) 2.61 3.04 2.71
Financial results Fourth quarter Full year 2018
Average realized gold price ($ per ounce) $1,223 $1,267
Net earnings ($ millions) (1,197) (1,545)
Adjusted net earnings ($ millions) 69 409
Operating cash flow ($ millions) 411 1,765
Free cash flow ($ millions) 37 365
Net earnings per share ($) (1.02) (1.32)
Adjusted net earnings per share ($) 0.06 0.35
Total attributable capital expenditures ($ millions) 409 1,413
Operating results -- gold Fourth quarter Full year 2018
Production (000s of ounces) 1,262 4,527
Cost of sales applicable to gold ($ per ounce) 980 892
Cash costs ($ per ounce) 588 588
All-in sustaining costs ($ per ounce) 788 806
Production (millions of pounds) 109 383
Cost of sales applicable to copper ($ per pound) 2.85 2.40
C1 cash costs ($ per pound) 1.98 1.97
All-in sustaining costs ($ per pound) 2.95 2.82
The company's Nevada growth projects at Cortez, Goldrush and Turquoise Ridge continued to advance according to schedule and within budget, underpinning the next generation of profitable production from this core region for Barrick. Exploration drilling continued to intersect high-grade mineralization at these properties, demonstrating the significant untapped geological potential of Barrick's land position in Nevada, and supporting the evaluation of increasing processing capacity in the region. The company also advanced studies and test work in support of an expansion to increase throughput at the Pueblo Viejo mine in the Dominican Republic by 50 per cent, with positive initial results.
Reflecting the company's commitment to shareholder returns, it increased its annual dividend by 33 per cent, from 12 cents per share in 2017, to 16 cents per share in 2018. In addition, the company continued to strengthen its balance sheet with the repurchase of $629-million in outstanding notes in July, bringing the company's total debt repayments to roughly $10-billion over the past 5-1/2 years.
During 2018, Barrick also strengthened its partnership with Shandong Gold Group Co. Ltd., one of China's leading mining companies. In July, the two companies announced an enhanced strategic co-operation agreement, focused on evaluating the Lama project in Argentina, and strengthening technical collaboration between the Barrick and Shandong teams. In September, Barrick and Shandong signed a mutual investment agreement, under which each company agreed to purchase up to $300-million of shares in the other, further deepening the partnership.
The completion of Barrick's transformational merger with Randgold on Jan. 1, 2019, created an industry-leading gold company with a common vision for long-term value creation. It significantly strengthened Barrick's position across key metrics relative to the senior gold peer group, including ownership of five of the world's top 10 tier 1 gold assets, and two potential tier 1 gold assets under development; the lowest total cash costs; high-quality gold reserves; and extensive land positions in many of the world's most prolific gold districts, positioning the company for sustainable growth.
As the company moves forward as one team, Barrick's vision is to be the world's most valued gold mining business. To achieve this, the company will focus on optimizing its existing operations, pursuing new opportunities that meet strict investment criteria, and developing them with disciplined efficiency. By doing so, the company aims to deliver sustainable returns to its owners, and real benefits to the company's partners, host countries and communities.
The company's liquidity position is strong and continues to improve, with robust cash flow generation, modest near-term debt repayment obligations, a $3-billion undrawn credit facility and a consolidated cash balance of approximately $1.6-billion. The company reduced its total debt by $685-million, or 11 per cent, in 2018, and with more than 85 per cent of the company's outstanding debt due after 2032, Barrick now has one of the strongest balance sheets in the industry. In addition, as of Dec. 31, 2018, Randgold had $700-million of cash and cash equivalents, and no debt outstanding, bringing the cash position of the combined company to $2.3-billion as of Jan. 1, 2019.
Barrick reported a net loss of $1.55-billion in 2018, primarily due to net impairment charges of $900-million relating to the Veladero and Lagunas Norte mines, and $742-million in significant tax adjustments. Adjusted net earnings of $409-million were lower than the prior year, primarily due to the impact of lower grades and recoveries, as anticipated, along with higher direct mining costs driven by increased energy prices and consumption, and the divestment of 50 per cent of the Veladero mine on June 30, 2017. Earnings were also impacted by lower throughput at Acacia as a result of reduced operations at Bulyanhulu, lower tonnage processed at Lagunas Norte and increased government imposts at Veladero. This was partially offset by lower income tax expense as a result of lower earnings and sales volumes, and lower depreciation.
