Exhibit
(a)(5)(I)
The
following is a transcript of a webcast that has been made available on Barrick
Gold Corporation's website. In order to access this webcast, investors must
agree to the following:
On
August 4, 2006, Barrick Gold Corporation filed a tender offer statement
related to its tender offer for the outstanding common shares of NovaGold
Resources Inc. Investors and security holders of NovaGold are urged to read
the
tender offer statement, because it contains important information. Investors
and
security holders of NovaGold may obtain a free copy of the tender offer
statement and other documents filed by Barrick Gold Corporation with the
SEC at
the SEC’s website at www.sec.gov. The tender offer statement may also be
obtained for free from Barrick Gold Corporation on its website or by directing
a
request to Barrick Gold Corporation’s investor relations
department.
Q2
2006
Barrick Gold Earnings Conference Call
CORPORATE
PARTICIPANTS
James
Mavor
Barrick
Gold - VP, IR
Greg
Wilkins
Barrick
Gold - President, CEO
Peter
Kinver
Barrick
Gold - COO
Alex
Davidson
Barrick
Gold - EVP of Exploration and Corporate Development
Jamie
Sokalsky
Barrick
Gold - EVP CFO
Kelvin
Dushnisky
Barrick
Gold - SVP, Corporate Affairs
CONFERENCE
CALL PARTICIPANTS
Mark
Smith
Dundee
Securities - Analyst
John
Hill
Citigroup
- Analyst
David
Christie
TD
Newcrest - Analyst
Victor
Flores
HSBC
- Analyst
Steve
Butler
Canaccord
Adams - Analyst
Stephen
Kibsey
CDP
-
Analyst
John
Bridges
JP
Morgan - Analyst
John
Tumazos
Prudential
- Analyst
Larry
Strauss
GMP
Securities - Analyst
PRESENTATION
OPERATOR
Welcome
to the Barrick Gold Corporation second quarter 2006 results. [OPERATOR
INSTRUCTIONS] It's my pleasure now to turn the call over to James Mavor,
Vice
President Investor Relations of Barrick Gold. Please proceed, sir.
James
Mavor -
Barrick Gold - VP, IR
Thank
you
operator. And good morning, ladies and gentlemen. Welcome to our second quarter
conference call. Yesterday we released our second quarter results and they
are
available on our corporate web site as well as Mine Statistics and you can
get
them by our website or by calling our Investor Relations department. We'll
be
mailing our offer circulars for NovaGold and Pioneer Metals shortly and
following their mailing we will be pleased to respond to questions in connection
with their offers. Now, before we begin our conference call I'll read the
forward-looking statement. Management will be making forward-looking statements
during the course of this conference call and for a complete discussion of
the
risks, uncertainties and factors which may lead to our actual financial results
and performance being different from the estimates contained in our
forward-looking statement please refer to our year-end report for our most
recent AIF filing.
I'm
joined here today with our President and CEO, Greg Wilkins and he will chair
the
call and we will also have an update of our operations and development projects
by Peter Kinver, followed by an update of our exploration by Alex Davidson
and
then we will open it up to any questions. Greg, I'll turn it over to
you.
Greg
Wilkins -
Barrick Gold - President, CEO
Thanks,
Jim and good morning everyone. Thank you for joining us this morning to discuss
our second quarter results and to talk about the prospects going forward
and to
talk a little bit about the Placer integration and what we see with respect
to
the work that we've been doing over the last 6 months. We're obviously very
pleased with the financial results, the record financial results.
It's
gratifying to position the company over the last number of years to take
advantage of these high metal prices and I think really these results are
just
the start of the demonstration of the wisdom of some of the decisions that
we've
been making. We have lots left to do and we have lots of value left to extract
out of the company and to continue to work forward. We're going to enjoy
the
results for today but we recognize that we still have lots to do going forward.
The results were record for us, both in terms of earnings and cash flow but
more
importantly on a per share basis, which is really the test. There was
significant volatility in the quarter with movements in the gold price reaching
a high of about $730 an ounce and lows of $550. We continued to see an average
of about $600 an ounce but it did provide us with the opportunity to
aggressively bring down the Placer Legacy position and I think it's important
to
note that these strong financial results were done even though we had taken
down
the Placer Hedge Book to zero. We also concluded the transaction with Goldcorp
and received proceeds of $1.6 billion. We remain on track with our full year
gold production guidance and cash cost guidance. I think that's also quite
remarkable given the cost pressures that the industry continues to face.
Equally
in challenges that we see in the mining business generally and I think it
does
speak to the wisdom of having a good portfolio of assets. We're actually
increasing our copper production guidance and maintaining the cost guidance
for
copper, so pleased with that.
Jim
mentioned we will be shortly mailing our bid documents for both Nova and
Pioneer
and we would appreciate answering questions once those documents are out
rather
than trying to speculate on the contents as we see today. The results
themselves: earnings came in at $459 million and I think about $420 million
for
a couple unusual items, $0.53 a share, operating cash flow strong at $643
million. Just to put it into a bit of context, throughout the history of
the
company our best year earnings were in 2005, they came in at $401 million.
In
the second quarter alone we were able to surpass what we've been able to
do as a
best year up to this point in time and I think demonstrating again, the leverage
that we see with the higher commodity prices.
Operating
cash flow I mentioned was $643 million and on a per share basis came in at
$0.73. Gold production 2.1 million ounces, cost at $281. Copper production
was
100 million pounds and $0.76 a pound. All within guidance, all within
expectations. Very pleased with that performance. I think it really does
show,
by being able to keep our costs in line, we can truly see the effect of the
leverage as a result of the higher gold prices and copper prices as well.
