Barrick Reports First Quarter 2017 Results
All amounts expressed in U.S. dollars unless otherwise indicated
(firmenpresse) - TORONTO, ONTARIO -- (Marketwired) -- 04/24/17 --
Barrick Gold Corporation (NYSE: ABX)(TSX: ABX) ("Barrick" or the "Company") today reported strong first quarter results, with operating cash flow of $495 million, free cash flow(2) of $161 million, and production and costs in line with expectations. Our focus remains on maintaining and growing industry-leading margins, driven by innovation and our digital transformation, managing our portfolio and allocating capital and talent with discipline and rigor, and leveraging our distinctive partnership culture as a competitive advantage.
Reflecting our focus on operational excellence and Best-in-Class performance, the integration of our Cortez and Goldstrike mines in Nevada is on track, with stronger-than-anticipated first quarter results and the accelerated rollout of digital mining solutions. Higher capital expenditures in the first quarter were in line with plan, and underscore our commitment to disciplined investment in 2017, as we re-invest in our business to deliver high margin ounces and growth in free cash flow per share over the long term.
We further optimized our portfolio through the creation of distinctive new partnerships. In early April, we announced a partnership with Shandong Gold Group that will help us generate more value from the Veladero mine in the short term, while potentially unlocking the untapped mineral wealth of the El Indio Belt in Argentina and Chile over the long term. In addition, we announced the creation of a new joint venture with Goldcorp at the Cerro Casale project in Chile, and new exploration partnerships with ATAC Resources and Osisko Mining, opening up new avenues to grow the long-term value of our portfolio.
FINANCIAL HIGHLIGHTS
First quarter net earnings were $679 million ($0.58 per share), compared to a net loss of $83 million ($0.07 per share) in the prior-year period. A significant improvement in net earnings was largely due to approximately $1.125 billion of net impairment reversals ($522 million net of tax effect and non-controlling interest) recorded in the first quarter of 2017, reflecting the indicative fair value of the Cerro Casale project resulting from our divestment of 25 percent, and the associated partnership agreement with Goldcorp. Net earnings also benefited from lower currency translation losses compared to the first quarter of 2016, when the Company recorded $91 million of currency translation losses, primarily related to Australian entities.
Adjusted net earnings(1) for the first quarter were $162 million ($0.14 per share), compared to $127 million ($0.11 per share) in the prior-year period. Higher adjusted net earnings reflect the impact of higher gold and copper prices, partially offset by higher depreciation, higher exploration and evaluation expenses, and slightly higher direct mining costs.
Operating cash flow increased to $495 million, compared to $451 million in the first quarter of 2016. Higher operating cash flow was driven by higher gold and copper prices, as well as lower interest payments, reflecting the impact of significant debt reduction completed over the past year. These favorable movements were partially offset by unfavorable working capital movements compared to the prior-year period. Free cash flow(2) for the first quarter was $161 million, compared to $181 million in the first quarter of 2016. Lower free cash flow primarily reflects higher planned sustaining capital expenditures in the first quarter (see page 3 for details), as well as increased project spending at Barrick Nevada, primarily related to the development of Crossroads and the Cortez Hills lower zone, in addition to Goldrush project expenditures. These increases were partially offset by higher operating cash flow.
RESTORING A STRONG BALANCE SHEET
Achieving and maintaining a strong balance sheet remains a top priority. We intend to reduce our total debt from $7.9 billion at the start of 2017, to $5 billion by the end of 2018-half of which we are targeting this year. We will achieve this by using cash flow from operations, further portfolio optimization, and the creation of new joint ventures and partnerships.
In the first quarter, total debt was reduced by $178 million. In early April, the company announced the sale of 50 percent of the Veladero mine in Argentina to Shandong Gold for $960 million, the majority of which will be allocated to debt reduction.
At the end of the first quarter, Barrick had a consolidated cash balance of approximately $2.3 billion.(4) The Company now has less than $100 million in debt due before 2019.(5) About $5 billion, or 64 percent of our outstanding total debt of $7.8 billion, does not mature until after 2032.
