Third Quarter Report 2017
THIRD QUARTER REPORT 2017 All amounts expressed in U.S. dollars unless otherwise indicated
Barrick Reports Third Quarter 2017 Results
- Barrick reported a net loss attributable to equity holders ("net loss") of $11 million ($0.01 per share), and adjusted net earnings1 of $186 million ($0.16 per share) for the third quarter.
- The Company generated third quarter revenues of $1.993 billion, net cash provided by operating activities ("operating cash flow") of $532 million, and free cash flow2 of $225 million.
- Gold production in the third quarter was 1.243 million ounces, at a cost of sales applicable to gold3 of $820 per ounce, and all-in sustaining costs4 of $772 per ounce.
- We have reduced our total debt by nearly $1.5 billion year to date, exceeding our target for 2017.
- We have narrowed full-year gold production guidance to 5.3-5.5 million ounces, at a cost of sales3 of $790-$810 per ounce, and all-in sustaining costs4 of $740-$770 per ounce.
- Feasibility level projects at Cortez Deep South, Goldrush, Turquoise Ridge, and Lagunas Norte continue to advance on schedule and within budget. A prefeasibility study for Pascua-Lama remains underway.
- Barrick and the Government of Tanzania have reached an agreement on a proposed framework that would redefine Acacia's relationship with the Government, creating a path for the resolution of outstanding matters impacting Acacia's operations.
TORONTO, October 25, 2017 — Barrick Gold Corporation (NYSE:ABX)(TSX:ABX) ("Barrick" or the "Company") today reported third quarter results for the period ending September 30, 2017. Lower revenues, earnings, and cash flow for the quarter reflect lower gold production compared to the prior-year period, as well as the impact of lower sales from Acacia. Despite these factors, a stronger balance sheet and robust cash flow generation allowed us to increase investments in the future of our business, with the ultimate objective of growing free cash flow per share over the long term.
We allocated more capital to our pipeline of low risk, organic projects, located at or near Barrick's core operations. These projects have the potential to contribute more than one million ounces of annual production to Barrick, beginning in 2020. In addition to organic growth and exploration, the impact of our ongoing investments in digital transformation and innovation, including improvements in safety, productivity, efficiency, and transparency, are expected to accelerate as we broaden the implementation of these projects across our operations.
FINANCIAL HIGHLIGHTS
The Company reported a net loss of $11 million ($0.01 per share) for the third quarter, compared to net earnings of $175 million ($0.15 per share) in the prior-year period. The decrease in net earnings primarily reflects lower gold production and lower gold prices, as well as the impact of Tanzania's concentrate export ban on Acacia.
Net earnings were also impacted by a tax provision of $172 million related to the proposed framework for Acacia's operations in Tanzania (see page 4 for more details).
In addition, debt extinguishment costs, direct mining costs, exploration and evaluation costs, and depreciation expenses were higher than the prior-year period. These increases were partially offset by higher earnings from equity investees, lower interest costs as a result of debt repayments, and lower tax expense.
Adjusted net earnings1 for the third quarter were $186 million ($0.16 per share), compared to $278 million ($0.24 per share) in the prior-year period. Significant adjusting items (pre-tax and non-controlling interest effects) in the third quarter include:
- $101 million in losses on debt extinguishment; and
- $172 million in a tax provision relating to the proposed framework for Acacia operations in Tanzania; partially offset by
- $93 million in tax effects and non-controlling interest impacts, primarily in relation to the two adjustments discussed above.
Refer to page 50 of Barrick's third 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 $532 million, compared to $951 million in the third quarter of 2016. Lower operating cash flow primarily reflects lower gold sales, combined with higher cash taxes paid, and higher direct mining costs. Operating cash flow was also impacted by lower cash flows attributable to non-controlling interests, an increase in exploration, evaluation and project expenses, and lower gold prices.
Free cash flow2 for the third quarter was $225 million, compared to $674 million in the third quarter of 2016. Lower free cash flow primarily reflects higher capital expenditures combined with lower operating cash flows. In the third quarter of 2017, capital expenditures on a cash basis were $307 million, compared to $277 million in the third quarter of 2016. This includes a $27 million increase in project capital expenditures, primarily at Barrick Nevada, relating to the development of Crossroads, the Cortez Hills Lower Zone, and the Goldrush project. Minesite sustaining capital expenditures were also higher at Barrick Nevada and Veladero, in line with plans.
