Mr. Mark Bristow reports
BARRICK MAKES STRONG START; ROBUST ALL-ROUND PERFORMANCE TOPPED BY NEVADA JV
Barrick Gold Corp.'s first quarterly results since its merger with Randgold Resources Ltd. show solid results across the board from the new group, which also showed rapid progress with the integration of the two businesses as well as with the implementation of key strategic initiatives.
All amounts expressed in U.S. dollars unless otherwise indicated.
FINANCIAL AND OPERATING HIGHLIGHTS
Financial results Q1 2019 Q4 2018 Q1 2018
Realized gold price ($ per ounce) $1,307 $1,223 $1,332
Net earnings (loss) ($ millions) 111 (1,197) 158
Adjusted net earnings ($ millions) 184 69 170
Net cash provided by operating activities ($ millions) 520 411 507
Free cash flow ($ millions) 146 37 181
Net earnings (loss) per share ($) 0.06 (1.02) 0.14
Adjusted net earnings per share ($) 0.11 0.06 0.15
Total attributable capital expenditures ($ millions) 361 368 320
Operating results Q1 2019 Q4 2018 Q1 2018
Gold
Production (000 of ounces) 1,367 1,262 1,049
Cost of sales (Barrick's share) ($ per ounce) 947 980 878
Total cash costs ($ per ounce) 631 588 573
All-in sustaining costs ($ per ounce) 825 788 804
Copper
Production (millions of pounds) 106 109 85
Cost of sales (Barrick's share) ($ per pound) 2.21 2.85 2.07
C1 cash costs ($ per pound) 1.66 1.98 1.88
All-in sustaining costs ($ per pound) 2.46 2.95 2.61
Key performance indicators:
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Integration and strategic initiatives on track across the group following Barrick-Randgold merger;
- Nevada joint venture agreement signed and implementation expected by second quarter-end;
- Group gold production up 8 per cent quarter on quarter and in line with guidance;
- Net cash provided by operating activities up 27 per cent quarter on quarter;
- Net earnings per share increases 106 per cent quarter on quarter to six cents;
- Adjusted net earnings per share up 83 per cent quarter on quarter to 11 cents;
- Copper operations deliver significant improvements;
- Debt, net of cash down 12 per cent quarter on quarter to $3.65-billion;
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Nevada performs ahead of plan as the Cortez Hills open pit ramps down;
- Veladero posts encouraging operational improvements;
- Pueblo Viejo makes progress with expansion project and benefits from operational efficiencies;
- African operations perform well as Kibali makes a good start to the year;
- Sustainability core to group as team effectiveness workshops are rolled out;
-
Greenfields and brownfields exploration make good progress;
- Key growth projects on track;
- Barrick declares four-cent quarterly dividend per share, up from the first quarter of 2018.
While quarter-on-quarter comparisons are skewed by the merger, group gold production was up 8 per cent in line with guidance, net cash from the operations rose by 27 per cent, net earnings per share increased by 106 per cent to six cents, adjusted net earnings per share increased by 83 per cent to 11 cents, and debt, net of cash was down 12 per cent to $3.65-billion. A dividend of four cents per share was declared in respect of the first quarter of 2019.
President and chief executive officer Mark Bristow said the key operations had all performed on plan and within guidance. Nevada exceeded plan as the Cortez Hills open pit ramps down, Veladero posted encouraging improvements and Pueblo Viejo progressed its expansion project and benefited from operational efficiencies. Led by Kibali, the African operations made a good start to the year and the copper operations delivered significant improvements. Key growth projects were on track and greenfields and brownfields exploration were augmenting reserves and identifying new opportunities.
"We have gone a long way towards integrating the organizations, streamlining the processes and ensuring that all the sites have the geological, operational and technical capability to meet their business objectives," Mr. Bristow said.
"We're also well advanced in establishing our new joint venture with Newmont, which has been named Nevada Gold Mines. The organizational structures are being finalized and we're working together with Newmont to realize the synergies and cost reduction opportunities offered by the joint venture, which is scheduled for completion by the end of the second quarter."
