Ms. Amy Schwalm reports
BARRICK REPORTS FOURTH QUARTER AND FULL YEAR 2014 RESULTS
Barrick Gold Corp. had a fourth-quarter net loss of $2.85-billion ($2.45 per share), reflecting the impact of $2.8-billion in after-tax impairment charges, primarily related to the Lumwana mine ($930-million) and the Cerro Casale project ($778-million). Fourth-quarter adjusted net earnings (2) were $174-million (15 cents per share), and operating cash flow was $371-million.
For the full year 2014, Barrick recorded a net loss of $2.91-billion ($2.50 per share), reflecting the impact of $3.4-billion in after-tax impairment charges. Adjusted net earnings for 2014 were $793-million (68 cents per share), and operating cash flow was $2.3-billion.
Taking Barrick back to the future
Barrick became the world's leading gold company by pursuing its founding purpose: the generation of wealth for its owners, employees and the communities with which it partners. Those who founded and first led the company were committed to a culture of partnership, and the values underpinning such a culture: trust, transparency, shared responsibility and accountability, and a sense of emotional and financial ownership.
That culture also nurtured a powerful operating model. In its early years, Barrick was lean and nimble, with minimal bureaucracy. A small head office managed the company with a balance of entrepreneurialism and prudence, focusing on only a few core activities: defining and implementing strategy, allocating human and financial capital, and fulfilling the obligations required of a public company. Leaders at the operational level had greater autonomy, responsibility and accountability, functioning as business owners. Free from bureaucracy and middle management, they focused on maximizing free cash flow, and the head office focused on allocating that cash flow to maximize shareholder returns.
Over the last year, Barrick has been returning to this partnership culture and the operating model that made it so successful. It has cut its head office by close to half, and eliminated all management layers between Toronto and the mines. What remains are shared service centres in the field that provide support directly to its mines and projects, with costs charged directly to the relevant operation.
Along with managing financial capital, managing the company's talent is a central responsibility of Barrick's leaders. Attracting, retaining and developing exceptional people is a fundamental component of the company's partnership culture. In 2014, Darian Rich was promoted to the role of executive vice-president, talent management, elevating this critical function. Over the last six months, it attracted 12 new leaders to Barrick who personify the company's original values, and bring vital skills and experience that support the company's business objectives, such as strengthening the balance sheet, fixing Pascua-Lama, improving efficiency and productivity, and building partnerships in China and beyond. This group includes people such as Kevin Thomson (senior EVP, strategic matters), Shaun Usmar (senior EVP and chief financial officer), Sergio Fuentes (executive project director, Pascua-Lama), and Melanie Miller (VP, supply chain), to name just a few. Barrick has also promoted top internal talent across the organization to challenging new roles that will strengthen their capabilities. This includes Rich Haddock (SVP and general counsel), a lawyer who intimately understands all facets of the company's business, and Calvin Pon (SVP, finance and tax) one of the brightest analytical minds in the industry.
Going "back to the future" demands that the company's leaders be owners. Accordingly, Barrick has extended its innovative partnership plan to 35 leaders across the business. Each year, these leaders will be graded on their collective performance, as measured against a transparent long-term scorecard disclosed to shareholders in advance. A significant portion of their total compensation, if earned, will be long term in nature, awarded in units that convert into Barrick common shares, which cannot be sold until an individual retires or leaves the company. A smaller proportion of total compensation, if earned, will be in the form of annual bonuses, determined for each individual based on a personal scorecard tailored to the individual's specific responsibilities. This plan increases financial and emotional ownership among the company's senior leaders, and will deepen to include new partners over time.
The company's approach to capital allocation ensures that all new investments align with its strategic focus and contribute to maximizing free cash flow in pursuit of industry-leading returns.
Investments in new projects will compete with share buybacks and acquisitions, along with the objective of paying a dividend to the company's owners. Barrick expects its portfolio to deliver a 10-per-cent to 15-per-cent return on invested capital through the metal price cycle, and, as such, individual projects are assessed against a hurdle rate of 15 per cent. The company will defer, cancel or sell projects that cannot achieve this target. It will also apply more rigour in monitoring execution to ensure that it meets its cost and schedule commitments. And Barrick will conduct postinvestment reviews to evaluate how it has lived up to its original investment promises, using what it learned to improve execution on future projects.
