Second Quarter Report 2017
SECOND QUARTER REPORT 2017 All amounts expressed in U.S. dollars unless otherwise indicated
Barrick Reports Second Quarter 2017 Results
- Barrick reported second quarter net earnings attributable to equity holders (“net earnings”) of $1.084 billion ($0.93 per share), and adjusted net earnings1 of $261 million ($0.22 per share).
- The Company reported second quarter revenues of $2.160 billion, net cash provided by operating activities (“operating cash flow”) of $448 million, and free cash flow2 of $43 million.
- Gold production in the second quarter was 1.432 million ounces, at a cost of sales applicable to gold3 of $726 per ounce, and all-in sustaining costs4 of $710 per ounce.
- Total debt was reduced by $309 million in the second quarter.
- We continue to expect full-year gold production of 5.3-5.6 million ounces, at a cost of sales3 of $780-$820 per ounce, and all-in sustaining costs4 of $720-$770 per ounce.
- Normal leaching operations, including the addition of cyanide, have resumed at the Veladero mine in Argentina, following the anticipated ramp up and testing of upgraded leach pad systems.
- We completed the formation of our strategic partnership with Shandong Gold, a landmark agreement with the potential to create fundamental long-term value for our respective owners, as well as our community and government partners in Argentina.
- Barrick will begin discussions with the Government of Tanzania next week concerning the concentrate export ban and other issues impacting Acacia Mining plc’s operations in the country.
TORONTO, July 26, 2017 — Barrick Gold Corporation (NYSE:ABX)(TSX:ABX) (“Barrick” or the “Company”) today reported second quarter results for the period ending June 30, 2017.
Our portfolio delivered higher gold production and a 10 percent decrease in direct mining costs compared to the prior-year period, resulting in lower cost of sales and all-in sustaining costs for the second quarter. A number of factors contributed to lower cash flow over the same period, including higher cash taxes paid, an increase in working capital, and a planned increase in capital expenditures focused on sustaining and growing the value of our operations over the long term. We expect higher cash flow in the second half of the year as a number of these factors abate.
Reflecting our drive to maximize the productivity and efficiency of our operations, we have completed the unification of our Cortez and Goldstrike operations, and we are accelerating the implementation of our digital transformation in Nevada, which will support unit cost improvements, increased throughput, and expanding margins. During the quarter we continued to optimize our portfolio for long-term value creation, completing the formation of a strategic partnership with Shandong that has the potential to unlock the untapped mineral wealth of the El Indio Belt—a highly prospective district on the border of Argentina and Chile that is home to the Veladero mine, Pascua- Lama, Alturas, and other projects.
By applying strict capital discipline, leveraging innovation and digital technologies, and building distinctive partnerships, we are positioning Barrick to grow free cash flow per share over the long term. We continue to advance a deep organic project pipeline that provides our owners with exceptional leverage to gold prices, built on a foundation of core mines that are among the longestlife, lowest-cost gold operations in the industry.
FINANCIAL HIGHLIGHTS
Second quarter net earnings were $1.084 billion ($0.93 per share), compared to $138 million ($0.12 per share) in the prior-year period. This significant increase in net earnings was primarily due to $882 million in gains related to the sale of a 50 percent interest in the Veladero mine, and the sale of a 25 percent interest in the Cerro Casale project.
Adjusted net earnings1 for the second quarter were $261 million ($0.22 per share), compared to $158 million ($0.14 per share) in the prior-year period. Higher adjusted net earnings were primarily the result of a 10 percent decrease in direct mining costs, driven by lower costs at Barrick Nevada and Pueblo Viejo, higher sales from our low-cost operations at Barrick Nevada, and lower relative sales from Acacia and Turquoise Ridge compared to the prior-year period. Higher gold and copper sales volumes and higher copper prices also contributed to stronger adjusted net earnings. This was partially offset by an increase in tax expense, higher depreciation, and an increase in exploration and evaluation costs.
Significant adjusting items (pre-tax and non-controlling interest effects) in the second quarter of 2017 include:
- $689 million in a gain relating to the sale of a 50 percent interest in the Veladero mine;
- $193 million in a gain relating to the sale of a 25 percent interest in the Cerro Casale project; partially offset by
- $32 million in foreign currency translation losses primarily related to the devaluation of the Argentine Peso on VAT receivables; and
- $26 million in losses on debt extinguishment.
Refer to page 48 of Barrick’s second quarter MD&A for a full list of reconciling items between net earnings and adjusted net earnings for the current and prior-year periods.
Operating cash flow was $448 million, compared to $527 million in the second quarter of 2016. Lower operating cash flow was primarily due to higher cash taxes paid at Pueblo Viejo. During the quarter we made our final 2016 tax payment in the Dominican Republic, in addition to our first tax payment for 2017. Based on our current estimates, this should result in nominal tax payments at Pueblo Viejo for the remainder of the year. Operating cash flow was further impacted by the concentrate export ban affecting Acacia’s operations in Tanzania, an increase in working capital primarily related to leach pad inventories at Veladero, and an increase in exploration, evaluation, and project costs. These decreases were partially offset by higher gold and copper sales volumes and higher copper prices, combined with lower direct mining costs, as described above.