OPERATING HIGHLIGHTS AND OUTLOOK
Barrick produced 1.31 million ounces of gold in the first quarter at a cost of sales of $833 per ounce, in line with plan. This compares to 1.28 million ounces at a cost of sales of $810 per ounce in the prior-year period.
All-in sustaining costs(3) in the first quarter were $772 per ounce, compared to $706 per ounce in the first quarter of 2016. Approximately 90 percent of this increase, or roughly $58 per ounce, is a result of higher sustaining capital expenditures compared to the prior-year period. Significant items in the first quarter included planned capitalized stripping at Barrick Nevada, increased expenditures at Veladero relating to phase 4B and 5B of the leach pad, and other equipment purchases. Over the same period, cash costs(3) decreased, from $553 per ounce in the first quarter of 2016 to $545 per ounce in the first quarter of 2017.
Gold production in the first quarter was impacted by the timing of autoclave maintenance at the Pueblo Viejo mine in the Dominican Republic. Heavy rains, road closures. and power outages associated with the El Nino weather pattern also impacted production at the Lagunas Norte mine in Peru. Both operations remain on track to achieve their original full-year production guidance.
The Company produced 95 million pounds of copper in the first quarter, at a cost of sales of $1.73 per pound, and all-in sustaining costs(6) of $2.19 per pound. This compares to 111 million pounds, at a cost of sales of $1.34 per pound, and all-in sustaining costs(6) of $1.97 per pound in the first quarter of 2016. Lower copper production in the first quarter was primarily the result of lower production at the Lumwana mine in Zambia, as a result of lower tonnes processed, combined with lower grades.
Please see page 29 of Barrick's first quarter MD&A for individual operating segment performance details.
We now expect full-year gold production of 5.3-5.6 million ounces, down from our previous range of 5.6-5.9 million ounces. A significant portion of this reduction is attributable to the anticipated sale of 50 percent of Veladero, which is expected to close at the end of the second quarter. Our updated guidance assumes no change to Acacia's full-year guidance as a result of the export ban on concentrates currently affecting Acacia's operations in Tanzania. It also assumes the resumption of normal processing activities at Veladero in June, subject to government approval of proposed modifications to the mine's operating systems (see Page 4 - Veladero Update).
We continue to expect full-year cost of sales attributable to gold to be $780-$820 per ounce, and all-in sustaining costs(3) of $720-$770 per ounce.
Our copper production guidance for 2017 is unchanged at 400-450 million pounds, at a cost of sales applicable to copper between $1.50-1.70 per pound, and all-in sustaining costs(6) of $2.10-$2.40 per pound.
Please see Appendix 1 of this press release for individual mine site guidance updates.
Veladero Update
On March 28, a coupling on a pipe carrying gold-bearing solution at the Veladero mine heap leach facility failed. Solution released from the rupture was contained within the operating site and did not result in any impact to the environment or people. The Company promptly notified San Juan provincial authorities, who inspected the site on March 29. On March 30, the Government of San Juan province temporarily restricted the addition of cyanide to the Veladero mine's heap leach facility, pending the completion of works to strengthen and improve the mine's operating systems.
Barrick presented its proposed work plan to San Juan provincial authorities on April 21, following extensive consultation with both federal and provincial officials and regulators. The provincial government has indicated it will take approximately two weeks to review the Company's proposals, a process that will also include federal authorities, including the national Ministry of Environment and Sustainable Development. Initial work on the proposed modifications to the heap leach facility has already begun, concurrent with the review by provincial and federal authorities. Our updated guidance assumes a resumption of normal leaching activities at the mine in June, subject to approval by the Government of San Juan province, the lifting of operating restrictions by the San Juan provincial court, and the resolution of regulatory and legal matters by the federal and provincial courts (for more information about these matters, please see Note 17 "Contingencies" of Barrick's first quarter financial statements and the notes thereto). This assumption is based on our assessment of the time required to complete the proposed modifications to the leach pad. The timing of approval for the resumption of leaching activities will depend on the actual progress of work, any potential new requirements, and a final evaluation of the completed modifications by provincial authorities. In parallel with the submission of a new technical plan for the operation, Barrick has also presented an updated community investment and engagement plan to the Government of San Juan and federal authorities for review.
