Barrick Reports 2018 Full Year and Fourth Quarter Results
PRESS RELEASE
NYSE : GOLD TSX : ABX
Barrick Reports 2018 Full Year and Fourth Quarter Results
All amounts expressed in U.S. dollars unless otherwise indicated
- Completed transformational merger with Randgold Resources Limited to create industry-leading gold company, effective January 1, 2019.
- Generated annual revenues of $7.24 billion, net cash provided by operating activities (“operating cash flow”) of $1.77 billion, and free cash flow1 of $365 million.
- Increased returns to shareholders with a 33 percent increase in annual dividend.
- Full-year gold production of 4.53 million ounces was within guidance, at a cost of sales2 of $892 per ounce, and all-in sustaining costs3 of $806 per ounce. Full-year copper production was 383 million pounds, also within guidance, at a cost of sales2 of $2.40 per pound, and all-in sustaining costs4 of $2.82 per pound.
- Q4 gold production was 1.26 million ounces, at a cost of sales2 of $980 per ounce, and all-in sustaining costs3 of $788 per ounce. Q4 copper production was 109 million pounds, at a cost of sales2 of $2.85 per pound, and all-in sustaining costs4 of $2.95 per pound.
- Q4 revenue was $1.90 billion, with operating cash flow of $411 million, and free cash flow1 of $37 million.
- Total attributable capital expenditures for 2018 were $1.41 billion, at the low end of guidance range.
- Full-year corporate administration costs of $212 million were significantly below 2018 guidance.
- The Company recorded a net loss attributable to equity holders (“net loss”) of $1.55 billion ($1.32 per share) for 2018, including a net loss of $1.20 billion ($1.02 per share) in the fourth quarter, reflecting the impact of impairment charges recorded during 2018.
- 2018 adjusted net earnings5 were $409 million ($0.35 per share), with Q4 adjusted net earnings5 of $69 million ($0.06 per share).
- Total debt was reduced by 11 percent in 2018, with a year-end cash balance of $1.6 billion.6
- Achieved a 9 percent improvement in total reportable injury frequency rate7, and reduced reportable environmental incidents by 12.5 percent.
Organic growth projects in Nevada and the Dominican Republic remain on schedule and in line with budget.
Added an initial inferred resource at Fourmile, at an average grade of 18.6 grams of gold per tonne.8
Declared proven and probable gold reserves of 62.3 million ounces8 as of December 31, 2018.
Declared proven and probable copper reserves of 10.6 billion pounds8 as of December 31, 2018.
TORONTO, February 13, 2019 — Barrick Gold Corporation (NYSE:GOLD)(TSX:ABX) (“Barrick” or the “Company”) today reported fourth quarter and full year results for the period ending December 31, 2018. In 2018, our operations produced 4.53 million ounces of gold, at a cost of sales of $892 per ounce, and all-in sustaining costs3 of $806 per ounce—among the lowest of the senior gold peers.9
The Company generated annual revenue of $7.24 billion, operating cash flow of $1.77 billion, and free cash flow1 of $365 million. In 2018, our focus on capital discipline allowed us to increase investments in organic growth and significantly reduce our debt, while also increasing returns to shareholders.
Summarized 2018 Financial and Operating Results
| First | Second | Third | Fourth | Full Year | |
|---|---|---|---|---|---|
| Financial Results | Quarter | Quarter | Quarter | Quarter | 2018 |
| Average realized gold price ($ per ounce)10 | 1,332 | 1,313 | 1,216 | 1,223 | 1,267 |
| Net earnings ($ millions) | 158 | (94) | (412) | (1,197) | (1,545) |
| Adjusted net earnings ($ millions)5 | 170 | 81 | 89 | 69 | 409 |
| Operating cash flow ($ millions) | 507 | 141 | 706 | 411 | 1,765 |
| Free cash flow ($ millions)1 | 181 | (172) | 319 | 37 | 365 |
| Net earnings per share ($) | 0.14 | (0.08) | (0.35) | (1.02) | (1.32) |
| Adjusted net earnings per share ($)5 | 0.15 | 0.07 | 0.08 | 0.06 | 0.35 |
| Total Attributable Capital Expenditures ($ millions)11 | 326 | 332 | 346 | 409 | 1,413 |
| Operating Results | First | Second | Third | Fourth | Full Year |
| Gold | Quarter | Quarter | Quarter | Quarter | 2018 |
| Production (000s of ounces) | 1,049 | 1,067 | 1,149 | 1,262 | 4,527 |
| Cost of sales applicable to gold ($ per ounce)2 | 848 | 882 | 850 | 980 | 892 |
| Cash Costs ($ per ounce)3 | 573 | 605 | 587 | 588 | 588 |
| All-in sustaining costs ($ per ounce)3 | 804 | 856 | 785 | 788 | 806 |
Copper
| Production (millions of pounds) | 85 | 83 | 106 | 109 | 383 |
| Cost of sales applicable to copper ($ per pound) | 2.07 | 2.45 | 2.18 | 2.85 | 2.40 |
| C1 Cash Costs ($ per pound)4 | 1.88 | 2.10 | 1.94 | 1.98 | 1.97 |
| All-in sustaining costs ($ per pound)4 | 2.61 | 3.04 | 2.71 | 2.95 | 2.82 |
Our Nevada growth projects at Cortez, Goldrush, and Turquoise Ridge continued to advance according to schedule and within budget, underpinning the next generation of profitable production from this core region for Barrick. Exploration drilling continued to intersect high-grade mineralization at these properties, demonstrating the significant untapped geological potential of Barrick’s land position in Nevada, and supporting the evaluation of increasing processing capacity in the region. We also advanced studies and test work in support of an expansion to increase throughput at the Pueblo Viejo mine in the Dominican Republic by 50 percent, with positive initial results.12
Reflecting our commitment to shareholder returns, we increased our annual dividend by 33 percent, from 12 cents per share in 2017, to 16 cents per share in 2018. In addition, we continued to strengthen our balance sheet with the repurchase of $629 million in outstanding notes in July, bringing the Company’s total debt repayments to roughly $10 billion over the past five and a half years.
