In its third quarter earnings report, Barrick Gold said its quarterly production figures were in line with expectations: 1.66 million oz of gold at an all-in sustaining costs (AISC) of $771/oz. Full-year 2015 gold production is expected to be 6.1-6.3 million oz. AISC guidance for the year has been reduced to $830-$870/oz from the previous range of $840-$880/oz.
“Our objective is to grow free cash flow per share from a portfolio of high-quality gold assets through disciplined capital allocation and operational excellence,” said Kelvin Dushnisky, president, Barrick Gold. “We have returned to a leaner, decentralized operating model designed to maximize free cash flow and improve execution. Clear capital allocation criteria, including a 15% hurdle rate for all investments, are driving greater financial rigor and stronger returns. The divestment of noncore assets has refocused our portfolio and we have formed vital new strategic partnerships that will drive new opportunities in the future.”
The leading gold producers has posted two consecutive quarters of positive free cash flow and improved costs. And, the company said its on track to reduce debt by $3 billion.
The Cortez mine in Nevada produced 321,000 oz at an AISC of $501/oz in the third quarter. Production benefited from higher open-pit tonnage and improved underground productivity. A prefeasibility study for expanded underground mining in an area known as Deep South below currently permitted levels will be completed in late 2015. With a 382-square-mile land package, Cortez remains a highly prospective district for Barrick.
The Goldstrike mine contributed 328,000 oz in the third quarter, while AISC of $558 per ounce were better than expected due to lower operating costs and lower sustaining capital. “Our innovative thiosulfate (TCM) circuit achieved commercial production in the third quarter, coming in at a capital cost of $610 million,” Dushnisky said. “We expect to complete the ramp up of the TCM circuit in the first half of 2016.”
Barrick's 60% share of production from Pueblo Viejo for the third quarter was 172,000 oz at AISC of $554/oz. Production was slightly below the plan due to lower gold grades and recoveries from a higher proportion of carbonaceous ore. Production is expected to be higher and costs lower in the fourth quarter compared to the third quarter on higher grades, improved recoveries and better autoclave availability. Barrick completed a preliminary economic assessment on a plan to remove these constraints to tailings capacity, which if implemented could significantly extend the life of Pueblo Viejo.
The Lagunas Norte mine contributed 108,000 oz at an AISC of $581/oz in the third quarter, in line with expectations. Production expected in the fourth quarter will be driven by improved performance at the Phase Five leach pad. Fourth quarter AISC are expected to be higher than the third quarter, reflecting the sale of higher cost inventory as well as increased sustaining capital for Phase Six leach-pad construction. A prefeasibility study on a plan to extend the mine life by up to 12 years by mining nearly 2 million oz of sulfide ore below the existing open pit is on schedule for completion in 2015.
Barrick’s share of third quarter production from Acacia Mining (63.9%) was lower than expected at 104,000 oz at AISC of $1,195/oz due to temporary factors impacting output from Bulyanhulu and Buzwagi. “We now expect attributable 2015 production from Acacia to be about 460,000 oz at AISC of approximately $1,155/oz,” Dushnisky said.
Barrick’s copper production in the third quarter was 140 million lb at C1 cash costs of $1.53/lb. For 2015, copper production is anticipated to be 480-520 million lb at lower C1 cash costs of $1.60-$1.85/lb, reflecting currency impacts and improved costs at Lumwana, which contributed 77 million lb at C1 cash costs of $1.59/lb. Power restrictions and potential reductions to smelter capacity in Zambia are not expected to have any material impact on Lumwana’s 2015 production guidance.
At Jabal Sayid, first shipments of copper-in-concentrate continue to be anticipated in early 2016. Once the mine reaches full production, average production in the first full five years is expected to be 100 million lb per year.
At the end of 2014, Barrick had 93 million oz of proven and probable gold reserves and 94 million oz of measured and indicated gold resources. At 1.37 grams per metric ton (g/mt), its reserve grade is more than 50% higher than its senior peer average.
“For more than 20 years, Barrick has maintained an average reserve mine life of between 10 to 20 years with a track record of replacing reserves and resources at our operations,” Dushnisky said. “Mine life and production rates at the majority of our mines have far surpassed initial estimates and we continue to identify excellent potential for resource conversion at many of our operations. Of our exploration budget, 65% is focused on opportunities at or near our existing operations. Drilling and feasibility study work to convert resources to reserves over the next five years at Cortez, Goldstrike, Lagunas Norte, Pueblo Viejo and Turquoise Ridge are progressing well.”
In addition, recent drilling at Hemlo and Porgera indicates strong potential for resource additions, the company said. The company is also advancing its Goldrush project in Nevada and drilling to define the limits of mineralization at the Alturas project in Chile is expected to resume in the fourth quarter.