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Barrick Gold: Delivery and development
Barrick Gold www.BARRICK.com
Delivery and development
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Despite the disruption caused by the Covid-19 pandemic, Barrick Gold referred to 2020 as ‘a year of delivery and development’ as the company met its production targets and advanced its growth projects.
Barrick Gold is pursuing a vision ‘to be the world’s most valued gold mining business by finding, developing and operating the best assets, with the best people, to deliver the best returns, on a sustainable basis, to our owners and partners’. That vision was supported by a consistent operating performance across all quarters of the year, demonstrating the company’s ability to manage impact of the pandemic and its other challenges, which included a coup in Mali, the financial meltdown in Argentina and the Papua New Guinea government’s flirtation with resource nationalism.
Higher gold and copper prices drove annual operating cash flow up 91% to $5.4 billion and annual free cash flow to a new record high of $3.4 billion. Net earnings per share were $1.31 for 2020 and adjusted net earnings per share of $1.15 was up 125% on the previous year. Gold total cash costs and all-insustaining-costs (AISC) were within guidance, in spite of higher royalty costs, and Barrick-operated copper assets produced a strong performance with costs at the low end, or below, the guidance range.
The results allowed Barrick to declare an unchanged quarterly dividend of 9 cents per share and to propose a $750 million capital return, in line with the
company’s strategy of returning surplus funds to shareholders. The return of capital is subject to shareholder approval at the Annual and Special Meeting on 4 May 2021.
The group’s total attributable gold resources grew in 2020, net of depletion and excluding the impact of the disposition of Massawa, as a result of the focus on high-confidence geology models following the merger with Randgold. Attributable gold reserves achieved a 76% replacement of depleted ounces, excluding Massawa, with the Africa and Middle East region once again more than replenishing their reserves.
The merger with Randgold created a company which owned five of the industry’s Top 10 Tier One gold assets – Cortez and Goldstrike in Nevada USA (both 100%), Loulo-Gounkoto in Mali (80%), Kibali in the Democratic Republic of Congo (45%) and Pueblo Viejo in the Dominican Republic (60%) – as well as two with Tier One potential – Turquoise Ridge and the Goldrush/ Fourmile project, both in Nevada.
When Barrick combined its Nevada assets on 1 July 2019 with those of Newmont to create Nevada Gold Mines (61.5% owned and operated by Barrick) Turquoise Ridge became the sixth Tier One mine in the Barrick portfolio.
Delivery and development
Africa
Barrick’s African mines have performed particularly well, as the benefits of the merger with Randgold come to the fore. Loulo-Gounkoto is now one of the world’s largest gold mining operations and one of the largest businesses in West Africa. Randgold also brought with it the Tongon Mine in Côte d’Ivoire, Kibali Gold Mine in the Democratic Republic of Congo, Massawa in Senegal (now sold), Lumwana in Zambia and the Morila Gold Mine in Mali.
The discovery and development of Morila, in which a JV with AngloGold Ashanti owned 80 per cent, served as the springboard for the company’s expansion into Africa. Since it went into production in October 2000 Morila produced 6.9 million ounces of gold. The mine was due for closure this year but the JV’s share was sold in November 2020 to Firefinch Limited (previously known as Mali Lithium Limited) for $28.8 million cash. The Government of Mali retains the remaining 20 per cent.
For Barrick, the sale is in line with its policy of selling non-core assets to concentrate on Tier One mines – those with the capacity to produce at least 500,000 ounces of gold annually for more than 10 years in the lower half of the industry’s cost curve.
One of these is Kibali in the DRC, a joint venture with AngloGold Ashanti and the Congolese parastatal SOKIMO. The Kibali Joint Venture produced 808,134 ounces of gold in 2020, achieving the top-end of production guidance for the year.
This performance was driven by its underground operation which achieved record monthly and quarterly ore production in December and Q4 2020. Kibali is a world leader in automated underground mining, through systems that allow multiple autonomous machines to operate on the same haulage and production levels, and provide real-time visibility of all operations as well as automated control of the ventilation fans.
Kibali has consistently lowered its carbon emissions thanks to its three hydropower stations and the implementation of predictive maintenance monitoring at these plants will further minimize downtime. At the same time, Kibali has continued exploration and resource conversion and has replaced the ounces depleted by mining, thereby extending the life of the mine.