On a 100 percent basis, we now expect full-year production at Veladero of 630,000-730,000 ounces of gold, at a cost of sales of $740-$790 per ounce, and all-in sustaining costs(3) of $890-$990 per ounce. Barrick's share of full-year production, assuming 50 percent ownership from July 1, is expected to be 430,000-480,000 ounces of gold. This compares to our original 2017 guidance of 770,000-830,000 ounces (100 percent basis), at a cost of sales of $750-$800 per ounce, and all-in sustaining costs(3) of $840-$940 per ounce.
PORTFOLIO OPTIMIZATION AND PARTNERSHIPS
The creation of new partnerships and joint ventures is a core element of our strategy to grow free cash flow per share over the long term. So far this year, we have entered into four new partnerships in support of this long-term strategy.
Strategic Cooperation Agreement with Shandong
On April 6, Barrick announced that it had entered into a strategic cooperation agreement with Shandong Gold Group Co., Ltd., the leading underground mining company in China, based in Jinan, Shandong province. As a first step in the new partnership, Shandong Gold Mining Co., Ltd, the listed company of Shandong Gold Group, will acquire 50 percent of Barrick's Veladero mine in San Juan province, Argentina, for $960 million. As a second step, Barrick and Shandong will form a working group to explore the joint development of the Pascua-Lama deposit. As a third step, both companies will evaluate additional investment opportunities on the highly prospective El Indio Gold Belt on the border of Argentina and Chile, which hosts a cluster of world-class gold mines and projects including Veladero, Pascua-Lama, and Alturas. The transaction is expected to close at the end of the second quarter.
Cerro Casale Joint Venture
On March 28, Barrick announced that it has reached an agreement with Goldcorp Inc. to form a new partnership at the Cerro Casale Project in Chile. Under the terms of the agreement, Goldcorp has agreed to purchase a 25 percent interest in Cerro Casale from Barrick, as well as Kinross Gold Corporation's 25 percent interest, resulting in a 50/50 joint venture between Barrick and Goldcorp. The agreement brings a fresh perspective to the project, along with the potential for synergies in the district. It also allows us to direct capital elsewhere in our portfolio, while ensuring Barrick shareholders retain exposure to the optionality associated with one of the largest undeveloped gold and copper deposits in the world. The resulting increase in carrying value illustrates how Barrick's partnership approach is surfacing value associated with otherwise dormant options within our asset portfolio.
ATAC Resources Exploration Earn-In and Private Placement
On April 10, ATAC Resources announced that it had reached an earn-in agreement with Barrick at ATAC's Orion project in the Yukon, Canada. The Orion Project hosts the Orion and Anubis Carlin-type gold discoveries, in addition to eight other early stage Carlin-type gold prospects. These form part of the largest Carlin-type mineralized system in North America outside of Nevada. Barrick has extensive experience and expertise with Carlin-type deposits in Nevada. Barrick has the option to spend C$35 million over five years to acquire a 60 percent interest in the project, after which the companies would form a joint venture. We will then have the option to earn an additional 10 percent by spending a further C$20 million at the project. Barrick will also purchase ATAC common shares through a charity flow-through private placement for a total cost to Barrick of C$6.3 million, increasing Barrick's shareholding in ATAC from approximately 9.2 percent to 19.9 percent.
Osisko Mining Exploration Earn-In
On March 27, Osisko Mining Inc. announced that it had commenced its previously announced earn-in agreement with Barrick on the Kan property in northern Quebec. Under the earn-in agreement, Barrick must commit $15 million in exploration expenditures by December 31, 2020, to earn a 70 percent interest in the Kan property, subject to certain annual expenditure thresholds. Following the formation of a joint venture, Barrick may earn a further five percent interest by funding an additional $5 million of project level expenditures. The Labrador Trough in northern Quebec is home to numerous well known iron ore deposits and base metal prospects. We believe it has been under appreciated for its gold potential, and could develop into a core mineral district for Barrick. The partnership will leverage the on-the-ground experience and expertise of Osisko in this region, with Barrick Exploration team members embedded at the project.