Bristow said the assets that did not pass Barrick's strategic filters had been identified and once optimized would be brought to account in a way that would recognize the importance to the remaining stakeholders with the objective of being well advanced by mid-2020. Management was also dealing with some legacy challenges, including the long standoff between Acacia and the Tanzanian government.
"Given our solid operational performance for the first quarter, Barrick is on track to deliver against its plans for the year. Considering the shortage of good assets and the industry's underinvestment in its own future we believe we are well positioned as the industry's value leader. Barrick stands apart from the rest of the industry on four counts: the quality of our assets; our significant potential for portfolio optimization; the very real synergies that we expect to be delivered by Nevada Gold Mines; and our superior exploration and pipeline of development efforts," Mr. Bristow said.
"This quarter has seen a great start for our first year as the new and improved Barrick and I am confident that we are well on the way to achieving our strategic objective of becoming the world's most valued gold mining business. It is our commitment to get there by finding, developing, owning and operating the best assets in our industry, with the best people, to deliver standout returns for our owners and partners."
Conference call and webcast
Please join the company for a conference call and webcast today at 11 a.m. Eastern Daylight Time/4 p.m. British Summer Time to discuss the results:
U.S. and Canada: 1-800-319-4610
United Kingdom: 0-808-101-2791
International: 1-416-915-3239
Webcast
The event will be available for replay on-line or by telephone at 1-855-669-9658 (U.S. and Canada) and 1-604-674-8052 (international), access code 3107.
First quarter delivers a new Barrick made fit for purpose
Since Barrick and Randgold were formally united on the first working day of this year, new management has moved swiftly to engineer a business capable of achieving its creators' vision of being the world's most valued gold company.
The process started well before the deal was consummated, with teams from both sides sitting down together to define new Barrick's goals and plot the best routes to achieving them. They emerged from these meetings with a clear strategy and action plans, as well as a shared vision of a business with a leaner management structure and a more agile, flexible management style.
"Getting the right people in the right places was our first priority," said Mr. Bristow. "We started with a new executive leadership team of people with the right skills and attitude at the corporate level. Supported by a slimmed down technical, financial, commercial, communication and administration team, they now exercise full oversight of all the operations."
This process was duplicated in each of Barrick's three geographical regions, where senior executive teams have been installed, in line with a new policy of moving people, skills and decision making out of the corporate office and into the operations.
"To make sure everyone is focused on the new expected outcomes and their responsibilities, we have held strategy reviews and team effectiveness exercises throughout the organization," Mr. Bristow said.
"We've also made sure that each site has the geological, operational and technical abilities to meet our business objectives and have introduced the Randgold system of parallel work streams that are integrated horizontally for optimal efficiency. At the same time, we are upgrading and integrating the digital and information systems throughout the organization to provide managers with real-time data for planning and decision making."
The corporate structure has been streamlined with the Toronto office now occupying a single floor with approximately 70 people. The process of refining and rationalizing the structure of the business is continuing at the site offices.
"It's important to note that this is not a cost-cutting exercise. It's been designed to ensure that the best people are in the right places," Mr. Bristow said.
"With Barrick now looking and acting like the modern gold business we envisaged, the merger is delivering all that we expected from it. With our house in order, we can now start looking at the abundance of opportunities that are within our grasp.
"Nevada is the base of Barrick's business and its wealth of possibilities will be expanded by the creation of the joint venture there with Newmont Goldcorp. But Barrick is also looking at other prospects to the north and into Canada," Mr. Bristow said. Africa is a high-risk, high-reward destination which holds two of Barrick's Tier 1 gold mines -- Kibali and Loulo-Gounkoto -- and the promise of more to come, but those assets which do not fit the portfolio profile are likely to be divested.