BARRICK SECOND QUARTER 2017 2 PRESS RELEASE
Free cash flow2 for the second quarter was $43 million, compared to $274 million in the second quarter of 2016. The decrease primarily reflects higher capital expenditures, combined with lower operating cash flows. On a cash basis, capital expenditures for the second quarter were $405 million, compared to $253 million in the second quarter of 2016. This primarily reflects a planned increase in minesite sustaining capital expenditures at Barrick Nevada, relating to higher capitalized stripping costs and the timing of minesite sustaining projects in the current period, as well as greater spending at Veladero relating to phase 4B and 5B of the leach pad expansion and equipment purchases. The increase in capital expenditures also includes a $31 million increase in project capital, primarily at Barrick Nevada. This includes the Robertson property acquisition, development of Crossroads and the Cortez Hills Lower Zone, and the Goldrush project, partially offset by a decrease in preproduction stripping at the Arturo pit, which entered commercial production in August 2016. These increases reflect high-confidence investments in our most attractive opportunities to sustain and grow the value of our operations over the long term.
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—at least 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. We will continue to pursue debt reduction with discipline, taking only those actions that make sense for the business, on terms we consider favorable to our shareholders.
We reduced our total debt by $309 million in the second quarter, or a total of $487 million year to date. On June 30, the Company completed the sale of a 50 percent interest in the Veladero mine in Argentina to Shandong for $960 million, which will be allocated to debt reduction.
At the end of the second quarter, Barrick had a consolidated cash balance of approximately $2.9 billion.5 The Company has less than $200 million6 in debt due before 2020. About $5 billion, or twothirds of our outstanding total debt of $7.4 billion, does not mature until after 2032.
OPERATING HIGHLIGHTS AND OUTLOOK
Barrick produced 1.432 million ounces of gold in the second quarter at a cost of sales3 of $726 per ounce. This compares to 1.340 million ounces at a cost of sales3 of $836 per ounce in the prior-year period. After removing non-controlling interests, cost of sales declined by 13 percent on a per-ounce basis compared to the second quarter of 2016, primarily driven by a 10 percent reduction in direct mining costs, and higher ounces sold.
All-in sustaining costs4 in the second quarter were $710 per ounce, compared to $782 per ounce in the second quarter of 2016. A nine percent reduction in all-in sustaining costs was primarily driven by lower cost of sales per ounce, combined with lower general and administrative expenses, partially offset by an increase in minesite sustaining capital expenditures. Cash costs3 also decreased by 18 percent, from $578 per ounce in the second quarter of 2016, to $474 per ounce in the second quarter of 2017.
BARRICK SECOND QUARTER 2017 3 PRESS RELEASE
We continue to expect full-year gold production of 5.3-5.6 million ounces, at a cost of sales3 of $780- $820 per ounce, and all-in sustaining costs4 of $720-$770 per ounce. This does not include any revisions to Acacia’s annual output as a result of the export ban on concentrates currently impacting Acacia’s operations (see “Tanzania Concentrate Export Ban Update” on page 5 for additional details). We expect production for the remainder of the year to be weighted towards the fourth quarter. Based on sales mix and our current expectations for the timing of capital expenditures, we expect costs to be higher in the third quarter.
The Company produced 104 million pounds of copper in the second quarter, at a cost of sales3 of $1.85 per pound, and all-in sustaining costs7 of $2.38 per pound. This compares to 103 million pounds, at a cost of sales3 of $1.43 per pound, and all-in sustaining costs7 of $2.14 per pound in the second quarter of 2016.
Cost of sales applicable to copper increased by 28 percent compared to the prior-year period, primarily due to higher depreciation expense, and higher power and processing costs at Lumwana. Copper all-in sustaining costs, adjusted to include our proportionate share of equity method investments at Zaldívar and Jabal Sayid, were 10 percent higher in the second quarter. This primarily reflects the higher cost of sales applicable to copper combined with higher minesite sustaining capital expenditures at Jabal Sayid, which only began incurring sustaining capital expenditures upon entering commercial production in July 2016, as well as higher capitalized stripping at Lumwana.
We continue to expect full-year copper production of 400-450 million pounds, at a cost of sales3 of $1.50-$1.70 per pound, and all-in sustaining costs7 of $2.10-$2.40 per pound.
As part of our ongoing efforts to increase transparency and strengthen our disclosures, we intend to pre-release production and sales figures ahead of our quarterly earnings releases, beginning in the third quarter of 2017.
