In its third quarter earnings statement, Barrick Gold reported solid production and lower-than-expected costs, which drove a second reduction to annual all-in sustaining cost guidance this year. The company produced 1.65 million oz of gold and narrowed its full-year guidance to 6.1-6.4 million oz from 6-6.5 million oz originally.
“We are focused on the best assets in the best regions, where we see the most potential to create value for shareholders, areas where we have already established distinctive geological and technical knowledge and strong partnerships,” said Kelvin Dushnisky, co-president of Barrick. “We will only invest in mines and development opportunities that can generate strong returns and free cash flow through commodity cycles.”
The company is now concentrating its efforts on the best regions where it believes it has a competitive advantage. Barrick said it will accelerate the identification and advancement of profitable growth opportunities in these core regions. A regional strategy allows the company to leverage its competitive strengths, which include deep geological and technical expertise as well as strong local relationships.
This will help identify the best prospects first and permit them as efficiently as possible, translating into less time to production.
Barrick continues to focus its exploration and growth efforts on Nevada. Approximately 50% of Barrick’s 2014 exploration budget is allocated to Nevada, with a large majority allocated to advance Goldrush, the only significant greenfield discovery by a major gold producer in the past five years. The Goldrush project, located about 6 km from the Cortez mine, is progressing through a prefeasibility study, which remains on schedule for completion in mid-2015.
“Operational excellence remains a top priority for Barrick. Our performance in the third quarter reflects the quality of our mines and our people,” said Jim Gowans, co-president of Barrick. “Our operating teams continue their relentless efforts to improve performance and cut costs. As a result, we were able to reduce annual cost guidance for the second time this year.” All-in sustaining costs are expected to be $880/oz-$920/oz, compared to $900/oz-$940/oz previously.
In Nevada, the Cortez mine produced 273,000 oz at $589/oz in the third quarter. Production in 2014 is expected to be 880,000-920,000 oz, below the low end of the previous guidance of 925,000 oz. This is primarily due to negative grade reconciliations, which impacted production in the first half of 2014. In 2015, production is expected to be below 1 million oz due to the sequencing and mining of ore and waste phases.
Goldstrike produced 239,000 in the third quarter at $921/oz. Production benefited from higher processed grades. Overall costs were better than expected due to lower processing costs, mainly as a result of processing less acidic ore and lower sustaining capital. Modifications to the autoclave facility for the thiosulfate project are almost complete and will enable Goldstrike to accelerate the cash flow from a 4-million-oz stockpile through the addition of a patented thiosulfate process. This is expected to contribute an average of 350,000 to 450,000 of annual production in the first full five years. First production is on track for the fourth quarter of 2014 at a total capital cost of approximately $620 million. Lower production is expected in the fourth quarter in part from an autoclave shutdown to facilitate startup of the thiosulfate project and also from expected lower grades as stripping begins for the next phase of the open pit. Production at Goldstrike in 2014 is expected to be 865,000-915,000 oz and at all-in costs of $870/oz-$900/oz as a result of lower lime consumption at the roaster. In 2015, production is expected to exceed 1 million oz with contributions from the thiosulfate process.
In Latin America, Barrick’s 60% share of production from Pueblo Viejo in the third quarter was 168,000 oz at $551/oz. Production and recoveries were impacted by planned autoclave shutdowns for maintenance. Fourth quarter production is expected to benefit from higher grade ore.
Lagunas Norte produced 157,000 oz at $554/oz in the third quarter. Production was higher in the third quarter due to processing higher grade material and a faster leach cycle from stacking ore on the new area of the leach pad. Fourth quarter production is expected to benefit from higher grades.
The Veladero mine produced 178,000 oz at $822/oz in the third quarter. Production benefited from higher grades on positive grade reconciliations. This trend is expected to continue into the fourth quarter.