Barrick’s Loulo-Gounkoto mine complex comprises two distinct mining permits, Loulo and Gounkoto, in western Mali, bordering Senegal and adjacent to the Falémé River. The Loulo gold mine is owned by Société des Mines de Loulo, and the Gounkoto gold mine by Société des Mines de Gounkoto. Both Loulo and Gounkoto are owned by Barrick (80%), and the State of Mali (20%).
The Loulo-Gounkoto complex delivered production of 680,215 ounces of gold in 2020, exceeding its full year guidance despite Covid-19 and other challenges. At the same time,
Delivery and development
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it improved its safety performance, reducing its lost-time injury frequency rate by more than half compared to 2019 and achieving a lost-time injury-free year in its underground operations.
The underground operations have reached a world-class level of automation, hard on the heels of pace-setter Kibali. The two existing underground mines, Yalea and Gara, will shortly be joined by a third when Gounkoto underground delivers its first ore tonnes planned for the second quarter of this year.
In another major technological advance, Loulo commissioned Barrick’s first solar power plant in the Africa and Middle East region, delivering 20mW of capacity into the microgrid. Projects scheduled for completion in 2021 include the commissioning of a water treatment plant, an expansion of power generating capacity and a powerline upgrade to support the new Gounkoto underground mine.
The complex continued to support and develop local businesses, spending more than $375 million with local contractors and suppliers in 2020. In a presentation to local media and stakeholders at the Loulo mine, Barrick president and chief executive Mark Bristow said that thanks to continuing successful exploration, the complex’s gold reserves were now larger than they had been 15 years ago, and indications were that it would once more have replaced ounces depleted by mining in 2020.
“The Loulo district lies at the heart of one of the world’s most prolific gold regions,” he said. “Over the past 15 years, this has delivered more worldclass discoveries than any other, and our extensive exploration programs are designed not only to replenish our reserves but to find our next Tier One mine.”
In Côte D’Ivoire, Barrick’s Tongon gold mine is 55 kilometres south of the border with Mali. The mine is owned by Société des Mines de Tongon SA, in which Barrick has an 89.7% interest, and the State of Côte d’lvoire 10%, with 0.3% held by Ivorian investors.
The Tongon mine produced a total of 284,863 ounces of gold in 2020, at the top end of its guidance for the year, driven by strong plant throughput with runtime setting a record of 95.2% in October. This improved throughput, combined with cost-reduction initiatives, had a positive impact on per ounce costs compared to 2019.
Built and commissioned in the middle of a civil war, Tongon has operated in an unstable socio-political environment
and has been impacted by problems including a mill fire, recurring technical issues and an erratic grid power supply.
“Despite all these challenges, Tongon has been consistently profitable and in 2020 again paid a $150 million dividend to its shareholders,” said Bristow. “It provided $1.2 million to the government to support its campaign against Covid-19 while implementing effective prevention measures at the mine to protect its people and the business. And it maintained its commitment to its host community with the installation and start-up of a number of incomegenerating projects.”
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Continued exploration and the conversion of resources to reserves have extended the life of the mine to 2023 and further opportunities for replacing reserves are being pursued.
In Tanzania, the North Mara and Bulyanhulu gold mines both produced near the top end of their production guidance in 2020, their first full year under Barrick’s management. Including Buzwagi, the Tanzanian assets delivered a combined output of 462,472 ounces for the year.
The mines have been successfully revived, with North Mara delivering significant improvements and underground production restarted at Bulyanhulu. The mines, managed through the Twiga joint venture with the Government of Tanzania, paid a maiden dividend of $250 million in October 2020.
North Mara posted a record throughput in Q4 and Bulyanhulu recommenced processing of underground ore during the quarter. Bulyanhulu is scheduled to be in full production by the second half of 2021, when its ramp-up is completed. “We’re optimizing our 10-year plan to make the combined North Mara and Bulyanhulu mines the seventh Tier One complex in the Barrick portfolio by bringing them into the lower half of the industry’s cost curve,” said Bristow.
During 2020, Barrick invested $800 million in the Tanzanian economy in the form of taxes, permits, infrastructure development, salaries and payments to local suppliers. In line with its groupwide policy of employing host country nationals, the company continued to recruit locally, with over 600 new workers employed during the year at Bulyanhulu alone. Tanzanian nationals now make up 96% of the mine’s total workforce.
Barrick’s African portfolio is completed by the Lumwana copper mine in Zambia, a conventional open pit (truck and shovel) operation 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 to produce copper concentrate. The mine produced 276 million pounds of copper in 2020, a 23% increase since 2018.
