Barrick Reports Third Quarter 2013 Results

TORONTO, ONTARIO--(Marketwired - Oct 31, 2013) - Barrick Gold Corp. (NYSE:ABX)(TSX:ABX) (Barrick or the "company") today reported third quarter 2013 financial and operating results.

• Strong operating results and cash flow; improved 2013 guidance
  • gold production of 1.85 million ounces at all-in sustaining costs (AISC) of $916 per ounce
  • copper production of 139 million pounds at C3 fully allocated costs of $2.15 per pound
  • narrowed the range and lowered top end of operating cost guidance for gold; improved copper guidance on Lumwana turnaround
  • adjusted net earnings of $0.58 billion ($0.58 per share) and adjusted operating cash flow of $1.30 billion
• Suspension of construction activities at the Pascua-Lama project will further reduce 2014 capital costs by up to $1.0 billion
• Targeting annual cost savings of $500 million from a flatter operating model and other initiatives
• Portfolio optimization progress with sale of Barrick Energy, Yilgarn South mines, and Pierina closure

"Significant cost and operational improvements achieved this year, including previously announced reductions of $2.0 billion from budgeted 2013 capital and costs, have translated into another quarter of strong results," said Jamie Sokalsky, Barrick's President and CEO. "We continue to make excellent progress at Lumwana and are evaluating a number of other opportunities to improve performance further. We have also targeted additional annual savings of approximately $500 million through a simpler, more efficient operating model and other initiatives, demonstrating our commitment to continued cost reductions. The suspension of Pascua-Lama will also significantly improve our near term cash flows."

PASCUA-LAMA PROJECT SUSPENSION

Barrick has decided to temporarily suspend construction activities at Pascua-Lama, except those required for environmental protection and regulatory compliance. This decision will postpone and reduce near term cash outlays, and allows the company to proceed with development at the appropriate time under a more effective, phased approach. The decision to re-start will depend on improved project economics such as go-forward costs, the outlook for metal prices, and reduced uncertainty associated with legal and other regulatory requirements.

"We have determined that the prudent course - at this stage - is to suspend the project, but naturally we will maintain our option to resume construction and finish the project when improvements to its current challenges have been attained," Mr. Sokalsky said. "As a result of our previous decision to slow down and re-sequence construction, which resulted in significant demobilization over the last few months, we are in a much better position to implement this temporary suspension quickly and efficiently, with many ramp-down activities already underway. Our previously lowered capital cost guidance for 2014 is now expected to be further reduced by up to $1.0 billion while we continue to address all our environmental and social obligations. This decision is consistent with our disciplined capital allocation framework announced last year."

The ramp-down will be carried out in a way that allows for an efficient and effective re-start when conditions warrant. In the meantime, the company will update and refine capital cost estimates and stage the project's remaining development into distinct phases with specific work programs, budgets and objectives. This staged approach will also facilitate more efficient planning and execution, more effective capital deployment, and improved cost control. The company will also continue to explore further opportunities to improve the project's risk-adjusted returns, such as strategic partnerships and royalty or other income streaming agreements. Most importantly, Barrick's decision will maintain the option value of this major world class resource and its potential to generate significant cash flows during its 25 year mine life and beyond.

FLATTER OPERATING MODEL AND ADDITIONAL COST REDUCTION INITIATIVES

Barrick is targeting $500 million of annual cost savings related to: job reductions from a company-wide review launched earlier this year, now largely complete, and through a new operating model (~$150 million), a program to reduce procurement costs (~$250 million) and other initiatives (~$100 million). In addition, African Barrick Gold (ABG) has targeted annual savings of $185 million.

Barrick's commitment to maximizing risk-adjusted returns and free cash flow by focusing on its most profitable production requires a more streamlined operating model. The new model provides a more efficient and simpler decision-making structure that better supports the company's goal of cost reduction. The new model will eliminate the Regional Business Unit structure and will be in place by early next year. As a result of the change in operating structure, the company is eliminating approximately 1,850 positions, 85 percent of which have been achieved to date.