A portion of the company's capital budget is reinvested in existing mines to sustain or expand them. That capital is not spread evenly across the portfolio, and its operations must compete for it. The company will focus its investments at mines that meet its overall expectations for returns on invested capital. Assets that are unable to meet the company's capital allocation objectives over time will be sold.
Restoring a strong balance sheet
For many years, Barrick had the only A-rated balance sheet in the gold industry. Prudent financial management was a bedrock principle of the company. Its current level of debt is inconsistent with that principle, and that inconsistency is reflected in the company's share price. As the company returns to its original values, no priority is more important than restoring a strong balance sheet.
Barrick intends to reduce its net debt by at least $3-billion by the end of 2015. The company has a number of options to achieve this target, and it will take only those actions that make sense for the business, on terms it considers most favourable to its shareholders. Barrick's debt reduction strategy includes the following levers:
-
Maximizing free cash flow by implementing a leaner, decentralized
operating model that reflects Barrick's original culture, with more
efficient capital spending, reduced general and administrative costs,
and profitable growth;
-
Disciplined non-core asset sales, beginning with a process to sell the
Porgera joint venture and Cowal mine;
-
Joint ventures and strategic partnerships if and where they make sense.
Barrick's strong liquidity means the company can tackle its debt in a disciplined manner. It has less than $1-billion in debt due over the next three years, a $4-billion undrawn credit facility and $2.7-billion in cash at the end of 2014.
Maximizing free cash flow
A return to the lean, decentralized operating model that underpinned Barrick's early success is freeing up its country and mine managers to focus on maximizing free cash flow across the business.
As part of this transformation, Barrick expects to realize $30-million in savings from reduced general and administrative expenditures, and overhead costs in 2015. These savings are projected to reach $70-million on an annualized basis in 2016. And the company expects more to follow, as its leaders focus on maximizing cash flow without the constraints of bureaucracy and unnecessary management layers.
The company is reducing the size of its head office by close to half, from 260 positions in 2014 to 140 positions in 2015. As a result, its corporate administration expense is expected to be about $145-million this year and even lower in 2016.
The company is now reporting G&A with clarity and transparency. It has eliminated all management layers between the head office and its operations; what remains are shared service centres that provide support directly to its mines and projects. These costs will no longer be reported as G&A. They will be charged directly to the mines and projects that use the services, and will be reflected in operating costs, as they should be. Services that are not required will be eliminated, driving further cost savings.
G&A costs at Barrick will now include head office administration, stock-based compensation and administration expense from Acacia Mining PLC.
For a full description of G&A expenses, please read page 34 of the management discussion and analysis.
In addition, the company is taking steps to improve the efficiency of its procurement and supply chain practices, freeing up working capital by reducing inventories. It also expects to generate additional free cash flow over the next 12 months through better integration of mine site maintenance programs, and its global procurement and logistics system.
Innovation also plays a key role in improving efficiency and unlocking the cash-generating potential of the company's assets. It sees this in action at Goldstrike, where a revolutionary new cyanide-free processing technology developed in house at Barrick is allowing it to accelerate cash flow from about four million stockpiled ounces of gold (see page 11 of the MD&A for more details). The company's in-house research and development team has also developed a patented flotation technology capable of utilizing sea water, reducing demand on scarce fresh water resources. The company will continue to develop industry-leading processing technologies, while expanding its focus to include more efficient ways to use water and power at its operations.
Best assets and regions
Barrick's five cornerstone mines in the Americas are expected to account for 60 per cent of its production in 2015 at average all-in sustaining costs of $725 to $775 per ounce. At two grams per tonne, these mines have an average reserve grade more than double that of the company's peer group average (3). They are among the most attractive assets in the entire gold industry, generating strong free cash flow even in today's gold price environment, while offering exceptional leverage to higher gold prices.
The company maintains a strong competitive advantage in Nevada and the Andean region, underpinned by proven operating experience, a critical mass of infrastructure, technical and exploration expertise, and established partnerships with host governments and communities. Barrick believes these regions provide the best opportunities to generate returns for shareholders, and it will, therefore, give them the majority of its focus. Divestments outside of the Americas, including the Porgera joint venture and the Cowal mine, will further centre the company's portfolio on its strongest assets.
