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SECURITIES AND EXCHANGE
COMMISSION Form 6-K Report of Foreign Private Issuer
BARRICK GOLD CORPORATION
Washington, DC 20549
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
For the month
of: February, 2004
Commission File
Number:
1-9059
BCE
Place, TD Canada Trust Tower
Suite 3700
161 Bay Street, P.O. Box 212
Toronto, Ontario
Canada M5J 2S1
(Address of
Principal Executive Offices)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:
Form 20-F ___ Form 40-F X
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ___
Indicate by check mark if the registrant is submitting the form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ___
Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934:
Yes ___ No X
If "Yes" is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): N/A
INCORPORATION BY REFERENCE
The Registrant's Management's Discussion and Analysis of Financial Results for the quarter ended December 31, 2003 and the Comparative Unaudited Financial Statements and the notes thereto prepared in accordance with U.S. generally accepted accounting principles for that same period (contained on pages 7 to 43 of Exhibit 1 of this Form 6-K Commission File No. 1-9059 furnished to the Commission on February 17, 2004), are incorporated by reference into the Registrant's registration statement on Form F-3 (No. 333-14148).
SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
BARRICK GOLD CORPORATION | ||
By: | /s/ | Jamie C. Sokalsky |
Name: | Jamie C. Sokalsky | |
Title: | Senior Vice President and | |
Chief Financial Officer |
Date: February 17, 2004
FOURTH QUARTER REPORT 2003
Based on US GAAP and expressed in US dollars
Barrick Earns $77 Million ($0.14 per share) in Fourth Quarter
Highlights |
|
Barrick Gold Corporation today reported earnings of $77 million ($0.14 per share) and operating cash flow of $134 million ($220 million prior to the Inmet settlement of $86 million) for fourth quarter 2003, compared to earnings of $54 million ($0.10 per share) and operating cash flow of $195 million in the year earlier period. Higher earnings for the fourth quarter 2003 compared to the same period in 2002 reflect a $51 per ounce higher realized gold price and a $60 million increase in non-hedge derivative gains (2003 - $46million gain versus 2002 $14 million loss). These were partly offset by higher cash operating costs, provisions of $14 million for the Inmet settlement and $10 million for reclamation costs and an $18 million lower income tax recovery. Lower operating cash flow in the current quarter and the full year primarily relates to the payment of $86 million on the Inmet settlement.
-------------------------------------------------------
1 | For an
explanation of non-GAAP performance measures refer to pages
17-18
of Management's Discussion and Analysis. |
2 | Calculated in accordance with National Instrument 43-101 as required by Canadian securities regulatory authorities. For United States reporting purposes, Industry Guide 7 (under the Securities Exchange Act of 1934), as interpreted by the Staff of the SEC, applies different standards in order to classify mineralization as a reserve. Accordingly, for U.S. reporting purposes, Alto Chicama is classified as mineralized material. For additional information on reserves see the tables and related footnotes on pages 48-51. |
BARRICK FOURTH QUARTER 2003 |
PRESS RELEASE |
Excluding the Inmet settlement, fourth quarter and full year cash flow from
operations was higher in 2003 than 2002. For 2003, net income was $200 million
($0.37 per share) and operating cash flow was $521 million ($607 million prior
to the Inmet settlement), compared to net income of $193 million ($0.36 per
share) and operating cash flow of $589 million in the year earlier period. "Overall, our portfolio of properties performed well - we had a solid
operating performance in 2003 and met our guidance," said Greg Wilkins,
President and Chief Executive Officer. "Our focus for 2004 will be building our
new mines and growing our production profile." PRODUCTION AND COSTS In fourth quarter 2003, Barrick produced 1.3 million ounces of gold at a
total cash cost of $199 per ounce, compared to 1.6 million ounces at $174 per
ounce, for the prior year quarter. Lower production and higher costs were
primarily attributable to expected lower grades and higher energy costs, as well
as higher royalties and other costs related to the rising spot gold price. For the year, the Company produced 5.51 million ounces of gold at a total
cash cost of $189 per ounce, achieving the Company's overall guidance for the
year, even though cash costs were impacted by rising gold prices which increased
royalty and mining tax payments. Higher production and lower costs at Betze-Post,
Kalgoorlie and Pierina more than offset lower production and higher costs at
Meikle and Bulyanhulu. In 2002 the Company produced 5.7 million ounces at a total cash cost of $177
per ounce. Lower production in 2003 was due largely to the closure of five mines
during 2002. RESERVES At year-end the Company had proven and probable reserves of 86 million ounces
of gold based on a $325 gold price, after producing 5.51 million ounces, (6.5
million ounces in-situ) compared to reserves of 86.9 million ounces in 2002,
virtually replacing 2003 production. Using a $375 gold price for sensitivity
purposes, the reserves at December 31, 2003 would be about 92 million ounces.