Please see page 32 of Barrick’s second quarter MD&A for individual operating segment performance details. Detailed mine site guidance information can be found in Appendix 1 of this press release.
| Second Quarter | Current | Original | |||
|---|---|---|---|---|---|
| Gold | 2017 | 2017 Guidance | 2017 Guidance | ||
| Production8(000s of ounces) | 1,432 | 5,300-5,600 | 5,600-5,900 | ||
| Cost of sales applicable to gold3($ per ounce) | 726 | 780-820 | 780-820 | ||
| All-in sustaining costs4($ per ounce) | 710 | 720-770 | 720-770 |
Copper
| Production8(millions of pounds) | 104 | 400-450 | 400-450 |
| Cost of sales applicable to copper3($ per pound) | 1.85 | 1.50-1.70 | 1.50-1.70 |
| All-in sustaining costs7($ per pound) | 2.38 | 2.10-2.40 | 2.10-2.40 |
| Total Attributable Capital Expenditures9 ($ millions) | 393 | 1,300-1,500 | 1,300-1,500 |
| BARRICK SECOND QUARTER 2017 | 4 | PRESS RELEASE |
Veladero Operational Update On June 15, San Juan provincial government and judicial authorities lifted operating restrictions that had been imposed at the Veladero heap leach facility in March 2017. Following the lifting of restrictions, Veladero completed a gradual ramp-up of the mine’s upgraded leach pad systems, testing the safety and integrity of the new infrastructure. Normal leaching operations at Veladero, including the addition of new cyanide to the heap leach circuit, resumed in mid-July.
On a 100 percent basis, we continue to expect full-year production at Veladero of 630,000-730,000 ounces of gold, at a cost of sales3 of $740-$790 per ounce, and all-in sustaining costs4 of $890-$990 per ounce. Barrick’s share of full-year production, reflecting 50 percent ownership from July 1, is expected to be 430,000-480,000 ounces of gold.
Tanzania Concentrate Export Ban Update Barrick holds a 63.9 percent equity interest in Acacia Mining plc, a publicly traded company listed on the London Stock Exchange that is operated independently of Barrick. At this time, Acacia continues to evaluate the impact of Tanzania’s concentrate export ban, as well as recently enacted legislation, on its 2017 production guidance. Acacia has not revised its full-year production guidance to reflect any change to annual output as a result of the concentrate export ban currently in place, but has stated that it is now targeting the lower end of its guidance range. Acacia has also indicated that, given the rate of cash outflow, it does not believe continued operations are sustainable at its Bulyanhulu mine beyond September 30. Barrick continues to monitor the situation, and should Acacia revise its full-year outlook, Barrick will evaluate the impact to its own guidance at that time. Any impact will depend, in large part, on the duration of the concentrate export ban. Acacia operations impacted by the current ban on concentrate exports (Bulyanhulu and Buzwagi) account for approximately six per cent of Barrick’s 2017 gold production guidance. In total, Acacia accounts for approximately 10 percent of Barrick’s 2017 gold production guidance.
In an effort to seek a resolution that is in the best interests of all parties, including the Government of Tanzania, Barrick, and Acacia, Barrick will begin direct discussions with the Government of Tanzania concerning the concentrate export ban and other issues next week. Barrick is doing so in its capacity as Acacia’s largest shareholder. Acacia is not participating directly in the discussions at this stage, however it intends to work with Barrick as necessary to support the process. Any potential resolution arising from these discussions will be subject to approval by Acacia.
STRATEGIC COOPERATION AGREEMENT WITH SHANDONG
On June 30, we completed the formation of our strategic partnership with Shandong. The sale of a 50 percent interest in the Veladero mine in San Juan province, Argentina to Shandong Gold Mining Co., Ltd, for $960 million was the first of three steps outlined in a strategic cooperation agreement signed by Barrick and Shandong Gold Group Co., Ltd. on April 6. In keeping with the second step in the agreement, the two companies have also formed a working group to explore the joint development of the Pascua-Lama deposit. As a third step, Barrick and Shandong will evaluate additional investment opportunities on the highly prospective El Indio Gold Belt on the border of Argentina and Chile, home to Pascua-Lama, Alturas, and other projects.
Following the closing of the transaction, senior Shandong leaders traveled to Argentina to kick off the new partnership, participating in town hall meetings and welcome ceremonies with employees at the Veladero mine and San Juan offices. The delegation also met with San Juan Governor Sergio
BARRICK SECOND QUARTER 2017 5 PRESS RELEASE
Uñac, San Juan Mining Minister Alberto Hensel, and other provincial and federal government officials. Our first joint venture planning and integration meeting was held on July 11.
PORTFOLIO OPTIMIZATION
Cerro Casale Joint Venture On June 9, Barrick completed the sale of a 25 percent interest in the Cerro Casale project in Chile to Goldcorp Inc., resulting in the formation of a new 50/50 joint venture to manage the project. Following the completion of Goldcorp’s acquisition of Exeter Resource Corporation, the Joint Venture will control more than 20,000 hectares of land in the Maricunga District, including the Caspiche and Cerro Casale deposits.