We
expanded our margins and we really saw it come through in this quarter going
up
from about $180 an ounce in Q2 '05 to over $300 an ounce in Q2 '06. That’s a 72%
increase. So it is a function of not only increased margins but increased
production so it brings on the wisdom of having developed the new 4 mines
that
we opened last year and the acquisition of Placer has certainly been a credit
to
Barrick shareholders just from the basic operations, not talking about some
of
the other upside potential which I'll mention in a moment.
On
the
hedge book reduction, you may recall we started out the year at about 10.5
million ounces for the corporate sales book. In the first quarter we
aggressively reduced that by about 4.7 million ounces and then followed through
again with further strong second quarter reduction. Really, in anticipation
of
higher metal prices, we continued to have a very optimistic view for where
gold
prices are likely to trade, not just in the short-term but more on a sustainable
basis given the dynamics in the gold market itself. We have completely closed
out the Placer Legacy Hedge Book as it relates to corporate sales. Did not
touch
the project sales book which continues to stand at 9.5 million ounces but
I do
want to point out that there is some additional accounting that will take
place
in the third and fourth quarter. We will take a reduction of revenue of $79
million in Q3 and a residual $18 million in Q4 to fully account for the effect
of the closeout of these contracts. That leaves us with 2.8 million ounces
from
the Barrick Legacy Book, which as we've said in the past we will eliminate
by
the end of 2009 at the latest. We're very pleased with the acquisition of
Placer. Frankly, we get happier and happier as time passes.
The
acquisition has obviously helped our results given the movement in the metal
prices and aside from, I think, some initial disappointment on the production
expectation at a couple of Placer's assets as we've had a chance to go look
at
them more fully, we're seeing improvement in production from those assets
for
the second half which Peter will discuss. We have a good solid portfolio
of
operations and great projects and we continue to move those projects ahead
and
excellent exploration potential which Alex will comment on.
It
is
also very rewarding that the integration is going well and really we've done
the
technical things, the organization's set up to deal with the new company,
functioning reporting, the movement of the offices and transition of people,
that's all great. What's really exciting is to see the people in the
organization working together and really looking for a common objective and
working strongly toward achieving that common objective. The people side,
which
I think is going to be the key to the success of this operation is actually
moving ahead quite well.
Also,
on the synergies front, we continue to gain
confidence to achieve our $200 million synergies target. We've identified
specific opportunities for that. And we will be measuring them so
we are
really quite on track. I did mention the exploration upside; it is quite
significant. We have increased our exploration budget for the balance of
the
year. We've added about $20 million to it to go after specifically identified
targets that we think we can turn into resources and reserves in the
relatively short-term.
So
we're
very pleased with the progress we're making on that front and as I mentioned,
I
think, on the people side things are going as well as we could possibly hope
for. That's going to bode very well for us in the future. With that, let
me turn
it over to Peter, to walk through the operations and then we will ask Alex
to
comment more on the exploration potential and I'll wrap up before we open
it up
for questions.
Peter
Kinver -
Barrick Gold - COO
Thanks,
Greg, good morning everyone. I'm going to give you an overview on where I
see
things today as well as brief overview of our key assets.
First,
I
want to comment on some of the cost management initiatives that we have
implemented as part of the Placer Dome integration. This is especially important
to face given the general trends that we're seeing in the mining industry
today
with continuing inflationary cost pressures, high turnover rates and the
scarcity of resources, both human and capital and operating supplies. The
strength, breadth and scale gained from the Placer Dome transaction better
positioned us to deal with these issues. It's provided us a number of
opportunities we can leverage and capitalize on. Let me highlight a few of
the
initiatives that we've implemented in the second quarter in supply chain
management. The company's renegotiated a global supply contract thereby
leveraging our greater North American requirements. This resulted in some
good
savings.
We've
utilized Goldstrike’s tire service capabilities to maintain adequate stock,
spare tires for Bald Mountain and Cortez, rather than outsourcing these tires
which Placer was doing, we’re actually now repairing these tires ourselves and
we see that the tires that we repair have an extra tire life of 1,300 hours,
this compared to 500 hours with outsourced tires. The sites are sharing key
supplies, such as tires, critical spares and equipment with other mines in
the
region. With respect to the Placer Dome operations, we're doing a number
of
things to overcome some of the short-term challenges faced by these mines
to get
them back up to optimal operating performance.
We
focused on rolling out standardized Barrick systems throughout the organization
and growing and cascading a high performance culture across all levels of
the
organization. Barrick has undertaken an operations review of the major Placer
Dome operations and these ORTs or operation reviews, formalize improvement
projects and highlight value add opportunities, assist the company's long-term
planning and benchmarks the company against peers’ performance.
Turning
to our results, we have summarized the Q2 production and cash cost by region
on
this slide. Quarterly production is about 2.1 million ounces at a total cash
cost of $281 per ounce. I'm pleased with our operating results for the first
half of the year, we are expecting even stronger performance from a number
of
mines in the second half, which I'll touch on as we go through the various
regions.
In
North
America, starting with Goldstrike, the property continues to be the company's
largest producer contributing about 1 million ounces in the first half of
the
year. The Goldstrike cash cost was $283 an ounce for the first half and is
in
line with our expectations. We've benefited by about $8 per ounce from the
startup of our power plant. As a note, the royalties are also up $10 per
ounce
year-on-year due to high gold prices. Goldstrike passed a very special milestone
in May this
year
when it pulled its 30 millionth ounce of gold since its acquisition 20 years
ago
and we are very, very proud of our team that’s operating the mine down
there.
At
Cortez, production was impacted by lower grades mined and processed due to
mine
sequencing that occurred at the tail end of last year. During the quarter
Cortez
processed grades of 0.0118 ounce per ton which is about half of the prior
year’s
grade. On a positive note we're starting to see improved performance and
this is
because we've now caught up with the stripping and we exposed high grade
portions of ore in the pits and we've also instigated a program side slopping
leaching, which will add to a better performance in the second half of the
year.