During 2018, Barrick also strengthened its partnership with Shandong Gold Group Co., Ltd., one of China’s leading mining companies. In July, the two companies announced an enhanced strategic cooperation agreement, focused on evaluating the Lama project in Argentina, and strengthening technical collaboration between the Barrick and Shandong teams. In September, Barrick and Shandong signed a mutual investment agreement, under which each Company agreed to purchase up to $300 million of shares in the other, further deepening the partnership.
The completion of Barrick’s transformational merger with Randgold on January 1, 2019, created an industry-leading gold company with a common vision for long-term value creation. It significantly strengthened Barrick’s position across key metrics relative to the senior gold peer group13, including: ownership of five of the world’s top 10 Tier One14 gold assets, and two potential Tier One gold assets under development; the lowest total cash costs15; high-quality gold reserves; and extensive land positions in many of the world’s most prolific gold districts, positioning the Company for sustainable growth.
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As we move forward as one team, Barrick’s vision is to be the world’s most valued gold mining business. To achieve this, the Company will focus on optimizing our existing operations, pursuing new opportunities that meet strict investment criteria, and developing them with disciplined efficiency. By doing so, we aim to deliver sustainable returns to our owners, and real benefits to our partners, host countries, and communities.
FINANCIAL COMMENTS
Our liquidity position is strong and continues to improve, with robust cash flow generation, modest near-term debt repayment obligations, a $3 billion undrawn credit facility, and a consolidated cash balance of approximately $1.6 billion. We reduced our total debt by $685 million, or 11 percent, in 2018, and with more than 85 percent of the Company’s outstanding debt due after 2032, Barrick now has one of the strongest balance sheets in the industry. In addition, as of December 31, 2018, Randgold had $0.7 billion of cash and cash equivalents, and no debt outstanding, bringing the cash position of the combined company to $2.3 billion as of January 1, 2019.
Barrick reported a net loss of $1.55 billion in 2018, primarily due to net impairment charges of $900 million relating to the Veladero and Lagunas Norte mines, and $742 million in significant tax adjustments. Adjusted net earnings5 of $409 million were lower than the prior year, primarily due to the impact of lower grades and recoveries, as anticipated, along with higher direct mining costs driven by increased energy prices and consumption, and the divestment of 50 percent of the Veladero mine on June 30, 2017. Earnings were also impacted by lower throughput at Acacia as a result of reduced operations at Bulyanhulu, lower tonnage processed at Lagunas Norte, and increased government imposts at Veladero. This was partially offset by lower income tax expense as a result of lower earnings and sales volumes, and lower depreciation.
Significant adjusting items to net earnings (pre-tax and non-controlling interest effects) in 2018 include:
- $900 million ($799 million net of tax and non-controlling interest) in net impairment charges primarily relating to Veladero and Lagunas Norte;
- $742 million in significant tax adjustments primarily relating to the de-recognition of deferred tax assets of $814 million, partially offset by a deferred tax recovery of $107 million on United States withholding taxes;
- Additional adjustments relating to the inventory impairment at Lagunas Norte of $166 million, a write-off of a Western Australia long-term stamp duty tax receivable of $43 million, and costs associated with the merger with Randgold of $37 million; partially offset by
- $68 million ($46 million net of tax and non-controlling interest) in disposition gains mainly relating to the sale of a non-core royalty asset at Acacia.
During the fourth quarter, the Company determined that the carbonaceous material project (CMOP) at Lagunas Norte does not currently meet the Company’s investment criteria, resulting in an inventory impairment of $166 million as described above. Barrick previously reported a non-current asset impairment of $405 million at Lagunas Norte in the third quarter, following the Company’s decision not to proceed with the refractory sulphide ore project (PMR). For more information, please see the Lagunas Norte project update on page seven of this press release. A non-current asset impairment of $246 million ($160 million net of tax), and a goodwill impairment of $154 million, were also recorded at the Veladero mine in the fourth quarter, reflecting an increase in the mine’s cost structure, related to increased government imposts and higher energy costs.
Refer to page 62 of Barrick’s fourth quarter MD&A for a full list of reconciling items between net earnings and adjusted net earnings for the current and prior year.
In 2018, we generated $1.77 billion in operating cash flow. Lower operating cash flow compared to 2017 primarily reflects lower sales volumes and increased direct mining costs (as described above). This was partially offset by a favorable movement in working capital, mainly as a result of increased drawdown of inventory and the timing of payments and changes in other current assets and liabilities. Operating cash flow also benefited from lower cash taxes paid, reflecting lower earnings and sales volume, and higher realized gold prices compared to 2017.