Two of the Company's deposits have significant silver
resources. Pascua-Lama has one of the largest silver resources in the world,
with 584 million ounces in-situ while Eskay Creek has 43 million ounces. GOLD HEDGE POSITION REDUCED In fourth quarter 2003, the Company announced that it had adopted a No-Hedge
Policy on its gold production. Under the new policy, Barrick will not add any
new gold hedge contracts. The Company is committed to reducing its hedge book to
zero over time. "While the policy of hedging a portion of our gold production
has contributed to our balance sheet strength," said Mr. Wilkins, "we no longer
consider hedging to be necessary in today's business climate." During the
quarter, the Company reduced its hedge position by 600,000 ounces, by delivering
a portion of production against hedge contracts at a price that approximated the
prevailing spot price. For fourth quarter 2003, the Company averaged a realized
price of $394 per ounce, $2 per ounce higher than the average spot price. For
the year, Barrick realized an average price of $366 per ounce compared to the
average spot price of $363 per ounce. The 2003 year-end hedge position was 15.5
million ounces, down 2.6 million ounces, or 14%, from year-end 2002 (down 8.6
million ounces, or 36%, over the last two years). At December 31, 2003, the
Company's hedge position represented 18% of its proven and probable reserves and
14% of its reserves and measured and indicated resources.
SHARE BUYBACK
Barrick repurchased 8.8 million of its common shares at an average purchase price of $17.56 per share, for a total cost of $154 million in 2003. The Company expects to continue its share buy-back program.
2004 OUTLOOK
As previously announced, the Company projects 2004 production to be between 4.9 - 5.0 million ounces at an average total cash cost of $205-$215 per ounce, as Pierina and Betze-Post mine lower grade ore, and higher expected spot gold prices continue to increase gold related costs. The Company plans to further reduce its hedge contracts in
BARRICK FOURTH QUARTER 2003 |
2 |
PRESS RELEASE |
2004 by a minimum of 1.5 million ounces, 300,000 of which has already been accomplished. While the Company's hedge contracts allow for full flexibility to deliver all of its production into the spot gold market, to achieve this target it may choose to deliver a portion of production against hedge contracts at prices below spot price.
Production and total cash costs in the first quarter 2004 are anticipated to be weaker than the remainder of the year due to the sequencing of the mining operations. For the year, amortization is expected to be about $480 - $490 million, administration expense is expected to be approximately $80 million and exploration, development and business development expense is expected to be approximately $110 million, with the possibility that positive results could lead to additional exploration spending. Capital expenditures for 2004 are anticipated to be approximately $770 million, as we advance the construction of our development projects.
DEVELOPMENT PROJECTS UPDATE
Barrick advanced on all projects in its mine development pipeline in fourth quarter 2003. "During 2003, we focused on detailed engineering and on delineation of our development projects as we readied ourselves for building our four new mines," said Peter Kinver, Chief Operating Officer. "These projects will provide additional production and lower cash costs for years to come."
At Veladero in Argentina, the Environmental Impact Statement (EIS) approval was received in fourth quarter 2003 and construction commenced. Road work and pre-strip activities are currently underway as well as construction of the valley fill heap leach, truck shops, assay lab, and camp facilities. There are currently over 700 construction workers on-site, with peak employment expected to reach approximately 1,500 comprising 500 permanent staff and 1,000 construction workers. Veladero is expected to commence production in 2005. As mineralization was classified as a reserve for U.S. reporting purposes as of October 1, 2003, development costs at Veladero are now being capitalized. Significant progress was made on advancing project financing for Veladero in 2003. It is anticipated that the financing will be completed in 2004.