Two-thirds of the company's 2015 exploration budget of $220-million to $260-million (4) is focused on high-quality, brownfield projects, with the remainder targeted at emerging discoveries that have the potential to become profitable mines. Approximately 85 per cent of the total exploration budget is allocated to the Americas, and about half of the budget will be directed to Nevada.
Growth in the Americas
This year, Barrick is advancing growth opportunities at or near existing operations in Nevada, with four prefeasibility studies on track for completion in 2015 (5).
It also has within its portfolio a number of the world's largest undeveloped gold deposits, including Pascua-Lama, Donlin Gold and Cerro Casale. These projects offer leverage to higher gold prices, with more than 37 million ounces of gold in reserves (100-per-cent basis) and more than 48 million ounces of gold in measured and indicated resources (100-per-cent basis). They provide the company with a platform for long-term growth in a higher gold price environment. In the meantime, the company will work to optimize the economics of these projects, spending the minimum required to maintain them as development options within the company's portfolio. As with all its investments, the company will only proceed with construction if these projects meet its capital allocation objectives, including its target hurdle rate of 15 per cent, with a robust execution plan to ensure execution on budget and on schedule.
Goldrush -- major new discovery near existing infrastructure
The Goldrush project, located six kilometres from the Cortez mine, is one of the largest gold discoveries of the last decade. Measured and indicated resources stood at 10.6 million ounces, and inferred resources were 4.9 million ounces at the end of 2014. The prefeasibility study remains on schedule for completion in mid-2015. Infill drilling in 2014 continued to demonstrate high-grade continuity and led to resource upgrades, with nearly 70 per cent of the overall resource now in the measured and indicated category. A permit application for twin exploration declines that will allow the company to better explore the northern limits of the known deposit was submitted in the second quarter of 2014.
Turquoise Ridge -- a core mine in the making
The Turquoise Ridge mine contains 4.5 million ounces in reserves (75-per-cent basis) at an average grade of 16.9 grams per tonne -- the highest reserve grade in the company's operating portfolio and among the highest in the entire gold industry. Turquoise Ridge has considerable untapped potential and could become a core operation for Barrick. The company is advancing a project to develop an additional shaft, which could bring forward more than one million ounces of production, roughly doubling output to an average of 500,000 ounces per year (100-per-cent basis) at all-in sustaining costs of about $625 to $675 per ounce (6). The prefeasibility study was completed in January, 2015, and key permits are expected in the third quarter. Pending approval by the joint venture partners, construction could commence in the fourth quarter of 2015, with initial production beginning in 2019. Preliminary estimates indicate capital expenditures of approximately $300-million to $325-million (100-per-cent basis) for additional underground development and shaft construction, and an attractive payback period of roughly 2-1/2 years using a gold price assumption of $1,300 per ounce.
Drilling at the northern extension of the deposit confirms the orebody is larger than previously known, at higher grades. Due to the substantial thickness of the mineralization, the company's engineering team is also looking at the economics of introducing bulk underground mining in some parts of the orebody. Advanced ground support technology and improved reinforcement techniques have also mitigated ground stability issues that challenged previous mining operations at the site.
Cortez -- high-grade underground expansion
A prefeasibility study for underground mining at Cortez below currently permitted levels will be completed in late 2015. Mineralization in this zone is primarily oxide and higher grade compared with the current underground mine, which is sulphide in nature. The limits of the Lower zone have not yet been defined, and drilling has indicated the potential for new targets at depth. The exploration drift has been extended to the south, enabling additional step-out drilling, which is anticipated to begin in June. Drill results to date include 36.6 metres at 31.5 grams per tonne and 27.4 metres at 20.9 grams per tonne, both oxide in nature, which compare favourably with the average grade of 13.8 grams per tonne in refractory ore above the 3,800-foot level (7).
Spring Valley -- low-capital-cost, heap-leach project
The Spring Valley project, 70 per cent owned by Barrick and located approximately 75 miles west of Cortez, is a low-capital-cost, oxide heap-leach project with potential to become another stand-alone mine in Nevada. Barrick reported an initial measured and indicated resource of 1.3 million ounces (70-per-cent basis) averaging 0.66 gram per tonne and an inferred resource of 600,000 ounces (70-per-cent basis) averaging 0.62 gram per tonne for Spring Valley at the end of 2014. In addition, there is good potential to expand the current resource at higher gold prices. The company expects to complete a prefeasibility study in late 2015.
