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Barrick Gold Corp
Symbol ABX
Shares Issued 1,165,574,071
Close 2017-02-15 C$ 25.28
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Barrick starts PFS on underground mine at Lama

2017-02-15 17:40 ET - News Release

Mr. Daniel Oh reports

BARRICK REPORTS PROGRESS ON PROJECTS

Barrick Gold Corp. has provided a progress update on projects with the potential to contribute up to 1.1 million ounces of gold production at Cortez, Goldrush, Lagunas Norte and Turquoise Ridge.

All amounts are expressed in U.S. dollars.

The company has also initiated a prefeasibility study to evaluate the construction of an underground mine at Lama, on the Argentine side of the Pascua-Lama project. Optimization work in Chile remains under way.

All projects go through a rigorous, independent peer review process led by Barrick's evaluations team. In keeping with Barrick's best-in-class approach, at every stage of the investment review process the company challenges assumptions, incorporates improvements and evaluates alternative development scenarios to maximize value creation.

Barrick measures its projects against a 15-per-cent hurdle rate, using a long-term gold price of $1,200 per ounce. They are then ranked, prioritized and sequenced to optimize capital spending over time, allowing Barrick to anticipate and plan for financing requirements.

Cortez underground expansion (1)

Project overview -- expand underground mining into Deep South area, below currently permitted levels

Status -- on track

The Deep South project, located within the lower zone of the Cortez Hills underground mine, remains on track to contribute average underground production of more than 300,000 ounces per year between 2022 and 2026.

Development of the range front twin declines that will provide access to the lower zone of the mine began in the fourth quarter of 2016. For the first time, the mine is using a road header -- a piece of machinery that employs mechanical cutting to facilitate continuous tunnel boring, rather than traditional drilling and blasting.

The prefeasibility study anticipated a cost of sales of $840 per ounce and average all-in sustaining costs (2) of $580 per ounce for mining in the Deep South zone. Optimization work under way as part of the feasibility study has identified a number of opportunities to reduce these costs, including through the use of autonomous loading with a smart conveyance system, compared with a traditional conveyor system contemplated in the prefeasibility study.

Initial capital costs for the project remain unchanged, and are estimated to be $153-million. The expansion will enable the company to access approximately 1.9 million ounces of proven and probable reserves (3) in the Deep South zone, of which more than 80 per cent are oxide.

Permitting was initiated in 2016 with the submission of an amendment to the current mine plan of operations to the Bureau of Land Management. The permitting process is expected to take approximately three to four years, including the preparation of an environmental impact statement. A record of decision is expected in 2019 or 2020. On this basis, dewatering and development work could begin as early as 2019 or 2020, with initial production from Deep South commencing in 2022 or 2023.

Barrick expects to complete the feasibility study by the end of 2017. The study will focus on processing, backfill and stope sequencing to optimize free cash flow.

Goldrush

Project overview -- development of an underground mine at Goldrush

Status -- on track

The Goldrush project continues to advance according to schedule, with the potential to become Barrick's newest mine in Nevada by 2021.

Average annual production for the first full five years of operation is expected to be approximately 450,000 ounces of gold. Goldrush is expected to have a mine life of 21 years, with first production as early as 2021, and sustained production in 2023. The prefeasibility study anticipated a cost of sales of $800 per ounce and average all-in sustaining costs (2) of $620 per ounce, and Barrick has identified opportunities to further reduce operating costs. Barrick continues to anticipate initial capital costs of approximately $1-billion. Goldrush now has 9.6 million ounces of measured and indicated gold resources (3), and 1.9 million ounces of inferred gold resources (3).

During 2016, Barrick obtained the necessary permits for the construction of twin exploration declines. This will enable further drilling of the orebody in support of the feasibility study, including the conversion of measured and indicated resources to proven and probable reserves. The twin decline portal access site has been cleared, and work is expected to begin on the portal pad in the first quarter of 2017. Barrick is also carrying out additional surface exploration drilling in the Red Hill zone, the shallowest portion of the Goldrush deposit. Permitting is expected to commence in 2018, initiating a three- to four-year environmental impact statement process. Underground development and production activities would commence following receipt of permits.

The Goldrush deposit remains open in a number of directions. In addition, the company continues to drill at the highly prospective Fourmile target, just north of the Goldrush discovery.

Lagunas Norte life extension project (4)

Project overview -- optimization of carbonaceous oxide ore recovery, and installation of refractory ore processing circuit

Status -- on track

Barrick is now evaluating a sequenced approach to extending the life of the Lagunas Norte mine by first optimizing the recovery of carbonaceous oxide ore contained in existing stockpiles, followed by extraction and processing of refractory ores.