Robertson Property Acquisition On June 8, Barrick completed the acquisition of the Robertson property and other claims in Nevada from Coral Gold Resources. The Robertson property is adjacent to Cortez, located just six kilometers north of the Pipeline mill. If successfully brought into production, ore from the project would provide an additional feed for the Cortez mill, with the potential to extend open pit operations in the Cortez District. Robertson also has processing synergies with the Deep South underground expansion project at Cortez. In addition, the land package contains a number of promising near-mine exploration opportunities, as well potential new exploration targets in this highly prospective and prolific district.
ALTURAS PROJECT UPDATE
The Alturas project, located on the border between Argentina and Chile on the El Indio Belt, is a Barrick greenfield discovery with 6.8 million ounces of inferred gold resources (211 million tonnes, grading 1.0 grams per tonne) as of December 31, 2016.10 We have completed a scoping study for a conventional open pit heap leach operation at Alturas. We believe we can add more value by applying innovative new mining and processing solutions to the project, and through additional reverse circulation (RC) drilling. We are now carrying out further studies to evaluate the feasibility of these potential enhancements. Establishing a more accurate grade model using RC drilling will be one of our objectives for the next drilling season. Our Investment Committee will continue to scrutinize the project as it advances, applying a high degree of consistency and rigor—as we do for all capital allocation decisions at the Company—before further review by Barrick’s Executive Committee and our Board of Directors at each stage of advancement.
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, Rick Sims, Registered Member SME, Senior Director, Resources and Reserves of Barrick, and Patrick Garretson, Registered Member SME, Senior Director, Life of Mine Planning of Barrick, each a “Qualified Person” as defined in National Instrument 43-101 Standards of Disclosure for Mineral Projects.
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APPENDIX 1 —2017 Updated Operating and Capital Expenditure Guidance
GOLD PRODUCTION AND COSTS All-in Production Cost of sales3 Cash costs4 sustaining costs4 (millions of ounces) ($ per ounce) ($ per ounce) ($ per ounce)
Barrick Nevada 2.270-2.350 790-830 630-680 440-480 Pueblo Viejo (60%) 0.625-0.650 650-680 540-570 420-440 Veladero (50%) 0.430-0.480 740-790 890-990 550-590 Lagunas Norte 0.380-0.420 660-730 490-550 430-470 Sub-total 3.700-3.900 750-790 650-700 450-480 Acacia (63.9%) 0.545-0.575 860-910 880-920 580-620 KCGM (50%) 0.375-0.425 680-770 665-715 585-635 Turquoise Ridge (75%) 0.230-0.250 700-750 750-830 570-600 Porgera (47.5%) 0.240-0.260 780-840 900-970 650-700 Hemlo 0.205-0.220 880-940 940-1,040 720-770 Golden Sunlight 0.035-0.050 1,200-1,500 1,200-1,300 1,100-1,200 Total Gold 5.300-5.60011 780-820 720-770 510-535
COPPER PRODUCTION AND COSTS All-in Production Cost of sales3 C1 cash costs7 sustaining costs7 (millions of pounds) ($ per pound) ($ per pound) ($ per pound)
Zaldívar (50%) 120-135 2.00-2.20 1.90-2.10 ~1.50 Lumwana 250-275 1.20-1.40 2.10-2.30 1.40-1.60 Jabal Sayid (50%) 35-45 2.10-2.80 2.10-2.60 1.50-1.90 Total Copper 400-45011 1.50-1.70 2.10-2.40 1.40-1.60
CAPITAL EXPENDITURES ($ millions)
Mine site sustaining 1,050-1,200 Project 250-300 Total Attributable 1,300-1,500 Capital Expenditures9
BARRICK SECOND QUARTER 2017 7 PRESS RELEASE
APPENDIX 2 — 2017 Outlook Assumptions and Economic Sensitivity Analysis
Impact on Impact on Impact on 2017 Guidance Hypothetical Revenue Cost of sales3 All-in sustaining Assumption Change
| (millions) | (millions) | costs4,7 | |||
|---|---|---|---|---|---|
| Gold revenue, net of royalties | $1,050/oz | +/- $100/oz | +/- $271 | +/- $8 | +/- $3/oz |
| Copper revenue, net of royalties12 | $2.25/lb | + $0.50/lb | + $113 | + $7 | + $0.03/lb |
| Copper revenue, net of royalties12 | $2.25/lb | - $0.50/lb | - $100 | - $6 | - $0.03/lb |
Gold all-in sustaining costs4
| WTI crude oil price13 | $55/bbl | +/- $10/bbl | n/a | +/- $9 | +/- $3/oz |
| Australian dollar exchange rate | 0.75 : 1 | +/- 10% | n/a | +/- $15 | +/- $6/oz |
| Canadian dollar exchange rate | 1.32 : 1 | +/- 10% | n/a | +/- $16 | +/- $6/oz |
Copper all-in sustaining costs7 WTI crude oil price13 $55/bbl +/- $10/bbl n/a +/- $3 +/- $0.01/lb Chilean peso exchange rate 675 : 1 +/- 10% n/a +/- $3 +/- $0.01/lb
ENDNOTE 1 "Adjusted net earnings" and "adjusted net earnings per share" are non-GAAP financial performance measures. Adjusted net earnings excludes the following from net earnings: certain impairment charges (reversals) related to intangibles, goodwill, property, plant and equipment, and investments; gains (losses) and other one-time costs relating to acquisitions or dispositions: foreign currency translation gains (losses); significant tax adjustments not related to current period earnings; unrealized gains (losses) on non-hedge derivative instruments; and the tax effect and non-controlling interest of these items. The Company uses this measure internally to evaluate our underlying operating performance for the reporting periods presented and to assist with the planning and forecasting of future operating results. Barrick believes that adjusted net earnings is a useful measure of our performance because these adjusting items do not reflect the underlying operating performance of our core mining business and are not necessarily indicative of future operating results. Adjusted net earnings and adjusted net earnings per share are intended to provide additional information only and do not have any standardized meaning under IFRS and may not be comparable to similar measures of performance presented by other companies. They should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. Further details on these non-GAAP measures are provided in the MD&A accompanying Barrick's financial statements filed from time to time on SEDAR at www.sedar.com and on EDGAR at www.sec.gov.