Significant adjusting items to net earnings (pretax and non-controlling interest effects) in 2018 include:
$900-million ($799-million net of tax and non-controlling interest) in net impairment charges primarily relating to Veladero and Lagunas Norte;
$742-million in significant tax adjustments primarily relating to the derecognition of deferred tax assets of $814-million, partially offset by a deferred tax recovery of $107-million on United States withholding taxes;
- Additional adjustments relating to the inventory impairment at Lagunas Norte of $166-million, a write-off of a western Australia long-term stamp duty tax receivable of $43-million and costs associated with the merger with Randgold of $37-million; partially offset by
$68-million ($46-million net of tax and non-controlling interest) in disposition gains mainly relating to the sale of a non-core royalty asset at Acacia.
During the fourth quarter, the company determined that the carbonaceous material project (CMOP) at Lagunas Norte does not currently meet the company's investment criteria, resulting in an inventory impairment of $166-million as described above. Barrick previously reported a non-current asset impairment of $405-million at Lagunas Norte in the third quarter, following the company's decision not to proceed with the refractory sulphide ore project (PMR). A non-current asset impairment of $246-million ($160-million net of tax) and a goodwill impairment of $154-million were also recorded at the Veladero mine in the fourth quarter, reflecting an increase in the mine's cost structure, related to increased government imposts and higher energy costs.
In 2018, the company generated $1.77-billion in operating cash flow. Lower operating cash flow compared with 2017 primarily reflects lower sales volumes and increased direct mining costs (as described above). This was partially offset by a favourable movement in working capital, mainly as a result of increased drawdown of inventory and the timing of payments and changes in other current assets and liabilities. Operating cash flow also benefited from lower cash taxes paid, reflecting lower earnings and sales volume, and higher realized gold prices compared with 2017.
Capital expenditures were at the low end of the company's guidance range for the year, and in line with 2017, with an increase in project capital expenditures offset by a decrease in mine site sustaining capital expenditures. Free cash flow of $365-million was lower than the prior year, primarily driven by lower operating cash flows.
Over the course of 2018, the company continued to realize savings resulting from the implementation of its decentralized operating model, as well as work force reductions associated with the Randgold merger. Full-year corporate administration costs were $212-million, significantly below the company's original 2018 guidance of approximately $275-million.
Ensuring the safety of people and the environment is its most important priority. The company continued to improve its safety performance in 2018, achieving a total reportable injury frequency rate (TRIFR) of 0.32 -- the best result in the company's history, and a 9-per-cent improvement compared with 2017. Since 2014, Barrick has also achieved an 87-per-cent reduction in reportable environmental incidents, with seven incidents at the company's operations last year, down from eight in 2017, continuing a long-term improvement trend.
In 2018, the company's operations produced 4.53 million ounces of gold, at a cost of sales of $892 per ounce, and all-in sustaining costs of $806 per ounce. As anticipated, gold production improved over the second half of 2018, driven by stronger performance at Barrick Nevada and Pueblo Viejo, with gold production of 1.26 million ounces in the fourth quarter, compared with 1.15 million ounces in the third quarter. Higher costs compared with 2017 primarily reflect the impact of lower grades and recoveries, higher energy costs and higher mine site sustaining capital expenditures on a per ounce basis.
As anticipated, copper production improved progressively over the third and fourth quarters, driven by a steady improvement in grade and crusher reliability at Lumwana. In 2018, the company's copper portfolio produced 383 million pounds, at a cost of sales of $2.40 per pound, and all-in sustaining costs of $2.82 per pound. Copper production in the fourth quarter was 109 million pounds, at a cost of sales of $2.85 per pound, and all-in sustaining costs of $2.95 per pound.
Mineral resource management
Barrick's 2018 year-end reserve and resource statements reflect the company's asset portfolio prior to the completion of the company's merger with Randgold on Jan. 1, 2019. Randgold's 2018 year-end reserve and resource statements can be found at the company's website.
Barrick's 2018 reserves were calculated using a gold price assumption of $1,200 per ounce, consistent with 2017. As of Dec. 31, 2018, Barrick's proven and probable gold reserves were 62.3 million ounces, compared with 64.4 million ounces at the end of 2017. While 5.4 million ounces of reserves were depleted through mining and processing, the company added 3.2 million ounces of reserves at an average grade of 4.7 grams per tonne, significantly higher than its overall reserve grade of 1.56 grams per tonne. Reserves at the company's underground operations, where the majority of the company's future production will come from, were replaced, with additions at Turquoise Ridge, Goldstrike, Hemlo and Porgera.