The most exciting growth opportunities are in Latin America, where the expansion of Pueblo Viejo is expected to maintain the mine's Tier 1 status for years to come. There is also the potential to work on adding life and lifting efficiencies at Veladero as well as rebuilding the company's exploration capabilities across Chile, Argentina and Peru as the company addresses some of the significant legacy challenges it faces. And then there is Porgera in Papua New Guinea where the company is in the process of renewing the mining licence and which offers Tier 1 potential.
"The new Barrick is off to a strong start but there is a long road ahead of us and much still to be done to achieve our goal of becoming the most valued gold company by having the best people, employing the best skills, systems and structures, to extract sustainable returns for our owners and partners from the best assets," Mr. Bristow said.
Strong new sustainability drive
Sustainability, a core component of the management philosophy of both Barrick and Randgold, has been given an even higher priority by the merged business.
One of the first appointments postmerger was that of Grant Beringer in the new position of group sustainability executive. At the same time an environmental, social and health and safety oversight committee (chaired by the president and chief executive officer) was established to monitor, review and update sustainability policies and practices throughout the organization.
The energetic new sustainability team has embarked on an extensive stakeholder engagement exercise designed to understand the issues and devise mutually acceptable solutions. Site-level leadership has been involved in this process and sustainability is now a key reporting line on Barrick's weekly executive committee call as well as a dedicated agenda item at the monthly management and quarterly board meetings.
"At the heart of Barrick's sustainability vision is a commitment to contribute to the social and economic development of our host countries and communities. Last year, the combined organization generated more than $8.2-billion in economic value across 16 countries through payments to governments, employees and suppliers, and through community investments," Mr. Beringer said.
"While the two companies achieved much, we acknowledge that Barrick still faces significant legacy issues relating to community and tailings disposal issues at Porgera, litigation and environmental challenges relating to Pascua-Lama, and a checkered environmental past at Veladero, but we are exploring all options to manage and mitigate these risks."
Added Mr. Bristow, "We are pledged to deliver long-term benefits to our host countries and communities through open and ongoing stakeholder engagement and a commitment to genuine partnership."
Geology: mining's bedrock
Geology is the starting point of all mining ventures, argues Barrick mineral resource management and evaluation executive Rod Quick; and it also plays an integral part at every stage of a project's life, from discovery through evaluation and development to mine design and operation.
While Barrick was focused on driving down debt, its business model was focused on free cash flow. With the debt situation now stabilized, that model is now driven by the optimal exploitation of the orebodies. This shift in strategy has been signalled by the appointment of mineral resource managers at all the mines.
"It all starts with an understanding of the mineralization controls of each orebody and using this information in the geological modelling to project the grade, geometry and geotechnical characteristics of the orebody. After all, this is our revenue base, and it is essential that we know it well," he said.
"Using this knowledge, the geologists can work with their mining and metallurgical colleagues to develop a mining plan that will extract the ore with minimum dilution and process it with the smallest possible recovery loss. Mining is a consumptive industry, and replacing depleted ounces requires a deep understanding of the orebodies and the ability to replace the gold we mine through brownfield extensions and new discoveries."
The new approach includes reconciliation programs between the orebody models and what the company actually extracts as well as operational and financial forecasts. There are also grade control programs, which allow geologists and mining engineers to model the geology, geotechnical and metallurgical characteristics ahead of the mining areas. This allows the company to optimally design the ore extraction and develop reliable metallurgical models to optimize ore processing.
"Geology is not a discrete discipline. It needs to be integrated into a multiskilled team making a contribution throughout the life of a mine, for that operation to be sustainably profitable," said Mr. Quick.
Exploration successes boost inventory
Barrick's exploration programs have two goals: to replace the gold it depletes by mining; and to discover its next Tier 1 mine.
In Nevada the combination of the Fourmile discovery, which is expected to eventually be consolidated with the Goldrush project, is shaping up as the portfolio's next megamine. Since the high-grade maiden resource was reported, widely spaced drilling beyond the deposit footprint has intersected high grades in multiple directions, signalling significant growth potential.