The EIS for Alto Chicama in Peru was submitted at the end of the third quarter 2003. Public hearings were held during the fourth quarter 2003, and approval anticipated in second quarter 2004.
As 2003 ended, the Company received development approval for its Tulawaka project in Tanzania. Construction on this 70% owned joint venture commenced in the fourth quarter 2003, with projected average annual production of 125,000 ounces at a total cash cost of $175 per ounce on a 100% basis. Production is expected to begin in first quarter 2005. Total capital approved for project development is $49 million.
At the Company's Cowal property in Australia, construction of mine infrastructure commenced in January 2004. Mine development is anticipated during the first quarter, leading to commercial production in early 2006. At Pascua-Lama in Chile/Argentina, work continues on the engineering optimization of the project, with a production decision expected in early second quarter 2004.
EXPLORATION UPDATE
During fourth quarter 2003, Barrick was actively exploring 44 projects in nine countries. Drilling was carried out on 19 projects during the quarter. "Our investment in exploration over the past few years will continue to yield results going forward," said Alex Davidson, Executive Vice President, Exploration. "Our large land position provides us with opportunities in key prospective districts."
In North America, an underground drill program was completed at the end of December on the Rossi property in Nevada (60% joint venture with Meridian Gold). The objective of the program was to better define the Storm resource and an updated resource calculation is expected in the first half of 2004. A drill program at Goldstrike was focused on near term resource additions on targets north of the Betze-Post pit. The results from the program were very positive and drilling will continue during the first half
BARRICK FOURTH QUARTER 2003 |
3 |
PRESS RELEASE |
of 2004. The drill program at Gold Hill, located north of Round Mountain, confirmed and refined the geological model, and an updated resource estimate will be completed in the first half of 2004. At the Eskay Creek property in northern British Columbia, results from the drill program completed in third quarter 2003 highlighted the potential of the 22 Zone, located 2 kilometres south of the mine. A winter drill program is planned to test for mineralization along strike and at depth.
In South America, drill programs were also completed on properties in the Alto Chicama district where the Company has an excellent portfolio of prospects as well as in Chile and southern Argentina. Results are being evaluated and follow up work is planned in 2004. Early stage exploration carried out in Peru continues to identify and prioritize targets for detailed follow up.
During fourth quarter 2003, Barrick entered into a strategic relationship with QGX Limited which has prospective exploration properties in Mongolia.
NEW DEVELOPMENTS
On January 28, 2004, Barrick announced that it agreed to a share purchase and strategic relationship in Russia with Highland Gold Mining, based in London. In total, Barrick has now invested cash of US$84 million for a total stake of 17% of Highland. The Highland partnership will give Barrick the right, but not the obligation, to participate on an exclusive basis for up to 50% on any acquisition made by Highland Gold in Russia. Highland holds similar rights for any acquisition made by Barrick in certain regions in Russia. "The Highland transaction represents an important next step in the development of Barrick's strategy in Russia - one of the most prospective gold regions anywhere in the world," commented Mr. Wilkins.
On February 12, 2004 Barrick and Falconbridge have signed a Letter of Intent to negotiate Definitive Agreements regarding Barrick's Kabanga Nickel Project.
The Kabanga Nickel Project was acquired by Barrick in the Sutton Resources transaction in 1999. Since the acquisition, Barrick has significantly enhanced the value of the Project by increasing the known resource estimate at Kabanga Main and discovering the adjacent MNB deposit. The Project is located in northwestern Tanzania, approximately 385 kilometres west of the Bulyanhulu gold mine and 100 kilometres northwest of the Tulawaka gold project, which is currently under construction. Kabanga has a current resource of 26.4 million tonnes grading 2.6% nickel for approximately 700,000 tonnes of contained nickel.