In 2018, measured, indicated and inferred gold resources were calculated using a gold price assumption of $1,500 per ounce, consistent with 2017. Measured and indicated gold resources increased slightly to 88.8 million ounces at the end of 2018, compared with 88.6 million ounces at the end of 2017. Inferred gold resources also increased to 33.5 million ounces at the end of 2018, compared with 30.8 million ounces at the end of 2017.
Approximately 1.25 million ounces of proven and probable reserves, 1.3 million ounces of measured and indicated resources, and 1.2 million ounces of inferred resources (Barrick's 63.9-per-cent share) were removed at Acacia's Bulyanhulu operation following a review by Acacia of the mine's geological and mineral resource models, and other optimization work.
Copper reserves and resources for 2018 were calculated using a copper price of $2.75 per pound and $3.50 per pound, respectively, consistent with 2017. As of Dec. 31, 2018, proven and probable copper reserves were 10.6 billion pounds8, measured and indicated copper resources were 11.6 billion pounds8, and inferred copper resources were 2.8 billion pounds. These figures include copper contained within gold reserves and resources.
Exploration has been repositioned to invest in the company's assets, with a focus on adding value at its tier 1 mines, enhancing cash flow from other operations, and discovering and developing the next generation of tier 1 mines. The company expects to incur approximately $160-million to $170-million of exploration and evaluation expenditures in 2019 with approximately 80 per cent allocated to the Americas. The company's 2019 program includes the following highlights.
In the Cortez district, deep drilling will continue to focus on adding resources, as well as testing open mineralization, extensions and concepts farther afield. Consolidating the Goldrush and Fourmile geology models is a top priority and in progress. The company anticipates that Fourmile and Goldrush have the potential to be integrated and developed as a single project.
At Goldstrike, the company has a renewed focus on targets along a relatively poorly tested section of the Post fault north of the Meikle underground mine. This corridor is also the current focus of underground mining expansion and resource additions as development advances north from the Banshee deposit.
During the fourth quarter, a selective relogging program at Pueblo Viejo led to a significant reinterpretation of the project's geology model. The company is preparing a fully revised geology model with a newly established, dedicated site-based project team. This has the potential to predict the location of high-grade mineralization that could be brought forward in the mine plan.
As mining of the existing oxide orebody at Lagunas Norte winds down, the company is focused on improving geological understanding of the remaining resources, and it is actively exploring a number of other regional targets with the potential to extend the life of the mine, with drilling commencing in the fourth quarter.
At Veladero, the company is mounting a renewed effort to develop satellite targets and make new discoveries in the Veladero-Lama district, supported by the establishment of an experienced site-based exploration team. This includes drilling at Quatro Esquinas, immediately south of the Filo Federico pit, and at the Del Carmen project, located in Argentina, adjacent to the Alturas deposit in Chile.
In Africa, the discovery of the high-grade Loulo 3 shoot highlights the potential for further discoveries around the company's existing orebodies. Continuing brownfields exploration at Kibali has also identified numerous opportunities for reserve replacement. At Massawa, brownfields exploration will focus on efforts to expand the project's resource base. The north of Ivory Coast will be another key exploration target area.
The company continues to advance a pipeline of high-confidence projects at or near its existing operations, with the potential to contribute more than one million ounces of annual production to Barrick, at costs well below its current portfolio average.
Turquoise Ridge Expansion, Nevada, United States
(75 per cent Barrick/25 per cent Newmont)
The company is focused on developing Turquoise Ridge into a tier 1 mine by increasing production and resources through mechanization, automation and innovation. Ramp-up of the road header over the course of 2018 has improved safety, increased throughput and dropped mining costs per tonne. A second road header is on order, and further evaluation of the opportunity associated with increasing the level of mechanization and automation for the mine as a whole is under way.
Construction of a third shaft at Turquoise Ridge continues to advance according to schedule and within budget, with efforts in 2019 focused on earthworks and shaft sinking. The construction of this shaft is expected to increase annual production to more than 500,000 ounces per year (100-per-cent basis), at an average cost of sales of around $720 per ounce, and average all-in sustaining costs of roughly $630 per ounce. As of Dec. 31, the company has spent $62-million (including $3-million in the fourth quarter of 2018) out of a total estimated capital cost of $300-million to $325-million (100-per-cent basis) on the construction this shaft. Initial production from the new shaft is expected to begin in 2022, with sustained production from 2023.