SUSTAINABILTIY BRIEFING
Barrick will hold its first Sustainability Briefing for investors on Tuesday, May 9. Speakers will include Board Member and Chair of our Corporate Responsibility Committee, Nancy Lockhart, along with our Chief Operating Officer, Chief Sustainability Officer, and other leaders. Please join us for the live webcast from 10 a.m. to 12 p.m. at .
TECHNICAL INFORMATION
The scientific and technical information contained in this press release has been reviewed and approved by Steven Haggarty, P. Eng., Senior Director, Metallurgy of Barrick, who is a "Qualified Person" as defined in National Instrument 43-101 Standards of Disclosure for Mineral Projects.
APPENDIX 1 - Updated 2017 Operating and Capital Expenditure Guidance
APPENDIX 2 - 2017 Outlook Assumptions and Economic Sensitivity Analysis
ENDNOTE 1
"Adjusted net earnings" and "adjusted net earnings per share" are non-GAAP financial performance measures. Adjusted net earnings excludes the following from net earnings: certain impairment charges (reversals) related to intangibles, goodwill, property, plant and equipment, and investments; gains (losses) and other one-time costs relating to acquisitions or dispositions: foreign currency translation gains (losses); significant tax adjustments not related to current period earnings; unrealized gains (losses) on non-hedge derivative instruments; and the tax effect and non-controlling interest of these items. The Company uses this measure internally to evaluate our underlying operating performance for the reporting periods presented and to assist with the planning and forecasting of future operating results. Barrick believes that adjusted net earnings is a useful measure of our performance because these adjusting items do not reflect the underlying operating performance of our core mining business and are not necessarily indicative of future operating results. Adjusted net earnings and adjusted net earnings per share are intended to provide additional information only and do not have any standardized meaning under IFRS and may not be comparable to similar measures of performance presented by other companies. They should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. Further details on these non-GAAP measures are provided in the MD&A accompanying Barrick's financial statements filed from time to time on SEDAR at and on EDGAR at .
Reconciliation of Net Earnings to Net Earnings per Share, Adjusted Net Earnings and Adjusted Net Earnings per Share
ENDNOTE 2
"Free cash flow" is a non-GAAP financial performance measure which excludes capital expenditures from Net cash provided by operating activities. Barrick believes this to be a useful indicator of our ability to operate without reliance on additional borrowing or usage of existing cash. Free cash flow is intended to provide additional information only and does not have any standardized meaning under IFRS and may not be comparable to similar measures of performance presented by other companies. Free cash flow should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. Further details on these non-GAAP measures are provided in the MD&A accompanying Barrick's financial statements filed from time to time on SEDAR at and on EDGAR at .
Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow
ENDNOTE 3
"Cash costs" per ounce and "All-in sustaining costs" per ounce are non-GAAP financial performance measures. "Cash costs" per ounce starts with cost of sales related to gold production, but excludes the impact of depreciation, the non-controlling interest of cost of sales, and includes by-product credits. "All-in sustaining costs" per ounce begin with "Cash costs" per ounce and add further costs which reflect the additional costs of operating a mine, primarily sustaining capital expenditures, general & administrative costs, minesite exploration and evaluation costs, and reclamation cost accretion and amortization. Barrick believes that the use of "cash costs" per ounce and "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, assessing our operating performance and also our ability to generate free cash flow from current operations and to generate free cash flow on an overall Company basis. "Cash costs" per ounce and "All-in sustaining costs" per ounce are intended to provide additional information only and do not have any standardized meaning under IFRS. 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 comprised of and funded by 18 gold mining companies from around the world, including Barrick), it is not a regulatory organization, and other companies may calculate this measure differently. These measures should not be considered in isolation or as a substitute for measures prepared in accordance with IFRS. Further details on these non-GAAP measures are provided in the MD&A accompanying Barrick's financial statements filed from time to time on SEDAR at and on EDGAR at .