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Capital expenditures were at the low end of our guidance range for the year, and in line with 2017, with an increase in project capital expenditures offset by a decrease in minesite sustaining capital expenditures. Free cash flow of $365 million was lower than the prior year, primarily driven by lower operating cash flows.
Over the course of 2018, we continued to realize savings resulting from the implementation of our decentralized operating model, as well as workforce reductions associated with the Randgold merger. Full-year corporate administration costs were $212 million, significantly below our original 2018 guidance of approximately $275 million.
OPERATIONS COMMENTS
Ensuring the safety of people and the environment are our most important priorities. We continued to improve our safety performance in 2018, achieving a total reportable injury frequency rate (TRIFR)7 of 0.32—the best result in the Company’s history, and a nine percent improvement compared to 2017. Since 2014, Barrick has also achieved an 87 percent reduction in reportable environmental incidents, with seven incidents at our operations last year, down from eight in 2017, continuing a long-term improvement trend.
In 2018, our operations produced 4.53 million ounces of gold, at a cost of sales of $892 per ounce, and all-in sustaining costs3 of $806 per ounce. As anticipated, gold production improved over the second half of 2018, driven by stronger performance at Barrick Nevada and Pueblo Viejo, with gold production of 1.26 million ounces in the fourth quarter, compared to 1.15 million ounces in the third quarter. Higher costs compared to 2017 primarily reflect the impact of lower grades and recoveries, higher energy costs, and higher mine site sustaining capital expenditures on a per ounce basis.
As anticipated, copper production improved progressively over the third and fourth quarters, driven by a steady improvement in grade and crusher reliability at Lumwana. In 2018, our copper portfolio produced 383 million pounds, at a cost of sales of $2.40 per pound, and all-in sustaining costs4 of $2.82 per pound. Copper production in the fourth quarter was 109 million pounds, at a cost of sales of $2.85 per pound, and all-in sustaining costs4 of $2.95 per pound.
Please see page 44 of Barrick’s fourth quarter MD&A for individual operating segment performance details.
MINERAL RESOURCE MANAGEMENT
Barrick’s 2018 year-end reserve and resource statements reflect the Company’s asset portfolio prior to the completion of the Company’s merger with Randgold on January 1, 2019. Randgold’s 2018 year-end reserve and resource statements can be found at www.barrick.com/investors.
Barrick’s 2018 reserves were calculated using a gold price assumption of $1,200 per ounce, consistent with 2017. As of December 31, 2018, Barrick’s proven and probable gold reserves were 62.3 million ounces8, compared to 64.4 million ounces at the end of 2017. While 5.4 million ounces of reserves were depleted through mining and processing, the Company added 3.2 million ounces of reserves at an average grade of 4.7 grams per tonne, significantly higher than our overall reserve grade of 1.56 grams per tonne. Reserves at our underground operations, where the majority of the Company’s future production will come from, were replaced, with additions at Turquoise Ridge, Goldstrike, Hemlo and Porgera.
In 2018, measured, indicated, and inferred gold resources were calculated using a gold price assumption of $1,500 per ounce, consistent with 2017. Measured and indicated gold resources increased slightly to 88.8 million ounces8 at the end of 2018, compared to 88.6 million ounces at the end of 2017. Inferred gold resources also increased to 33.5 million ounces at the end of 20188, compared to 30.8 million ounces at the end of 2017.
Approximately 1.25 million ounces of proven and probable reserves, 1.3 million ounces of measured and indicated resources, and 1.2 million ounces of inferred resources (Barrick’s 63.9 percent share) were removed at Acacia’s Bulyanhulu operation following a review by Acacia of the mine’s geological and mineral resource models, and other optimization work.
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Copper reserves and resources for 2018 were calculated using a copper price of $2.75 per pound and $3.50 per pound, respectively, consistent with 2017. As of December 31, 2018, proven and probable copper reserves were 10.6 billion pounds8, measured and indicated copper resources were 11.6 billion pounds8, and inferred copper resources were 2.8 billion pounds. These figures include copper contained within gold reserves and resources.
EXPLORATION UPDATE
Exploration has been repositioned to invest in our assets, with a focus on adding value at our Tier One mines, enhancing cash flow from other operations, and discovering and developing the next generation of Tier One mines. We expect to incur approximately $160 to $170 million of exploration and evaluation expenditures in 2019 with approximately 80 percent allocated to the Americas. Our 2019 program includes the following highlights:
In the Cortez District, deep drilling will continue to focus on adding resources, as well as testing open mineralization, extensions, and concepts farther afield. Consolidating the Goldrush and Fourmile geology models is a top priority and in progress. We anticipate that Fourmile and Goldrush have the potential to be integrated and developed as a single project (see Goldrush project update on page six).
At Goldstrike, we have a renewed focus on targets along a relatively poorly-tested section of the Post Fault north of the Meikle underground mine. This corridor is also the current focus of underground mining expansion and resource additions as development advances north from the Banshee deposit.
During the fourth quarter, a selective re-logging program at Pueblo Viejo led to a significant reinterpretation of the project’s geology model. We are preparing a fully-revised geology model with a newly-established, dedicated sitebased project team. This has the potential to predict the location of high-grade mineralization that could be brought forward in the mine plan.
