First Quarter Report 2018
FIRST QUARTER REPORT 2018 All amounts expressed in U.S. dollars unless otherwise indicated
Barrick Reports First Quarter 2018 Results
- Barrick reported first quarter net earnings attributable to equity holders ("net earnings") of $158 million ($0.14 per share), and adjusted net earnings1 of $170 million ($0.15 per share).
- The Company reported first quarter revenues of $1.79 billion, net cash provided by operating activities ("operating cash flow") of $507 million, and free cash flow2 of $181 million.
- Gold production in the first quarter was 1.05 million ounces, at a cost of sales applicable to gold3 of $878 per ounce, all-in sustaining costs4 of $804 per ounce, and cash costs4 of $573 per ounce.
- Copper production was 85 million pounds, at a cost of sales applicable to copper3 of $2.07 per pound, all-in sustaining costs5 of $2.61 per pound, and C1 cash costs5 of $1.88 per pound.
- We continue to expect full-year gold production of 4.5-5.0 million ounces, at a cost of sales3 of $810- $850 per ounce, all-in sustaining costs4 of $765-$815 per ounce, and cash costs4 of $540-$575 per ounce.
- Full-year copper production guidance remains 385-450 million pounds, at a cost of sales3 of $1.80- $2.10 per pound, all-in sustaining costs5 of $2.30-$2.60 per pound, and C1 cash costs5 of $1.55-$1.75
- During the first quarter, S&P Global Ratings and Moody's Investors Service upgraded Barrick's credit rating, citing significant improvements in free cash flow generation and liquidity, supported by the Company's low-cost portfolio and favorable geopolitical risk profile.
- The Company does not intend to sell additional assets for purposes of debt reduction, and will use cash on hand and cash flow from operations for future debt repayments. Proceeds from any future portfolio optimization will be used to enhance our project pipeline, or returned to shareholders.
- Nevada growth projects remain on schedule and within budget. The Fourmile exploration program in the Cortez district is progressing well, with encouraging initial assay results.
TORONTO, April 23, 2018 — Barrick Gold Corporation (NYSE:ABX)(TSX:ABX) ("Barrick" or the "Company") today reported first quarter results for the period ending March 31, 2018. Gold production and costs for the quarter were in line with expectations, with higher production and lower costs expected in the second half of 2018 driven by the timing of capital expenditures, higher throughput, and improved grades. Despite lower production levels, adjusted net earnings, operating cash flow, and free cash flow all increased compared to the prior-year period, primarily driven by higher gold prices.
Our priorities for 2018 are focused on positioning Barrick to grow free cash flow per share over the long term from a portfolio of high-quality, long-life gold assets in the Americas, with an increasing focus on organic growth in Nevada and the Dominican Republic. At our existing operations, our goal is to maintain industry-leading margins through a continuous cycle of optimization, pushing our mines to achieve greater levels of safety, efficiency, and productivity, while working to mitigate increasing costs associated with more complex ore types and a shift to more underground mining. In addition, we are making investments in digital technology and innovation that will allow us to identify and accelerate further operational improvements across our portfolio.
OUTLOOK
We continue to expect full-year gold production of 4.5-5.0 million ounces, at a cost of sales3 of $810-$850 per ounce, and all-in sustaining costs4 of $765-$815 per ounce. As previously reported, the power plant that supplies electricity to the Porgera Joint Venture mine was damaged during an earthquake that struck Papua New Guinea on February 26, 2018. The mine's processing plant is currently operating at approximately 25 percent capacity, supported by an existing on-site diesel power station, as well as portable generators. At this time, the operation expects to increase processing capacity in stages, with full capacity anticipated by the fourth quarter. While the impact of this event to production at Porgera remains under evaluation, the Company's consolidated 2018 gold production guidance remains unchanged. Business interruption insurance is expected to mitigate a significant portion of earnings lost as a result of this event.
We expect gold production in the second quarter to be roughly in line with the first quarter at around one million ounces, mainly due to the impact of a scheduled maintenance shutdown at the Barrick Nevada roaster.
Sustaining capital expenditures are expected to be higher in the second quarter relative to the first quarter as the North American construction season ramps up for major sustaining projects such as tailings dam raises. Capitalized stripping at Barrick Nevada, Pueblo Viejo, and Veladero, and increased underground development at Barrick Nevada, are also expected to be higher in the second quarter.
