TORONTO — Barrick Gold Corp. recently reported fourth-quarter and full-year results for the period ending Dec. 31, 2017, highlighting 5.32 million ounces of gold produced, with a particularly strong performance from Barrick Nevada.
In 2017, Barrick generated operating cash flow of $2.07 billion, and free cash flow of $669 million.
Gold cash costs fell by 3.7 percent, driven by a favorable sales mix, and the ongoing impact of initiatives to improve the productivity and efficiency of operations. Lower free cash flow compared to 2016 was primarily the result of lower production and higher working capital, in part due to the temporary suspension of operations at the Veladero mine in Argentina, and the concentrate export ban impacting Acacia Mining plc’s operations in Tanzania.
Higher capital expenditures in 2017 also reflected planned investments in the organic project pipeline, as the company invests more in the future of the business.
In 2017, Barrick reduced its total debt by $1.51 billion, or 19 percent, exceeding the target of $1.45 billion. At the same time, the company returned more capital to shareholders, with a 50 percent increase in quarterly dividend, to $0.03 per share.
While seeing higher sales from Barrick Nevada, the company forged a new strategic partnership with Shandong Gold at the Veladero mine, a landmark agreement with the potential to create significant long-term value for owners, as well as community and government partners in Argentina and beyond.
Barrick year-end 2017 highlights
Full year net earnings were $1.44 billion ($1.23 per share), compared to net earnings of $655 million ($0.56 per share) in 2016. This significant improvement in net earnings was primarily due to $2.03 billion ($1.43 billion net of tax and noncontrolling interest) in impairment reversals and gains on sale related to the divestment of 50 percent of the Veladero mine and 25 percent of the Cerro Casale project in 2017. This was partially offset by net impairment charges of $908 million ($511 million net of tax and noncontrolling interest) mainly relating to Acacia’s Bulyanhulu mine, which has been placed on reduced operations, and the Pascua-Lama project, where proven and probable gold reserves have been reclassified as measured and indicated resources, coupled with an impairment reversal at the Lumwana mine.
In 2017, adjusted net earnings increased by 7 percent to $876 million ($0.75 per share), compared to $818 million ($0.70 per share) in 2016. Adjusted net earnings benefited from higher gold and copper prices, combined with lower direct mining costs, reflecting higher capitalized waste stripping at Barrick Nevada and Veladero, a lower relative sales contribution from higher cost operations at Acacia, and lower inventory write-downs compared to 2016. These gains were partially offset by lower sales volumes, primarily due to the sale of 50 percent of Veladero, and the concentrate export ban impacting Acacia’s operations, combined with an increase in exploration and evaluation costs, investments in innovation, higher income tax expense, and higher depreciation expense.
Operating cash flow in 2017 was $2.07 billion, compared to $2.64 billion in 2016. This decrease reflects working capital outflows related to the buildup of inventory at Pueblo Viejo, Lagunas Norte, and Acacia, lower gold sales driven by the sale of 50 percent of the Veladero mine on June 30, 2017, and lower sales volumes at Pueblo Viejo, Hemlo, Turquoise Ridge, Lagunas Norte, and Acacia. Operating cash flow was also impacted by an increase in exploration, evaluation and project expenses, lower operating cash flows attributed to non-controlling interest, and higher cash taxes paid. These declines were partially offset by higher sales from Barrick Nevada, which benefited from operational efficiencies and improved throughput, higher gold and copper prices, and lower direct mining costs.
Free cash flow for 2017 was $669 million, compared to $1.51 billion in the prior year. The decrease primarily reflects lower operating cash flows combined with higher capital expenditures. In 2017, capital expenditures on a cash basis were $1.40 billion compared to $1.13 billion in 2016. Higher capital spending reflects a $161 million increase in mine site sustaining capital expenditures, primarily at Barrick Nevada and Veladero, partially offset by a decrease in sustaining capital at Acacia. Project capital expenditures also increased by $109 million, reflecting the development of Crossroads and the Cortez Hills Lower Zone at Barrick Nevada, and Goldrush project drilling, partially offset by a decrease in pre-production stripping at the South Arturo pit, which entered commercial production in August 2016.
Barrick continues to advance a pipeline of high-confidence projects at or near existing operations, with the potential to contribute more than 1 million ounces of annual production to Barrick, at costs well below current portfolio average.
Goldrush has the potential to become Barrick’s newest underground mine in Nevada, with first production expected as early as 2021, and sustained production by 2023. The prefeasibility study estimated average production of approximately 450,000 ounces of gold per year, at an average cost of sales of $800 per ounce, and average all-in sustaining costs of $665 per ounce.
Through the development of a third shaft, the Turquoise Ridge Joint Venture in Nevada has the potential to increase production to an average of 500,000 ounces per year (100 percent basis) at a cost of sales of $750-$800 per ounce, and all-in sustaining costs of about $625-$675 per ounce.
The Deep South project at Cortez will expand mining below currently permitted levels, and is expected to contribute average production of more than 300,000 ounces of gold per year from the underground mine, with initial production as early as 2023. The prefeasibility study estimated average cost of sales of $840 per ounce, and average all-in sustaining costs of $580 per ounce.
For the full report, visit Barrick’s website.