RESTORING A STRONG BALANCE SHEET
Achieving and maintaining a strong balance sheet remains a top priority. So far this year, we have reduced our total debt by nearly $1.5 billion, exceeding our target of $1.45 billion for 2017. During the third quarter, we completed the redemption of approximately $731 million of May 2023 notes, and fully repaid the amounts outstanding on our Pueblo Viejo project financing agreement.
Our goal is to reduce our total debt to $5 billion by the end of 2018, using cash flow from operations, and through further portfolio optimization, including potential divestments and the creation of new joint ventures and partnerships. The Company 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.
At the end of the third quarter, Barrick had a consolidated cash balance of approximately $2.0 billion5. The Company has less than $100 million6 in debt due before 2020. Three-quarters of our outstanding total debt of $6.4 billion does not mature until after 2032.
BARRICK THIRD QUARTER 2017 2 PRESS RELEASE
OPERATING HIGHLIGHTS AND OUTLOOK
Barrick produced 1.243 million ounces of gold in the third quarter, at a cost of sales3 of $820 per ounce. This compares to 1.381 million ounces, at a cost of sales3 of $766 per ounce in the prior-year period. Production levels were expected to be lower in the third quarter, with higher gold production and lower costs expected in the fourth quarter. On a per ounce basis, cost of sales applicable to gold was higher due to the impact of fewer ounces sold, combined with higher direct mining costs, and depreciation expense.
All-in sustaining costs4 in the third quarter were $772 per ounce, compared to $704 per ounce in the third quarter of 2016. Higher all-in sustaining costs primarily reflect a planned increase in minesite sustaining capital expenditures at Barrick Nevada and Veladero, and higher cost of sales on a per ounce basis.
Cash costs3 increased from $518 per ounce in the third quarter of 2016, to $546 per ounce in the third quarter of 2017, primarily driven by higher direct mining costs. Cash costs have decreased by five percent over the first nine months of 2017, compared to the same period in 2016.
We have narrowed our full-year gold production and cost guidance ranges. We expect full-year gold production to be 5.3-5.5 million ounces, at a cost of sales3 of $790-$810 per ounce, and all-in sustaining costs4 of $740- $770 per ounce. This compares to our most recent production guidance 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.
The Company produced 115 million pounds of copper in the third quarter, at a cost of sales3 of $1.67 per pound, and all-in sustaining costs7 of $2.24 per pound. This compares to 100 million pounds, at a cost of sales3 of $1.43 per pound, and all-in sustaining costs7 of $2.02 per pound, in the third quarter of 2016.
Our full-year copper production guidance range has narrowed to 420-440 million pounds. We have increased our copper cost of sales3 guidance to $1.70-$1.85 per pound, primarily as a result of higher costs in Zambia. Our copper all-in sustaining cost7 guidance range has narrowed to $2.20-$2.40 per pound.
Please see page 34 of Barrick’s third quarter MD&A for individual operating segment performance details. Detailed mine site guidance information can be found in Appendix 1 of this press release.
Third Quarter Current 2017 Original 2017 Gold 2017 Guidance Guidance Production8 (000s of ounces) 1.243 5.300-5.500 5.600-5.900* Cost of sales applicable to gold3 ($ per ounce) 820 790-810 780-820 All-in sustaining costs4 ($ per ounce) 772 740-770 720-770
Copper
| Production8(millions of pounds) | 115 | 420-440 | 400-450 |
| Cost of sales applicable to copper3($ per pound) | 1.67 | 1.70-1.85 | 1.50-1.70 |
| All-in sustaining costs7($ per pound) | 2.24 | 2.20-2.40 | 2.10-2.40 |
| Total Attributable Capital Expenditures9($ millions) | 296 | 1,350-1,500 | 1,300-1,500 |
*Original 2017 gold production guidance was adjusted to 5.3-5.6 million ounces to reflect the sale of 50 percent of Veladero to Shandong Gold Mining Co., Ltd effective June 30, 2017.
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APPOINTMENT OF CHIEF DIGITAL OFFICER
Digital transformation is helping Barrick generate more value from its assets by leveraging data, analytics, and deep machine learning to make our business more safe, productive, and transparent.