Reconciliation of Gold Cost of Sales to Cash costs, All-in sustaining costs and All-in costs, including on a per ounce basis
ENDNOTE 4
Includes $598 million of cash primarily held at Acacia and Pueblo Viejo, which may not be readily deployed outside of Acacia and/or Pueblo Viejo.
ENDNOTE 5
Amount excludes capital leases and includes project financing payments at Pueblo Viejo (60 percent basis) and Acacia (100 percent basis).
ENDNOTE 6
"C1 cash costs" per pound and "All-in sustaining costs" per pound are non-GAAP financial performance measures. "C1 cash costs" per pound is based on cost of sales but excludes the impact of depreciation and royalties and includes treatment and refinement charges. "All-in sustaining costs" per pound begins with "C1 cash costs" per pound and adds further costs which reflect the additional costs of operating a mine, primarily sustaining capital expenditures, general & administrative costs and royalties. Barrick believes that the use of "C1 cash costs" per pound and "all-in sustaining costs" per pound will assist investors, analysts, and other stakeholders in understanding the costs associated with producing copper, understanding the economics of copper mining, assessing our operating performance, and also our ability to generate free cash flow from current operations and to generate free cash flow on an overall Company basis. "C1 cash costs" per pound and "All-in sustaining costs" per pound are intended to provide additional information only, do not have any standardized meaning under IFRS, and may not be comparable to similar measures of performance presented by other companies. These measures should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. Further details on these non-GAAP measures are provided in the MD&A accompanying Barrick's financial statements filed from time to time on SEDAR at and on EDGAR at .
Reconciliation of Copper Cost of Sales to C1 cash costs and All-in sustaining costs, including on a per pound basis
ENDNOTE 7
Barrick's share.
ENDNOTE 8
Barrick's share on an accrued basis.
ENDNOTE 9
Operating unit guidance ranges for production reflect expectations at each individual operating unit, but do not add up to corporate-wide guidance range total.
ENDNOTE 10
Utilizing option collar strategies, the Company has protected the downside on approximately 72 million pounds of expected remaining 2017 copper production at an average floor price of $2.30 per pound, and can participate in the upside on the same amount up to an average of $2.92 per pound. Our remaining copper production is subject to market prices.
ENDNOTE 11
Due to our hedging activities, which are reflected in these sensitivities, we are partially protected against changes in these factors.
CAUTIONARY STATEMENT ON FORWARD-LOOKING INFORMATION
Certain information contained or incorporated by reference in this First Quarter Report 2017, including any information as to our strategy, projects, plans or future financial or operating performance, constitutes "forward-looking statements". All statements, other than statements of historical fact, are forward-looking statements. The words "believe", "expect", "anticipate", "contemplate", "target", "plan", "objective" "aspiration", "aim", "intend", "project", "goal", "continue", "budget", "estimate", "potential", "may", "will", "can", "should", "could", "would" and similar expressions identify forward-looking statements. In particular, this First Quarter Report 2017 contains forward-looking statements including, without limitation, with respect to: (i) Barrick's forward-looking production guidance; (ii) estimates of future cost of sales per ounce for gold and per pound for copper, all-in-sustaining costs per ounce/pound, cash costs per ounce and C1 cash costs per pound; (iii) cash flow forecasts; (iv) projected capital, operating and exploration expenditures; (v) targeted debt and cost reductions; (vi) mine life and production rates; (vii) the expected time of closing of certain announced transactions; (viii) Barrick's Best-in-Class program (including potential improvements to financial and operating performance that may result from certain Best-in-Class initiatives); (ix) the benefits of integrating the Cortez and Goldstrike operations; (x) the potential impact and benefits of Barrick's digital transformation; (xi) asset sales, joint ventures and partnerships; and (xii) expectations regarding future price assumptions, financial performance and other outlook or guidance.