Pascua-Lama
Pascua-Lama has 15.4 million ounces of gold reserves and more than 674 million ounces of contained silver. The mine is expected to have low operating costs and the potential to generate significant free cash flow over a 25-year-plus mine life.
The unique challenges of Pascua-Lama are well known, and the company has acknowledged the issues that led to the mine's suspension. But those are sunk costs, and the question before Barrick now is whether Pascua-Lama's economics going forward will justify resuming development.
Pascua-Lama's new executive project director, Sergio Fuentes, reports to the co-presidents, and comes to Barrick after nearly three decades of successfully managing the construction of complex mining projects in Chile, including high-altitude operations in the Andes. He and the team he is assembling are working hard to assess Pascua-Lama's economics going forward. To do so, they will address the project's outstanding legal and regulatory hurdles, and will complete a new execution plan to optimize remaining construction activities. If that plan aligns with the company's capital allocation objectives and demonstrates an acceptable return on invested capital of at least 15 per cent, the company will consider resuming development of Pascua-Lama.
In any scenario, the company must permit and construct a new water management system in Chile. It will submit its application for the new system by mid-year, with permitting expected to take two years.
In the meantime, the company is working to minimize the costs of holding the asset. In 2015, Barrick anticipates expenditures of approximately $170-million to $190-million for the project, including approximately $140-million to $150-million for care and maintenance, including water management system costs, and approximately $30-million to $40-million (8) for other project costs, including those related to permit obligations in Argentina and Chile.
Financial highlights
Fourth-quarter 2014 adjusted net earnings were $174-million (15 cents per share) (10) compared with $406-million (37 cents per share) in the prior-year period. This reflects the impact of 257,000 fewer ounces sold in the quarter, along with lower realized gold and copper prices. The net loss for the fourth quarter was $2.85-billion ($2.45 per share), compared with a net loss of $2.83-billion ($2.61 per share) in the prior-year quarter. Significant adjusting items for the quarter include:
-
$2.8-billion in after-tax impairment charges, including $1.7-billion in
asset impairment charges primarily related to Cerro Casale and Lumwana,
and $1.1-billion in goodwill impairments, largely related to Zaldivar
and Lumwana;
-
$138-million in unrealized losses on non-hedge derivative instruments
primarily related to fuel hedge positions.
Fourth-quarter operating cash flow of $371-million compares with $1.02-billion in the prior-year period. The decrease in operating cash flow primarily reflects lower realized gold and copper prices, partially offset by a decrease in income tax payments and a lower net loss compared with the prior year.
Reserves and resources
Barrick calculated its 2014 reserves using a conservative gold price assumption of $1,100 per ounce, unchanged from 2013. While this is below the company's gold price outlook and current spot prices, it reflects Barrick's emphasis on pursuing profitable ounces. Gold reserves were 93.0 million ounces (11) at the end of 2014, compared with 104.1 million ounces at the end of 2013. Approximately 65 per cent of the reduction was attributable to ounces mined and processed in 2014, with the balance reflecting the divestiture of the Kanowna, Plutonic and Marigold mines, and the partial sale of Barrick's equity interest in Acacia Mining during the year.
Measured and indicated gold resources were 94.3 million ounces (11) at the end of 2014, compared with 99.4 million ounces at the end of 2013. The majority of the reduction relates to a lower gold price assumption of $1,400 per ounce (compared with $1,500 per ounce for 2013), with divestitures and movements to reserves more than offset by additions in the year. Inferred gold resources were 29.3 million ounces (11) at the end of 2014, compared with 31.9 million ounces at the end of 2013, primarily due to ounces upgraded to the measured and indicated category, and from divestitures.
Copper reserves decreased to 9.6 billion pounds (11) from 14.0 billion pounds based on a copper price assumption of $3 per pound (unchanged from 2013), primarily reflecting the transfer of Lumwana reserves into resources following the company's decision to place the mine on care and maintenance. Measured and indicated copper resources decreased to 4.6 billion pounds (11), compared with 6.9 billion pounds at the end of 2013 based on an unchanged copper price assumption of $3.50 per pound. Inferred copper resources were 100 million pounds (11) compared with 200 million pounds at the end of 2013.