We expect to see some catch-up in the next 2 quarters and we're quite optimistic
that we may actually beat the expectation of 200,000 ounces in
2006.
At
Bald
Mountain, Bald Mountain is an operation that is expected to see a substantial
improvement in the second half of the year. We already saw a significant
improvement on Q2 over Q1. During the first half of 2006 the focus was on
mining
and putting the material on the pads. Now, we're in the leaching phase and
we'll
see a better performance in the second half of the year.
Moving
to
South America, first at the Lagunas Norte mine, the mine continues to perform
exceptionally well, now having produced over 1 million ounces of gold since
startup in June last year. Primary crusher capacity increased from 42 to
54,000
tons a day. As a result of this increased throughput and high recovery rates
the
mine remains on track to contribute over 1 million ounces of production in
2006
at low cash costs.
At
Veladero, all grades for leaching are expected to increase as the mine
transitions from lower grade ore from the Filo Mario pit to the high grade
ore
from the Amable pit the second half of this year. Total cash costs are expected
to benefit from the higher volume of ounces produced.
Zaldivar,
our copper mine in Chile had a very good quarter producing 82 million pounds
of
copper at $0.61 a pound. We realized a price of $3.49 per pound for copper
over
that period over that quarter so it contributed a lot of cash flow for the
company.
Copper
production is forecast higher due to higher than expected ore tons and grade,
we
expect to now produce about 300 million pounds, which is great given the
current
copper price.
In
Australia Pacific region, the Cowal mine has been ramping up production during
the second quarter and will therefore increase its contributions to company
wide
production in the second half. The mine is still to reach the required run
rate
because of staffing issues, an example of manpower pressures, which the industry
is currently experiencing in Australia.
In
Africa
at North Mara, the mine experienced equipment availability problems during
the
first half of the year which caused changes to the mining schedule and the
processing of lower grade ore. The first half was also impacted by mine
sequencing which occurred in the last quarter of 2005. Improvements in equipment
availability in the second half along with accessing the high grade ores
as we
move into lower elevation areas in the pit will result in better second half
production and cash costs.
At
South
Deep in South Africa, as a result of the incident at South Deep the mine
site’s
hoisting capacity has been reduced to about 40% for the remainder of the
year.
The company is adjusting its full year guidance at South Deep to about
150,000
ounces.
We're
still on track to meet our company wide guidance for the year. With respect
to
the repair and rehabilitation of the main shaft, quick progress has been
made,
to date we've repaired the damaged shaft steelwork and mine services from
shaft
collar down to 84 level. And the alignment test of this section of the shaft
is
ahead of schedule. Recasting the dams in false bottom at the base of the
shaft
is also in progress. We expect the main shaft to be re-commissioned in early
2007.
Now
a few
comments on the progress of our development projects. We'll start with Cortez
Hills. The Cortez Hills project involves development of 2 adjacent
deposits: the Cortez Hills and Pediment. Barrick is 60% owner and operator
of
the project. Barrick’s share of expenditures for 2006 expected to be $40
million. In
Q2
activities consisted of procurement of equipment, primarily the open pit
mining
fleet. Equipment is expected to be delivered starting the second half of
this
year. We've also been busy commissioning the water supply system to the
underground portion of the projects and the underground
development.
We've
also got an exploration program there which Alex will be discussing later.
The
underground portion of the Cortez Hills project consists of twin declines
which
is shown in the slide, which are being driven from within the existing pits.
These declines will be used for exploration and access of the area underneath
the proposed Cortez Hills open pit. The year to date total development is
just
over 1,000 meters, which is roughly over 30% of the total project development
and the current achievement rates are on plan.
Pueblo
Viejo, Barrick has a 60% interest in this project with 40% interest sold
to
Goldcorp in May of this year. We continue to update the feasibility in analysis
prepared by Placer Dome and are reviewing other work completed on the projects.
This work is targeted for completion by year end.
We
remain
on track to provide project notice to the Dominican Government by July 2007,
which is necessary to retain our rights in the project. Review in progress
includes the following, promising metallurgical test work related to recovery
of
silver and potentially relate to copper and zinc. As a result we're studying
some plant modifications to accommodate improved by product credits which
should
improve project revenues.
A
technical evaluation of alternative power plant location and plant configuration
is underway and will determine the timing of the power plant EIA.
An
assessment to incorporate brick-lined autoclaves rather than titanium clad
based
on our Goldstrike experience and knowledge.
Preliminary
findings indicate some upward pressures on project capital cost due to industry
inflation pressures and increased power requirements. Optimization efforts
are
on-going.
Donlin
Creek, since acquiring control of Placer Dome earlier this year, Barrick
has
moved decisively to assure that the appropriate financial, technical and
human
resources are being devoted to the timely completion of the required feasibility
study. The 2006 budget has been increased
from 30 to $56 million on a 100% basis. The number of drills operating on
the
site have been significant increased -- to ensure that the 80,000 meters
of
drilling planned this year can be completed, ensuring sufficient drilling
information is available for the completion of the feasibility
study.
In
addition, Barrick has assigned to this project the best qualified technical
personnel from both inside Barrick and externally to ensure the challenges
of
the project are properly assessed and exploited.
Moving
to
Pascua-Lama, in June the appeals process was completed in Chile and the project
has received definitive approval.
We
continue to work with the Argentine authorities providing them with information
and now target their approval of project later this year. As a result the
timeline of this project has been backed up by about a quarter.
I'd
like
to now turn the call over to Alex to talk about exploration.
Alex
Davidson -
Barrick Gold - EVP of Exploration and Corporate Development
Thanks,
Peter. Good morning, ladies and gentlemen. I'd like to spend a few minutes
this
morning updating you on our Q2 exploration activities and some of the results.