As mining of the existing oxide orebody at Lagunas Norte winds down, we are focused on improving geological understanding of the remaining resources, and we are actively exploring a number of other regional targets with the potential to extend the life of the mine, with drilling commencing in the fourth quarter.
At Veladero, we are mounting a renewed effort to develop satellite targets and make new discoveries in the Veladero- Lama district, supported by the establishment of an experienced site-based exploration team. This includes drilling at Quatro Esquinas, immediately south of the Filo Federico pit, and at the Del Carmen project, located in Argentina, adjacent to the Alturas deposit in Chile.
In Africa, the discovery of the high grade Loulo 3 shoot highlights the potential for further discoveries around our existing orebodies. Continuing brownfields exploration at Kibali has also identified numerous opportunities for reserve replacement. At Massawa, brownfields exploration will focus on efforts to expand the project’s resource base. The north of Côte d’Ivoire will be another key exploration target area.
PROJECTS UPDATE
We continue to advance a pipeline of high-confidence projects at or near our existing operations, with the potential to contribute more than one million ounces of annual production to Barrick, at costs well below our current portfolio average.
Turquoise Ridge Expansion, Nevada, U.S.A.16 (75 percent Barrick / 25 percent Newmont)
The Company is focused on developing Turquoise Ridge into a Tier One mine by increasing production and resources through mechanization, automation, and innovation. Ramp up of the road header over the course of 2018 has improved safety, increased throughput, and dropped mining costs per tonne. A second road header is on order, and further evaluation of the opportunity associated with increasing the level of mechanization and automation for the mine as a whole is underway.
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Construction of a third shaft at Turquoise Ridge continues to advance according to schedule and within budget, with efforts in 2019 focused on earthworks and shaft sinking. The construction of this shaft is expected to increase 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 costs3 of roughly $630 per ounce. As of December 31, we have spent $62 million (including $3 million in the fourth quarter of 2018) out of a total estimated capital cost of $300-$325 million (100 percent basis) on the construction this shaft. Initial production from the new shaft is expected to begin in 2022, with sustained production from 2023.
Since the end of 2015, reserves have increased by 3.5 million ounces8 (100 percent basis), primarily through driving down mining costs per tonne, which has allowed for a lower cutoff grade, thereby optimizing the way the orebody is mined. The focus in 2019 is to realize the potential to further grow reserves, extend mine life, and grow production over and above the current mine plan, through reducing costs to further lower the cutoff grade, as well as extending mineralization at depth.
Goldrush Complex, Nevada, U.S.A.
Construction of twin exploration declines at Goldrush accelerated in the fourth quarter, and each decline has now advanced approximately 450 meters. These declines will provide access to the orebody, allowing for further drilling, and the conversion of existing resources to reserves. The exploration declines can be converted to production declines in the future, subject to further permitting. The project’s growing resource base is now enabling the team to re-evaluate and optimize the project design.
Infill drilling at the Red Hill portion of the Goldrush deposit continues to support geological and resource models. In 2018, probable gold reserves for Goldrush grew by 35 percent to 2.0 million ounces8, while measured and indicated resources remained steady at 9.4 million ounces.8 Conversion of a large majority of the remaining resources to reserves, as well as the significant potential to identify additional resources, will begin on completion of the exploration declines, and therefore is not expected for a number of years.
Ongoing drilling at Fourmile, located within 500 meters of Goldrush, continues to intersect high-grade mineralization across a number of stratigraphic horizons, supporting the notion that the deposit is a northern extension of the Goldrush system. Drilling has also expanded the footprint of Fourmile to the north and the south, resulting in a modest initial inferred resource. Inferred resources for Goldrush, including Fourmile, have increased to 3.6 million ounces.8 In 2019, we will continue to test the gap between Goldrush and Fourmile, as well as seek to extend mineralization to the north. We are also carrying out an integrated review of the geological, geotechnical, and geometallurgical aspects of the mineralized corridor to optimize the mine design, which could impact production rates and processing options for the operation.
Cortez Deep South, Nevada, U.S.A.
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 sales of $650 per ounce, and all-in sustaining costs3 of $580 per ounce. The draft Environmental Impact Statement for the project was published in late October, with the public comment period concluding in December. As of December 31, we have spent $33 million (including $2 million in the fourth quarter of 2018) out of a total estimated capital cost of $106 million on the Deep South Expansion. Initial production from Deep South is expected in 2022. 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 in use and under construction.
Pueblo Viejo, Dominican Republic12 (60 percent Barrick / 40 percent Goldcorp)
Scoping studies and pilot project work are supportive of a plant expansion at the Pueblo Viejo mine that could increase throughput by roughly 50 percent to 12 million tonnes per year, allowing the mine to maintain average annual gold production of approximately 800,000 ounces after 2022 (100 percent basis). To achieve this, the mine is evaluating a flotation concentrator followed by ultra-fine grinding and tank oxidation of the concentrate. Testing to date has indicated that tank oxidation is preferable to the pad pre-oxidation process previously considered. Pueblo Viejo expects to complete prefeasibility studies for the plant expansion and additional tailings capacity by the end of 2019. The project
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has the potential to convert roughly seven million ounces of measured and indicated resources to proven and probable reserves (100 percent basis).