2015 outlook
Barrick's 2015 all-in sustaining cost guidance is $860 to $895 per ounce. The company's five cornerstone mines are forecast to contribute 60 per cent of overall production at AISC of $725 to $775 per ounce in 2015.
Gold production guidance for 2015 is 6.2 million to 6.6 million ounces, with higher contributions from Goldstrike, Lagunas Norte and Acacia more than offsetting lower production from Veladero, and the sale of Kanowna, Plutonic and Marigold in 2014. Copper guidance of 310 million to 340 million pounds at C1 cash costs of $1.75 to $2.00 per pound primarily reflects the planned suspension of the Lumwana mine in Zambia, partially offset by higher expected production from Zaldivar.
Detailed 2015 operating and capital expenditure guidance is as shown in the associated table.
GOLD PRODUCTION AND COSTS
Production
(millions of AISC (12) Cash costs (12, 13)
ounces) ($ per ounce) ($ per ounce)
Cortez 0.825-0.900 760-835 560-610
Goldstrike 1.000-1.150 700-800 540-590
Pueblo Viejo
(60%) 0.625-0.675 540-590 390-425
Lagunas Norte 0.600-0.650 675-725 375-425
Veladero 0.575-0.625 990-1,075 600-650
Subtotal 3.800-4.000 725-775 500-540
Porgera (95%) 0.500-0.550 1,025-1,125 775-825
Acacia (63.9%) 0.480-0.510 1,050-1,100 695-725
KCGM (50%) 0.315-0.330 915-940 775-800
Cowal 0.250-0.280 740-775 630-655
Hemlo 0.200-0.225 940-980 675-715
Turquoise Ridge
(75%) 0.175-0.200 875-925 570-600
Round Mountain
(50%) 0.170-0.190 1,180-1,205 875-900
Bald Mountain 0.170-0.195 1,060-1,100 560-600
Golden Sunlight 0.090-0.105 1,000-1,025 740-765
Total gold 6.200-6.600 (14) 860-895 600-640
COPPER PRODUCTION AND COSTS
C3 fully allocated
Production C1 cash costs (15) costs (13) ($ per
(millions of pounds) ($ per pound) pound)
Zaldivar 240-260 1.65-1.95 2.00-2.30
Lumwana 70-80 (16) 1.90-2.15 3.05-3.35
Total copper 310-340 1.75-2.00 2.30-2.60
CAPITAL EXPENDITURES
($ millions)
Mine site
sustaining 1,600-1,800
Mine site
expansion 150-200
Projects 150-200
Total 1,900-2,200
Total capital expenditures in 2015 are expected to be $1.90-billion to $2.20-billion, compared with $2.18-billion in 2014. The lower forecast expenditures primarily reflect reduced expansion capital due to the commissioning of the Goldstrike thiosulphate project in the fourth quarter of 2014, and lower sustaining and development capital at Lumwana following the decision to suspend operations. Sustaining capital expenditures are forecast to increase slightly at Lagunas Norte, Cortez and Turquoise Ridge, and also reflect increased stripping activities at Porgera, Veladero and Bald Mountain.
The company anticipates higher depreciation expense of $240 to $260 per ounce in 2015 due to higher depreciation at Lagunas Norte, Goldstrike, Cortez and Pueblo Viejo. The company expects similar increases in depreciation expense over the next two years.
OPERATING HIGHLIGHTS
Fourth quarter Full year
Gold 2014 2014
Production (000s of ounces) (17) 1,527 6,249
All-in sustaining costs ($ per ounce) 925 864
Copper
Production (millions of pounds) (17) 134 436
C1 cash costs ($ per pound) 1.78 1.92
Total capital expenditures
($ millions) (18) 627 2,180
Cortez
The Cortez mine produced 902,000 ounces at AISC of $706 per ounce in 2014. After several years of exceptional performance with production surpassing one million ounces at low AISC, the Cortez mine is transitioning to a greater proportion of underground mining. Barrick is advancing plans to expand profitable production from the underground mine at Cortez, which is characterized by higher grades and significant resource upside. Expected production of 825,000 to 900,000 ounces in 2015 reflects lower open-pit tonnage due to stripping requirements and a period of lower grades from the underground mine. AISC of $760 to $835 per ounce in 2015 reflects lower sales and higher sustaining capital. To mitigate cost increases at Cortez, the mine is improving shift change sequencing, revamping fleet maintenance practices, improving underground capital efficiency, installing advanced process controls and strengthening geometallurgical modelling.