The Letter of Intent provides that Falconbridge can earn a 50% interest in Kabanga by:
Meeting the next $45 million of expenditures on the execution of a well defined Work Plan over a period not exceeding 27 months;
CORPORATE GOVERNANCE GUIDELINES
Following on the September 2003 appointment of Mr. Gustavo Cisneros, Chairman of the Cisneros Group of Companies, as an independent director to Barrick's Board, the Company announced today that it was pleased to appoint Mr. Peter Godsoe, Chairman of Scotiabank, as an independent Director to the Board. "Our Board will be strengthened by his breadth of business experience and knowledge of international capital markets," said Peter Munk, Founder and Chairman.
Barrick Gold Corporation is building new low-cost, long-life mines in highly prospective gold mining districts around the globe. It has the lowest cash costs among major gold producers and the only A-rated balance sheet with a cash position of nearly $1 billion. Barrick's shares are traded under the ticker symbol ABX on the Toronto, New York, London and Swiss stock exchanges and the Paris Bourse.
BARRICK FOURTH QUARTER 2003 |
4 |
PRESS RELEASE |
Key Statistics | |||||||||
(in United States dollars, US GAAP basis) | Three months ended Dec. 31, | Twelve months ended Dec. 31, | |||||||
(Unaudited) | 2003 | 2002 | 2003 | 2002 | |||||
Operating Results | |||||||||
Gold production (thousands of ounces) | 1,301 | 1,596 | 5,510 | 5,695 | |||||
Gold sold (thousands of ounces) | 1,362 | 1,540 | 5,554 | 5,805 | |||||
Per ounce data | |||||||||
Average spot gold price | $ | 392 | $ | 323 | $ | 363 | $ | 310 | |
Average realized gold price | 394 | 343 | 366 | 339 | |||||
Cash operating costs(3) | 186 | 166 | 177 | 170 | |||||
Total cash costs(1) (3) | 199 | 174 | 189 | 177 | |||||
Total production costs(3) | 292 | 267 | 279 | 268 | |||||
Financial Results (millions) | |||||||||
Gold sales | $ | 536 | $ | 526 | $ | 2,035 | $ | 1,967 | |
Net income | 77 | 54 | 200 | 193 | |||||
Operating cash flow | 134 | 195 | 521 | 589 | |||||
Operating cash flow excluding Inmet settlement | 220 | 195 | 607 | 589 | |||||
Per share data (dollars) | |||||||||
Net income (basic and diluted) | 0.14 | 0.10 | 0.37 | 0.36 | |||||
Operating cash flow | 0.26 | 0.36 | 0.97 | 1.09 | |||||
Operating cash flow excluding Inmet settlement | 0.42 | 0.36 | 1.13 | 1.09 | |||||
Common shares outstanding (as at Dec. 31) (millions)(2) | 535 | 542 | 535 | 542 |
As at Dec. 31, | As at Dec. 31, | |||
2003 | 2002 | |||
Financial Position (millions) | ||||
Cash and equivalents | $ | 970 | $ | $ 1,044 |
Working capital | 1,015 | 839 | ||
Long-term debt | 719 | 761 | ||
Shareholders' equity | 3,494 | 3,334 |
1
Comprises cash operating costs, royalties and production taxes.BARRICK FOURTH QUARTER 2003 |
5 |
SUMMARY INFORMATION |
Production and Cost Summary | |||||||||||||||
Production (attributable ounces) |
Total Cash Costs (US$/oz) (1) |
||||||||||||||
3 months ended 12/31, | 12 months ended 12/31, | 3 months ended 12/31, | 12 months ended 12/31, | ||||||||||||
(Unaudited) | 2003 | 2002 | 2003 | 2002 | 2003 | 2002 | 2003 | 2002 | |||||||
North America | |||||||||||||||
Goldstrike - Open Pit | 324,951 | 406,224 | 1,559,461 | 1,409,985 | $ | 250 | $ | 220 | $ | 233 | $ | 228 | |||
Goldstrike - Underground | 147,199 | 192,631 | 551,664 | 640,336 | 261 | 184 | 253 | 198 | |||||||