The completion of development work, stripping, and maintenance in the second quarter, along with access to higher grades in the second half of the year, is expected to drive stronger production in the third and fourth quarters, at lower costs compared to the first half of 2018. In particular, we expect higher production from Barrick Nevada and Pueblo Viejo in the second half of the year, driven by higher grades and throughput.
We continue to expect full-year copper production of 385-450 million pounds, at a cost of sales3 of $1.80- $2.10 per pound, and all-in sustaining costs5 of $2.30-$2.60 per pound. Lower realized grades in the first quarter at the Lumwana mine are expected to steadily improve over the course of 2018.
Total attributable capital expenditure guidance6 for 2018 remains unchanged at $1.40-$1.60 billion, including mine site sustaining capital7 of $0.95-$1.10 billion, and project capital expenditures8 of $450-$550 million.
FINANCIAL HIGHLIGHTS
The Company reported net earnings of $158 million ($0.14 per share) for the first quarter, compared to net earnings of $679 million ($0.58 per share) in the prior-year period. Lower net earnings are primarily the result of a net impairment reversal of $1.13 billion ($522 million net of tax and non-controlling interest) recorded in the first quarter of 2017, in connection with our divestment of 25 percent of the Cerro Casale project (Norte Abierto).
Adjusted net earnings1 for the first quarter rose by five percent to $170 million ($0.15 per share), compared to $162 million ($0.14 per share) in the first quarter of 2017. The increase in adjusted net earnings was primarily due to higher realized gold prices9 and lower depreciation.
BARRICK FIRST QUARTER 2018 2 PRESS RELEASE
Operating cash flow for the first quarter was $507 million, compared to $495 million in the prior-year period. Higher operating cash flow was driven by higher realized gold prices9, lower cash taxes and interest paid, and lower general and administrative expenses related to stock-based compensation compared to the first quarter of 2017.
Free cash flow2 for the first quarter was $181 million, compared to $161 million in the prior-year period, reflecting slightly higher operating cash flows, combined with slightly lower capital expenditures. In the first quarter of 2018, capital expenditures on a cash basis were $326 million, compared to $334 million in the prior-year period.
BALANCE SHEET UPDATE
Over the past three years, we have reduced our total debt by more than 50 percent, from $13.1 billion at the end of 2014, to $6.4 billion by the end of 2017. In the first quarter of 2018, both S&P Global Ratings and Moody's Investors Service upgraded Barrick's credit rating, citing significant improvements in free cash flow generation and liquidity, supported by the Company's low-cost portfolio and favorable geopolitical risk profile.
Our goal remains to reduce our total debt from $6.4 billion at present, to around $5 billion by the end of 2018. To achieve this, we will use cash flow from operations, and cash on hand. Having materially strengthened the balance sheet, Barrick does not intend to sell further assets for the purposes of debt repayment. Any proceeds resulting from additional portfolio optimization will be reinvested back into the business to enhance our project pipeline, or returned to shareholders.
At the end of the first quarter, Barrick had a consolidated cash balance of approximately $2.4 billion.10 The Company has less than $100 million in debt due before 2020.11 More than three-quarters of our outstanding total debt of $6.4 billion does not mature until after 2032.
OPERATING HIGHLIGHTS
Barrick produced 1.05 million ounces of gold in the first quarter of 2018 at a cost of sales3 of $878 per ounce, and all-in sustaining costs4 of $804 per ounce, in line with expectations. This compares to gold production of 1.31 million ounces in the first quarter of 2017, at a cost of sales3 of $833 per ounce, and all-in sustaining costs4 of $772 per ounce.
Lower gold production compared with the prior-year period was expected as a result of the sale of 50 percent of the Veladero mine on June 30, 2017, lower throughput at Acacia as a result of reduced operations at Bulyanhulu, lower grades processed through the oxide mill and roaster at Barrick Nevada, and lower throughput and grade at Hemlo and Lagunas Norte. An earthquake that damaged power infrastructure in Papua New Guinea also impacted production at Porgera during the quarter.
On a per ounce basis, cost of sales was five percent higher than the prior-year period due to the impact of fewer ounces sold, and higher royalty expenses as a result of an increase in realized gold prices.9 Cost of sales was also impacted by higher direct mining costs, primarily due to inflation in fuel, labor, and maintenance costs, partially offset by Best-in-Class operational and efficiency improvements. Higher all-in sustaining costs4 primarily reflect a planned increase in mine site sustaining capital expenditures on a per ounce basis, combined with higher direct mining costs.
