Barrick Reports 2017 Full Year and Fourth Quarter Results

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Algemeen advies 15/02/2018 06:29
All amounts expressed in U.S. dollars unless otherwise indicated
•In 2017, Barrick reported net earnings attributable to equity holders of Barrick (“net earnings”) of $1.44 billion ($1.23 per share), and adjusted net earnings1 of $876 million ($0.75 per share).
•The Company reported annual revenues of $8.37 billion, net cash provided by operating activities (“operating cash flow”) of $2.07 billion, and free cash flow2 of $669 million.
•Full year gold production was 5.32 million ounces. Cost of sales applicable to gold3 was $794 per ounce, and all-in sustaining costs4 were $750 per ounce. Copper production was 413 million pounds, at a cost of sales3 of $1.77 per pound, and all-in sustaining costs6 of $2.34 per pound.
•Total debt was reduced by $1.51 billion, or 19 percent, to $6.4 billion. We intend to reduce total debt to around $5 billion by the end of 2018.
•Proven and probable gold reserves were 64.5 million ounces5 as of December 31, 2017, primarily reflecting the reclassification of Pascua-Lama reserves to resources. Through increased investment in mine exploration drilling, the Company more than replaced the reserves it depleted through production at existing operations in 2017.
•Proven and probable copper reserves, including copper contained within gold reserves, were 11.2 billion pounds5 as of December 31, 2017, and include the addition of approximately 2.6 billion pounds at Lumwana as a result of successful cost reduction efforts.
•Barrick reported a net loss of $314 million ($0.27 per share) in the fourth quarter, and adjusted net earnings1 of $253 million ($0.22 per share).
•Fourth quarter revenue was $2.23 billion, operating cash flow was $590 million, and free cash flow2 was $240 million.
•Gold production in the fourth quarter was 1.34 million ounces, at a cost of sales applicable to gold3 of $801 per ounce, and all-in sustaining costs4 of $756 per ounce. Copper production in the fourth quarter was 99 million pounds, at a cost of sales3 of $1.79 per pound, and all-in sustaining costs6 of $2.51 per pound.
•Gold production guidance for 2018 is 4.5-5.0 million ounces, at a cost of sales applicable to gold3 of $810-$850 per ounce, and all-in sustaining costs4 of $765-$815 per ounce. Copper production guidance for 2018 is 385-450 million pounds, at a cost of sales3 of $1.80-$2.10 per pound, and all-in sustaining costs6 of $2.30-$2.60 per pound.
•Based on our current asset mix, from 2019 to 2022 we expect average annual gold production to be between 4.2-4.6 million ounces, at an average cost of sales3 of $850-$980 per ounce, and average all-in sustaining costs4 of $750-$875 per ounce.
•Investor Day will be webcast on February 22 at www.barrick.com. Please join us for additional insights on our operations, projects, and other priorities.



Barrick Gold Corporation (NYSE:ABX) (TSX:ABX) (“Barrick” or the “Company”) today reported fourth quarter and full year results for the period ending December 31, 2017.

In 2017, Barrick generated operating cash flow of $2.07 billion, and free cash flow2 of $669 million. Cost of sales applicable to gold3 of $794 per ounce declined slightly compared to 2016, while all-in sustaining costs4 rose by approximately three percent to $750 per ounce, reflecting a planned increase in minesite sustaining capital expenditures. Gold cash costs4 fell by 3.7 percent, driven by a favorable sales mix, and the ongoing impact of initiatives to improve the productivity and efficiency of our operations. Lower free cash flow compared to 2016 was primarily the result of lower production and higher working capital, in part due to the temporary suspension of operations at our Veladero mine in Argentina, and the concentrate export ban impacting Acacia Mining plc’s operations in Tanzania. Higher capital expenditures in 2017 also reflected planned investments in our organic project pipeline, as we invest more in the future of our business.
In 2017, we reduced our total debt by $1.51 billion, or 19 percent, exceeding our target of $1.45 billion. We maintained our focus on capital discipline, with total capital expenditures of $1.36 billion, near the low end of our guidance range for the year. We are advancing a pipeline of high-confidence, organic projects with the potential to contribute more than one million ounces of annual production to Barrick, at costs well below our current portfolio average. At the same time, we returned more capital to shareholders, with a 50 percent increase in our quarterly dividend, to $0.03 per share. Finally, we forged a new strategic partnership with Shandong Gold at the Veladero mine, a landmark agreement with the potential to create significant long-term value for our owners, as well as our community and government partners in Argentina and beyond.