Since the end of 2015, reserves have increased by 3.5 million ounces (100-per-cent basis), primarily through driving down mining costs per tonne, which has allowed for a lower cut-off grade, thereby optimizing the way the orebody is mined. The focus in 2019 is to realize the potential to further grow reserves, extend mine life, and grow production over and above the current mine plan, through reducing costs to further lower the cut-off grade, as well as extending mineralization at depth.
Goldrush complex, Nevada, U.S.
Construction of twin exploration declines at Goldrush accelerated in the fourth quarter, and each decline has now advanced approximately 450 metres. These declines will provide access to the orebody, allowing for further drilling and the conversion of existing resources to reserves. The exploration declines can be converted to production declines in the future, subject to further permitting. The project's growing resource base is now enabling the team to re-evaluate and optimize the project design.
Infill drilling at the Red Hill portion of the Goldrush deposit continues to support geological and resource models. In 2018, probable gold reserves for Goldrush grew by 35 per cent to 2.0 million ounces, while measured and indicated resources remained steady at 9.4 million ounces. Conversion of a large majority of the remaining resources to reserves, as well as the significant potential to identify additional resources, will begin on completion of the exploration declines, and therefore is not expected for a number of years.
Continuing drilling at Fourmile, located within 500 metres of Goldrush, continues to intersect high-grade mineralization across a number of stratigraphic horizons, supporting the notion that the deposit is a northern extension of the Goldrush system. Drilling has also expanded the footprint of Fourmile to the north and the south, resulting in a modest initial inferred resource. Inferred resources for Goldrush, including Fourmile, have increased to 3.6 million ounces. In 2019, the company will continue to test the gap between Goldrush and Fourmile, as well as seek to extend mineralization to the north. The company is also carrying out an integrated review of the geological, geotechnical and geometallurgical aspects of the mineralized corridor to optimize the mine design, which could impact production rates and processing options for the operation.
Cortez Deep South, Nevada, U.S.
The Deep South project is expected to contribute approximately 300,000 ounces of annual gold production when fully ramped up between 2024 and 2028, at a cost of sales of $650 per ounce, and all-in sustaining costs of $580 per ounce. The draft environmental impact statement for the project was published in late October, with the public comment period concluding in December. As of Dec. 31, the company has spent $33-million (including $2-million in the fourth quarter of 2018) out of a total estimated capital cost of $106-million on the Deep South Expansion. Initial production from Deep South is expected in 2022. Deep South will utilize infrastructure which has already been approved under current plans to expand mining in the Lower zone of the Cortez underground mine, including the new Rangefront twin declines, and other underground infrastructure already in use and under construction.
Pueblo Viejo, Dominican Republic
(60 per cent Barrick/40 per cent Goldcorp)
Scoping studies and pilot project work are supportive of a plant expansion at the Pueblo Viejo mine that could increase throughput by roughly 50 per cent to 12 million tonnes per year, allowing the mine to maintain average annual gold production of approximately 800,000 ounces after 2022 (100-per-cent basis). To achieve this, the mine is evaluating a flotation concentrator followed by ultrafine grinding and tank oxidation of the concentrate. Testing to date has indicated that tank oxidation is preferable to the pad preoxidation process previously considered. Pueblo Viejo expects to complete prefeasibility studies for the plant expansion and additional tailings capacity by the end of 2019. The project has the potential to convert roughly seven million ounces of measured and indicated resources to proven and probable reserves (100-per-cent basis).
Lagunas Norte carbonaceous material and refractory ore project, Peru
In 2018, Barrick updated a feasibility study on a project to extend the life of the Lagunas Norte mine through the sequenced installation of mill, carbon-in-leach, flotation and autoclave processing facilities. During 2018, the company determined that the project does not currently meet Barrick's investment criteria. As a result, the company is re-evaluating the Lagunas Norte business plan. The near-term focus of the re-evaluation will be to reduce costs, improve geological understanding of the in-pit reserves and near-pit resources, and to explore regional targets with the potential to extend the life of the mine.