The Company produced 85 million pounds of copper in the first quarter, at a cost of sales3 of $2.07 per pound, and all-in sustaining costs5 of $2.61 per pound. This compares to 95 million pounds, at a cost of sales of $1.73 per pound, and all-in sustaining costs5 of $2.19 per pound, in the first quarter of 2017.
BARRICK FIRST QUARTER 2018 3 PRESS RELEASE
Copper production for the first quarter of 2018 was 11 percent lower than the prior-year period, primarily due to lower production at Lumwana as a result of mill shutdowns and lower grades, and at Zaldívar due to fewer tonnes placed on the leach pad. This was partially offset by higher production at Jabal Sayid, driven by higher grade, throughput, and recoveries.
On a per pound basis, cost of sales applicable to copper3 increased as a result of higher processing and maintenance costs at Lumwana, and higher unit production costs at Zaldívar, partially offset by lower production costs at Jabal Sayid. Copper all-in sustaining costs5 were higher than the prior-year period, reflecting higher cost of sales combined with higher mine site sustaining capital expenditures at Zaldívar and Lumwana.
Please see page 41 of Barrick's first quarter MD&A for individual operating segment performance details. Detailed mine site guidance information can be found in Appendix 1 of this press release.
| Gold | First Quarter 2018 | 2018 Guidance | |
| Production12(000s of ounces) | 1,049 | 4,500 - 5,000 | |
| Cost of sales applicable to gold3($ per ounce) | 878 | 810 - 850 | |
| Cash costs4($ per ounce) | 573 | 540 - 575 | |
| All-in sustaining costs4($ per ounce) | 804 | 765 - 815 |
Copper
| Production12(millions of pounds) | 85 | 385 - 450 |
| Cost of sales applicable to copper3($ per pound) | 2.07 | 1.80 - 2.10 |
| C1 cash costs5($ per pound) | 1.88 | 1.55 - 1.75 |
| All-in sustaining costs5($ per pound) | 2.61 | 2.30 - 2.60 |
| Total Attributable Capital Expenditures6($ millions) | 326 | 1,400 - 1,600 |
EXPLORATION AND GROWTH
Nevada remains the focus of our 2018 exploration programs and project development activities. Our strategy is focused on growing free cash flow from this core district over the long term through organic project development, growing our gold resource base through exploration, and optimizing the processing of existing stockpiles.
Nevada growth projects at Turquoise Ridge, Goldrush, and Cortez Deep South are now in execution, and are expected to begin contributing to production from 2021. Our mine exploration programs are focused on replacing gold reserves and identifying new resources which, in many cases, can be quickly incorporated into mine plans, driving near-term improvements in production and cash flow. In addition, Barrick Nevada currently has approximately 4.8 million ounces of proven gold reserves in existing stockpiles. To unlock the full potential of our Nevada asset base, the Company is evaluating an increase in processing capacity that would accommodate new production from organic projects, and bring forward production from stockpiles, increasing overall production levels from Nevada.
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NEVADA, U.S.A.
Turquoise Ridge (75 percent Barrick)13 - Shaft sinking preparation underway
Barrick is constructing a third shaft at Turquoise Ridge, which will allow the mine to roughly double annual production to more than 500,000 ounces per year (100 percent basis), at an average cost of sales of around $720 per ounce, and average all-in sustaining costs4 of roughly $630 per ounce. The contract for shaft sinking was awarded to Thyssen Mining during the first quarter, and mobilization planning is now underway. Procurement of long-lead-time items has begun, with major components such as the shaft hoist now ordered. Construction during the first quarter centered on well drilling activities, electrical distribution, and mine site utility construction and activation. The capital cost for this project is estimated to be $300-$325 million (100 percent basis). Initial production from the new shaft is expected to begin in 2022, with sustained production from 2023. At 15.56 grams per tonne, Turquoise Ridge has the highest average reserve grade in the Company's operating portfolio, and among the highest in the gold industry.