Reconciliation of Net Earnings to Net Earnings per Share, Adjusted Net Earnings and Adjusted Net Earnings per Share
| ($ millions, except per share amounts in dollars) | For the three months ended June 30 | For the six months ended June 30 | ||
|---|---|---|---|---|
| 2017 | 2016 | 2017 | 2016 | |
| Net earnings (loss) attributable to equity holders of the Company | $ 1,084 | $ 138 | $ 1,763 | $ 55 |
| Impairment charges (reversals) related to intangibles, goodwill, property, plant and equipment, and investments1 | (5) | 4 | (1,130) | 5 |
| Acquisition/disposition (gains)/losses2 | (880) | (11) | (877) | (2) |
| Foreign currency translation (gains)/losses | 32 | 23 | 35 | 162 |
| Significant tax adjustments | 12 | 3 | 9 | 54 |
| Other expense adjustments | 21 | 6 | 27 | 74 |
| Unrealized gains on non-hedge derivative instruments | - | (5) | 3 | (11) |
| Tax effect and non-controlling interest3 | (3) | - | 593 | (52) |
| Adjusted net earnings | $ 261 | $ 158 | $ 423 | $ 285 |
| Net earnings (loss) per share4 | 0.93 | 0.12 | 1.51 | 0.05 |
| Adjusted net earnings per share4 | 0.22 | 0.14 | 0.36 | 0.24 |
1 Net impairment reversals for six month period ended June 30, 2017 primarily relate to impairment reversals at the Cerro Casale project upon reclassification of the project’s net assets as held-for-sale as at March 31, 2017.
2 Disposition gains for the three and six month periods ended June 30, 2017 primarily relates to the sale of a 50% interest in the Veladero mine and the gain related to the sale of a 25% interest in the Cerro Casale project.
3 Tax effect and non-controlling interest for the six month period ended June 30, 2017 primarily relates to the impairment reversals at the Cerro Casale project discussed above.
4 Calculated using weighted average number of shares outstanding under the basic method of earnings per share.
BARRICK SECOND QUARTER 2017 8 PRESS RELEASE
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 www.sedar.com and on EDGAR at www.sec.gov.
Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow
| ($ millions) | For the three months ended June 30 | For the six months ended June 30 | ||
|---|---|---|---|---|
| 2017 | 2016 | 2017 | 2016 | |
| Net cash provided by operating activities | $ 448 | $ 527 | $ 943 | $ 978 |
| Capital expenditures | (405) | (253) | (739) | (523) |
| Free cash flow | $ 43 | $ 274 | $ 204 | $ 455 |
ENDNOTE 3 Cost of sales applicable to gold per ounce is calculated using cost of sales applicable to gold on an attributable basis (removing the non-controlling interest of 40% Pueblo Viejo and 36.1% Acacia from cost of sales), divided by attributable gold ounces. Cost of sales applicable to copper per pound is calculated using cost of sales applicable to copper including our proportionate share of cost of sales attributable to equity method investments (Zaldívar and Jabal Sayid), divided by consolidated copper pounds (including our proportionate share of copper pounds from our equity method investments).
ENDNOTE 4 "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 applicable 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 www.sedar.com and on EDGAR at www.sec.gov.