I'll be focusing on Nevada this morning as a preview to the tours we're going
to
be running in September. We spent $44 million worldwide in the quarter for
$77
million year-to-date on regional and mine site exploration. We drilled about
22
properties in the quarter. We have over 48 rigs active around the
world.
Nevada
is
our key focus for exploration this year with 31 rigs running. About 35% of
planned 2006 exploration expenditures are going to be spent in Nevada. Q2
was
actually the first full quarter of Barrick implementation on the Placer projects
and I just want to talk about Cortez for a second. The exploration drilling
year-to-date on the Cortez joint venture is about 220,000 feet and about
200
holes. We currently have 5 core rigs and 3 RC rigs drilling on the Cortez
joint
venture.
Favorable
results in the quarter have been received from the Cortez Hills underground
project. Expanding the lower zone mineralization to the north and to the
south.
Also, in-fill drilling is showing significant increases in grades from the
lower or underground portion of the Cortez Hills breccia zone. The first
hole
drilled in the existing Cortez pits area has also returned a significant
oxide
intersection. Drilling is going to continue in all these areas this is
quarter.
Also,
on
the pipeline side of the property, significant intercepts have been received
from drilling in the deeper portion of the North Gap and confirmation drilling
in the Gold Acres southwest extension zone. Exploration plans for the remainder
of the year on Cortez are designed to add resources, through additional in-fill
drilling of the Cortez Hills breccia underground zone and step out drilling
on
the lower zone. Also, we will be continuing in-fill drilling on the Cortez
Pits
area and will be testing the Western Highwall of the Stage 8 at the pipeline
North Gap. That should bring in some more near surface oxide mill feed.
We'll
be
bringing the Gold Acres southwest extension zone into resource status. At
Bald
Mountain, 7 drill rigs were operating in the second quarter. We drilled about
130,000 feet in almost
150 holes. Most of the drilling activity and the success was in the reserve
development drilling in the areas of the existing pits.
Also,
9
exploration holes were drilled in the Zed Williams and LJ areas late in
the
quarter and we are waiting for results on those holes. We just completed
a large
soil geo-chemical sample in the Bald Mountain Stock and Bida Trends areas
and
have discovered two large soil anomalies there and we’re starting an in-fill
gravity survey through out that area.
At
South
Arturo we completed about 100,000-feet of drilling in 83 holes, mineralization
is largely drilled out now at 200-foot centers, but there's still some possible
extensions. We're doing both column leach and other met tests and preliminary
results are positive.
In
the
Hinge zone 12 holes have been completed with 10 of those returning significant
mineralization along about 2,000-feet of strike length. The Hinge zone is
still
open to the north, to the south and also on the east side. An additional
$5
million, $3 million from Barrick and $2 million from Glamis, has been approved
-- was approved in June for another 100,000 feet of drilling and for the
rest of
this year and the program is in progress with 3 rigs.
On
Goldstrike lastly, we have 3 underground drill rigs on site. The North Post
program is about 50% complete. We drilled about 26,000 feet at North Post
and
Deep North Post and have completed about 700 feet of development work on
the
Banshee Drift. Significant results have been received from both the North
Post
and the Deep Post areas and the programs are going to continue for the rest
of
the year.
With
that, I'll turn it back to Greg and I look forward to seeing some of you
on the
September tours.
Greg
Wilkins -
Barrick Gold - President, CEO
Thanks,
Alex. Let me just quickly wrap up and then we'll open the lines for questions.
We are reiterating our guidance for gold production between 8.6 and 8.9 million
ounces. We are reiterating our cost guidance between $275 and $290. I think
it's
worth highlighting the benefit of having the portfolio of assets. While we
had a
production hit on the South Deep Mine it did not actually affect our overall
guidance for the company. I think we've seen the odd example where a single
mine
dependence creates a significant amount of risk for investors as the mining
industry itself is not without its risk. On the copper side, we're increasing
the outlook for copper production from 350 to 370 million pounds, reiterating
our cost guidance there.
On
the
exploration side we're increasing our guidance with respect to exploration
expenditures. Alex has just walked you through some of the excellent results,
as
we've always had a program of allocating exploration capital to success,
we're
pleased that we're having the successes, not just in Nevada but allocating
additional funds to Pakistan to our project there and Tanzania and down in
the
Frontera district. We are also increasing our expenditures from a project
development standpoint and I really view this $150 million as an investment
as
we'll advance our pipeline of projects, albeit we have to charge it to earnings
because we haven't got it to the point where we've met the U.S. accounting
standards for capitalization.
Our
tax
rate ought to be in the 28 to 30% range, which is pretty much where we expected
it to be. We will be allocating the balance of the purchase price for Placer
Dome with more precision as we get more information going forward. So on
balance, very pleased with the outlook.
As
you
saw in the second quarter numbers, the leverage that we're able to achieve
against these higher metal prices by keeping the line on costs is certainly
delivering very tangible results for our shareholders. With that, operator,
if
we could open the lines for questions, I'd appreciate it.
OPERATOR
Thank
you. [OPERATOR INSTRUCTIONS] Our first question comes from the line of
Mark
Smith with Dundee Securities. Please proceed.
Mark
Smith -
Dundee Securities - Analyst
Congratulations
on an excellent quarter and bucking a trend. Couple questions. First on Cortez
Hills, for Alex, I guess. As you've been doing the additional drilling at
Cortez
Hills, have you been able to confirm the findings from Placer for most of
that
vertical drilling that they'd done on the deeply stepping ore body?
Alex
Davidson -
Barrick Gold - EVP of Exploration and Corporate Development
Yes,
we
have. That's the point I mentioned about we're getting significant increases
in
grades in the in-fill drilling on the Cortez Hills underground. So we're
confirming and frankly increasing the grades on the in-fill
drilling.