Goldrush - Portal pad construction completed, decline development underway
When in full operation, the Goldrush underground project is expected to produce approximately 500,000 ounces of gold per year, at a cost of sales3 of roughly $750 per ounce, and all-in sustaining costs4 of approximately $640 per ounce. Portal pad construction for twin declines was completed in the first quarter of 2018, with decline construction now underway. Decline construction, detailed engineering, and permitting are expected to take place between 2018 and 2021, with construction and initial production expected between 2021 and 2022, and sustained production expected from 2023. The exploration twin declines will provide access to the orebody at depth, which will enable further exploration drilling, as well as the conversion of existing resources to reserves. These declines can be converted into production declines in the future. Goldrush currently has proven and probable gold reserves of 1.5 million ounces14, and measured and indicated gold resources of 9.4 million ounces14, with significant potential to identify additional resources once underground access to drill the deposit is established. Ongoing surface drilling in the Red Hill zone of the deposit in 2018 is also expected to support additional resource conversion.
Cortez Deep South15 - Rangefront east decline completed, infrastructure under construction The Deep South project is expected to contribute approximately 300,000 ounces of annual gold production when fully ramped up between 2024 and 2028, at a cost of sales3 of $650 per ounce, and all-in sustaining costs4 of $580 per ounce. Deep South will utilize infrastructure which has already been approved under current plans to expand mining in the Lower Zone of the Cortez underground mine, including the new Rangefront twin declines and other underground infrastructure already under construction. The east decline is now complete, breaking through to the underground mine approximately two weeks ahead of schedule on March 18. The west decline is 38 percent complete and advancing according to schedule. 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. A record of decision on an Environmental Impact Statement is expected in the second half of 2019, followed by two years of construction, with initial production from Deep South in 2022.
Fourmile - More high grade drill results increase confidence
The Fourmile exploration project is located one to three kilometers north of the Goldrush deposit, and is the focus of our 2018 greenfield exploration program in Nevada. Drilling to date has intersected mineralization well above the average grade of the measured and indicated resources at Goldrush. We are increasingly confident that Fourmile and Goldrush form part of a seven-kilometer-long mineralized system, similar in length to the mineralization at Goldstrike. In 2018, we plan to drill 24 holes at Fourmile—with five holes now completed, and four in progress. Assay results completed in 2018 include a hole with 9.1 meters grading 40.9 grams per tonne of gold. Please see endnote 16 for a significant intercepts table including recent Fourmile drilling.
BARRICK FIRST QUARTER 2018 5 PRESS RELEASE
ARGENTINA/CHILE
Pascua-Lama
Over the past year, Barrick has been studying the optimization of the Pascua-Lama project. Work to date on the prefeasibility study for a potential underground project indicates that while the concept may be feasible from a technical standpoint, it does not meet Barrick's investment criteria. Based on this, and taking into consideration other risk factors, the Company has suspended work on the prefeasibility study, and will focus on adjusting the project closure plan for surface infrastructure on the Chilean side of the project, in line with legal requirements. Barrick will continue to evaluate opportunities to de-risk the project while maintaining Pascua-Lama as an option for development in the future if economics improve, and related risks can be mitigated.
ACACIA MINING PLC UPDATE
Discussions between the Government of Tanzania and Barrick concerning the proposed framework agreement for Acacia Mining plc's operations in Tanzania have been constructive and continue to progress. Detailed legal agreements concerning the implementation of the conceptual framework are now being drafted. Barrick has continued to engage with independent directors of Acacia during this process, and Acacia is supporting Barrick in its ongoing discussions. We continue to target the first half of 2018 for the completion of a detailed proposal for review by Acacia. Under the proposed framework agreement, economic benefits generated by Acacia's operations would be split with the Government of Tanzania on a 50/50 basis. The Government's portion would be delivered primarily 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.