Forward-looking statements are necessarily based upon a number of estimates and assumptions that, while considered reasonable by the Company as at the date of this press release in light of management's experience and perception of current conditions and expected developments, are inherently subject to significant business, economic and competitive uncertainties and contingencies. Known and unknown factors could cause actual results to differ materially from those projected in the forward-looking statements and undue reliance should not be placed on such statements and information. Such factors include, but are not limited to: fluctuations in the spot and forward price of gold, copper or certain other commodities (such as silver, diesel fuel, natural gas and electricity); the speculative nature of mineral exploration and development; changes in mineral production performance, exploitation and exploration successes; risks associated with the fact that certain Best-in-Class initiatives are still in the early stages of evaluation and additional engineering and other analysis is required to fully assess their impact; risks associated with the implementation of Barrick's digital transformation initiative and the ability of the projects under this initiative to meet the Company's capital allocation objectives; the risk that the certain announced transactions may not close when planned or at all or on the terms and conditions set forth in their transaction agreements; the benefits expected from announced transactions being realized; diminishing quantities or grades of reserves; increased costs, delays, suspensions and technical challenges associated with the construction of capital projects; operating or technical difficulties in connection with mining or development activities, including geotechnical challenges and disruptions in the maintenance or provision of required infrastructure and information technology systems; failure to comply with environmental and health and safety laws and regulations; timing of receipt of, or failure to comply with, necessary permits and approvals; uncertainty whether some or all of the Best-in-Class initiatives and targeted investments will meet the Company's capital allocation objectives; the impact of global liquidity and credit availability on the timing of cash flows and the values of assets and liabilities based on projected future cash flows; adverse changes in our credit ratings; the impact of inflation; fluctuations in the currency markets; changes in U.S. dollar interest rates; risks arising from holding derivative instruments; changes in national and local government legislation, taxation, controls or regulations and/or changes in the administration of laws, policies and practices, expropriation or nationalization of property and political or economic developments in Canada, the United States and other jurisdictions in which the Company does or may carry on business in the future;
lack of certainty with respect to foreign legal systems, corruption and other factors that are inconsistent with the rule of law; damage to the Company's reputation due to the actual or perceived occurrence of any number of events, including negative publicity with respect to the Company's handling of environmental matters or dealings with community groups, whether true or not; risk of loss due to acts of war, terrorism, sabotage and civil disturbances; litigation; contests over title to properties, particularly title to undeveloped properties, or over access to water, power and other required infrastructure; business opportunities that may be presented to, or pursued by, the Company; our ability to successfully integrate acquisitions or complete divestitures; risks associated with working with partners in jointly controlled assets; employee relations including loss of key employees; increased costs and physical risks, including extreme weather events and resource shortages, related to climate change; availability and increased costs associated with mining inputs and labor; and the organization of our previously held African gold operations and properties under a separate listed company. In addition, there are risks and hazards associated with the business of mineral exploration, development and mining, including environmental hazards, industrial accidents, unusual or unexpected formations, pressures, cave-ins, flooding and gold bullion, copper cathode or gold or copper concentrate losses (and the risk of inadequate insurance, or inability to obtain insurance, to cover these risks).
Many of these uncertainties and contingencies can affect our actual results and could cause actual results to differ materially from those expressed or implied in any forward-looking statements made by, or on behalf of, us. Readers are cautioned that forward-looking statements are not guarantees of future performance. All of the forward-looking statements made in this First Quarter Report 2017 are qualified by these cautionary statements. Specific reference is made to the most recent Form 40-F/Annual Information Form on file with the SEC and Canadian provincial securities regulatory authorities for a more detailed discussion of some of the factors underlying forward-looking statements and the risks that may affect Barrick's ability to achieve the expectations set forth in the forward-looking statements contained in this press release.
The Company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise, except as required by applicable law.
Contacts:
INVESTOR CONTACTS: Daniel Oh
Senior Vice President, Investor Engagement and Governance
+1 416 307-7474
MEDIA CONTACT: Andy Lloyd
Senior Vice President, Communications
+1 416 307-7414
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Datum: 24.04.2017 - 21:10 Uhr
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