In August, we appointed Sham Chotai as Barrick's first Chief Digital Officer. Under Mr. Chotai's leadership, Barrick will accelerate its digital transformation by bringing together the Company's Information Technology, Digital, and Operating Technology groups. This will ensure an integrated approach to developing and adopting digital solutions across the Company, and will build on the success of our pilot implementations this year.
Those pilots have demonstrated the ability to capture productivity gains and cost reductions at the Cortez mine by optimizing mining cycle times, digitizing maintenance work, and introducing autonomous operations. As we scale up the use of these products across Cortez and other Barrick operations, we expect to see a corresponding acceleration of the benefits we have achieved thus far.
Mr. Chotai comes to Barrick with 25 years of experience in digital technology, business intelligence, and software development. Prior to joining Barrick, he was Chief Technology Officer and Head of Software for GE's Power business. Mr. Chotai also served as Vice President, Cloud Computing for Hewlett-Packard.
PROPOSAL FOR A NEW PARTNERSHIP BETWEEN ACACIA AND TANZANIA
Following three months of discussions, the Government of Tanzania and Barrick have agreed on a proposed framework, which, if adopted, would redefine Acacia's relationship with Tanzania for the long term, moving to a partnership characterized by trust and transparency. This proposal is subject to review and approval by Acacia.
We believe the proposed framework represents the optimal path for the resolution of outstanding disputes between Acacia and the Government of Tanzania, and for the resumption of normal operations. Such a partnership has the potential to provide greater near-term certainty to Acacia and Barrick shareholders, and mitigate risk of future business disruptions; thereby improving the long-term stability and sustainability of Acacia's operations in Tanzania.
Under the proposed framework, economic benefits from Acacia's operations would be split on a 50/50 basis with the Government of Tanzania. The Government's portion will be delivered in the form of royalties, taxes, and a 16 percent free carried interest in Acacia's Tanzanian operations, in line with the country's new mining law.
A new Tanzanian operating company will be created to manage Bulyanhulu, Buzwagi, and North Mara. The principle of transparency between partners will define how this company operates. The Government of Tanzania will participate in decisions related to operations, investment, planning, procurement, and marketing. This operating company will maximize employment of Tanzanians, building local capacity at all levels of the business, from board membership to operations. It will also increase procurement of goods and services within Tanzania.
Having agreed on a proposed partnership framework, the Government of Tanzania and Barrick have created a working group to resolve outstanding tax matters relating to Acacia. In support of the working group's ongoing efforts, the proposed framework agreed between Barrick and the Government of Tanzania provides for the payment of $300 million to the Government of Tanzania by Acacia, on terms to be settled by the working group. Given Acacia's current financial position, these payments would be made over time, using Acacia's ongoing cash flows. As such, payment would be also conditional on Acacia's ability to sell doré and concentrate.
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Barrick will also be working with the Government of Tanzania to establish the basis upon which the concentrate export ban can be lifted as expediently as possible, including protocols for joint oversight and verification of concentrate shipments.
Barrick and the Government of Tanzania will now work to complete detailed documentation and final agreements for review and approval by Acacia. We expect this work to be completed in the first half of 2018. Barrick has engaged with independent directors of Acacia during this process, and will continue to do so.
PROJECTS UPDATE
Our four most advanced projects continue to progress according to schedule and in line with initial capital estimates, with the potential to contribute more than one million ounces of annual gold production to Barrick beginning in 2020, at costs well below our current portfolio average.
This includes three significant projects in Nevada: the Cortez Deep South underground expansion; the development of an underground mine at Goldrush; and the construction of a third shaft at the Turquoise Ridge mine. At Lagunas Norte in Peru, we are advancing a phased approach to extending the life of the mine by optimizing the recovery of carbonaceous oxide ores, followed by mining and processing of refractory material.
In addition, we continue to advance a prefeasibility study for underground mining at the Pascua-Lama project on the border between Argentina and Chile.
Cortez Hills Deep South Underground Project, Nevada, USA10
The Deep South project, located within the Lower Zone of the Cortez Hills underground mine, is expected to contribute average underground production of more than 300,000 ounces per year. The prefeasibility study anticipated a cost of sales3 of $840 per ounce, and average all-in sustaining costs4 of $580 per ounce, for mining in the Deep South area. The project remains on schedule and within budget, with initial capital costs estimated to be $153 million.