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, Vice President, Reserves and Resources of Barrick; and Robert Krcmarov, FAusIMM, Executive Vice President, Exploration and Growth 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 2018 Operating and Capital Expenditure Guidance
GOLD PRODUCTION AND COSTS
All-in Production Cost of sales3 Cash costs4 sustaining costs4 (000s ounces) ($ per ounce) ($ per ounce) ($ per ounce)
Barrick Nevada 2,000 - 2,255 760 - 810 610 - 660 470 - 530 Turquoise Ridge (75%) 240 - 270 670 - 720 650 - 730 580 - 620 Pueblo Viejo (60%) 585 - 615 720 - 750 590 - 620 425 - 450 Veladero (50%) 275 - 330 970 - 1,110 960 - 1,100 560 - 620 Lagunas Norte 230 - 270 780 - 910 670 - 780 420 - 490 Porgera (47.5%) 230 - 255 950 - 1,000 950 - 1,000 780 - 830 Kalgoorlie (50%) 350 - 400 775 - 825 750 - 800 640 - 690 Acacia (63.9%) 275 - 305 970 - 1,020 935 - 985 690 - 720 Hemlo 200 - 220 860 - 920 975 - 1,075 740 - 790 Golden Sunlight 35 - 50 1,100 - 1,200 1,290 - 1,460 1,130 - 1,230 Total Gold 4,500 - 5,00017 810 - 850 765 - 815 540 - 575
COPPER PRODUCTION AND COSTS
All-in Production Cost of sales3 C1 cash costs5 sustaining costs5 (millions of pounds) ($ per pound) ($ per pound)
Zaldívar (50%) 115 - 130 2.30 - 2.50 2.05 - 2.25 ~1.70 Lumwana 230 - 265 1.65 - 1.90 2.50 - 2.80 1.65 - 1.90 Jabal Sayid (50%) 40 - 55 1.85 - 2.50 1.70 - 2.30 1.40 - 1.80 Total Copper 385 - 45017 1.80 - 2.10 2.30 - 2.60 1.55 - 1.75
CAPITAL EXPENDITURES
($ millions)
Mine site sustaining 950 - 1,100 Project 450 - 550 Total Attributable Capital Expenditures6 1,400 - 1,600
BARRICK FIRST QUARTER 2018 7 PRESS RELEASE
Appendix 2 2018 Outlook Assumptions and Economic Sensitivity Analysis
Impact on Impact on Impact on 2018 Guidance Hypothetical Revenue Cost of sales3 All-in sustaining Assumption Change
| (millions) | (millions) | costs4,5 | |||
|---|---|---|---|---|---|
| Gold revenue, net of royalties | $1,200/oz | +/- $100/oz | +/- $363 | +/- $10 | +/- $3/oz |
| Copper revenue, net of royalties18 | $2.75/lb | + $0.50/lb | + $163 | + $12 | + $0.04/lb |
| Copper revenue, net of royalties18 | $2.75/lb | - $0.50/lb | - $137 | - $10 | - $0.03/lb |
Gold all-in sustaining costs4
| WTI crude oil price19 | $55/bbl | +/- $10/bbl | n/a | +/- $20 | +/- $5/oz |
| Australian dollar exchange rate | 0.75 : 1 | +/- 10% | n/a | +/- $22 | +/- $6/oz |
| Argentine peso exchange rate | 18.35 : 1 | +/- 10% | n/a | +/- $11 | +/- $3/oz |
| Canadian dollar exchange rate | 1.25 : 1 | +/- 10% | n/a | +/- $26 | +/- $7/oz |
Copper all-in sustaining costs5
| WTI crude oil price19 | $55/bbl | +/- $10/bbl | n/a | +/- $3 | +/- $0.06/lb |
| Chilean peso exchange rate | 650 : 1 | +/- 10% | n/a | +/- $7 | +/- $0.02/lb |
| BARRICK FIRST QUARTER 2018 | 8 | PRESS RELEASE |
Endnotes
ENDNOTE 1
“Adjusted net earnings” and “adjusted net earnings per share” are non-GAAP financial performance measures. Adjusted net earnings excludes the following from net earnings: certain impairment charges (reversals) related to intangibles, goodwill, property, plant and equipment, and investments; gains (losses) and other one-time costs relating to acquisitions or dispositions; foreign currency translation gains (losses); significant tax adjustments not related to current period earnings; unrealized gains (losses) on non-hedge derivative instruments; and the tax effect and non-controlling interest of these items. The Company uses this measure internally to evaluate our underlying operating performance for the reporting periods presented and to assist with the planning and forecasting of future operating results. Barrick believes that adjusted net earnings is a useful measure of our performance because these adjusting items do not reflect the underlying operating performance of our core mining business and are not necessarily indicative of future operating results. Adjusted net earnings and adjusted net earnings per share are intended to provide additional information only and do not have any standardized meaning under IFRS and may not be comparable to similar measures of performance presented by other companies. They should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. Further details on these non-GAAP measures are provided in the MD&A accompanying Barrick’s financial statements filed from time to time on SEDAR at www.sedar.com and on EDGAR at www.sec.gov.