Under the new structure, Cortez, Goldstrike, Pueblo Viejo, Lagunas Norte and Veladero will report directly to the Chief Operating Officer (COO), as will the head of Copper operations. The balance of the mines will report to Operating Heads in North America and Australia Pacific and in turn, to the COO. The new operating model allows mine managers to focus more sharply on the core business of mining, brings senior management closer to the mines, and creates a flatter organization with stronger accountability.

BARRICK'S HIGH QUALITY ASSETS PROVIDE FLEXIBILITY IN A LOWER METAL PRICE ENVIRONMENT

As part of Barrick's increased focus on disciplined capital allocation adopted in 2012, the company has aggressively reduced costs, improved cash flow and is well underway in executing its portfolio optimization plan. During the third quarter, the company has made further progress to divest non-core assets and improve cash flow:

The company is developing new mine plans at $1,100 per ounce at its mines. The combination of: i) selling non-core assets; ii) changing mine plans to focus on more profitable production; and, iii) calculating reserves with a lower gold price assumption will reduce year-end reserves and future production. Where possible, we will nevertheless maintain the option to access the metal in the future once gold prices recover.

FINANCIAL DISCUSSION

Third quarter net earnings and adjusted net earnings were $0.17 billion ($0.17 per share) and $0.58 billion ($0.58 per share)⁽¹⁾, respectively. These results compare to net earnings and adjusted net earnings of $0.65 billion ($0.65 per share) and $0.88 billion ($0.88 per share), respectively, in the same prior year period. Net earnings reflect the impact of lower realized gold and copper prices, higher interest expense and higher income tax expense, partially offset by higher copper sales. Significant adjusting items (net of tax and non-controlling interest effects) for the quarter include:

• $280 million in income tax expense at Pueblo Viejo, primarily due to the recognition of an increase in the deferred tax liability which will be drawn down over the life of the mine, as well as an acceleration of current taxes payable for 2012 and 2013 related to the enactment of the revised Special Lease Agreement (SLA);
• $47 million increase in the rehabilitation provision for Pierina as a result of its accelerated closure; and,
• $40 million in unrealized foreign currency translation losses.

Third quarter 2013 operating cash flow of $1.23 billion compares to $1.85 billion in the third quarter of 2012 and reflects the lower net earnings, partially offset by a decrease in income tax payments. Adjusted operating cash flow of $1.30 billion⁽¹⁾ compares to $1.40 billion in the same prior year period and removes the impact of the settlement of foreign currency and commodity derivative contracts. Realized gold and copper prices for the quarter were $1,323 per ounce⁽¹⁾ and $3.40 per pound⁽¹⁾, respectively, compared to the spot averages of $1,326 per ounce and $3.21 per pound.

LIQUIDITY AND FINANCIAL FLEXIBILITY

At September 30, Barrick had cash and equivalents of $2.3 billion and $4.0 billion available under its credit facility. The company generated operating cash flow of $3.22 billion in the first nine months of 2013. Barrick has approximately $1.3 billion of cumulative debt maturing through to the end of 2015.

In the third quarter, Barrick Energy was sold for total consideration of $435 million, including cash of $387 million plus a future royalty valued at $48 million. Barrick also completed the sale of the Yilgarn South assets to Gold Fields Ltd. for total consideration of $266 million, consisting of $135 million in cash and $131 million in Gold Fields Ltd. shares. The company continues to actively pursue other portfolio optimization opportunities, including the divestiture of non-core assets.

CORPORATE GOVERNANCE

Since the company's 2013 annual meeting, various directors of Barrick have engaged in discussions with Barrick's institutional shareholders to understand their perspectives on Barrick's compensation practices and governance arrangements. The Board is addressing the issues that have been raised with our directors, including the modification of the company's executive compensation arrangements and the rejuvenation of the Board through a combination of departures from the Board and the addition of independent directors. The company's intention is to update the market before year end on these initiatives.

OPERATING RESULTS AND OUTLOOK DISCUSSION

Third quarter 2013 gold production was 1.85 million ounces at adjusted operating costs and AISC of $573 per ounce⁽²⁾ and $916 per ounce⁽²⁾, respectively. Adjusting for the sale of the Yilgarn South mines, full year gold production is now expected to be at the low end of the original 7.0-7.4 million ounce guidance range. All-in sustaining costs are expected to be within the recently reduced guidance range of $900-$975 per ounce and the company has lowered the top end of its adjusted operating cost guidance to $575-$600 per ounce.