Lagunas Norte Carbonaceous Material and Refractory Ore Project, Peru
In 2018, Barrick updated a feasibility study on a project to extend the life of the Lagunas Norte mine through the sequenced installation of mill, carbon-in-leach, flotation and autoclave processing facilities. During 2018, the Company determined that the project does not currently meet Barrick’s investment criteria. As a result, the Company is reevaluating the Lagunas Norte business plan. The near-term focus of the re-evaluation will be to reduce costs, improve geological understanding of the in-pit reserves and near-pit resources, and to explore regional targets with the potential to extend the life of the mine.
Greenfield Projects - Long-term value and optionality for shareholders
Donlin Gold, Alaska, U.S.A. (50 percent Barrick / 50 percent NOVAGOLD)
Donlin Gold contains 19.5 million ounces8 of measured and indicated gold resources (Barrick’s 50 percent share). In August 2018, the project received its Record of Decision and other major federal permits, concluding six years of federal permitting. Donlin Gold, located in a stable jurisdiction with strong stakeholder support, represents one of the world’s largest undeveloped gold deposits. We continue to work in collaboration with our partners at NOVAGOLD to identify ways to optimize the project.
Norte Abierto, Atacama Region, Chile (50 percent Barrick / 50 percent Goldcorp)
Norte Abierto, a joint venture with Goldcorp in Chile, contains 11.6 million ounces8 of proven and probable gold reserves, and 13.3 million ounces8 of measured and indicated gold resources (Barrick’s 50 percent share). The joint venture continues to advance project optimization efforts, including an updated geological model for the Cerro Casale, Caspiche, and Luciano deposits.
Pascua-Lama, San Juan Province, Argentina / Atacama Region, Chile
Pascua-Lama, located on the border between Argentina and Chile, contains 21.3 million ounces8 of measured and indicated gold resources. At present, the Pascua-Lama project does not meet Barrick’s investment criteria. The Company plans to carry out a re-evaluation of options for the project in 2019, while continuing efforts to reduce care and maintenance costs.
Alturas, Coquimbo Region, Chile
The Alturas project, located in Chile on the El Indio Belt, is a Barrick greenfield discovery with 8.9 million ounces8 of inferred gold resources. Work in 2018 focused on improving geological understanding of high-grade and shallow orebody areas at the project, and defining the potential mineral inventory of the nearby Del Carmen prospect.
CONFERENCE CALL AND WEBCAST
Please join us for a conference call and webcast today at 11:00 EST / 16:00 UTC to discuss the results.
Webcast: www.barrick.com U.S. and Canada: 1-800-319-4610 UK: 0808 101 2791 South Africa: 0800 981 705 International: +1 416 915-3239
The conference call will be available for replay by phone at 1-855-669-9658 (U.S. and Canada toll free), and +1 604 674-8052 (international), access code 2852.
TECHNICAL INFORMATION
The scientific and technical information contained in this press release has been reviewed and approved by: Rick Sims, Registered Member SME, Vice President, Reserves and Resources of Barrick; Geoffrey Locke, P. Eng., Manager, Metallurgy of Barrick; and Mike Tsafaras, P. Eng., Manager, Value Realization of Barrick—who are each a “Qualified
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Person” as defined in National Instrument 43-101 – Standards of Disclosure for Mineral Projects. Following the completion of the merger with Randgold, the designation of Qualified Persons for the combined company will be reviewed, and may be updated for future reporting.
THIRD PARTY DATA
The total cash costs comparison of Barrick to its senior gold peers is based on data obtained from Wood Mackenzie as of August 31, 2018. Wood Mackenzie is an independent third party research and consultancy firm that provides data for, among others, the metals and mining industry. Wood Mackenzie is not affiliated with Barrick.
Where figures for Barrick are compared to its senior gold peers, the data from Wood Mackenzie has been used to ensure consistency in the compared measure across the Barrick and the comparator group. Barrick does not have the ability to verify the Wood Mackenzie figures and the non-GAAP financial performance measures used by Wood Mackenzie may not correspond to the non-GAAP financial performance measures calculated by Barrick or any of the other senior gold peers.
ENDNOTES
Endnote 1
“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 this non-GAAP measure 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 years ended December 31 | For the three months ended December 31 | |||
|---|---|---|---|---|---|
| 2018 | 2017 | 2016 | 2018 | 2017 | |
| Net cash provided by operating activities | $1,765 | $2,065 | $2,640 | $411 | $590 |
| Capital expenditures | (1,400) | (1,396) | (1,126) | (374) | (350) |
| Free cash flow | $365 | $669 | $1,514 | $37 | $240 |
Endnote 2
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, 36.1% Acacia and 40% South Arturo from cost of sales), divided by attributable gold ounces sold. 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 sold (including our proportionate share of copper pounds sold from our equity method investments).