Mark
Smith -
Dundee Securities - Analyst
Is
it
still open, the depth now? Or is it restricted to stratigraphic
horizon?
Alex
Davidson -
Barrick Gold - EVP of Exploration and Corporate Development
No,
that
is fairly flat there. What we call the lower zone is where that flares out
into
a -- or out into a more flat lying zone underneath it.
Mark
Smith -
Dundee Securities - Analyst
Could
you
give me a handle on where the permitting stands for Pediment and Cortez
Hills?
Kelvin
Dushnisky -
Barrick Gold - Snr VP, Corporate Affairs
Its
plan
of operations have been filed and so at the present the project EIS a being
prepared.
Mark
Smith -
Dundee Securities - Analyst
And
Pediment is now completely included within the Cortez Hills plans,
correct?
Kelvin
Dushnisky -
Barrick Gold - Snr. VP, Corporate Communications
Correct.
Mark
Smith -
Dundee Securities - Analyst
Maybe
you
could just give me an idea of how things are going at Getchell or Turquoise
Ridge with respect to staffing and the training going on there.
Peter
Kinver -
Barrick Gold - COO
Peter
here. Yes, it has been an issue, turnover for all underground mines in Nevada
is
an issue. But we've instituted an intensive training program and I'm pleased
to
say that the turnover has got down to more acceptable levels. In respect
to
ground conditions, everybody has accepted the ground conditions there are
not
great. They've got a drift in-fill mining method using an extension of shot
crete and dealing with the difficult mine conditions down there.
Mark
Smith -
Dundee Securities - Analyst
Maybe
just one final question. Could you give us an idea of where Porgera's future
lies in terms of the exploration that's been ongoing and what we could
see from
that operation?
Alex
Davidson -
Barrick Gold - EVP of Exploration and Corporate Development
Yes.
In
terms of the exploration, we're targeting 2 targets, 1 of the deep targets.
And
we're currently drilling holes to test under Porgera and we just added
a rig.
That program totals about 6,000 meters and we're currently waiting for
analysis
on that. We are about to start a 3,600 meter surface field program to test
the
Tapagai prospect which is adjacent to the pit. And we should start that
this
month.
Mark
Smith -
Dundee Securities - Analyst
Thanks
once again. Congratulations on a good quarter.
Alex
Davidson -
Barrick Gold - EVP of Exploration and Corporate Development
Thanks,
Mark.
OPERATOR
Our
next
question comes from the John Hill with Citigroup.
John
Hill -
Citigroup - Analyst
Good
morning, everyone. I'd echo those comments. Also very impressive what the
company was delivered at Lagunas Norte. On the hedging side, you've obviously
been so aggressive in terms of taking down the Placer positions, also with
some
of the Barrick corporate book and you really haven't talked much about the
project hedge, the 9.5 million ounces. At what point would you consider tackling
something like that and maybe bringing that down to enhance the long-term
economics of Pascua.
Greg
Wilkins -
Barrick Gold - President, CEO
We're
quite content to allow that hedge book to continue to accumulate additional
to
[contango] and improve the forward looking prices. I think we're going to
be
able to utilize those contracts to support return of capital and support
project
financing activities which will help diminish the risk associated with making
those large CapEx projects. We continue to enjoy price accumulation and forward
prices, albeit lower than current spot price, but there's some security in
having that support.
John
Hill -
Citigroup - Analyst
Understood.
Perhaps, Alex, could you provide a couple comments on the plans for Frontera
as
we move ahead, seems all of the other regions have leapt forward. What's
your
thought?
Alex
Davidson -
Barrick Gold - EVP of Exploration and Corporate Development
We're
doing exploration at Frontera on Guanaco Zouzo which is south of Veladero.
There's a number of areas we're drilling at the moment and we've had some
decent
success on Dos Lagunas and actually some silver, success on the silver side
at a
target called Argenta. That drilling was done towards the end of the first
quarter beginning of the second quarter. Frontera will be kicking off again,
starting up again in sort of September/October.
John
Hill -
Citigroup - Analyst
Very
good, thank you.
OPERATOR
Our
next
question comes from the line of David Christie with TD Newcrest. Please
proceed.
David
Christie -
TD
Newcrest - Analyst
Good
morning guys. On that Pascua-Lama, in the report it talks about design
improvements that are going to help economics on that project. What would
they
be and give a little color on that?
Peter
Kinver -
Barrick Gold - COO
From
our
experiences, we've learned at Veladero, snow we've learned may not necessarily
be as bad as wind pressure tipping points, we're trying to keep them protected
from winds, buildings, having learned a lot about wind, construction activity
at
high altitudes. Wind and snow loads. All of these experiences we've been
getting
up there are going to help us optimize the new project.
David
Christie -
TD
Newcrest - Analyst
Okay.
I
guess, Alex, I was wondering if you'd give a little more color on what you're
seeing in the Hinge zones as far as what you're seeing as far as grades and
thickness.
Alex
Davidson -
Barrick Gold - EVP of Exploration and Corporate Development
They
are
similar to Arturo in the 0.5 plus range and thicknesses are similar to South
Arturo somewhere in the 100 to 200 feet.
David
Christie -
TD
Newcrest - Analyst
We
will
have a resource on that by the year end?
Alex
Davidson -
Barrick Gold - EVP of Exploration and Corporate Development
I
don't
know on Hinge zone, we've said we're going to have South Arturo itself later
this year.
David
Christie -
TD
Newcrest - Analyst
Thanks,
guys.
Greg
Wilkins -
Barrick Gold - President, CEO
On
Pascua, we intend to do a full update of all the projects later in the year.
At
that time we'll show you the total of the re-engineering elements, there
have
been quite a few changes and redesign from the picture that we painted back
in
July of 2004.
David
Christie -
TD
Newcrest - Analyst
That's
great. Thank you.