Third quarter copper production was 139 million pounds at C1 cash costs of $1.69 per pound⁽²⁾ and C3 fully allocated costs of $2.15 per pound⁽²⁾. The Lumwana copper mine continues to benefit from changes made to the mine plan in the second quarter and other business improvement initiatives to decrease costs and maximize cash flow. Due to the mine's improved operating performance, Barrick has increased full year company-wide copper production guidance to 520-550 million pounds. Full year C1 cash cost and C3 fully allocated cost guidance has been reduced to $1.90-$2.00 per pound and $2.40-$2.60 per pound, respectively.

North America

North America produced 0.90 million ounces at AISC of $816 per ounce. Barrick's 60 percent share of production from the Pueblo Viejo mine was 0.11 million ounces at AISC of $770 per ounce. Barrick's share of 2013 production from Pueblo Viejo is anticipated to be about 500,000 ounces at AISC of $700-$750 per ounce, primarily due to a slower than expected ramp-up. Major modifications to the autoclaves have been completed and all four autoclaves are online after being individually tested to design capacity. The new 215 megawatt power plant was commissioned on schedule in the third quarter. The mine is now expected to reach full capacity in the first half of 2014 following completion of de-bottlenecking modifications to the lime circuit. During the quarter, proposed amendments to the Pueblo Viejo SLA were approved by the Government of the Dominican Republic and Pueblo Viejo Dominicana Corporation (PVDC) and were effective as at the quarter-end.

The Cortez mine produced 0.33 million ounces at AISC of $470 per ounce on lower grades and recoveries. Production at Cortez is expected to decline in the fourth quarter due to lower grades as anticipated in the mine plan. Goldstrike produced 0.23 million ounces at AISC of $874 per ounce, reflecting higher open pit grades following a stripping phase in the first half of the year. The autoclave facility is undergoing modifications for the thiosulphate project, which will enable about 4.0 million ounces to be brought forward in the mine plan. Total project costs are now expected to be about $585 million due to increased steel requirements and higher contractor costs. The company expects first production from this project in the fourth quarter of 2014 and average annual production of 350,000-450,000 ounces over its first full five years of operation. Full year production for North America is expected to be within the original guidance range of 3.55-3.70 million ounces. Full year AISC are anticipated to be at the high end of the previous guidance range of $750-$800 per ounce, primarily on higher costs at Pueblo Viejo due to lower silver by-product credits as a result of the slower than expected ramp-up.

South America

South America produced 0.33 million ounces at AISC of $831 per ounce. The Veladero mine contributed 0.15 million ounces at AISC of $874 per ounce, reflecting lower grades and silver credits compared to the first half of the year. Lagunas Norte produced 0.14 million ounces at AISC of $696 per ounce. Production at Lagunas Norte is expected to increase in the fourth quarter on higher grades and tons as anticipated in the mine plan and as a result of the newly commissioned carbon-in-column plant, which allows for greater solution flow to the expanded leach pad. The company has decided to initiate closure of the Pierina mine in Peru.

Full year production for South America is now expected to be at the high end of the original guidance range of 1.25-1.35 million ounces. Full year AISC are anticipated to be at the low end of the original guidance range of $875-$925 per ounce.

Australia Pacific

Australia Pacific produced 0.50 million ounces at AISC of $945 per ounce. The Porgera mine contributed 0.12 million ounces at AISC of $1,187 per ounce. Due to the sale of Yilgarn South, full year production for Australia Pacific is now expected to be at the low end of the original 1.70-1.85 million ounce guidance range. Full year AISC are anticipated to be at the low end of the previous guidance range of $1,100-$1,200 per ounce.

African Barrick Gold plc (ABG)

Third quarter attributable production from ABG was 0.12 million ounces at AISC of $1,275 per ounce. Barrick's share of 2013 production from ABG is expected to exceed the top end of the original guidance range of 0.40-0.45 million ounces. Full year AISC are expected to be below the low end of the original guidance range of $1,550-$1,600 per ounce. The improved outlook reflects the implementation of ABG's operational review.