The Deep South project will utilize infrastructure which has already been approved under current plans to expand mining in the Lower Zone. This includes construction of new twin declines, a conveyor haulage system, fuel and lubrication system, shotcrete and cemented rock fill plants, and an underground maintenance shop.
At the end of the third quarter, the twin declines had advanced a total of 6,581 feet, or 44 percent of the total distance, in line with schedule. Mass excavations for key underground infrastructure have also begun, and contracts for underground construction works have been awarded. Activities in the fourth quarter will include mobilizing contractors, advancing the twin declines, and completing temporary warehouses, in addition to continued procurement for construction activities.
Permitting for Deep South was initiated in 2016 with the submission of an amendment to the current Mine Plan of Operations to the Bureau of Land Management. Permitting is expected to take approximately three to four years, including the preparation of an Environmental Impact Statement. A record of decision is expected by 2020. On this basis, initial production from Deep South could commence by 2023.
Goldrush Project, Cortez District, Nevada, USA
Goldrush has the potential to become Barrick's newest underground operation in Nevada, with first production expected as early as 2021, and sustained production by 2023. The mine is expected to produce approximately
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450,000 ounces of gold per year during its first full five years in operation. Cost of sales3 is expected to be $800 per ounce, with average all-in sustaining costs4 of $665 per ounce. We continue to anticipate initial capital costs of approximately $1 billion.
The first phase of the project involves the construction of an exploration twin decline to provide access to the orebody at depth, which will enable further exploration drilling, as well as the conversion of existing resources to reserves. The exploration declines can be converted into full production declines in the future.
Initial site preparation works for the portal have been completed, and construction on the portal pad is now under way. We have also completed a surface drilling program in the Red Hill zone of the deposit, which is expected to support additional resource conversion.
Work during the fourth quarter will focus on advancing portal pad construction, and the selection of an underground contractor for decline development, which is expected to begin in early 2018. Permitting is expected to commence in 2018, initiating a three- to four-year Environmental Impact Statement process.
Turquoise Ridge Third Shaft Project, Nevada, USA
Through the development of a third shaft, combined with improvements in mining productivity, Turquoise Ridge has the potential to increase output to an average of 500,000 ounces per year (100 percent basis) at a cost of sales3 of $750-$800 per ounce, and all-in sustaining costs4 of about $625-$675 per ounce. The project is expected to require capital expenditures of approximately $300-$325 million (100 percent basis) for additional underground development and shaft construction. All necessary permits for a third shaft are already in place.
Surface preparation works began in the third quarter, and included moving 95,000 cubic yards of earth, setting up storm water diversion infrastructure, and extending utilities to the shaft site. This work is expected to be complete by the end of 2017. Contracts and materials to support medium and high voltage electrical distribution, water handling and sewage treatment have been purchased, and a tender process is now open for the shaft sinking contract.
In keeping with our phased approach, construction on a ventilation shaft could begin in the second half of 2018, at roughly half the total capital expenditure of a full production shaft. This ventilation shaft would allow for expanded underground mining using existing infrastructure, and could be equipped and converted to a full production shaft to increase the mine's output to approximately 500,000 ounces per year.
During the quarter, Turquoise Ridge also took delivery of its first road header. Building on the successful use of this technology at Cortez, the road header will enable the mine to transition to mechanical cutting, rather than traditional drilling and blasting, improving overall productivity and throughput at the operation, and supporting the increased hoisting capacity that a third shaft will support.
Lagunas Norte Life Extension Project, La Libertad, Peru11
In 2016, the Company completed a prefeasibility study for a 6,000 tonne per day grinding-flotation-autoclave and carbon-in-leach processing circuit. The project has the potential to extend the life of the Lagunas Norte mine by approximately 10 years by treating refractory material located under the mine's existing oxide ore body. By employing strategies to optimize and increase the recovery of carbonaceous oxide ore from existing stockpiles at the mine, we have been able to re-sequence this project in two parts, deferring the capital expenditures necessary for refractory ore processing.
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The first component of the project would involve the construction of a grinding and carbon-in-leach processing circuit that would treat remaining carbonaceous oxide material at Lagunas Norte. Environmental permits for these facilities are already in hand. Pending completion of the feasibility study, a positive investment decision, and receipt of construction permits, work on these facilities could begin in late 2018, with first production in 2020. Construction of the flotation and pressure oxidation circuits would follow this, subject to Environmental Impact Assessment approval and a positive investment decision by the Company.