Drilling resumed in January and financing may be increased to continue scoping extensions. In the meantime, exploration and project teams are working together to maximize the value from a consolidated and optimized Fourmile-Goldrush.
"Fourmile and Goldrush are classic Carlin-style orebodies of the kind that has made this region one of the world's most prospective. Another is Turquoise Ridge, adjacent to the Twin Creeks mine and included in the Nevada joint venture, which we anticipate is also on the way to becoming a Tier 1 asset. We feel strongly that Nevada still holds enormous potential for more major discoveries," said Rob Krcmarov, executive vice-president, exploration and growth.
Over in Africa, the extensions to the recently discovered 11000 lode at Kibali and the increasing continuity and confirmation of the down-plunge extensions to the geology and mineralization at Gorumbwa are not only supporting Kibali's high production profile but are also expected to extend the life of the mine. Like Nevada, the Democratic Republic of the Congo is mineral rich but largely unexplored, and it too has a great potential for new mines. In addition to the gold-prolific West African Birimian and its counterpart, the Guyana Shield in Latin America, along with the company's presence and growing exploration focus along the Andean trend in Chile, Argentina and Peru.
"Barrick and Randgold have a history of building shareholder value through discovery and development of world-class gold mines. The combination under Barrick brings two industry-leading exploration teams together and given our presence in some of the best gold belts in the world we are uniquely positioned to continue that legacy," said Mr. Bristow.
Kibali makes strong start to 2019
"Kibali, ranked among the world's top 10 gold mines, has made a strong start to 2019 after setting a new production record last year," said Mr. Bristow.
Barrick operates Kibali, which is a joint venture with AngloGold Ashanti and the Congolese parastatal Sokimo.
Speaking at a briefing for local media and stakeholders, Mr. Bristow said Kibali was continuing to break records en route to its 2019 guidance of 750,000 ounces, the latest being the 285,000 tonnes of ore hoisted through the shaft in March. Throughput and recovery remained at or above nameplate levels and Kibali continued to add new technology to its autonomous mining operation, a field in which it is already an industry leader.
"With Kibali producing at this rate, we are intensifying our focus on reserve and resource replacement.
"Drilling is targeting the extensions of the KCD and Gorumbwa complex of orebodies, along the 30 km gold-bearing KZ structure, and the western extensions of the Kibali Graben. This has confirmed that there is a substantial potential for replenishing the reserve and resource base," Mr. Bristow said.
"Kibali is one of five Tier 1 gold mines in the Barrick stable and it is an outstanding example of Barrick's commitment to partnerships. This is demonstrated by the constructive relationship between its three shareholders as well as by its continuing investment in the local economy. During the past quarter the mine spent $38-million with Congolese contractors and the recently initiated Durba road upgrade project is being undertaken by 100-per-cent-Congolese-owned and -operated contractors which Kibali developed."
Mr. Bristow noted that, at their meeting in Washington earlier this month, the Congolese President, Felix Tshisekedi, and Barrick executive chairman John Thornton had confirmed their joint commitment to a partnership designed to develop the country's gold mining industry. Follow-up meetings held in-country between President Tshisekedi, Mr. Bristow and their respective executive teams focused on partnership initiatives and strategies to support the continued growth of the mining industry for the benefit of investors, the Congolese nation and other stakeholders.
"The DRC government is one of our most important partners and we look forward to working with them to create an economic climate capable of attracting large and long-term investments such as the one we made in Kibali. This requires a mining code which equitably balances the interests of the state and the capital providers and allows both to participate fairly in the value creation that the mining industry offers. We are and will continue to engage with the government and administration on the issues around the code introduced last year," he said.