STRATEGIC FRAMEWORK

Over the past three years, we have optimized our portfolio by divesting high-cost, non-core operations. We used the proceeds of these divestments to reduce our total debt by more than 50 percent, from $13.1 billion at the end of 2014, to $6.4 billion today. Our portfolio is now focused on high-margin, long-life gold operations and projects clustered in core districts throughout the Americas, with a materially stronger balance sheet.

Our overriding objective remains unchanged. We are focused on growing free cash flow per share over the long term, which we will do primarily in three ways. First, we will drive industry-leading margins through operational excellence and consistent execution. Second, we will manage our portfolio and allocate capital with discipline and rigor. Third, we will leverage top talent and our distinctive partnership culture as competitive advantages.

Our priorities for 2018 are consistent. We will maintain our focus on maximizing free cash flow, and seek to build a business that can generate positive free cash flow at a gold price of $1,000 per ounce, on a sustainable basis. We will drive operational excellence through a continuous cycle of optimization, pushing our mines to achieve greater levels of efficiency and productivity, while working to mitigate increasing costs associated with more complex ore types and a shift to more underground mining. This will be aided by investments in digital technology and innovation, which will allow us to identify and accelerate further operational improvements across our portfolio. We will maintain a sharp focus on capital discipline while further strengthening the balance sheet. We will continue to optimize and advance our organic project pipeline. And finally, we will focus on attracting top talent to Barrick and developing our people to achieve their full potential in the Company’s decentralized operating model.

OUTLOOK

All investment decisions are driven by our primary objective of growing free cash flow over the long term, not ounces. Our production profile will adjust up or down according to what best advances this objective. All projects undergo rigorous scrutiny by our Investment Committee at every stage of evaluation and development. Each project is benchmarked against a 15 percent hurdle rate using a long-term gold price of $1,200 per ounce, and ranked accordingly.

In 2018, we expect to produce 4.5-5.0 million ounces of gold, at a cost of sales applicable to gold3 of $810-$850 per ounce, and all-in sustaining costs4 of $765-$815 per ounce. Higher cost guidance for 2018 primarily reflects lower anticipated gold production from Barrick Nevada, Pueblo Viejo and Veladero, increased processing of higher-cost inventory, and higher costs at Acacia. We expect first quarter production of around one million ounces at costs that will be proportionately higher than those anticipated for the remainder of the year, largely due to lower grades at Barrick Nevada, and the timing of planned maintenance at Pueblo Viejo.

Total attributable capital expenditures for 2018 are expected to be in the range of $1.40-$1.60 billion. This includes project capital expenditures of $450-$550 million, an increase of roughly $270 million compared to 2017, as we increase investments in the future of our business. Attributable mine site sustaining capital expenditures are expected to be in the range of $950 million-$1.1 billion, compared to $1.1 billion in 2017, reflecting our ongoing focus on capital efficiency and discipline.

In 2018, we expect corporate administration costs to be approximately $275 million, an increase of roughly $75 million compared to 2017. This reflects additional investments to optimize our enterprise-wide processes and systems, to accelerate the implementation of digital technologies across our business, and to drive step-change innovations, all of which are designed to reduce operating costs and increase productivity across the business over the long term.

Based on our current asset mix, from 2019 to 2022 we expect average annual gold production to be between 4.2-4.6 million ounces, at an average cost of sales3 of $850-$980 per ounce, and average all-in sustaining costs4 of $750-$875 per ounce, representing a stable base case for our business. This includes contributions from feasibility level projects at Goldrush, Cortez Deep South, Turquoise Ridge, and Lagunas Norte—but assumes no contribution from Pascua-Lama, Donlin Gold, Cerro Casale, or Alturas. Please join us for our Investor Day webcast on February 22 for additional insights on our production profile.

Our aspiration is to have the most efficient and productive gold mines in the industry, and as such, we have challenged ourselves to continually improve our cost profile. It is equally important that we reinvest in the future of our business now, to ensure that we generate sustainable value for our owners over the long term, at the lowest possible costs. In support of this, we are increasing our investments in organic projects and mine exploration drilling, which will strengthen the overall quality of our portfolio. We also are investing in digital systems and innovation, which we expect will drive down costs and improve productivity over the long term.

Please see Appendix 1 for detailed operating and capital expenditure guidance. The table found in Appendix 2 outlines the material assumptions used to develop the forward-looking statements in our outlook and guidance, and provides an economic sensitivity analysis of those assumptions. For certain related risk factors, please see the cautionary statement on forward-looking information at the end of this press release.