OPERATOR
Our
next
question comes from the line of Victor Flores with HSBC. Please
proceed.
Victor
Flores -
HSBC - Analyst
I
was
wondering if you could give us a little bit of color in East Africa. It looks
like cost still seems to be an issue. I know there's been a problem with
grades
and equipment availability and people and whatnot. I was hoping you could
just
flush that out a bit more for us, please.
Peter
Kinver -
Barrick Gold - COO
I'm
just
getting my notes. Victor, it's Peter here again. If we referred to North
Mara,
generally in Q1 this year they started off roughly 3 million of waste stripping
behind and that was mainly due to rescheduling from the last quarter of last
year. We refocused the waste mining and the core tonnage increased quarter
on
quarter we managed to increase the gold production at North Mara from
59,000 ounces in Q1 to 83,000 ounces in Q2. We expect to see a steady increase
as a percentage of open pit ore, an increase in over age to get the drop
in
ounces to come down. At Bulyanhulu we managed to show an increase quarter
on
quarter from 71,000 to 85,000 ounces and, again, a drop in the cash cost
there
and general things. Of course Tulawaka is going extremely well. They went
from
67,000 tons process to 105. So basically all 3 operations are showing a steady
improvement.
Victor
Flores -
HSBC - Analyst
So
essentially you're not particularly worried by the high cash cost from
these
assets, as long as you're seeing a sequential improvement in the operating
performance?
Peter
Kinver -
Barrick Gold - COO
As
we
said before, it would take longer to fix than we were saying. We said it
would
take 18 months to 2 years. We hope to see a steady improvement over the next
18
months. North Mara should have a much better performance next year.
Victor
Flores -
HSBC - Analyst
I
would
ask Alex to comment on the Buzwagi.
Alex
Davidson -
Barrick Gold - EVP of Exploration and Corporate Development
It's
currently in feasibility and in permitting. [inaudible]
Victor
Flores -
HSBC - Analyst
I
guess
it's good news it's no longer in your hands and it's now in
feasibility
Alex
Davidson -
Barrick Gold - EVP of Exploration and Corporate Development
That's
right.
Victor
Flores -
HSBC - Analyst
Thank
you
very much.
OPERATOR
Our
next
question comes from the line of Steve Butler, Canaccord Adams Please
proceed.
Steve
Butler -
Canaccord Adams - Analyst
Couple
questions, guys, I guess primarily for Peter. How will the grades improve?
How
will the grades improve in the second half of the year given that you did
improve nicely from Q1 to Q2 on grades at Veladero.
Peter
Kinver -
Barrick Gold - COO
[inaudible]
We've got a fair amount contained. So when you look at true recovery, we
put
about 360,00 ounces on the pad. There's a fair bit of inventory built up.
Those
are going to start through in Q2.
Steve
Butler -
Canaccord Adams - Analyst
Are
the
recovery rates better than you expected or better than you thought? How are
the
recoveries at Lagunas Norte?
Peter
Kinver -
Barrick Gold - COO
The
rates
of recovery are certainly quicker.
Steve
Butler -
Canaccord Adams - Analyst
Okay.
Peter
Kinver -
Barrick Gold - COO
Recovery
in 21 days as originally we planned for 28 days, something like that. It's
really a question of quicker leach and slightly higher leach
recovery.
Steve
Butler -
Canaccord Adams - Analyst
Last
question on Pueblo Viejo you guys alluded to the potential for base metal
credit
there in the future, zinc and copper. Could you give us a sense of what
the
grades are there? They are not in any of our models.
Greg
Wilkins -
Barrick Gold - President, CEO
I
think
it's a bit early for that. As we give you an update later in the year we'll
try
to address those questions for you.
Steve
Butler -
Canaccord Adams - Analyst
Okay,
thank you.
OPERATOR
Our
next
question comes from the line of Stephen Kibsey, CDP, please
proceed.
Stephen
Kibsey -
CDP
- Analyst
We
often
hear that it's a challenge for large gold producers to replace their annual
production with new found reserves. With respect to gold reserves and resources
in the ground where would you be comfortable with -- would you feel comfortable
with a 10 or 15 or 20 years of production and resource? Where does your
confident zone begin?
Greg
Wilkins -
Barrick Gold - President, CEO
I
would
say I certainly wouldn't want to be under ten years of reserves. That gives
you
a pretty short time frame. It's hard to take exact resource numbers, it's
all a
function of what we think the capability of our assets are. That often is
going
to be a judgment call of Alex and Peter and our technical folks rather than
necessarily investing into the drilling ore body with great continuity there's
great consistency. It wouldn't pay us to go on -- that's a bit of an art
exactly
what the number is. I can say we've been very focused on wanting to build
out a
pipeline of projects that give us that capacity. Ultimately convert those
resources. That's why we did the Pakistan deal earlier this year. Partly
it’s
why we did the Placer deal and clearly why we've made the bid for
NovaGold.
Stephen
Kibsey -
CDP
- Analyst
Thank
you.
Greg
Wilkins -
Barrick Gold - President, CEO
Thank
you. Next question?
OPERATOR
Now
our
next question comes from the line of Mark Smith Dundee Securities. Please
proceed.
Mark
Smith -
Dundee Securities - Analyst
Could
I
ask a question just on the timing. The last slide that you showed of your
pipeline, you suggested that Donlin and a few other projects would be beyond
2009 and production. You're obviously a lot of manpower to capital. Can you
give
me an idea of what it would take to permit that project and when you think
you
might actually have that project in production?