Cortez has considerable exploration potential, particularly in the higher-grade and mostly oxide Lower zone below the 3,800-foot level, which remains open at depth and to the south.
Goldstrike
Goldstrike delivered another year of outstanding results, while further solidifying its position as one of the world's most technologically advanced gold processing centres. The mine contributed 902,000 ounces in 2014 at AISC of $854 per ounce, with the fourth quarter reflecting lower expected grades and a shutdown of the autoclave facility to complete the transition to thiosulphate processing.
First gold from the thiosulphate circuit, an innovative and proprietary technology developed by Barrick, was produced in late November. Since it was commissioned late last year, the new circuit has met the company's production and cost expectations. This new processing method, which does not use cyanide, will enable Goldstrike to accelerate cash flow from about four million stockpiled ounces. The new circuit is expected to process an average of 350,000 to 450,000 ounces annually in its first full five years. Production at Goldstrike in 2015 is expected to be one million to 1.15 million ounces at AISC of $700 to $800 per ounce, including contributions from the thiosulphate leaching circuit. The mine is anticipated to continue producing at the one-million-ounce level for the next three years (2015 to 2017) at AISC below $900 per ounce.
Pueblo Viejo
Pueblo Viejo completed its ramp-up in 2014, and is now the only mine in the world with annual production of more than one million ounces (100-per-cent basis) at AISC below $700 per ounce for the next three years (2015 to 2017). Barrick's technical experts have identified opportunities to further optimize operations and increase cash flow at Pueblo Viejo. These include increasing plant throughput by optimizing ore blending and autoclave availability, and reducing costs by optimizing maintenance programs. Long term, Pueblo Viejo has significant reserves and resources with potential to extend the life of the mine.
Barrick's 60-per-cent share of production from Pueblo Viejo for the year was 665,000 ounces at AISC of $588 per ounce. Production in the fourth quarter was lower due to scheduled maintenance, which more than offset higher grades. Production in 2015 is forecast to be 625,000 to 675,000 ounces at AISC of $540 to $590 per ounce.
Lagunas Norte
Lagunas Norte contributed 582,000 ounces at AISC of $543 per ounce in 2014. As expected, production in the fourth quarter improved due to higher-grade material and a faster leach cycle from stacking ore on a new area of the leach pad. Production in 2015 is anticipated to be 600,000 to 650,000 ounces, also benefiting from increased leach pad efficiency. AISC of $675 to $725 per ounce in 2015 reflect the start of construction on the next phase of the new leach pad and the expansion of existing waste rock storage facilities.
The company is currently evaluating a plan to extend the life of Lagunas Norte by mining the refractory orebody below the current oxide orebody.
Veladero
The Veladero mine produced 722,000 ounces of gold in 2014 at AISC of $815 per ounce on positive grade reconciliations and a reduction in capitalized stripping costs. Production guidance of 575,000 to 625,000 ounces for 2015 reflects lower grades in the mine plan. AISC guidance of $990 tp $1,075 per ounce reflects lower production and higher capitalized stripping compared with 2014, related to development of the next phase of the Federico pit.
The company is working to realize cost savings at Veladero by improving the efficiency and effectiveness of inventory management and maintenance, and improving productivity in equipment availability and utilization.
Turquoise Ridge
The Turquoise Ridge mine had a strong performance in 2014, contributing 195,000 ounces (75-per-cent basis) at AISC of $628 per ounce on increased throughput, higher grades and lower sustaining capital. The mine is expected to produce 175,000 to 200,000 ounces (75-per-cent basis) in 2015 at AISC of $875 to $925 per ounce. As discussed on page five of the MD&A, Barrick is advancing a project to develop an additional shaft, which could nearly double production to 500,000 ounces (100-per-cent basis) per year at AISC of about $625 to $675 per ounce.
Porgera
Higher recoveries and throughput from improved mill availability, and a focus on reducing sustaining capital contributed to improved 2014 production and AISC of 493,000 ounces and $996 per ounce, respectively. Porgera is expected to produce 500,000 to 550,000 ounces in 2015, reflecting increased underground mining rates and mining from higher-grade areas of the open pit. AISC of $1,025 to $1,125 per ounce in 2015 reflects increased sustaining capital in line with the mine plan. The company is evaluating a number of initiatives with the potential to further reduce costs at Porgera. These include: lowering energy costs through an alternative electricity supply project, and reducing the number of expatriate staff and other external spending.