FINANCIAL HIGHLIGHTS

Full year net earnings were $1.44 billion ($1.23 per share), compared to net earnings of $655 million ($0.56 per share) in 2016. This significant improvement in net earnings was primarily due to $2.03 billion ($1.43 billion net of tax and non-controlling interest) in impairment reversals and gains on sale related to the divestment of 50 percent of the Veladero mine and 25 percent of the Cerro Casale project in 2017. This was partially offset by net impairment charges of $908 million ($511 million net of tax and non-controlling interest) mainly relating to Acacia’s Bulyanhulu mine, which has been placed on reduced operations, and the Pascua-Lama project, where proven and probable gold reserves have been reclassified as measured and indicated resources, coupled with an impairment reversal at the Lumwana mine.

In 2017, adjusted net earnings1 increased by seven percent to $876 million ($0.75 per share), compared to $818 million ($0.70 per share) in 2016. Adjusted net earnings benefited from higher gold and copper prices, combined with lower direct mining costs, reflecting higher capitalized waste stripping at Barrick Nevada and Veladero, a lower relative sales contribution from higher cost operations at Acacia, and lower inventory write-downs compared to 2016. These gains were partially offset by lower sales volumes, primarily due to the sale of 50 percent of Veladero, and the concentrate export ban impacting Acacia’s operations, combined with an increase in exploration and evaluation costs, investments in innovation, higher income tax expense, and higher depreciation expense.

Please refer to page 70 of our fourth quarter MD&A for a full list of reconciling items between net earnings and adjusted net earnings for the current and prior year.

Operating cash flow in 2017 was $2.07 billion, compared to $2.64 billion in 2016. This decrease reflects working capital outflows related to the buildup of inventory at Pueblo Viejo, Lagunas Norte, and Acacia, lower gold sales driven by the sale of 50 percent of the Veladero mine on June 30, 2017, and lower sales volumes at Pueblo Viejo, Hemlo, Turquoise Ridge, Lagunas Norte, and Acacia. Operating cash flow was also impacted by an increase in exploration, evaluation and project expenses, lower operating cash flows attributed to non-controlling interest, and higher cash taxes paid. These declines were partially offset by higher sales from Barrick Nevada, which benefited from operational efficiencies and improved throughput, higher gold and copper prices, and lower direct mining costs (as described above).

Free cash flow2 for 2017 was $669 million, compared to $1.51 billion in the prior year. The decrease primarily reflects lower operating cash flows combined with higher capital expenditures. In 2017, capital expenditures on a cash basis were $1.40 billion compared to $1.13 billion in 2016. Higher capital spending reflects a $161 million increase in minesite sustaining capital expenditures, primarily at Barrick Nevada and Veladero, partially offset by a decrease in sustaining capital at Acacia. Project capital expenditures also increased by $109 million, reflecting the development of Crossroads and the Cortez Hills Lower Zone at Barrick Nevada, and Goldrush project drilling, partially offset by a decrease in pre-production stripping at the South Arturo pit, which entered commercial production in August 2016.

RESTORING A STRONG BALANCE SHEET

Achieving and maintaining a strong balance sheet remains a top priority. In 2017, we reduced our total debt by $1.51 billion, or 19 percent, exceeding our original target of $1.45 billion.

Our goal remains to reduce our total debt from $6.4 billion at present, to around $5 billion by the end of 2018. We plan to achieve this primarily by using cash flow from operations and cash on hand, and potentially through further portfolio optimization. Barrick will continue to pursue debt reduction with discipline, taking only those actions that make sense for the business, on terms we consider favorable to our shareholders.

At the end of the fourth quarter, Barrick had a consolidated cash balance of approximately $2.2 billion.7 The Company has less than $100 million in debt due before 2020.8 More than three-quarters of our outstanding total debt of $6.4 billion does not mature until after 2032.

OPERATING HIGHLIGHTS

In 2017, our operations produced 5.32 million ounces of gold, at a cost of sales3 of $794 per ounce, and all-in sustaining costs4 of $750 per ounce, with a particularly strong performance from Barrick Nevada. This compares to production of 5.52 million ounces of gold in 2016, at a cost of sales3 of $798 per ounce, and all-in sustaining costs4 of $730 per ounce. Lower production in 2017 primarily reflects the sale of 50 percent of the Veladero mine on June 30, and lower production from Acacia as a result of Tanzania’s concentrate export ban.

Our most important operational priorities are to ensure the safety of people and the environment. We improved our safety performance in 2017, achieving a total reportable injury frequency rate (TRIFR)9 of 0.35—the best result in the Company’s history, and among the lowest in the industry. Regrettably, this was overshadowed by the tragic deaths of two team members in workplace accidents in 2017: Williams Garrido, a contractor at the Pascua-Lama project; and Eulogio Gutierrez, an employee at our Hemlo mine. We will not be satisfied with our performance until we can say that every person at Barrick has gone home safe and healthy every day, and this will remain our focus in 2018.