Reconciliation of Gold Cost of Sales to Cash costs, All-in sustaining costs and All-in costs, including on a per ounce basis
| ($ millions, except per ounce information in dollars) | For the three months ended June 30 | For the six months ended June 30 | ||||
|---|---|---|---|---|---|---|
| Footnote | 2017 | 2016 | 2017 | 2016 | ||
| Cost of sales applicable to gold production | $ 1,159 | $ 1,229 | $ 2,397 | $ 2,431 | ||
| Depreciation | (383) | (367) | (768) | (735) | ||
| By-product credits | 1 | (32) | (46) | (73) | (84) | |
| Realized (gains)/losses on hedge and non-hedge derivatives | 2 | 10 | 26 | 10 | 57 | |
| Non-recurring items | 3 | - | - | - | (10) | |
| Other | 4 | (27) | (6) | (47) | (15) |
BARRICK SECOND QUARTER 2017 9 PRESS RELEASE
| Non-controlling interests (Pueblo Viejo and Acacia) | 5 | (64) | (90) | (145) | (175) |
| Cash costs | $ 663 | $ 746 | $ 1,374 | $ 1,469 | |
| General & administrative costs | 45 | 88 | 117 | 146 | |
| Minesite exploration and evaluation costs | 6 | 16 | 8 | 23 | 16 |
| Minesite sustaining capital expenditures | 7 | 320 | 235 | 582 | 410 |
| Rehabilitation - accretion and amortization (operating sites) | 8 | 20 | 14 | 37 | 25 |
| Non-controlling interest, copper operations and other | 9 | (71) | (82) | (132) | (132) |
| All-in sustaining costs | $ 993 | $ 1,009 | $ 2,001 | $ 1,934 | |
| Project exploration and evaluation and project costs | 6 | 65 | 48 | 133 | 95 |
| Community relations costs not related to current operations | 1 | 3 | 2 | 5 | |
| Project capital expenditures | 7 | 83 | 49 | 139 | 89 |
| Rehabilitation - accretion and amortization (non-operating sites) | 8 | 9 | 3 | 13 | 5 |
| Non-controlling interest and copper operations | 9 | (1) | (15) | (6) | (31) |
| All-in costs | $ 1,150 | $ 1,097 | $ 2,282 | $ 2,097 | |
| Ounces sold - equity basis (000s ounces) | 10 | 1,398 | 1,292 | 2,703 | 2,598 |
| Cost of sales per ounce | 11,12 | $ 726 | $ 836 | $ 778 | $ 823 |
| Cash costs per ounce | 12 | $ 474 | $ 578 | $ 508 | $ 565 |
| Cash costs per ounce (on a co-product basis) | 12,13 | $ 488 | $ 605 | $ 527 | $ 591 |
| All-in sustaining costs per ounce | 12 | $ 710 | $ 782 | $ 739 | $ 744 |
| All-in sustaining costs per ounce (on a co-product basis) | 12,13 | $ 724 | $ 809 | $ 758 | $ 770 |
| All-in costs per ounce | 12 | $ 823 | $ 849 | $ 844 | $ 807 |
| All-in costs per ounce (on a co-product basis) | 12,13 | $ 837 | $ 876 | $ 863 | $ 833 |
| 1 | By-product credits | |
| Revenues include the sale of by-products for our gold and copper mines for the three and six months ended June 30, 2017 of $32 million and $73 million, respectively, (2016: $32 million and $60 million, respectively) and energy sales from the Monte Rio power plant at our Pueblo Viejo mine for the three and six months ended June 30, 2017 of $nil and $nil, respectively, (2016: $14 million and $24 million, respectively) up until its disposition on August 18, 2016. | ||
| 2 | Realized (gains)/losses on hedge and non-hedge derivatives | |
| Realized (gains)/losses on hedge and non-hedge derivatives | ||
| Includes realized hedge losses of $8 million and $14 million, respectively, for the three and six month periods ended June 30, 2017 (2016: $20 million and $44 | ||
| million, respectively), and realized non-hedge losses of $2 million and gains of $4 million, respectively, for the three and six month periods ended June 30, 2017 | ||
| (2016: losses of $6 million and $13 million, respectively). Refer to Note 5 of the Financial Statements for further information. | ||
| 3 | Non-recurring items | |
| Non-recurring items in the first half of 2016 consist of $10 million in abnormal costs at Veladero relating to the administrative fine in connection with the cyanide incident that occurred in 2015. These costs are not indicative of our cost of production and have been excluded from the calculation of cash costs. | ||
| 4 | Other | |
| Other | ||
| Other adjustments for the three and six month periods ended June 30, 2017 include adding the net margins related to power sales at Pueblo Viejo of $nil and | ||
| $nil, respectively, (2016: $2 million and $4 million, respectively) adding the cost of treatment and refining charges of ($1 million) and $1 million, respectively, | ||
| (2016: $4 million and $9 million, respectively) and the removal of cash costs and by-product credits associated with our Pierina mine, which is mining incidental | ||
| ounces as it enters closure, of $27 million and $48 million, respectively (2016: $12 million and $28 million, respectively). | ||
| 5 | Non-controlling interests (Pueblo Viejo and Acacia) | |
| Non-controlling interests (Pueblo Viejo and Acacia) | ||
| Non-controlling interests include non-controlling interests applicable to gold production of $98 million and $214 million, respectively, for the three and six month periods ended June 30, 2017 (2016: $131 million and $257 million, respectively). Refer to Note 5 of the Financial Statements for further information. | Non-controlling interests include non-controlling interests applicable to gold production of $98 million and $214 million, respectively, for the three and six | |
