Barrick Gold: Value Creation

Under new CEO Mark Bristow, Barrick aims to make the brand synonymous with value creation through a top tier operational base of long-life mines, in world-class geological regions

“On 1 July 2019, Barrick and Newmont announced the completion of the joint venture to combine their respective Nevada properties into Nevada Gold Mines LLC”

barrick gold value creation 2 019 was an eventful year for Barrick Gold. The company began the year as the world’s largest gold producer, after acquiring Randgold Resources in an all-stock deal for $6.5 billion, producing a combined entity holding five of the world’s top ten tier one gold assets.

Randgold added some geographical diversity to the Barrick portfolio. Established in 1995, the company commissioned the Morila Gold Mine in Mali in 2000, followed by the Loulo mine in 2005. Loulo-Gounkoto is now one of the world’s largest gold mining operations and one of the largest businesses in West Africa. Randgold’s other assets include the Tongon Mine in Côte d’Ivoire, Kibali Gold Mine in the Democratic Republic of Congo, Massawa in Senegal and Lumwana in Zambia.

Barrick’s tenure in the No 1 position was brief, however, as it was announced in January 2019 that Newmont Mining Corporation had agreed to buy Goldcorp in a $10 billion deal that would see this resulting combined entity become the world’s largest gold producer.

In February, Barrick livened up the BMO Global Metals and Mining Conference by launching a surprise bid for Newmont, proposing an all-share transaction valuing Newmont at $17 billion. New Barrick president and CEO Mark Bristow said a Barrick/ Newmont deal would be superior to Newmont’s proposed acquisition of Goldcorp, adding that he expected the proposed merger to unlock more than $7 billion in synergies, a major portion of which would be generated by combining the two companies’ highly complementary assets in Nevada, where Barrick has significant mineral resources and Newmont has processing plants and infrastructure.

Newmont responded vigorously, rebuffing Barrick and sticking firmly to its guns in respect of its Goldcorp proposal. Barrick’s Mark Bristow and Newmont’s Gary Goldberg engaged in a brief war of words before finally agreeing simply to combine their interests in Nevada.

In April, a mere four months after the initial proposal was made public, Newmont announced the successful

“In October it was announced that the underground operation at Kibali had again set new mining and shaft production records in the third quarter to keep the Barrick Tier 1 gold mine on track to meet or beat its guidance of 750,000 ounces for the year”

conclusion of the transaction combining Newmont Mining Corporation and Goldcorp Inc into Newmont Goldcorp. Then, on 1 July, Barrick and Newmont announced the completion of their joint venture (first announced in May) to combine their respective Nevada properties into Nevada Gold Mines LLC.

Nevada Nevada Gold Mines is a classic case of the whole being more valuable than the sum of its parts, according to Barrick CEO Mark Bristow. “It will be one of the world’s greatest gold mining operations and will create sustainable, long-term value for all its stakeholders, not least the State and people of Nevada.” Nevada Gold Mines is operated and 61.5% owned by Barrick, and 38.5% owned by Newmont Goldcorp. The new JV ranks as the largest gold producing complex in the world by a wide margin, with three of the world’s top 10 tier one gold assets (Barrick’s Cortez; the combination of Barrick’s Goldstrike and Newmont Goldcorp’s Carlin; and Barrick’s Turquoise Ridge with Newmont Goldcorp’s Twin Creeks. Construction of the third shaft at Turquoise Ridge, which has a hoisting capacity of 5,500 tonnes per day, continues to advance according to schedule and within budget, with efforts in 2019 focused on surface civil works and shaft sinking.

Its assets in northeastern Nevada comprise 10 underground and 12 open pit mines, two autoclave facilities, two

World Mining Magazine www.ogsmag.com roasting facilities, four oxide mills, a flotation plant and five heap leach facilities. In 2018 these operations produced a total of 4.1 million ounces of gold, approximately double that of the industry’s next largest gold mine (Muruntau in Uzbekistan).

Identified synergies are expected to deliver up to $500 million per year over the first five years from 2020, stepping down over time after that. These will come mainly from integrated mine planning, optimized mining and processing, cost reductions and the combination of the adjacent Turquoise Ridge and Twin Creeks, which will be operated as a single mine.

In September this year, Barrick reported a new discovery hole about two kilometres from the best ever

drilling intercept at its Fourmile project in Nevada and said this pointed to the delivery of at least one more Tier 1 gold mine through the combination of Fourmile with the nearby Goldrush development project. Mark Bristow said diligent exploration and detailed geological modelling had led to effective targeting at Fourmile.

The intercept is of a new orebody a kilometre north of Fourmile which increases the strike length of the mineralized Goldrush-Fourmile trend to greater than six kilometres. Mineralization is open in all directions and significant resource growth is expected from continuing the step-out drilling programme.

Nevada Gold Mines is targeting production of between 1.8 and 1.9

million ounces at a preliminary estimated cost of sales of $940 to $970 per ounce and AISC6 of $920 to $950 per ounce for the second half of 2019.