Consistent with our overall improvement trend in safety, we also achieved a 38 percent reduction in reportable environmental incidents at our operations last year, from 13 incidents in 2016, to eight incidents in 2017. Despite this success, a pipe rupture at the leach pad of our Veladero operation in March 2017 resulted in a three-and-a-half month suspension of processing operations at the mine. In response, Veladero implemented a series of measures to strengthen the mine’s operating systems, including major modifications to the heap leach facility, as well as initiatives to improve community engagement, training, and local hiring.
On a per ounce basis, cost of sales applicable to gold3 declined slightly compared to 2016. All-in sustaining costs4 increased by three percent, primarily reflecting an increase in minesite sustaining capital expenditures. At the same time, we reduced our cash costs4 by 3.7 percent, from $546 per ounce in 2016, to $526 per ounce in 2017, reflecting a favorable sales mix, as well as our ongoing focus on driving Best-in-Class productivity and efficiency improvements across our portfolio.

Gold production in the fourth quarter was 1.34 million ounces, at a cost of sales applicable to gold3 of $801 per ounce, and all-in sustaining costs4 of $756 per ounce, compared to 1.52 million ounces, at a cost of sales3 of $784 per ounce, and all-in sustaining costs4 of $732 per ounce in the prior-year period.

In 2017, our copper portfolio produced 413 million pounds, at a cost of sales3 of $1.77 per pound, and all-in sustaining costs6 of $2.34 per pound. Production was slightly below the Company’s adjusted guidance of 420-440 million pounds for 2017, but in line with our original full year guidance of 400-450 million pounds. This compares to production of 415 million pounds, at a cost of sales3 of $1.41 per pound, and all-in sustaining costs6 of $2.05 per pound in 2016.

Copper production in the fourth quarter was 99 million pounds, at a cost of sales3 of $1.79 per pound, and all-in sustaining costs6 of $2.51 per pound, compared to 101 million pounds, at a cost of sales3 of $1.43 per pound, and all-in sustaining costs6 of $2.04 per pound in the prior-year period.

Cost of sales applicable to copper3 increased by 25 percent in 2017 as a result of higher power, fuel, consumables and contractor costs, combined with higher depreciation expense at Lumwana. Copper all-in sustaining costs6, which have been adjusted to include our proportionate share of equity method investments, were 14 percent higher than the prior year, primarily as a result of higher cost of sales and higher minesite sustaining capital expenditures at Lumwana and Jabal Sayid.

Turquoise Ridge Toll Milling Agreement
In January 2018, Barrick and Newmont Mining Corporation (“Newmont”) reached a new, seven-year toll milling agreement for the processing of Turquoise Ridge ore at Newmont’s Twin Creeks facility. The agreement supports plans to expand production and unlock the full potential of Turquoise Ridge by increasing processing capacity. It provides for throughput of 850,000 tons per year in 2018 and 2019, rising to 1.2 million tons per year between 2020 and 2024. Processing costs are in line with market rates, and are reflected in our guidance for Turquoise Ridge.
Please join our upcoming Investor Day webcast for a detailed update on all major operations. Visit www.barrick.com for webcast information, press release, and presentations on February 22.

Digital Barrick
During 2017, we laid the foundation for our digital transformation through a series of pilot projects primarily focused at our Cortez mine in Nevada. This allowed us to validate the viability of our digital solutions and their potential economic returns in a controlled environment with rigorous oversight.

In 2018, our digital strategy will focus on completing version one of the Barrick Data Fabric, an enterprise-grade, big data analytics platform. This will provide a unified data environment for the Company that will allow our leaders and operators to identify variability and trends, generate trusted, real-time data, predict failures, and take action to address problems quickly, or before they arise. We also will accelerate the implementation of digital projects across our other operations, with an initial focus in Nevada, including:
•Expanded use of automated processing systems, combined with introduction of artificial intelligence;
•Implementation of short interval control in open pit, underground, and processing areas;
•Expanded implementation of digital work management and predictive maintenance systems; and
•Expanded use of automation, including an autonomous open pit trial, and the implementation of automated underground drills.

We are taking a disciplined approach to our digital strategy and will continue to apply a high degree of rigor to these projects, just as we would for any other investment, to ensure that our investments in digital deliver the benefits we anticipate.
read more on
http://www.barrick.com/investors/news/news-details/2018/Barrick-Reports-2017-Full-Year-and-Fourth-Quarter-Results/default.aspx






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