Reconciliation of Net Earnings to Net Earnings per Share, Adjusted Net Earnings and Adjusted Net Earnings per Share
($ millions, except per share amounts in dollars) For the three months ended March 31 2018 2017 Net earnings attributable to equity holders of the Company $158 $679 Impairment charges related to intangibles, goodwill, property, plant and equipment, and investments1 (1,125)
| Acquisition/disposition (gains)/losses2 | (46) | 3 |
| Foreign currency translation losses | 15 | 3 |
| Significant tax adjustments3 | 46 | (3) |
| Other expense adjustments | (6) | 6 |
| Unrealized gains on non-hedge derivative instruments | — | 3 |
| Tax effect and non-controlling interest | 1 | 596 |
| Adjusted net earnings | $170 | $162 |
| Net earnings per share4 | 0.14 | 0.58 |
| Adjusted net earnings per share4 | 0.15 | 0.14 |
Net impairment reversals for the three months ended March 31, 2017 primarily relate to impairment reversals at the Cerro Casale project upon reclassification of the project’s net assets as held-for-sale as at March 31, 2017.
Disposition gains for the three months ended March 31, 2018 primarily relate to the gain on the sale of a non-core royalty asset at Acacia.
Significant tax adjustments for the three months ended March 31, 2018 primarily relate to a tax audit of Pueblo Viejo in the Dominican Republic.
Calculated using weighted average number of shares outstanding under the basic method of earnings per share.
ENDNOTE 2
“Free cash flow” is a non-GAAP financial performance measure which deducts capital expenditures from net cash provided by operating activities. Barrick believes this to be a useful indicator of our ability to operate without reliance on additional borrowing or usage of existing cash. Free cash flow is intended to provide additional information only and does not have any standardized meaning under IFRS and may not be comparable to similar measures of performance presented by other companies. Free cash flow should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. Further details on these non-GAAP measures are provided in the MD&A accompanying Barrick’s financial statements filed from time to time on SEDAR at www.sedar.com and on EDGAR at www.sec.gov.
Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow
($ millions) For the three months ended March 31 2018 2017
| Net cash provided by operating activities | $507 | $495 |
| Capital expenditures | (326) | (334) |
| Free cash flow | $181 | $161 |
| BARRICK FIRST QUARTER 2018 | 9 | PRESS RELEASE |
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 25 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
($ millions, except per ounce information in dollars) For the three months ended March 31
| Footnote | 2018 | 2017 | |
| Cost of sales applicable to gold production | $1,046 | $1,238 | |
| Depreciation | (298) | (385) | |
| By-product credits | (36) | (41) | |
| Realized (gains)/losses on hedge and non-hedge derivatives | 1 | — | — |
| Non-recurring items | 2 | (7) | — |
| Other | 3 | (21) | (20) |
| Non-controlling interests (Pueblo Viejo and Acacia) | 4 | (72) | (81) |
| Cash costs | $612 | $711 | |
| General & administrative costs | 48 | 72 | |
| Minesite exploration and evaluation costs | 5 | 6 | 7 |
| Minesite sustaining capital expenditures | 6 | 231 | 262 |
| Rehabilitation - accretion and amortization (operating sites) | 7 | 19 | 17 |
| Non-controlling interest, copper operations and other | 8 | (55) | (61) |
| All-in sustaining costs | $861 | $1,008 | |
| Project exploration and evaluation and project costs | 5 | 67 | 68 |
| Community relations costs not related to current operations | 1 | 1 | |
| Project capital expenditures | 6 | 100 | 56 |
| Rehabilitation - accretion and amortization (non-operating sites) | 7 | 8 | 3 |
| Non-controlling interest and copper operations | 8 | (5) | (7) |
| All-in costs | $1,032 | $1,129 | |
| Ounces sold - equity basis (000s ounces) | 9 | 1,071 | 1,305 |
| Cost of sales per ounce | 10,11 | $878 | $833 |
| Cash costs per ounce | 11 | $573 | $545 |
| Cash costs per ounce (on a co-product basis) | 11,12 | $596 | $568 |
| All-in sustaining costs per ounce | 11 | $804 | $772 |
| All-in sustaining costs per ounce (on a co-product basis) | 11,12 | $827 | $795 |
| All-in costs per ounce | 11 | $963 | $865 |
| All-in costs per ounce (on a co-product basis) | 11,12 | $986 | $888 |
1 Realized (gains)/losses on hedge and non-hedge derivatives
Includes realized hedge losses of $1 million for the three months ended March 31, 2018 (2017: $6 million), and realized non-hedge gains of $1 million for the three months ended March 31, 2018 (2017: $6 million). Refer to Note 5 to the quarterly Financial Statements for further information.