Proper maintenance and increased efficiencies led to a record throughput of 25.3Mt in 2020, with December being the highest month for milling since the plant was commissioned in 2008. The life of mine has been extended to 2039 as a result of the improved cost profile, and there is potential for further expansion and development of a super-pit.
Delivery and development
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On 1 July 2019 Barrick Gold and Newmont Corporation (then known as Newmont Goldcorp) announced the completion of their joint venture to combine their respective Nevada properties into Nevada Gold Mines LLC. The deal was described at the time as a classic case of the whole being more valuable than the sum of its parts – and so it has proved.
The JV is operated and 61.5% owned by Barrick, and 38.5% owned by Newmont. It 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’s Carlin, and Barrick’s Turquoise Ridge with Newmont’s Twin Creeks.
In its first year of combined operation, NGM met the production and cost targets set out at the start of the joint venture, a significant achievement considering the JV had required the integration of multiple assets, including three Tier One mines, into a unified complex under a new leadership team.
“The new team was drawn from both legacy companies,” said Bristow. “It started with a clean slate in a fit-forpurpose structure, integrating the two bodies of knowledge to produce new models and fresh opportunities.
“By removing the fences that had previously separated geologically connected assets, mines and projects
that clearly belonged together could be combined into larger and more efficient operations, with substantial savings as an immediate benefit. Even more important, this joint venture has created a platform from where we can see a bright new future for NGM as the leader of its industry in every respect: truly a case of the best assets and the best people delivering the best returns.”
Barrick’s growth projects in Nevada are also continuing according to plan. Construction of the twin exploration declines at Goldrush continues to progress ahead of schedule. The integration of the Goldrush project team into the Cortez structure has been completed and the consolidated underground management team is currently progressing operational readiness.
During 2021, underground development and exploration will continue at Goldrush. First ore will be exposed in the first half of 2021 as part of ongoing exploration and development. Activities in 2021 will primarily focus on verifying geological, geotechnical and geohydrological models developed for the feasibility study until a Record of Decision is received. Following receipt, construction of infrastructure to allow the ramp-up of production activities can commence.
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. Together with increased hoisting capacity, the third shaft is expected to provide additional ventilation for underground mining operations as well as shorter material haulage distances. Commissioning is expected in late 2022.
With the implementation of SAP S4 HANA at Nevada Gold Mines in 2020, Barrick laid one of the key foundations for its updated digital roadmap. As the remaining mines and regions bring SAP online in 2021, a major portion of the data used for operational and financial analysis will become standardized globally.
Having successfully implemented the financial consolidation process into OneStream during Q4, the next building block is a concurrent roll-out of a more agile financial planning system, also within the new OneStream application. The full integration of these two major platforms (SAP and OneStream) will enable much quicker insight into the group’s key cost drivers and enormously increase the potential for efficiency analysis, benchmarking and other valueadded reporting.
Barrick’s approach to delivering digital innovation is to let subject matter experts from within the business functions drive the programs, as opposed to a centralized innovation office. This has the benefit of ensuring tight ownership by the business and alignment with technology teams.
In Canada, the Hemlo operation is located about 350 kilometres east of Thunder Bay, Ontario. Plans were announced in October 2020 to extend the life of the Hemlo mine by transitioning it to a modernized Tier Two asset with a purely underground operation.
The Hemlo open pit has been mined since 1989 and has produced over 2.8 million ounces of gold. In 2013, the David Bell mine closed, leaving the open pit and the Williams underground mine as the chief sources of ore for the mill feed. Over the next six years, the open pit ramped up and became the primary source of ore for Hemlo.
With mining at the open pit scheduled to wind down at the end of October last year, however, with less than 200,000 tonnes of ore remaining, a transition plan was put in place to transfer most of the 70-plus open pit employees to the current underground contractor, Barminco.
Delivery and development
Barrick’s flagship operation in Latin America is Pueblo Viejo in the Dominican Republic, approximately 100 kilometres northwest of the capital city of Santo Domingo. Owned and operated by the Pueblo Viejo Dominicana Corporation, a joint venture between Barrick (60%) and Newmont (40%), the project has been producing gold since 2012. The company’s workforce is 98% Dominican. For the second straight year, mill throughput achieved a record in 2020.
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.
The plant expansion was approved last year and work has commenced. Construction activities continued to ramp-up following EIA approval in Q3 2020. The company is engaging with government and stakeholders to secure land tenure and access for a new tailings storage facility.