Africa The successful 20 year partnership between the government of Mali and Randgold made the gold mining industry one of the key drivers of the country’s economy. Briefing local media on the Loulo-Gounkoto complex’s current performance in October this year, Barrick CEO Mark Bristow said the new company was committed to further investment in Mali. He said it was currently developing a new underground mine at Gounkoto, replenishing existing reserves through brownfields exploration, prospecting for another world-class discovery along the Mali/Senegal shear zone and undertaking mapping and research in the south of the country.

Bristow noted that Barrick entered Mali through Randgold’s discovery and development of Morila, which laid the foundation for its mining industry as well as marking the first true partnership between a host country and investors in West Africa.

At Morila, which is nearing closure, the company has invested in an Agripole which will provide a sustainable postmining micro-economy for the villages around the mine. At Loulo, it has established an agricultural college which this year produced 40 farming graduates

who have been deployed across 10 farms. Bristow said in the past quarter LouloGounkoto had again set production records and was on track to meet its production guidance of 690,000 ounces of gold for 2019. Successful exploration was replacing depleted reserves, ensuring that its remaining life exceeded 10 years.

In the DRC, Barrick operates Kibali, which is a joint venture with AngloGold Ashanti and the Congolese parastatal SOKIMO. Kibali, ranked among the world’s Top 10 gold mines, made a strong start to 2019 after setting a new production record last year. In October it was announced that the underground operation had again set new mining and shaft production records in the third quarter to keep the Barrick Tier 1 gold mine on track to meet or beat its guidance of 750,000 ounces for the year. Throughput and recovery for the quarter were at or above the nameplate level. Briefing local media, Bristow said Kibali – already a world leader in automation – was taking this to the next level with the commissioning of a Newtrax system which would provide real-time data collection, enhance predictive maintenance, track and manage the fleet, and implement a digital safety system with personnel tracking. The mine is also working towards a proof of concept of a highly advanced system which will allow manned and unmanned operations in the same area.

In Zambia, the Lumwana copper mine is a conventional open pit (truck and shovel) operation. It’s located about 100 kilometres west of Solwezi in Zambia’s Copperbelt—one of the most prospective copper regions in the world. Lumwana ore, which is predominantly sulphide, is treated through a conventional sulphide flotation plant, producing copper concentrate. The mine produced 224 million pounds of copper in 2018.

Barrick also owns Acacia Mining in Tanzania, where the relationship between the previous owners and the Government of Tanzania (GoT) deteriorated over recent years. Barrick recently bought out the minority interests to enable it to negotiate with the GoT independently.

An agreement has now been reached which includes the payment of $300 million to the GoT to settle all outstanding tax and other disputes, the lifting of the concentrate export ban, the sharing of future economic benefits from the mines on a 50/50 basis and the establishment of a unique, Africafocused international dispute resolution framework.

A new operating company called Twiga Minerals Corporation (Twiga) has been formed to manage the Bulyanhulu, North Mara and Buzwagi mines. (Twiga is the Swahili word for giraffe, Tanzania’s national symbol.) “Rebuilding these operations after three years of value destruction will require a lot of work,” said Mark Bristow, “but the progress we’ve already made will be greatly accelerated by this agreement. Twiga, which will give the government full visibility of and participation in operating decisions made for and by the mines, represents our new partnership not only in spirit but also in practice.”

South America Barrick’s approach to South America has been somewhat mixed in the past, to the extent that new CEO Mark Bristow saw fit to renew the company’s commitment to the region in July this year.

Speaking at a meeting with local community leaders and media in Argentina, Bristow said the company’s assets in the region were a major part of its global portfolio and there was enormous potential for new discoveries

capable of amplifying Barrick’s ability to create real value for all its stakeholders. “Barrick holds a highly prospective land package, with mining rights covering some 34,000 hectares, in the El Indio gold belt. This legendary gold province, which spans Argentina, Chile and Peru, has already yielded five significant discoveries and we believe its mineral wealth still offers a very substantial upside,” he said.

“We have a new regional exploration strategy that is being implemented by a best-in-class team drawn from the merged Barrick and Randgold. In Argentina alone, we plan to invest more than $30 million in exploration over the next two years.”

At Veladero in Argentina, Bristow said, work to reclaim its full potential and extend its life was already showing results, with the mine increasing production by 26,000 ounces in the second quarter of this year. He noted that over the past 14 years Veladero had contributed some $8.9 billion to the Argentine economy through taxes, royalties, salaries and payments to local suppliers. In addition, the mine has established a new trust fund that could deliver more than $70 million in community infrastructure between 2020 and 2028, depending on production.