Endnote 3
“Cash costs” per ounce and “All-in sustaining costs” per ounce are non-GAAP financial performance measures. “Cash costs” per ounce starts with cost of sales 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
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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 26 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
For the years ended For the three months
| ($ millions, except per ounce information in dollars) | December 31 | ended December 31 | ||||
|---|---|---|---|---|---|---|
| Footnote | 2018 | 2017 | 2016 | 2018 | 2017 | |
| Cost of sales applicable to gold production | $4,621 | $4,836 | $4,980 | $1,353 | $1,292 | |
| Depreciation | (1,253) | (1,529) | (1,504) | (346) | (404) | |
| By-product credits | 1 | (131) | (135) | (184) | (26) | (30) |
| Realized (gains)/losses on hedge and non-hedge derivatives | 2 | 3 | 23 | 89 | 3 | 4 |
| Non-recurring items | 3 | (172) | — | 24 | (155) | — |
| Other | 4 | (87) | (106) | (44) | (27) | (35) |
| Non-controlling interests (Pueblo Viejo and Acacia) | 5 | (313) | (299) | (358) | (80) | (81) |
| Cash costs | $2,668 | $2,790 | $3,003 | $722 | $746 | |
| General & administrative costs | 265 | 248 | 256 | 53 | 62 | |
| Minesite exploration and evaluation costs | 6 | 45 | 47 | 44 | 14 | 8 |
| Minesite sustaining capital expenditures | 7 | 975 | 1,109 | 944 | 276 | 279 |
| Rehabilitation - accretion and amortization (operating sites) | 8 | 81 | 64 | 59 | 18 | 13 |
| Non-controlling interest, copper operations and other | 9 | (374) | (273) | (287) | (118) | (74) |
| All-in sustaining costs | $3,660 | $3,985 | $4,019 | $965 | $1,034 |
Project exploration and evaluation and project costs
| 6 | 338 | 307 | 193 | 110 | 90 | |
| Community relations costs not related to current operations | 4 | 4 | 8 | 2 | 1 | |
| Project capital expenditures | 7 | 459 | 273 | 175 | 127 | 81 |
Rehabilitation - accretion and amortization (non-operating
| sites) | 8 | 33 | 20 | 11 | 8 | 4 |
| Non-controlling interest and copper operations | 9 | (21) | (21) | (42) | (5) | (9) |
| All-in costs | $4,473 | $4,568 | $4,364 | $1,207 | $1,201 | |
| Ounces sold - equity basis (000s ounces) | 10 | 4,544 | 5,302 | 5,503 | 1,232 | 1,372 |
| Cost of sales per ounce | 11,12 | $892 | $794 | $798 | $980 | $801 |
| Cash costs per ounce | 12 | $588 | $526 | $546 | $588 | $545 |
| Cash costs per ounce (on a co-product basis) | 12,13 | $607 | $544 | $569 | $602 | $561 |
| All-in sustaining costs per ounce | 12 | $806 | $750 | $730 | $788 | $756 |
| All-in sustaining costs per ounce (on a co-product basis) | 12,13 | $825 | $768 | $753 | $802 | $772 |
| All-in costs per ounce | 12 | $985 | $860 | $792 | $985 | $882 |
| All-in costs per ounce (on a co-product basis) | 12,13 | $1,004 | $878 | $815 | $999 | $898 |
1 By-product credits
Revenues include the sale of by-products for our gold and copper mines for the three months ended December 31, 2018 of $26 million (2017: $30 million) and the year ended December 31, 2018 of $131 million (2017: $135 million; 2016: $151 million) and energy sales from the Monte Rio power plant at our Pueblo Viejo mine for the three months ended December 31, 2018 of $nil (2017: $nil) and the year ended December 31, 2018 of $nil (2017: $nil; 2016: $33 million) up until its disposition on August 18, 2016.
2 Realized (gains)/losses on hedge and non-hedge derivatives
Includes realized hedge losses of $2 million and $4 million for the three months and year ended December 31, 2018, respectively (2017: $5 million and $27 million, respectively; 2016: $73 million), and realized non-hedge losses of $1 million and gains of $1 million for the three months and year ended
BARRICK YEAR-END 2018 9 PRESS RELEASE
December 31, 2018, respectively (2017: gains of $1 million and $4 million, respectively; 2016: losses of $16 million). Refer to note 5 of the Financial Statements for further information.
3 Non-recurring items
These gains/costs are not indicative of our cost of production and have been excluded from the calculation of cash costs. Non-recurring items for the current year mainly relate to inventory impairment of $166 million at Lagunas Norte.
4 Other
Other adjustments include adding the net margins related to power sales at Pueblo Viejo of $nil and $nil, respectively, for the three months and year ended December 31, 2018 (2017: $nil and $nil, respectively; 2016: $5 million), adding the cost of treatment and refining charges of $nil and $nil, respectively, for the three months and year ended December 31, 2018 (2017: $nil and $1 million, respectively; 2016: $16 million), and the removal of cash costs associated with our Pierina mine, which is mining incidental ounces as it enters closure, of $27 million and $87 million for the three months and year ended December 31, 2018, respectively (2017: $35 million and $108 million, respectively; 2016: $66 million).
5 Non-controlling interests (Pueblo Viejo and Acacia)
Non-controlling interests include non-controlling interests related to gold production of $114 million and $453 million, respectively, for the three months and year ended December 31, 2018 (2017: $137 million and $454 million, respectively; 2016: $508 million). Refer to note 5 of the Financial Statements for further information.
6 Exploration and evaluation costs
Exploration, evaluation and project expenses are presented as minesite if it supports current mine operations and project if it relates to future projects. Refer to page 38 of Barrick’s fourth quarter MD&A.
7 Capital expenditures
Capital expenditures are related to our gold sites only and are presented on a 100% accrued basis. They are split between minesite sustaining and project capital expenditures. Project capital expenditures are distinct projects designed to increase the net present value of the mine and are not related to current production. Significant projects in the current year are Crossroads, the Cortez Range Front declines, Goldrush, and the Deep South Expansion at Barrick Nevada and construction of the third shaft at Turquoise Ridge. Refer to page 37 of Barrick’s fourth quarter MD&A.