Greg
Wilkins -
Barrick Gold - President, CEO
It's
a
bit early to give you some definitive time lines on that. The permitting
process
has been commenced and certainly the work associated with that has been planned
out. And you know, again, I'm a bit empty headed because the permitting
exercises are influenced by a whole host of factors that aren't necessarily
within our control. Exact time frames are difficult to predict. And we're
at the
earlier stage on this one. We've got the work program in place to accumulate
all
of the information we need to develop the prefeasibility study within the
time
frames required to earn our 70% interest. We've had an enormous amount of
experience in building projects. We have a very good understanding and ability
to achieve that. We're confident we're going to stay on our timelines that
are
necessary to protect our interest.
Mark
Smith -
Dundee Securities - Analyst
When
do
you think that you might actually file the EIS then to kind of kick off the
permitting? Maybe you could give me that in terms of timing.
Greg
Wilkins -
Barrick Gold - President, CEO
I
think
that give us a couple of months, Mark. We've got such a nice line of projects
that it’s worth a couple of hours to go through and do a pretty thorough outline
on them. By the time we do that the next month or two, we'll be better able
to
answer those questions for you.
Mark
Smith -
Dundee Securities - Analyst
Okay,
fine. Could I ask also one more question of Peter. With the 6 months behind
in
the Placer acquisition, could you just talk a bit about the operations that
you
acquired that were perhaps better than what you expected and which ones were
actually a little bit less than what you expected?
Peter
Kinver -
Barrick Gold - COO
I
think
the Granny Smith mine has done really well. It's sort of a, I suppose you
call
it a low key asset. It's performed really well year-to-date. I think the
Porgera
mine despite the problems we had in Q1 with various things has done very
well.
Nevada has tremendous upside. I think with higher gold prices we're going
to
re-look at the potential of all these pits, remodel them with higher prices.
We're going to have some upside there.
Mark
Smith -
Dundee Securities - Analyst
Are
there
any assets you've been disappointed with or moderately disappointed
with?
Peter
Kinver -
Barrick Gold - COO
I
think
some of these operations were suffering from a bit of uncertainty. The
integration has been completed. We've seen a really strong commitment from
all
the employees around the world.
Mark
Smith -
Dundee Securities - Analyst
Okay.
Thanks, Peter.
OPERATOR
Our
next
question comes from the line of John Bridges, J. P. Morgan.
John
Bridges -
JP
Morgan - Analyst
Congratulations
on clearing that hedge book. Could you give us a breakdown of how you cleared
the 7 million ounces through, even as you produced 4 million ounces from
the
mines? How did that breakdown go?
Jamie
Sokalsky -
Barrick Gold - EVP CFO
It's
Jamie. In essence, we delivered some of the Placer hedge book against
production. That was a few million ounces in the first half. And the rest
of it
in essence, we just went into the market and closed those contracts out.
And
some of the accounting impacts of that, as Greg mentioned, will flow through
the
second half. About $100 million of accounting losses will flow through
the
second half as a result.
John
Bridges -
JP
Morgan - Analyst
Okay.
And
then the allocation of goodwill, when do you expect that to be
done?
Jamie
Sokalsky -
Barrick Gold - EVP CFO
We'll
have that done by the end of this year. The accounting rules, John, give
us a
year to finalize that purchase price allocation, that allocation of some
of that
goodwill. We've done a lot of allocation of assets and liabilities already.
The
hedge book, the debt, obviously the working capital items. So it's really
mostly
the property planting equipment and asset retirement obligations. You can
expect
that with an acquisition of this complexity and scale and the number of
operations and, the aspect that we've got to get through our long range plans
to
take a look at from a Barrick standpoint that we've got to take the rest
of that
year. In
the
meantime what we've done is made a preliminary estimate based on the merger
model that we had at the time. And as a result, we have put through almost
$100
million of additional costs that Placer would not have booked had they remained
on a stand alone basis. Inventory, fair value adjustments, amortization,
additional project development expense that they would have capitalized.
We've
actually put through a fair amount of cost if we hadn't done that our earnings
would have been about $0.14 higher.
John
Bridges -
JP
Morgan - Analyst
When
you
do come to the final thing, will the accounting rules require you to restate
these earnings for the quarters?
Jamie
Sokalsky -
Barrick Gold - EVP CFO
No,
they
won't, you just deal with it going forward.
John
Bridges -
JP
Morgan - Analyst
Interesting.
Thank you very much.
OPERATOR
Our
next
question comes from the line of John Tomazos from Prudential. Please
proceed.
John
Tomazos -
Prudential - Analyst
Could
you explain logistical reasons why you bid cash
for NovaGold as opposed to mostly stock for Placer perhaps there's a difference
in tax situation on the major shareholders. And then secondly, prior to the
Placer acquisition, Pascua was your major project in terms of a couple years
off.
Now
there's Pakistan, the Cerro Casale is gone for now. Is it possible that
something else is such a great success that you just wait a few more years
and
let the glaciers melt?
Greg
Wilkins -
Barrick Gold - President CEO
It's
different in size and scale for one thing. To be honest, we're acquiring
a
couple of assets. Really view the Nova transaction as an asset acquisition.
It's
really to augment the pipeline of projects that we talked about. We want
to
leverage gains. The gold values in those projects and as far as the copper
value
at Galore Creek. It's really looking for upside leverage by fixing the price
with cash and then getting the benefit going forward rather than diluting
some
of our existing operations with potential and lots of growth potential as
we
acquire these other projects. Frankly, probably the simple answer from my
perspective is that I don't think the value of the Barrick stock adequately
reflects the prospects we have in front of us. We are not prepared to issue
equity at this time. Our balance is robust enough that we could take on the
cash
transaction here and continue to develop the pipeline of projects that we
have
without equity delusion. That's a good package.