In Chile, the Norte Abierto and Alturas projects are progressing, but the giant Pascua Lama project on the border with

Argentina has been closed since 2013 because of environmental difficulties. The current focus there is on going back to basics to review the original project’s parameters and redefine its future potential. In Peru the Lagunas Norte mine is being placed on care and maintenance while the team assesses the sulphide resource potential, and at Pierina closure planning is continuing. Bristow said Barrick acknowledged that there were legacy challenges in each of these countries. It was engaging with their governments and communities to resolve these and to build productive new partnerships with its hosts to ensure that the new value that is created benefits all stakeholders.

“We are an organization that has grown out of pioneering exploration, discoveries and development. Given our established presence here, our local geological knowledge and exploration skills, we are committed to becoming a leader in the region,” he said.

In the Dominican Republic, by contrast, the expansion of Pueblo Viejo is expected to maintain the mine’s Tier One status for years to come. Plans include an expansion of the mine’s processing plant and tailings capacity with an estimated initial capital investment of more than a billion dollars and the potential to extend the life of the mine into the 2030s and beyond. Barrick expects to complete a feasibility study

for the expansion project during 2020. The proposed capital investment would more than double the contribution the mine has already made to the Dominican Republic.

Rest of the world The Jabal Sayid copper operation is located 350 kilometres north-east of Jeddah in the Kingdom of Saudi Arabia. It’s a 50/50 joint venture operation with Ma’aden. The first shipment of copper concentrate occurred in December 2015, and the mine commenced commercial production in July 2016. It produced 55 million pounds of copper in 2018, and forecasts 45 – 60 million pounds this year.

In Papua New Guinea, the Porgera Joint Venture is an open pit and underground gold mine at an altitude of 2,200-2,600 meters in the Enga Province, about 600 kilometres northwest of Port Moresby. Barrick and Zijin Mining Group each own 47.5 per cent of

the operation, with the remaining 5 per cent interest held by Mineral Resources Enga.

Porgera’s special mining lease expired in August 2019 and the government is considering an application for a 20-year extension. Barrick CEO Mark Bristow said Prime Minister Marape’s view that PNG should receive a better share of the benefits generated by the development of its mineral resources was in line with Barrick’s own commitment to ensuring that the value created by its operations should reward all its stakeholders, especially its host governments and communities.

“The people of PNG have a right to benefit from these resources and the government is their steward,” he said. “The mining companies invest the capital and provide the expertise that makes profitable resource development possible. This common cause calls for a productive, mutually rewarding partnership between the miners and their hosts. Barrick has successfully established and maintained such relationships at its operations worldwide.”

Barrick has recently announced the sale of its share in a 50/50 joint venture with Newmont Goldcorp in Australia, the Kalgoorlie mine, in Western Australia. The Kalgoorlie operation consists primarily of the Super Pit openpit mine, located along the Golden Mile ore bodies which were previously mined from underground. The mine is located adjacent to the town of Kalgoorlie, approximately 350 miles east of Perth, Western Australia. Kalgoorlie is an open-pit, truck-and-loader operation. The Hemlo operation in Canada has produced more than 21 million ounces of gold, and has been operating continuously for over 30 years. It consists of the Williams mine, an underground and open pit operation located about 350 kilometres east of Thunder Bay, Ontario.

At the end of October this year Barrick announced that operations at Hemlo are being modernized and refocused to secure the mine’s continued viability. Several programs have been introduced to improve its performance and the next step will be to phase out the open pit operation and move to an underground contract mining model. The objective is to upgrade Hemlo to a Barrick Tier 2 asset and extend its Life of Mine well into the future.

“By repositioning Hemlo as a smaller but more profitable business, we are ensuring that it will continue to deliver value to its community, employees and other stakeholders for years to come,” said Catherine Raw, Barrick’s chief operating officer for North America. “A longer sustainable mine life will create longer-term employment opportunities and longer-term benefit sharing with the local community and economy,” she said.

“Because of the move to contract mining and the introduction of new technology, we are inviting the majority of employees working underground to participate in a voluntary separation program. We have already met with these employees to inform them about the program and to assure them that they will be treated fairly and with respect for their service to the mine.”

On becoming chief executive of Barrick Gold Mark Bristow pledged to make Barrick more agile with fewer layers of management, by cutting the number of workers at head office in Toronto and reversing plans to hire big data analysts and coders, preferring to hand control of operations to local mine sites.

“What we want to do is make sure we implement that at the site,” he said. “We don’t want IT to wag the dog, we want it to be an integral part of everyday operations. The manager of the mine should get the data first.”

Bristow also said that Barrick would not be afraid of operating in risky countries or working on difficult projects. He wants to increase its exposure to the Democratic Republic of Congo, he said, and develop copper and gold projects in South America.

“Our aim is to make the Barrick brand synonymous with value creation,” he said. “That value will be generated by our existing Top Tier operational base of long-life mines, located within worldclass geological provinces and run by management teams that can unlock and bring to account opportunities where others have failed,” he added.

“But there is also a lot more to be done, notably in Latin America and Tanzania, and you can be sure that we remain unrelenting in our quest to be the industry leader in value creation and delivery.”