| month periods ended June 30, 2017 (2016: $131 million and $257 million, respectively). Refer to Note 5 of the Financial Statements for further information. | ||
| 6 | Exploration and evaluation costs | |
| Exploration and evaluation costs | ||
| Exploration, evaluation and project expenses are presented as minesite sustaining if it supports current mine operations and project if it relates to future | ||
| projects. Refer to page 28 of Barrick's Second Quarter 2017 MD&A. | ||
| 7 | Capital expenditures | |
| Capital expenditures | ||
| Capital expenditures are related to our gold sites only and are presented on a 100% accrued basis. They are split between minesite sustaining and project | ||
| capital expenditures. Project capital expenditures are distinct projects designed to increase the net present value of the mine and are not related to current | ||
| production. Significant projects in the current year are stripping at Cortez Crossroads, underground development at Cortez Hills Lower Zone and the range | ||
| front declines, Lagunas Norte Refractory Ore Project and Goldrush. Refer to page 28 of Barrick's Second Quarter 2017 MD&A. | ||
| 8 | Rehabilitation - accretion and amortization | |
| Rehabilitation - accretion and amortization | ||
| Includes depreciation on the assets related to rehabilitation provisions of our gold operations and accretion on the rehabilitation provision of our gold | ||
| operations, split between operating and non-operating sites. |
BARRICK SECOND QUARTER 2017 10 PRESS RELEASE
| 9 | Non-controlling interest and copper operations | ||||||||||
| Removes general & administrative costs related to non-controlling interests and copper based on a percentage allocation of revenue. Also removes exploration, evaluation and project costs, rehabilitation costs and capital expenditures incurred by our copper sites and the non-controlling interest of our Acacia and Pueblo Viejo operating segment and Arturo. Figures remove the impact of Pierina. The impact is summarized as the following: | |||||||||||
| ($ millions) | For the three months ended June 30 | For the six months ended June 30 | |||||||||
| For the three months ended | For the six months ended June | ||||||||||
| ($ millions) | June 30 | 30 | |||||||||
| Non-controlling interest, copper operations and other | 2017 | 2016 | 2017 | 2016 | |||||||
| General & administrative costs | $ 1 | ($ 12) | ($ 8) | ($ 22) | |||||||
| Minesite exploration and evaluation costs | (5) | (2) | (7) | (4) | |||||||
| Rehabilitation - accretion and amortization (operating sites) | (4) | (2) | (6) | (3) | |||||||
| Minesite sustaining capital expenditures | (63) | (66) | (111) | (103) | |||||||
| All-in sustaining costs total | ($ 71) | ($ 82) | ($ 132) | ($ 132) | |||||||
| Project exploration and evaluation and project costs | (1) | (2) | (6) | (5) | |||||||
| Project capital expenditures | - | (13) | - | (26) | |||||||
| All-in costs total | ($ 1) | ($ 15) | ($ 6) | ($ 31) | |||||||
| 10 | Ounces sold - equity basis | ||||||||||
| 10 | Ounces sold - equity basis | ||||||||||
| Figures remove the impact of Pierina as the mine is currently going through closure. | |||||||||||
| 11 | Cost of sales per ounce | ||||||||||
| Cost of sales per ounce | |||||||||||
| Figures remove the cost of sales impact of Pierina of $47 million and $81 million, respectively, for the three and six month periods ended June 30, 2017 (2016: $16 | |||||||||||
| million and $35 million, respectively), as the mine is currently going through closure. Cost of sales per ounce excludes non-controlling interest related to gold | |||||||||||
| production. Cost of sales applicable to gold per ounce is calculated using cost of sales on an attributable basis (removing the non-controlling interest of 40% | |||||||||||
| Pueblo Viejo and 36.1% Acacia from cost of sales), divided by attributable gold ounces. | |||||||||||
| 12 | Per ounce figures | ||||||||||
| Per ounce figures | |||||||||||
| Cost of sales per ounce, cash costs per ounce, all-in sustaining costs per ounce and all-in costs per ounce may not calculate based on amounts presented in this | |||||||||||
| table due to rounding. | |||||||||||
| 13 | Co-product costs per ounce | ||||||||||
| Cash costs per ounce, all-in sustaining costs per ounce and all-in costs per ounce presented on a co-product basis removes the impact of by-product credits of our gold production (net of non-controlling interest) calculated as: | |||||||||||
| ($ millions) | For the three months ended | For the six months ended June | |||||||||
| ($ millions) | June 30 | 30 | |||||||||
| 2017 | 2016 | 2017 | 2016 | ||||||||
| By-product credits | $ 32 | $ 46 | $ 73 | $ 84 | |||||||
| Non-controlling interest | (9) | (13) | (17) | (26) | |||||||
| By-product credits (net of non-controlling interest) | $ 23 | $ 33 | $ 56 | $ 58 |
ENDNOTE 5 Includes $552 million of cash primarily held at Acacia and Pueblo Viejo, which may not be readily deployed outside of Acacia and/or Pueblo Viejo.
ENDNOTE 6 Amount excludes capital leases and includes project financing payments at Pueblo Viejo (60% basis) and Acacia (100% basis).