Work in 2017 has focused on completing a feasibility study, including additional drilling to improve orebody knowledge, and further metallurgical testing.
Pascua-Lama Project, San Juan, Argentina/Atacama Region, Chile
We have made significant progress on a prefeasibility study for the development of an underground, block caving operation at Pascua-Lama. The project would utilize the existing process plant and tailings facility on the Argentinean side of the border, construction of which is already well advanced.
In order to complete the prefeasibility study, de-risk the project and improve economics, we are undertaking a number of optimization studies, along with a focused drilling campaign during the 2017/2018 summer season in the southern hemisphere. Previous drilling on the deposit was primarily undertaken in support of open pit mining plans. This campaign will focus on improving ore body knowledge on the Argentinean side of the deposit where further data is needed to validate underground development plans and metallurgy.
A switch to underground mining addresses a number of stakeholder concerns by significantly reducing surface land disturbance and therefore the overall environmental footprint of the project, as compared to an open pit operation. In addition, an underground mine would be less susceptible to weather-related production interruptions during the winter season.
In keeping with Barrick's strategic cooperation agreement with Shandong Gold, representatives from Shandong will also work with the project team to exchange knowledge, experience and technologies that have the potential to further optimize Pascua-Lama.
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 2.280-2.320 790-830 620-650 450-470 Pueblo Viejo (60%) 0.635-0.650 650-670 540-560 410-430 Veladero (50%)* 0.430-0.465 870-940 920-990 580-610 Lagunas Norte 0.380-0.400 610-650 470-510 390-410 Sub-total 3.700-3.800 770-800 640-660 450-470 Acacia (63.9%) ~0.480 860-900 880-920 580-620 KCGM (50%) 0.375-0.425 810-900 665-715 585-635 Turquoise Ridge (75%) 0.210-0.230 700-750 770-830 580-610 Porgera (47.5%) 0.235-0.255 850-910 940-1,010 700-750 Hemlo 0.195-0.210 940-1,010 1,020-1,130 780-810 Golden Sunlight 0.035-0.050 1,200-1,550 1,200-1,300 1,150-1,250 Total Gold 5.300-5.50012 790-810 740-770 520-535
*Reflects our 50% equity share of Veladero from July 1, 2017 onwards.
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%) 115-125 2.10-2.30 2.10-2.30 ~1.60 Lumwana 250-270 1.40-1.60 2.20-2.40 1.50-1.70 Jabal Sayid (50%) 35-45 2.00-2.70 2.10-2.60 1.50-1.90 Total Copper 420-44012 1.70-1.85 2.20-2.40 1.60-1.75
CAPITAL EXPENDITURES
($ millions)
Mine site sustaining 1,100-1,200 Project 250-300 Total Attributable Capital Expenditures9 1,350-1,500
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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 | +/- $142 | +/- $4 | +/- $3/oz |
| Copper revenue, net of royalties13 | $2.25/lb | + $0.50/lb | + $58 | + $4 | + $0.03/lb |
| Copper revenue, net of royalties13 | $2.25/lb | - $0.50/lb | - $46 | - $3 | - $0.03/lb |
Gold all-in sustaining costs4
| WTI crude oil price14 | $55/bbl | +/- $10/bbl | n/a | +/- $5 | +/- $3/oz |
| Australian dollar exchange rate | 0.75 : 1 | +/- 10% | n/a | +/- $8 | +/- $5/oz |
| Argentine peso exchange rate | 16.50 : 1 | +/- 10% | n/a | +/- $2 | +/- $1/oz |
| Canadian dollar exchange rate | 1.32 : 1 | +/- 10% | n/a | +/- $8 | +/- $6/oz |
Copper all-in sustaining costs7
| WTI crude oil price14 | $55/bbl | +/- $10/bbl | n/a | +/- $1 | +/- $0.01/lb |
| Chilean peso exchange rate | 675 : 1 | +/- 10% | n/a | +/- $1 | +/- $0.01/lb |
| BARRICK THIRD QUARTER 2017 | 9 | PRESS RELEASE |
Endnotes
ENDNOTE 1
“Adjusted net earnings” and “adjusted net earnings per share” are non-GAAP financial performance measures. Adjusted net earnings excludes the following from net earnings: certain impairment charges (reversals) related to intangibles, goodwill, property, plant and equipment, and investments; gains (losses) and other one-time costs relating to acquisitions or dispositions; foreign currency translation gains (losses); significant tax adjustments not related to current period earnings; unrealized gains (losses) on non-hedge derivative instruments; and the tax effect and non-controlling interest of these items. The Company uses this measure internally to evaluate our underlying operating performance for the reporting periods presented and to assist with the planning and forecasting of future operating results. Barrick believes that adjusted net earnings is a useful measure of our performance because these adjusting items do not reflect the underlying operating performance of our core mining business and are not necessarily indicative of future operating results. Adjusted net earnings and adjusted net earnings per share are intended to provide additional information only and do not have any standardized meaning under IFRS and may not be comparable to similar measures of performance presented by other companies. They should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. Further details on these non-GAAP measures are provided in the MD&A accompanying Barrick’s financial statements filed from time to time on SEDAR at www.sedar.com and on EDGAR at www.sec.gov.