The prefeasibility study for the refractory ore project contemplated an initial capital investment of approximately $640-million for the installation of a 6,000-tonne-per-day grinding-flotation-autoclave and carbon-in-leach processing circuit to treat refractory material. Once ramped up, the circuit has the potential to produce an average of 240,000 ounces of gold per year at a cost of sales of approximately $1,080 per ounce and all-in sustaining costs (2) of $625 per ounce.

Over the past year, Lagunas Norte has developed a process to treat certain carbonaceous oxide material already stockpiled at the mine through heap leaching, helping to bridge the gap between the processing of oxide and refractory materials. This has created an opportunity to first construct a grinding and carbon-in-leach processing circuit that would treat the remaining carbonaceous oxide material at the site. This would allow Barrick to defer the construction of the flotation and pressure oxidation circuits required for treating refractory ore, optimizing the timing of capital expenditures.

Engineering for the grinding and carbon-in-leach circuits is under way at a feasibility level, and will be available for investment committee review by the end of 2017. Pending a positive investment decision and receipt of permits, construction of these facilities could begin in late 2018, with first production in 2020.

Following this, and subject to environmental impact assessment approval, construction of the refractory ore processing facilities (flotation and pressure oxidation circuits) could begin as early as 2020, with first production in 2023.

Turquoise Ridge underground expansion

Project overview -- expand underground mining through construction of an additional production shaft

Status -- on track

Barrick continues to advance a phased approach to expansion at its 75-per-cent-owned Turquoise Ridge mine that maximizes free cash flow from the operation, while optimizing the timing of capital spending for expansion.

Through the development of a third shaft, the mine has the potential to increase output to an average of 500,000 ounces per year (100-per-cent basis) from existing reserves at a cost of sales of $750 to $800 per ounce and all-in sustaining costs (2) of about $625 to $675 per ounce. The project would require capital expenditures of approximately $300-million to $325-million (100-per-cent basis) for additional underground development and shaft construction.

The first phase of expansion has been focused on leveraging best-in-class initiatives to maximize productivity from the existing mine infrastructure, with strong results. Turquoise Ridge recorded its highest-ever level of production in 2016, producing 355,000 ounces of gold (100-per-cent basis), at a cost of sales applicable to gold of $593 per ounce and all-in sustaining costs (2) of $618 per ounce. Average throughput increased by 40 per cent, from 1,500 tonnes per day in 2015 to 2,100 tonnes per day in 2016. Improvements in mining intensity and reliability have been driven by upgrades to underground ventilation systems, increasing top-cut mining widths, greater equipment standardization and better maintenance. Additional best-in-class initiatives under evaluation include the introduction of continuous mining, increased automation, additional ventilation modifications and alternative mining methods.

Based on the rapid pace of improvement at the mine, Barrick is evaluating whether to proceed directly to the construction of a third production shaft, instead of the installation of a new ventilation shaft, which was previously contemplated as the second phase of the mine expansion. All necessary permits for a third production shaft are already in place.

At the end of 2016, the Turquoise Ridge mine had four million ounces of gold in reserves (75-per-cent basis) (3) at an average grade of 15.1 grams per tonne -- the highest reserve grade in the company's operating portfolio, and among the highest in the entire gold industry. The mine also has 3.0 million ounces of measured gold resources (3) and 6.5 million ounces of indicated gold resources (75-per-cent basis) (3). The Turquoise Ridge deposit remains open to the northeast, with significant potential to add additional reserves and resources through drilling.

Pascua-Lama and Frontera district update

Following a detailed review of multiple development options for Pascua-Lama in 2016, both open pit and underground, Barrick has initiated a prefeasibility study to evaluate the construction of an underground mine at Lama. The study will evaluate the use of low-cost bulk mining methods, including sublevel cave and block cave mining, designed to target higher-value ore on the Argentine side of the border in the initial stages of the operation. Cash flow from Lama could support a staged development that would, over time, incorporate ore from the Chilean side of the border, subject to additional permitting in Chile. Efforts in Chile this year will focus on advancing project concepts in parallel with the Lama study, with the intention of moving to a prefeasibility level study in 2018.

Conceptually, initial ore processing at Lama would be undertaken using one of three partially completed processing streams at the site, with a capacity of approximately 15,000 tonnes per day. Existing infrastructure could be scaled up to 25,000 tonnes per day at a later date. An underground mine would reduce the surface footprint of the operation and would be less susceptible to weather-related production interruptions during the winter season.