2019 OPERATING AND CAPITAL EXPENDITURE GUIDANCE
Gold production and costs
Production Cost of sales Cash costs All-in sustaining costs
(000 ounces) ($ per ounce) ($ per ounce) ($ per ounce)
Cortez 850-920 $810-$850 $530-$580 $750-$800
Goldstrike 900-980 1,020-1,080 740-790 950-990
Turquoise Ridge (75%) 270-310 655-705 550-600 680-730
Pueblo Viejo (60%) 550-600 780-830 465-510 610-650
Loulo-Gounkoto (80%) 520-570 880-930 575-625 810-850
Kibali (45%) 330-350 1,150-1,200 555-605 670-730
Kalgoorlie (50%) 280-300 920-970 740-790 920-960
Tongon (89.7%) 250-270 1,300-1,350 710-760 780-820
Porgera (47.5%) 240-260 980-1,030 800-850 985-1,025
Veladero (50%) 230-250 1,250-1,350 770-820 1,150-1,250
Hemlo 200-220 890-940 765-815 1,100-1,200
Acacia (63.9%) 320-350 920-970 665-710 860-920
Other sites 190-250 1,155-1,240 895-945 1,055-1,115
Total gold 5,100-5,600 910-970 650-700 870-920
Copper production and costs
Production Cost of sales C1 cash costs All-in sustaining costs
(millions of pounds) ($ per pound) ($ per pound) ($ per pound)
Lumwana 210-240 $2.25-$2.50 $1.80-$2.10 $2.75-$3.15
Zaldivar (50%) 120-130 2.40-2.70 1.65-1.85 2.00-2.20
Jabal Sayid (50%) 45-60 2.00-2.30 1.60-1.90 1.60-1.90
Total copper 375-430 2.30-2.70 1.70-2.00 2.40-2.90
Capital expenditures
($ millions)
Mine site sustaining $1,100-$1,300
Project 300-400
Total attributable capital expenditures 1,400-1,700
Technical information
The scientific and technical information contained in this press release has been reviewed and approved by Steven Yopps, MMSA, director, metallurgy, North America; Chad Yuhasz, PGeo, mineral resource manager, Latin America and Australia Pacific; Simon Bottoms, CGeol, MGeol, FGS, MAusIMM, mineral resources manager, Africa and Middle East; Rodney Quick, MSc, PrSciNat, mineral resource management and evaluation executive; John Steele, cim, metallurgy, engineering and capital projects executive; and Rob Krcmarov, FAusIMM, executive vice-president, exploration and growth -- each a qualified person as defined in National Instrument 43-101 -- Standards of Disclosure for Mineral Projects.
FINANCIAL AND OPERATING HIGHLIGHTS
For the three months ended
March 31, 2019 Dec. 31, 2018 March 31, 2018
Financial results ($ millions)
Revenues $2,093 $1,904 $1,790
Cost of sales 1,490 1,577 1,152
Net earnings (loss) 111 (1,197) 158
Adjusted net earnings 184 69 170
Adjusted EBITDA 1,002 806 820
Total capital expenditures -- sustaining 253 267 233
Total project capital expenditures 120 100 93
Total consolidated capital expenditures 374 374 326
Net cash provided by operating activities 520 411 507
Free cash flow 146 37 181
Per-share data (dollars)
Net earnings (loss) (basic and diluted) 0.06 (1.02) 0.14
Adjusted net earnings (basic) 0.11 0.06 0.15
Operating results
Gold production (thousands of ounces) 1,367 1,262 1,049
Gold sold (thousands of ounces) 1,365 1,232 1,071
Per-ounce data
Market gold price ($/oz) 1,304 1,226 1,329
Realized gold price ($/oz) 1,307 1,223 1,332
Cost of sales (Barrick's share) ($/oz) 947 980 878
Total cash costs ($/oz) 631 588 573
All-in sustaining costs ($/oz) 825 788 804
Copper production (millions of pounds) 106 109 85
Copper sold (millions of pounds) 103 109 85
Per-pound data
Market copper price ($/lb) 2.82 2.80 3.16
Realized copper price ($/lb) 3.07 2.76 2.98
Cost of sales (Barrick's share) ($/lb) 2.21 2.85 2.07
C1 cash costs ($/lb) 1.66 1.98 1.88
All-in sustaining costs ($/lb) 2.46 2.95 2.61
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