2 Non-recurring items
Non-recurring items in 2018 relate to abnormal costs at Porgera as a result of the February 2018 earthquake in Papua New Guinea. These costs are not indicative of our cost of production and have been excluded from the calculation of cash costs.
3 Other
Other adjustments for the three months ended March 31, 2018 include adding the cost of treatment and refining charges of $nil (2017: $1 million) 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 $21 million (2017: $21 million).
4 Non-controlling interests (Pueblo Viejo and Acacia)
Non-controlling interests include non-controlling interests related to gold production of $106 million for the three months ended March 31, 2018 (2017: $116 million). Refer to Note 5 to the quarterly Financial Statements for further information.
5 Exploration and evaluation costs
Exploration, evaluation and project expenses are presented as minesite sustaining if it supports current mine operations and project if it relates to future projects. Refer to page 28 of Barrick's first quarter MD&A.
6 Capital expenditures
Capital expenditures are related to our gold sites only and are presented on a 100% accrued basis. They are split between minesite sustaining and project capital expenditures. Project capital expenditures are distinct projects designed to increase the net present value of the mine and are not related to current production. Significant projects in the current year are stripping at Cortez Crossroads, the Range Front declines, the Goldrush exploration declines and construction of the third shaft at Turquoise Ridge). Refer to page 27 of Barrick's first quarter MD&A.
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7 Rehabilitation—accretion and amortization
Includes depreciation on the assets related to rehabilitation provisions of our gold operations and accretion on the rehabilitation provision of our gold operations, split between operating and non-operating sites.
8 Non-controlling interest and copper operations
Removes general & administrative costs related to non-controlling interests and copper based on a percentage allocation of revenue. Also removes exploration, evaluation and project expenses, rehabilitation costs and capital expenditures incurred by our copper sites and the non-controlling interest of our Acacia and Pueblo Viejo operating segments and South Arturo. Figures remove the impact of Pierina. The impact is summarized as the following:
($ millions) For the three months ended March 31
| Non-controlling interest, copper operations and other | 2018 | 2017 |
| General & administrative costs | ($7) | ($9) |
| Minesite exploration and evaluation expenses | — | (1) |
| Rehabilitation - accretion and amortization (operating sites) | (1) | (3) |
| Minesite sustaining capital expenditures | (47) | (48) |
| All-in sustaining costs total | ($55) | ($61) |
| Project exploration and evaluation and project costs | (3) | (6) |
| Project capital expenditures | (2) | (1) |
| All-in costs total | ($5) | ($7) |
9 Ounces sold - equity basis
Figures remove the impact of Pierina as the mine is currently going through closure.
10 Cost of sales per ounce
Figures remove the cost of sales impact of Pierina of $32 million for the three month periods ended March 31, 2018 (2017: $34 million), as the mine is currently going through closure. Cost of sales per ounce excludes non-controlling interest related to gold production. Cost of sales applicable to gold per ounce is calculated using cost of sales on an attributable basis (removing the non-controlling interest of 40% Pueblo Viejo and 36.1% Acacia from cost of sales), divided by attributable gold ounces.
11 Per ounce figures
Cost of sales per ounce, cash costs per ounce, all-in sustaining costs per ounce and all-in costs per ounce may not calculate based on amounts presented in this table due to rounding.
12 Co-product costs per ounce
Cash costs per ounce, all-in sustaining costs per ounce and all-in costs per ounce presented on a co-product basis removes the impact of by-product credits of our gold production (net of non-controlling interest) calculated as:
($ millions) For the three months ended March 31 2018 2017
| By-product credits | $36 | $41 |
| Non-controlling interest | (11) | (8) |
| By-product credits (net of non-controlling interest) | $25 | $33 |
ENDNOTE 5
“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 www.sedar.com and on EDGAR at www.sec.gov.
BARRICK FIRST QUARTER 2018 12 PRESS RELEASE