Estimated capital costs for the project will be available following the completion of the prefeasibility study. Based on scoping work, the returns of the Lama project deteriorate if initial capital is much more than $1.5-billion. Returns are also dependent on the ability to access Chilean ore sources in future phases of the project. If Barrick cannot build the project at an attractive return, Barrick will not pursue it. As part of the prefeasibility study, Barrick will be evaluating opportunities to leverage innovation and new technology to strengthen the economics of the project, in addition to potential synergies with the nearby Veladero mine. Assuming a positive prefeasibility study result, permitting could begin in 2018. The timing of first production would depend on multiple factors, including permitting timelines, financing requirements and a decision to proceed with the project.

Beyond Pascua-Lama, Barrick is evaluating an integrated development strategy for the Frontera district, which includes Veladero and Alturas. At the Alturas project in Chile, Barrick has added an additional 1.1 million ounces of inferred gold resources, bringing the total inferred resource to 6.8 million ounces (3). Barrick expects to complete a scoping study for the project in 2017.

Ultimately, Barrick's objective is to capitalize on the significant growth potential of this highly prolific and prospective district, leveraging the company's existing footprint and infrastructure in the region, as a platform for long-term value creation.

Qualified persons

The following qualified persons, as that term is defined in National Instrument 43-101 (standards of disclosure for mineral projects), have prepared or supervised the preparation of their relevant portions of the technical information described in this press release:

  • Patrick Garretson, registered member SME, senior director, life-of-mine planning (Barrick);
  • Steven Haggarty, PEng, senior director, metallurgy;
  • Robert Krcmarov, FAusIMM, executive vice-president, exploration and growth;
  • Rick Sims, registered member SME, senior director, resources and reserves.

Endnotes

  1. For additional detail, see the technical report on the Cortez joint venture operations, Lander and Eureka counties, Nevada, United States, dated March 21, 2016, and filed on SEDAR and EDGAR on March 28, 2016.
  2. The measure "all-in sustaining costs" per ounce of gold is a non-GAAP (generally accepted accounting principles) financial performance measure. It begins with cost of sales less, among other items, the effect of depreciation, and adds further costs that reflect the additional costs of operating a mine, primarily sustaining capital expenditures, general and administrative costs, and mine site exploration and evaluation costs. Barrick believes that the use of all-in sustaining costs per ounce will assist investors, analysts and other stakeholders in understanding the costs associated with producing gold, understanding the economics of gold mining, and assessing Barrick's operating performance and its ability to generate free cash flow from current operations and to generate free cash flow on an overall company basis. This measure is intended to provide additional information only, and does not have any standardized meaning under IFRS (international financial reporting standards). Although a standardized definition of all-in sustaining costs was published in 2013 by the World Gold Council (a market development organization for the gold industry comprising and financed by 18 gold mining companies from around the world, including Barrick), the World Gold Council is not a regulatory organization, and other companies may calculate this measure differently. This measure should not be considered in isolation or as a substitute for measures prepared in accordance with IFRS.
  3. This was estimated in accordance with NI 43-101, as required by Canadian securities regulatory authorities. Estimates are as of Dec. 31, 2016, unless otherwise noted. Goldrush has measured resources of 161,000 tonnes grading 10.43 g/t and indicated resources of 30.8 million tonnes grading 9.60 g/t, representing 9.6 million ounces of gold, and has inferred resources of 7.3 million tonnes grading 8.18 g/t, representing 1.9 million ounces of gold. Turquoise Ridge has proven reserves of 4.3 million tonnes grading 15.54 g/t (75-per-cent basis) and probable reserves of 4.0 million tonnes grading 14.65 g/t (75-per-cent basis), representing 4.0 million ounces of gold, and has measured resources of 13.4 million tonnes grading 6.97 g/t (75-per-cent basis), representing 3.0 million ounces of gold, and has indicated resources of 37.4 million tonnes grading 5.39 g/t (75-per-cent basis), representing 6.5 million ounces of gold. Alturas has inferred resources of 211 million tonnes grading 1.00 g/t, representing 6.8 million ounces of gold. For U.S. reporting purposes, Industry Guide 7 under the Securities and Exchange Act of 1934 (as interpreted by staff of the U.S. Securities and Exchange Commission) applies different standards in order to classify mineralization as a reserve. Accordingly, for U.S. reporting purposes, the approximately 1.9 million ounces of proven and probable gold reserves associated with the Cortez underground expansion project (approximately 5.6 million tonnes grading 10.5 g/t) are classified as mineralized material. All mineral resources referenced in this press release are exclusive of mineral reserves, and mineral resources that are not mineral reserves do not have demonstrated economic viability. Complete mineral reserve and mineral resource data for all mines and projects referenced in this press release, including tonnes, grades and ounces, can be found in Barrick's fourth quarter and year-end 2016 report.
  4. For additional detail, see the technical report on the Lagunas Norte mine, La Libertad region, Peru, dated March 21, 2016, and filed on SEDAR and EDGAR on March 28, 2016.

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