Global Copper

Copper production in the third quarter was 139 million pounds at C1 cash costs of $1.69 per pound and C3 fully allocated costs of $2.15 per pound. The Zaldívar mine produced 68 million pounds at C1 cash costs of $1.63 per pound. Lumwana contributed 71 million pounds at C1 cash costs of $1.75 per pound. The mine plan at Lumwana was adjusted in the second quarter to reduce waste stripping volumes earlier than previously planned. This enabled the termination of a large mining contractor which has contributed to significant cost savings and focused site efforts on improving the owner mining fleet productivity. Elimination of the maintenance contractor associated with the transition to in-house maintenance and reductions to consumables have also contributed to the mine's improved performance.

Utilizing option collar hedging strategies, the company has protected the downside on approximately half of its expected remaining 2013 copper production at an average floor price of $3.50 per pound and can participate on the same amount up to an average price of $4.25 per pound⁽³⁾. In addition, it has protected the downside on approximately 40 percent of expected 2014 copper production at an average floor price of $3.00 per pound and can participate on the same amount up to an average of $3.75 per pound⁽⁴⁾.

Financial results are based on IFRS and expressed in US dollars. For a full explanation of results, the Financial Statements and Management Discussion & Analysis, please see the company's website, www.barrick.com.

CAUTIONARY STATEMENT ON FORWARD-LOOKING INFORMATION

Certain information contained or incorporated by reference in this Third Quarter Report 2013, including any information as to our strategy, projects, plans or future financial or operating performance, constitutes "forward-looking statements". All statements, other than statements of historical fact, are forward-looking statements. The words "believe", "expect", "anticipate", "contemplate", "target", "plan", "intend", "continue", "budget", "estimate", "may", "will", "schedule" 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 the company, are inherently subject to significant business, economic and competitive uncertainties and contingencies. Known and unknown factors could cause actual results to differ materially from those projected in the forward-looking statements. Such factors include, but are not limited to: fluctuations in the spot and forward price of gold and copper or certain other commodities (such as silver, diesel fuel and electricity); changes in national and local government legislation, taxation, controls, regulations, expropriation or nationalization of property and political or economic developments in Canada, the United States and other jurisdictions in which the company does or may carry on business in the future; diminishing quantities or grades of reserves; increased costs, delays, suspensions and technical challenges associated with the construction of capital projects; the impact of global liquidity and credit availability on the timing of cash flows and the values of assets and liabilities based on projected future cash flows; adverse changes in our credit rating; the impact of inflation; fluctuations in the currency markets; operating or technical difficulties in connection with mining or development activities; the speculative nature of mineral exploration and development, including the risks of obtaining necessary licenses and permits; contests over title to properties, particularly title to undeveloped properties; risk of loss due to acts of war, terrorism, sabotage and civil disturbances; changes in U.S. dollar interest rates; risks arising from holding derivative instruments; litigation; business opportunities that may be presented to, or pursued by, the company; our ability to successfully integrate acquisitions or complete divestitures; employee relations; availability and increased costs associated with mining inputs and labor; and; the organization of our African gold operations and properties under a separate listed company.
In addition, there are risks and hazards associated with the business of mineral exploration, development and mining, including environmental hazards, industrial accidents, unusual or unexpected formations, pressures, cave-ins, flooding and gold bullion, copper cathode or gold/copper concentrate losses (and the risk of inadequate insurance, or inability to obtain insurance, to cover these risks). Many of these uncertainties and contingencies can affect our actual results and could cause actual results to differ materially from those expressed or implied in any forward-looking statements made by, or on behalf of, us. Readers are cautioned that forward-looking statements are not guarantees of future performance. All of the forward-looking statements made in this Third Quarter Report 2013 are qualified by these cautionary statements. Specific reference is made to the most recent Form 40-F/Annual Information Form on file with the SEC and Canadian provincial securities regulatory authorities for a discussion of some of the factors underlying forward-looking statements.

The company 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.