8 Rehabilitation - accretion and amortization
Includes depreciation on the assets related to rehabilitation provisions of our gold operations and accretion on the rehabilitation provisions of our gold operations, split between operating and non-operating sites.
9 Non-controlling interest and copper operations
Removes general & administrative costs related to non-controlling interests and copper based on a percentage allocation of revenue. Also removes exploration, evaluation and project costs, rehabilitation costs and capital expenditures incurred by our copper sites and the non-controlling interest of our Acacia and Pueblo Viejo operating segments and South Arturo at Barrick Nevada. Figures remove the impact of Pierina, which is mining incidental ounces as it enters closure. The impact is summarized as the following:
For the three months
| ($ millions) | For the years ended December 31 | ended December 31 | |||
|---|---|---|---|---|---|
| Non-controlling interest, copper operations and other | 2018 | 2017 | 2016 | 2018 | 2017 |
| General & administrative costs | ($104) | ($21) | ($36) | ($36) | ($8) |
| Minesite exploration and evaluation costs | (3) | (12) | (9) | (2) | 1 |
| Rehabilitation - accretion and amortization (operating sites) | (6) | (10) | (9) | (2) | (2) |
Minesite sustaining capital expenditures
| (261) | (230) | (233) | (78) | (65) | |
| All-in sustaining costs total | ($374) | ($273) | ($287) | ($118) | ($74) |
| Project exploration and evaluation and project costs | (16) | (17) | (12) | (3) | (8) |
| Project capital expenditures | (5) | (4) | (30) | (2) | (1) |
| All-in costs total | ($21) | ($21) | ($42) | ($5) | ($9) |
10 Ounces sold - equity basis
Figures remove the impact of Pierina, which is mining incidental ounces as it enters closure.
11 Cost of sales per ounce
Figures remove the cost of sales impact of Pierina of $32 million and $116 million, respectively, for the three months and year ended December 31, 2018 (2017: $55 million and $174 million, respectively; 2016: $82 million), which is mining incidental ounces as it enters closure. Cost of sales per ounce excludes non-controlling interest related to gold production. Cost of sales related to gold per ounce is calculated using cost of sales on an attributable basis (removing the non-controlling interest of 40% Pueblo Viejo, 36.1% Acacia and 40% South Arturo from cost of sales), divided by attributable gold ounces sold.
12 Per ounce figures
Cost of sales per ounce, cash costs per ounce, all-in sustaining costs per ounce and all-in costs per ounce may not calculate based on amounts presented in this table due to rounding.
13 Co-product costs per ounce
Cash costs per ounce, all-in sustaining costs per ounce and all-in costs per ounce presented on a co-product basis remove the impact of by-product credits of our gold production (net of non-controlling interest) calculated as:
For the three months
| ($ millions) | For the years ended December 31 | ended December 31 | |||
|---|---|---|---|---|---|
| 2018 | 2017 | 2016 | 2018 | 2017 | |
| By-product credits | $131 | $135 | $184 | $26 | $30 |
| Non-controlling interest | (45) | (30) | (53) | (10) | (6) |
| By-product credits (net of non-controlling interest) | $86 | $105 | $131 | $16 | $24 |
| BARRICK YEAR-END 2018 | 10 | PRESS RELEASE |
Endnote 4
“C1 cash costs” per pound and “All-in sustaining costs” per pound are non-GAAP financial performance measures. “C1 cash costs” per pound is based on cost of sales but excludes the impact of depreciation and royalties and includes treatment and refinement charges. “All-in sustaining costs” per pound begins with “C1 cash costs” per pound and adds further costs which reflect the additional costs of operating a mine, primarily sustaining capital expenditures, general & administrative costs and royalties. Barrick believes that the use of “C1 cash costs” per pound and “all-in sustaining costs” per pound will assist investors, analysts, and other stakeholders in understanding the costs associated with producing copper, understanding the economics of copper mining, assessing our operating performance, and also our ability to generate free cash flow from current operations and to generate free cash flow on an overall Company basis. “C1 cash costs” per pound and “All-in sustaining costs” per pound are intended to provide additional information only, do not have any standardized meaning under IFRS, and may not be comparable to similar measures of performance presented by other companies. These measures should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. Further details on these non-GAAP measures are provided in the MD&A accompanying Barrick’s financial statements filed from time to time on SEDAR at www.sedar.com and on EDGAR at www.sec.gov.