Greenfield projects -- long-term value and optionality for shareholders
Donlin Gold, Alaska, U.S. (50 per cent Barrick/50 per cent NovaGold)
Donlin Gold contains 19.5 million ounces of measured and indicated gold resources (Barrick's 50-per-cent share). In August, 2018, the project received its record of decision and other major federal permits, concluding six years of federal permitting. Donlin Gold, located in a stable jurisdiction with strong stakeholder support, represents one of the world's largest undeveloped gold deposits. The company continues to work in collaboration with its partner at NovaGold to identify ways to optimize the project.
Norte Abierto, Atacama region, Chile (50 per cent Barrick/50 per cent Goldcorp)
Norte Abierto, a joint venture with Goldcorp in Chile, contains 11.6 million ounces of proven and probable gold reserves, and 13.3 million ounces of measured and indicated gold resources (Barrick's 50-per-cent share). The joint venture continues to advance project optimization efforts, including an updated geological model for the Cerro Casale, Caspiche and Luciano deposits.
Pascua-Lama, San Juan province, Argentina/Atacama region, Chile
Pascua-Lama, located on the border between Argentina and Chile, contains 21.3 million ounces of measured and indicated gold resources. At present, the Pascua-Lama project does not meet Barrick's investment criteria. The company plans to carry out a re-evaluation of options for the project in 2019, while continuing efforts to reduce care and maintenance costs.
Alturas, Coquimbo region, Chile
The Alturas project, located in Chile on the El Indio belt, is a Barrick greenfield discovery with 8.9 million ounces of inferred gold resources. Work in 2018 focused on improving geological understanding of high-grade and shallow orebody areas at the project, and defining the potential mineral inventory of the nearby Del Carmen prospect.
Conference call and webcast
Please join the company for a conference call and webcast today at 11 EST/4 p.m. UTC to discuss the results.
see company website U.S. and Canada: 1-800-319-4610
United Kingdom: 0808-101-2791
South Africa: 0800-981-705
The conference call will be available for replay by phone at 1-855-669-9658 (U.S. and Canada toll-free) and 1-604-674-8052 (international), access code 2852.
The scientific and technical information contained in this press release has been reviewed and approved by: Rick Sims, registered member SME, vice-president, reserves and resources of Barrick; Geoffrey Locke, PEng, manager, metallurgy of Barrick; and Mike Tsafaras, PEng, manager, value realization of Barrick -- who are each a qualified person as defined in National Instrument 43-101 -- Standards of Disclosure for Mineral Projects. Following the completion of the merger with Randgold, the designation of qualified persons for the combined company will be reviewed, and may be updated for future reporting.
Third party data
The total cash costs comparison of Barrick with its senior gold peers is based on data obtained from Wood Mackenzie as of Aug. 31, 2018. Wood Mackenzie is an independent third party research and consultancy firm that provides data for, among others, the metals and mining industry. Wood Mackenzie is not affiliated with Barrick.
Where figures for Barrick are compared to its senior gold peers, the data from Wood Mackenzie have been used to ensure consistency in the compared measure across the Barrick and the comparator group. Barrick does not have the ability to verify the Wood Mackenzie figures and the non-GAAP (generally accepted accounting principles) financial performance measures used by Wood Mackenzie may not correspond to the non-GAAP financial performance measures calculated by Barrick or any of the other senior gold peers.
CONSOLIDATED STATEMENTS OF INCOME
For the years ended Dec. 31
(in millions of United States dollars, except per share data)
Revenue $7,243 $8,374
Costs and expenses
Cost of sales 5,220 5,300
General and administrative expenses 265 248
Exploration, evaluation and project expenses 383 354
Impairment charges (reversals) 900 (212)
Loss on currency translation 136 72
Closed mine rehabilitation (13) 55
Income from equity investees (46) (76)
Gain on non-hedge derivatives - (6)
Other expense (income) 90 (799)
Income before finance items and income taxes 308 3,438
Finance costs, net (545) (691)
Loss (income) before income taxes (237) 2,747
Income tax expense (1,198) (1,231)
Net (loss) income $(1,435) $1,516
Equity holders of Barrick Gold Corp. $(1,545) $1,438
Non-controlling interests $110 $78
Earnings (loss) per share data attributable to
the equity holders of Barrick Gold Corp.
Net (loss) income
Basic $(1.32) $1.23
Diluted $(1.32) $1.23
We seek Safe Harbor.
© 2019 Canjex Publishing Ltd. All rights reserved.