Reconciliation of Net Earnings to Net Earnings per Share, Adjusted Net Earnings and Adjusted Net Earnings per Share
($ millions, except per share amounts in dollars) For the three months ended September 30 For the nine months ended September 30 2017 2016 2017 2016 Net earnings (loss) attributable to equity holders of the Company $ (11) $ 175 $ 1,752 $ 230 Impairment charges (reversals) related to intangibles,
| goodwill, property, plant and equipment, and investments1 | 2 | 49 | (1,128) | 54 |
| Acquisition/disposition (gains)/losses2 | (5) | 37 | (882) | 35 |
| Foreign currency translation (gains)/losses | 25 | 19 | 60 | 181 |
| Significant tax adjustments3 | 174 | 5 | 183 | 59 |
| Other expense adjustments4 | 103 | 1 | 130 | 75 |
| Unrealized gains on non-hedge derivative instruments | (9) | (12) | (6) | (23) |
| Tax effect and non-controlling interest5 | (93) | 4 | 500 | (48) |
| Adjusted net earnings | $ 186 $ | 278 $ | 609 $ | 563 |
| Net earnings (loss) per share6 | (0.01) | 0.15 | 1.50 | 0.20 |
| Adjusted net earnings per share6 | 0.16 | 0.24 | 0.52 | 0.48 |
Net impairment reversals for the nine month period ended September 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.
Disposition gains for the three and nine month periods ended September 30, 2017 primarily relate 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.
Significant tax adjustments for the three and nine month periods ended September 30, 2017 primarily relate to a tax provision relating to the impact of the proposed framework for Acacia operations in Tanzania.
Other expense adjustments for the three and nine month periods ended September 30, 2017 primarily relate to debt extinguishment costs.
Tax effect and non-controlling interest for the nine month period ended September 30, 2017 primarily relates to the impairment reversals at the Cerro Casale project discussed above.
Calculated using weighted average number of shares outstanding under the basic method of 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 www.sedar.com and on EDGAR at www.sec.gov.
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Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow
| ($ millions) | For the three months ended September 30 | For the nine months ended September 30 | |||
|---|---|---|---|---|---|
| 2017 | 2016 | 2017 | 2016 | ||
| Net cash provided by operating activities | $ | 532 $ | 951 $ | 1,475 $ | 1,929 |
| Capital expenditures | (307) | (277) | (1,046) | (800) | |
| Free cash flow | $ | 225 $ | 674 $ | 429 $ | 1,129 |
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 noncontrolling 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 “Allin 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.