With
respect to the pipeline of projects, you know, one of the strategic values
that
we see from having a pipeline is that we can move them ahead based on their
own
timetable. As we found in the past and as a necessity to deliver expectations
of
our board and investors, you found yourself dealing in a very constrained
environment. Permitting -[inaudible]- regulators not being the least. So
by
having some alternatives and allowing the projects to fill in based on the
project timetable rather than an imposed timetable, I think we can be way
more
effective getting it done. Does that mean we shuffle capital from one project
to
another project, by all means, I don't have any expectation that we're going
to
build out this pipeline in anything other than that's going to be a sequential
process. We're not going to be taking on and building multi-billion dollar
projects all at the same time. It's a process of knowing that these things
take
a long time, they take a lot of capital and human resources to be done well.
We
want to be able to allocate those resources. Having options for us and moving
it
forward in a timetable that is really optimal for us, I think, is going to
be a
great advantage going forward rather than being bound to deliver, on a specific
project because there's great expectations.
Having
said that, Pascua-Lama remains a robust project. We've debated in the past
about
economic returns. Look at the economic returns in reengineering. In spite
of the
cost of inflation, we put that in to our view of long-term metal prices,
that's
going to be a great project for us. We're very keen to get that permitting
over
the goal line in the fall of this year. It's obviously a lot of
work.
The
Chilean side attracted a lot of attention so that attention gets focused
in
Argentina as well. The information we've assembled, the quality of the technical
reviews, the mitigation with respect to the impacts on the environments,
the
benefits that we'll see from an employment in the regions they're going to
affect it, the project we're prepared to support, the package adds up to
a very
strong package that will benefit the local communities and our investors.
We
remain and we're very committed to getting that project over the goal
line.
John
Tumazos -
Prudential - Analyst
Thank
you.
OPERATOR
Our
next
question comes from the line of Larry Strauss GMP Securities. Please
proceed.
Larry
Strauss -
GMP
Securities - Analyst
I'd
like
to echo everyone else on the progress you're making. A couple quick
house-keeping questions for Jamie. Dealing with your hedge accounting,
will
there be additional losses in periods beyond 2006 associated with the Placer
hedge liquidation?
Jamie
Sokalsky -
Barrick Gold - EVP CFO
No,
there
won't be. There will be no more losses associated with the Placer book
beyond
2006.
Larry
Strauss -
GMP
Securities - Analyst
Good.
And
your effective tax rate, I believe in the first half, you had an effective
tax
rate of about 20%. And you're guiding to the 28 to 30% range. Is that a
conservative range or do you think taxes are going to come up in the second
half?
Jamie
Sokalsky -
Barrick Gold - EVP CFO
It's
a
relative estimate. I would say it's going to be about the 30% area. That's
without any other valuation allowances and items that might come in through
the
balance sheet. That's just the basic tax rate and that could change based
on
some of these other factors. I'd use about 30%.
Larry
Strauss -
GMP
Securities - Analyst
30%
for
the second half or the full year?
Jamie
Sokalsky -
Barrick Gold - EVP CFO
Basically
the second half.
Larry
Strauss -
GMP
Securities - Analyst
Thank
you
very much.
Greg
Wilkins
Thanks,
Larry. Operator, if there are no more questions -
OPERATOR
There
are
no further questions.
Greg
Wilkins
Then
we'll end the call. I just wanted to thank everybody, again, for their
participation and for the questions. And if anything comes to mind as the
days
progress, then we look forward to answering those questions. Thanks again
for
joining us.
OPERATOR
Thank
you. Ladies and gentlemen, this does conclude the conference call for today.
We
thank you all for your participation and ask that you please disconnect your
lines. We thank you. And have a good day, everyone.
END
OF
PRESENTATION
Copies
of
the offer circulars relating to the Pioneer and Novagold Offers are available
on
Barrick’s website:
For
further information:
|
INVESTOR
CONTACTS:
|
|
MEDIA
CONTACT:
|
|
James
Mavor
|
Mary
Ellen Thorburn
|
Vincent
Borg
|
|
Vice
President,
|
Director,
|
Senior
Vice President,
|
|
Investor
Relations
|
Investor
Relations
|
Corporate
Communications
|
|
|
|
|
|
|
|
|
********************************************************************************************************************************************
Forward-Looking
Statements
Certain
information included in this transcript, including any information as to
our
future financial or operating performance and other statements that express
management’s expectations or estimates of future performance, constitute
“forward-looking statements.” The words “expect”, “will”, “intend”, “estimate”
and similar expressions identify forward-looking statements. Forward-looking
statements are necessarily based upon a number of estimates and assumptions
that, while considered reasonable by management, are inherently subject to
significant business, economic and competitive uncertainties and contingencies.
The Company cautions the reader that such forward-looking statements involve
known and unknown risks, uncertainties and other factors that may cause the
actual financial results, performance or achievements of Barrick to be
materially different from the Company’s estimated future results, performance or
achievements expressed or implied by those forward-looking statements and
the
forward-looking statements are not guarantees of future performance. These
risks, uncertainties and other factors include, but are not limited to: changes
in the worldwide price of gold or certain other commodities (such as copper,
silver, fuel and electricity) and currencies; changes in U.S. dollar interest
rates or gold lease rates; risks arising from holding derivative instruments;
ability to successfully integrate acquired assets; legislative, political
or
economic developments in the jurisdictions in which the Company carries on
business; operating or technical difficulties in connection with mining or
development activities; employee relations; the speculative nature of gold
exploration and development, including the risks of diminishing quantities
or
grades of reserves; adverse changes in our credit rating; contests over title
to
properties, particularly title to undeveloped properties; and the risks involved
in the exploration, development and mining business. These factors are discussed
in greater detail in the Company’s most recent Form 40-F/Annual Information Form
on file with the US Securities and Exchange Commission and Canadian provincial
securities regulatory authorities.
Barrick
Gold Corporation disclaims any intention or obligation to update or revise
any
forward-looking statements whether as a result of new information, future
events
or otherwise, except as required by applicable law.