Reconciliation of Copper Cost of Sales to C1 cash costs and All-in sustaining costs, including on a per pound basis
For the years ended For the three months ended
| ($ millions, except per pound information in dollars) | December 31 | December 31 | |||
|---|---|---|---|---|---|
| 2018 | 2017 | 2016 | 2018 | 2017 | |
| Cost of sales | $558 | $399 | $319 | $210 | $107 |
| Depreciation/amortization | (170) | (83) | (45) | (84) | (24) |
| Treatment and refinement charges | 144 | 157 | 167 | 41 | 41 |
| Cash cost of sales applicable to equity method investments | 281 | 245 | 203 | 78 | 75 |
| Less: royalties and production taxes | (44) | (38) | (41) | (15) | (11) |
| By-product credits | (6) | (5) | — | (2) | (1) |
| Other | (11) | — | — | (11) | — |
| C1 cash cost of sales | $752 | $675 | $603 | $217 | $187 |
| General & administrative costs | 28 | 12 | 14 | 5 | 3 |
| Rehabilitation - accretion and amortization | 16 | 12 | 7 | 3 | 3 |
| Royalties and production taxes | 44 | 38 | 41 | 15 | 11 |
| Minesite exploration and evaluation costs | 4 | 6 | — | 2 | 1 |
| Minesite sustaining capital expenditures | 220 | 204 | 169 | 67 | 67 |
| Inventory write-downs | 11 | — | — | 11 | — |
| All-in sustaining costs | $1,075 | $947 | $834 | $320 | $272 |
| Pounds sold - consolidated basis (millions pounds) | 382 | 405 | 405 | 109 | 107 |
| Cost of sales per pound1,2 | $2.40 | $1.77 | $1.41 | $2.85 | $1.79 |
| C1 cash cost per pound1 | $1.97 | $1.66 | $1.49 | $1.98 | $1.72 |
| All-in sustaining costs per pound1 | $2.82 | $2.34 | $2.05 | $2.95 | $2.51 |
1. 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.
2. Cost of sales per pound related to copper 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 sold (including our proportionate share of copper pounds sold from our equity method investments).
Endnote 5
“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
BARRICK YEAR-END 2018 11 PRESS RELEASE
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
For the years ended For the three months ended ($ millions, except per share amounts in dollars) December 31 December 31 2018 2017 2016 2018 2017 Net earnings (loss) attributable to equity holders of the
| Company | ($1,545) | $1,438 | $655 | ($1,197) | ($314) |
| Impairment charges (reversals) related to long-lived assets1 | 900 | (212) | (250) | 408 | 916 |
| Acquisition/disposition (gains)/losses2 | (68) | (911) | 42 | (19) | (29) |
| Foreign currency translation (gains)/losses | 136 | 72 | 199 | (16) | 12 |
| Significant tax adjustments3 | 742 | 244 | 43 | 719 | 61 |
| Other expense adjustments4 | 366 | 178 | 114 | 261 | 17 |
Unrealized gains/(losses) on non-hedge derivative
| instruments | 1 | (1) | (32) | 1 | 5 |
| Tax effect and non-controlling interest5 | (123) | 68 | 47 | (88) | (415) |
| Adjusted net earnings | $409 | $876 | $818 | $69 | $253 |
| Net earnings (loss) per share6 | (1.32) | 1.23 | 0.56 | (1.02) | (0.27) |
| Adjusted net earnings per share6 | 0.35 | 0.75 | 0.70 | 0.06 | 0.22 |
1. Net impairment charges for the current year primarily relate to non-current asset impairments at Lagunas Norte during the third quarter of 2018, and non-current asset and goodwill impairments at Veladero during the fourth quarter of 2018.
2. Disposition gains for the current year primarily relate to the gain on the sale of a non-core royalty asset at Acacia.
3. Significant tax adjustments for the current year primarily relate to the de-recognition of our Canadian and Peruvian deferred tax assets.
4. Other expense adjustments for the current year primarily relate to the inventory impairment charge at Lagunas Norte, the write-off of a Western Australia longterm stamp duty receivable, costs associated with the merger with Randgold, debt extinguishment costs, and the settlement of a dispute regarding a historical supplier contract acquired as part of the Equinox acquisition in 2011.
5. Tax effect and non-controlling interest for the current year primarily relates to the impairment charges related to long-lived assets.
6. Calculated using weighted average number of shares outstanding under the basic method of earnings per share.
Endnote 6
Includes $146 million cash primarily held at Acacia, which may not be readily deployed.
Endnote 7
Total reportable incident frequency rate (TRIFR) is a ratio calculated as follows: number of reportable injuries x 200,000 hours divided by the total number of hours worked. Reportable injuries include fatalities, lost time injuries, restricted duty injuries, and medically treated injuries.
Endnote 8
Estimated in accordance with National Instrument 43-101 as required by Canadian securities regulatory authorities. Estimates are as of December 31, 2018, unless otherwise noted. Proven reserves of 344.6 million tonnes grading 2.15 g/t, representing 23.9 million ounces of gold, and 169.2 million tonnes grading 0.59%, representing 2.195 billion pounds of copper. Probable reserves of 0.9 billion tonnes grading 1.33 g/t, representing 38.4 million ounces of gold, and 452.7 million tonnes grading 0.55%, representing 5.454 billion pounds of copper. Measured resources of 405.3 million tonnes grading 0.93 g/t, representing 12.2 million ounces of gold, and 129.7 million tonnes grading 0.36%, representing 1.034 billion pounds of copper. Indicated resources of 1.6 billion tonnes grading 1.52 g/t, representing 76.7 million ounces of gold, and 585.9 million tonnes grading 0.49%, representing 6.367 billion pounds of copper. Inferred resources of 852.9 million tonnes grading 1.22 g/t, representing 33.5 million ounces of gold, and 141.3 million tonnes grading 0.42%, representing 1.323 billion pounds of copper. Pascua-Lama measured resources of 42.8 million tonnes grading 1.86 g/t representing 2.6 million ounces of gold, and indicated resources of 391.7 million tonnes grading 1.49 g/t, representing
BARRICK YEAR-END 2018 12 PRESS RELEASE