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Reconciliation of Gold Cost of Sales to Cash costs, All-in sustaining costs and All-in costs, including on a per ounce basis
For the three months For the nine months
| ($ millions, except per ounce information in dollars) | ended September 30 | ended September 30 | ||||
|---|---|---|---|---|---|---|
| Footnote | 2017 | 2016 | 2017 | 2016 | ||
| Cost of sales applicable to gold production | $ | 1,147 $ | 1,202 $ | 3,544 $ | 3,633 | |
| Depreciation | (357) | (373) | (1,125) | (1,108) | ||
| By-product credits | 1 | (32) | (59) | (105) | (143) | |
| Realized (gains)/losses on hedge and non-hedge derivatives | 2 | 9 | 15 | 19 | 71 | |
| Non-recurring items | 3 | — | 34 | — | 24 | |
| Other | 4 | (24) | (9) | (71) | (24) | |
| Non-controlling interests (Pueblo Viejo and Acacia) | 5 | (73) | (92) | (218) | (267) | |
| Cash costs | $ | 670 $ | 718 $ | 2,044 $ | 2,186 | |
| General & administrative costs | 69 | 71 | 186 | 217 | ||
| Minesite exploration and evaluation costs | 6 | 16 | 10 | 39 | 26 | |
| Minesite sustaining capital expenditures | 7 | 248 | 236 | 830 | 646 | |
| Rehabilitation - accretion and amortization (operating sites) | 8 | 14 | 16 | 51 | 41 | |
| Non-controlling interest, copper operations and other | 9 | (67) | (75) | (199) | (209) | |
| All-in sustaining costs | $ | 950 $ | 976 $ | 2,951 $ | 2,907 | |
| Project exploration and evaluation and project costs | 6 | 84 | 34 | 217 | 129 | |
| Community relations costs not related to current operations | 1 | 1 | 3 | 6 | ||
| Project capital expenditures | 7 | 53 | 35 | 192 | 124 | |
| Rehabilitation - accretion and amortization (non-operating sites) | 8 | 3 | 2 | 16 | 7 | |
| Non-controlling interest and copper operations | 9 | (6) | (7) | (12) | (38) | |
| All-in costs | $ | 1,085 $ | 1,041 $ | 3,367 $ | 3,135 | |
| Ounces sold - equity basis (000s ounces) | 11 | 1,227 | 1,386 | 3,930 | 3,984 | |
| Cost of sales per ounce | 10 | $ | 820 $ | 766 $ | 791 $ | 803 |
| Cash costs per ounce | 12 | $ | 546 $ | 518 $ | 520 $ | 549 |
| Cash costs per ounce (on a co-product basis) | 11,12 | $ | 565 $ | 550 $ | 539 $ | 575 |
| All-in sustaining costs per ounce | 12 | $ | 772 $ | 704 $ | 750 $ | 730 |
| All-in sustaining costs per ounce (on a co-product basis) | 12,13 | $ | 791 $ | 736 $ | 769 $ | 756 |
| All-in costs per ounce | 12 | $ | 884 $ | 751 $ | 856 $ | 787 |
| All-in costs per ounce (on a co-product basis) | 12,13 | $ | 903 $ | 783 $ | 875 $ | 813 |
1 By-product credits
Revenues include the sale of by-products for our gold and copper mines for the three and nine months ended September 30, 2017 of $32 million and $105 million, respectively, (2016: $50 million and $110 million, respectively) and energy sales from the Monte Rio power plant at our Pueblo Viejo mine for the three and nine months ended September 30, 2017 of $nil and $nil, respectively, (2016: $9 million and $33 million, respectively) up until its disposition on August 18, 2016.
2 Realized (gains)/losses on hedge and non-hedge derivatives
Includes realized hedge losses of $8 million and $22 million, respectively, for the three and nine month periods ended September 30, 2017 (2016: $15 million and $59 million, respectively), and realized non-hedge losses of $1 million and gains of $3 million, respectively, for the three and nine month periods ended September 30, 2017 (2016: losses of $nil and $12 million, respectively). Refer to Note 5 to the Financial Statements for further information.
3 Non-recurring items
Non-recurring items in 2016 consist of $34 million in a reduction in cost of sales attributed to insurance proceeds recorded in the third quarter of 2016 related to the 2015 oxygen plant motor failure at Pueblo Viejo and $10 million in abnormal costs at Veladero. These costs are not indicative of our cost of production and have been excluded from the calculation of cash costs.
4 Other
Other adjustments for the three and nine month periods ended September 30, 2017 include adding the net margins related to power sales at Pueblo Viejo of $nil and $nil, respectively, (2016: $1 million and $5 million, respectively), adding the cost of treatment and refining charges of $nil and $1 million, respectively, (2016: $3 million and $12 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 $25 million and $73 million, respectively (2016: $14 million and $42 million, respectively).
5 Non-controlling interests (Pueblo Viejo and Acacia)
Non-controlling interests include non-controlling interests related to gold production of $103 million and $317 million, respectively, for the three and nine month periods ended September 30, 2017 (2016: $124 million and $381 million, respectively). Refer to Note 5 to the Financial Statements for further information.
BARRICK THIRD QUARTER 2017 12 PRESS RELEASE