During the past year, Pueblo Viejo converted its Quisqueya power plant from heavy fuel oil to natural gas. This will reduce greenhouse gases by 30% and nitrogen oxide by 85%, further reducing Pueblo Viejo’s impact on the environment. There are also plans to switch its lime kiln from diesel to natural gas.
In Argentina, the Veladero mine is located in San Juan Province, in the highly prospective Frontera District. The property is located at elevations of 4,000 to 4,850 metres above sea level, approximately 374 kilometres northwest of the city of San Juan. Veladero is a 50/50 joint venture operation with Shandong Gold.
Barrick is presently focused on the transition to a new heap leach phase at Veladero, which was temporarily delayed by the response to the Covid-19 pandemic in Argentina. As the operation now transitions to Phase 6, which is on-track for commissioning by the end of the first half of 2021, the focus at Veladero will be on ensuring the delivery of the optimized 10year plan, including the start of the Cuatro Esquinas pit pushback and the acceleration of brownfields and infill drilling. Barrick expects stronger performance at Veladero in the second half of 2021 after commissioning of Phase 6, as heap leach processing operations will be reduced during the transition phase.
The project to link Veladero to the power grid in neighbouring Chile, halted by the pandemic, is also underway again.
In February this year Barrick announced it had reached an agreement to sell its 100% interest in the Lagunas Norte mine in Peru to Boroo Pte Ltd (Singapore) for a total consideration of up to $81 million, plus the assumption by Boroo of Barrick’s closure liability relating to Lagunas Norte.
Mark Bristow said the sale was in line with Barrick’s policy of selling non-core interests, a process which has already realized some $1.5 billion, in order to focus its portfolio on Tier One assets. The proposed acquisition would benefit the mine’s stakeholders in Peru, he said, by giving Boroo the opportunity
Delivery and development
to extend its life by accessing satellite resources and adapting the infrastructure.
At Pierina, also in Peru, closure planning is continuing, although Bristow has made it clear that the Latin American region remains an important destination for Barrick, so the company will keep a team in Peru to continue to develop its portfolio of exploration assets and to pursue opportunities to find and operate world-class gold and or copper mines in that country again.
Middle East and Asia-Pacific
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.
Jabal Sayid’s copper production in the fourth quarter of 2020 was 6% higher compared to the prior quarter, mainly due to an increase in throughput following improvements to the milling circuit and higher plant availabilities. Copper production in 2020 of 75 million pounds exceeded the guidance range of 60 to 70 million pounds, with the mine exceeding expectations on grade and tonnes, and the plant outperforming on both throughput and plant availabilities. 2021 production guidance is 70 to 80 mlbs.
The drill program at Jabal Sayid is on track to convert additional inferred resource into the life of mine plan. It continues to highlight extension opportunities at the known lodes and to outline new potential at greenfield targets. Building on the exploration success in the third quarter of 2020, surface and underground drilling has recommenced at Lode 1.
The Porgera Joint Venture is an open pit and underground gold mine located at an altitude of 2,200-2,600 meters in the Enga Province of Papua New Guinea, about 600 kilometres northwest of Port Moresby. Barrick and Zijin Mining Group each own 47.5% of the operation, with the remaining 5% interest held by Mineral Resources Enga.
Delivery and development
Porgera’s Special Mining Lease terminated on 16 August 2019. The company applied for a 20-year extension in June 2017 and has been engaging with the Government of Papua New Guinea on the matter ever since.
On 2 August 2019, a ruling from the National Court of Papua New Guinea allowed the mine to continue operating while the application to extend its SML was being considered. Also in 2019, in response to a request from Papua New Guinea Prime Minister Marape, the company proposed a benefitsharing arrangement that would deliver more than half the economic benefits from the Porgera mine to Papua New Guinea stakeholders, including the Government, for the remainder of the life of mine, estimated at 20 years.
On 24 April 2020, however, Barrick Niugini Limited (BNL), the majority owner and operator of the Porgera JV, was told by the Government of Papua New Guinea that the SML would not be extended, a move interpreted by Barrick as tantamount to nationalisation. Porgera was placed on temporary care and maintenance on 25 April 2020 to ensure the safety and security of its employees and communities.
The power struggle is continuing through the courts. Due to the uncertainty, however, Porgera has not been included in Barrick’s full year 2021 guidance.
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