Other mines
Barrick's other mines -- consisting of Bald Mountain, Round Mountain, Ruby Hill, Golden Sunlight, Hemlo, Cowal and KCGM -- contributed 1.2 million ounces at AISC of $1,011 per ounce in 2014.
Acacia Mining
Barrick's share of full-year production was 470,000 ounces, while AISC of $1,105 per ounce was at the bottom of the guidance range. Barrick's share of 2015 production from Acacia is anticipated to be 480,000 to 510,000 ounces at AISC of $1,050 to $1,100 per ounce.
Global copper
Copper production in 2014 was 436 million pounds at C1 cash costs of $1.92 per pound. Lower copper production for the year was primarily due to the temporary shutdown of Lumwana to repair the conveyor and fewer tons processed at Zaldivar, along with a minor disruption in leaching irrigation due to piping and pump issues.
Copper production guidance for 2015 of 310 million to 340 million pounds at C1 cash costs of $1.75 to $2 per pound assumes the planned suspension of Lumwana in March.
Lumwana contributed 214 million pounds at C1 cash costs of $2.08 per pound in 2014. During the quarter, the Zambian government enacted changes to the country's mining tax regime that replaced corporate income tax and variable profit tax with a 20-per-cent gross royalty, which took effect on Jan. 1, 2015. Given the substantial impact of the new royalty and in light of current low copper prices, Barrick intends to proceed with a suspension of operations at Lumwana unless an agreement with the government of Zambia can be reached. Assuming a suspension, the mine is expected to produce 70 million to 80 million pounds (19) of copper in 2015 at C1 cash costs of $1.90 to $2.15 per pound.
The Zaldivar mine produced 222 million pounds in 2014 at C1 cash costs of $1.79 per pound. The mine continues to be a steady generator of free cash flow and is expected to have improved production of 240 million to 260 million pounds at C1 cash costs of $1.65 to $1.95 per pound in 2015, reflecting higher mining rates and better equipment availability.
During the fourth quarter, Barrick completed the joint venture agreement with Saudi Arabian Mining Company (Ma'aden) to advance and operate the Jabal Sayid copper mine. Construction to complete safety and security installations has begun, and shipments of low-cost copper in concentrate are anticipated in early 2016. Once the mine reaches full production, the average annual output is expected to be 100 million pounds per year, with the potential to increase to 130 million pounds.
Qualified person
Scientific and technical information relating to exploration at the company's Cortez property contained in this news release has been reviewed and approved by Robert Krcmarov, senior vice-president, global exploration, of Barrick, who is a qualified person as defined in National Instrument 43-101 -- Standards of Disclosure for Mineral Projects.
CONSOLIDATED STATEMENTS OF INCOME
(in millions of U.S. dollars, except per-share data)
For the years ended Dec. 31,
2014 2013
Revenue $ 10,239 $ 12,527
Costs and expenses
Cost of sales 6,830 7,329
General and administrative expenses 385 390
Exploration, evaluation and project expenses 392 680
Impairment charges 4,106 12,687
Loss on currency translation 132 180
Closed mine rehabilitation 83 100
Loss (gain) on non-hedge derivatives 193 (76)
Other expense (income) (14) 56
(Loss) before finance items and income taxes (1,868) (8,819)
Finance items
Finance income 11 9
Finance costs (796) (657)
(Loss) before income taxes (2,653) (9,467)
Income tax expense (306) (630)
(Loss) from continuing operations (2,959) (10,097)
(Loss) from discontinued operations - (506)
Net (loss) $ (2,959) $ (10,603)
Attributable to
Equityholders of Barrick Gold Corp. $ (2,907) $ (10,366)
Non-controlling interests $ (52) $ (237)
Earnings per share data attributable to the
equityholders of Barrick Gold
(Loss) from continuing operations
Basic $ (2.50) $ (9.65)
Diluted $ (2.50) $ (9.65)
(Loss) from discontinued operations
Basic $ - $ (0.49)
Diluted $ - $ (0.49)
Net (loss)
Basic $ (2.50) $ (10.14)
Diluted $ (2.50) $ (10.14)
We seek Safe Harbor.
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