ENDNOTE 7 "C1 cash costs" per pound and "All-in sustaining costs" per pound are non-GAAP financial performance measures. "C1 cash costs" per pound is based on cost of sales but excludes the impact of depreciation and royalties and includes treatment and refinement charges. "All-in sustaining costs" per pound begins with "C1 cash costs" per pound and adds further costs which reflect the additional costs of operating a mine, primarily sustaining capital expenditures, general & administrative costs and royalties. Barrick believes that the use of "C1 cash costs" per pound and "all-in sustaining costs" per pound will assist investors, analysts, and other stakeholders in understanding the costs associated with producing copper, understanding the economics of copper mining, assessing our operating performance, and also our ability to generate free cash flow from current operations and to generate free cash flow on an overall Company basis. "C1 cash costs" per pound and "All-in sustaining costs" per pound are intended to provide additional information only, do not have any standardized meaning under IFRS, and may not
BARRICK SECOND QUARTER 2017 11 PRESS RELEASE
be comparable to similar measures of performance presented by other companies. These measures should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. Further details on these non-GAAP measures are provided in the MD&A accompanying Barrick's financial statements filed from time to time on SEDAR at www.sedar.com and on EDGAR at www.sec.gov.
Reconciliation of Copper Cost of Sales to C1 cash costs and All-in sustaining costs, including on a per pound basis
| ($ millions, except per pound information in dollars) | For the three months ended June 30 | For the six months ended June 30 | |||||||
|---|---|---|---|---|---|---|---|---|---|
| 2017 | 2016 | 2017 | 2016 | ||||||
| Cost of sales | $ 102 | $ 80 | $ 184 | $ 169 | |||||
| Depreciation/amortization1 | (19) | (9) | (33) | (20) | |||||
| Treatment and refinement charges | 35 | 38 | 67 | 84 | |||||
| Cash cost of sales applicable to equity method investments2 | 62 | 43 | 123 | 84 | |||||
| Less: royalties | (8) | (11) | (15) | (25) | |||||
| By-product credits | (3) | - | (3) | - | |||||
| C1 cash cost of sales | $ 169 | $ 141 | $ 323 | $ 292 | |||||
| C1 cash cost of sales | $ 169 | $ 141 | $ 323 | $ 292 | |||||
| General & administrative costs | 3 | 5 | 6 | 12 | |||||
| Rehabilitation - accretion and amortization | 3 | 2 | 5 | 3 | |||||
| Royalties | 8 | 10 | 15 | 25 | |||||
| Minesite exploration and evaluation costs | 1 | - | 1 | - | |||||
| Minesite sustaining capital expenditures | 50 | 41 | 87 | 70 | |||||
| All-in sustaining costs | $ 234 | $ 199 | $ 437 | $ 402 | |||||
| Pounds sold - consolidated basis (millions pounds) | 98 | 93 | 191 | 196 | |||||
| Cost of sales per pound3,4 | $1.85 | $ 1.43 | $1.79 | $ 1.39 | |||||
| C1 cash cost per pound3 | $1.72 | $ 1.52 | $1.69 | $ 1.49 | |||||
| All-in sustaining costs per pound3 | $2.38 | $2.14 | $2.29 | $2.05 |
1 For the three and six months ended June 30, 2017, depreciation excludes $17 million and $35 million, respectively, (2016: $11 million and $19 million, respectively) of depreciation applicable to equity method investments.
2 For the three and six months ended June 30, 2017, figures include $41 million and $87 million, respectively, (2016: $43 million and $84 million, respectively) of cash costs related to our 50% share of Zaldívar and $21 million and $36 million, respectively, (2016: $nil and $nil, respectively) of cash costs related to our 50% share of Jabal Sayid due to their accounting as equity method investments.
3 Cost of sales per pound, C1 cash costs per pound and all-in sustaining costs per pound may not calculate based on amounts presented in this table due to rounding.
4 Cost of sales applicable to copper per pound is calculated using cost of sales including our proportionate share of cost of sales attributable to equity method investments (Zaldívar and Jabal Sayid), divided by consolidated copper pounds (including our proportionate share of copper pounds from our equity method investments).
ENDNOTE 8 Barrick’s share.
ENDNOTE 9 Includes our 60% share of Pueblo Viejo and Arturo, our 63.9% share of Acacia, and our 50% share of Zaldívar and Jabal Sayid and our share of joint operations. 2017 guidance includes our 50% sale of Veladero which closed on June 30, 2017.
ENDNOTE 10 Estimated in accordance with National Instrument 43-101 as required by Canadian securities regulatory authorities. Estimates are as of December 31, 2016, unless otherwise noted. For United States reporting purposes, Industry Guide 7 under the Securities and Exchange Act of 1934 (as interpreted by Staff of the SEC), applies different standards in order to classify mineralization as a reserve. All mineral resources referenced in this press release are exclusive of mineral reserves and mineral resources which 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 on pages 25-35 of Barrick’s most recent Form 40-F/Annual Information Form.
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