Goldstrike Property Total | 472,150 | 598,855 | 2,111,125 | 2,050,321 | 253 | 209 | 238 | 218 | |||||||
Eskay Creek | 83,387 | 96,954 | 352,070 | 358,718 | 20 | 51 | 52 | 40 | |||||||
Round Mountain | 91,059 | 88,614 | 392,649 | 377,747 | 190 | 212 | 173 | 187 | |||||||
Hemlo | 64,930 | 83,179 | 267,888 | 269,057 | 227 | 184 | 226 | 224 | |||||||
Holt-McDermott | 23,203 | 21,502 | 89,515 | 83,577 | 210 | 193 | 239 | 173 | |||||||
Marigold | 12,953 | 11,086 | 47,396 | 27,422 | 187 | 144 | 171 | 187 | |||||||
747,682 | 900,190 | 3,260,643 | 3,166,842 | 219 | 182 | 209 | 193 | ||||||||
South America | |||||||||||||||
Pierina | 205,852 | 281,188 | 911,723 | 898,228 | 89 | 95 | 83 | 80 | |||||||
Australia/Africa | |||||||||||||||
Plutonic | 88,233 | 84,018 | 333,947 | 307,377 | 196 | 187 | 193 | 184 | |||||||
Darlot | 37,336 | 40,061 | 154,977 | 145,443 | 182 | 163 | 164 | 168 | |||||||
Lawlers | 27,355 | 28,571 | 99,223 | 113,291 | 268 | 188 | 249 | 179 | |||||||
Kalgoorlie | 115,498 | 98,356 | 436,098 | 360,025 | 215 | 231 | 209 | 222 | |||||||
268,422 | 251,006 | 1,024,245 | 926,136 | 208 | 200 | 200 | 196 | ||||||||
Bulyanhulu | 78,737 | 100,776 | 313,551 | 356,319 | 316 | 185 | 246 | 198 | |||||||
347,159 | 351,782 | 1,337,796 | 1,282,455 | 230 | 195 | 210 | 196 | ||||||||
Other/Mines closed in 2002 | - | 62,357 | - | 347,352 | - | 199 | - | 189 | |||||||
Total | 1,300,693 | 1,595,517 | 5,510,162 | 5,694,877 | $ | 199 | $ | 174 | $ | 189 | $ | 177 | |||
Total Production Costs (US$/oz) (1) |
|||||||||||||||
3 months ended 12/31, | 12 months ended 12/31, | ||||||||||||||
(Unaudited) | 2003 | 2002 | 2003 | 2002 | |||||||||||
Direct mining costs at market foreign exchange rates | $ | 225 | $ | 185 | $ | 210 | $ | 191 | |||||||
Gains realized on currency hedge contracts | (18) | (1) | (12) | (1) | |||||||||||
By-product credits | (21) | (18) | (21) | (20) | |||||||||||
Cash operating costs | 186 | 166 | 177 | 170 | |||||||||||
Royalties | 10 | 7 | 9 | 6 | |||||||||||
Production taxes | 3 | 1 | 3 | 1 | |||||||||||
Total cash costs | 199 | 174 | 189 | 177 | |||||||||||
Amortization and reclamation | 93 | 93 | 90 | 91 | |||||||||||
Total production costs | $ | 292 | $ | 267 | $ | 279 | $ | 268 |
1
For an explanation of non-GAAP performance measures refer to pages 16-18 of Management's Discussion and Analysis.BARRICK FOURTH QUARTER 2003 |
6 |
SUMMARY INFORMATION |
Management's Discussion and Analysis of Financial and Operating Results
GOLD SALES
Revenue for fourth quarter 2003 was $536 million on gold sales of 1.36 million ounces, compared to $526 million in revenue on gold sales of 1.54 million ounces for the year earlier quarter. A $51 per ounce (15%) increase in the realized gold price due to higher spot gold prices more than offset the lower sales volumes. During the fourth quarter, spot gold prices ranged from a high of $416 to a low of $369 per ounce, averaging $392 per ounce. The Company realized an average of $394 per ounce during the quarter, as it delivered 600,000 ounces against gold hedge contracts, with the remainder at spot gold prices. The Company plans to further reduce its hedge contracts in 2004 by a minimum of 1.5 million ounces. While the Company's hedge contracts allow for full flexibility to deliver all of its production into the spot gold market, to achieve this target it may chose to deliver a portion of production against hedge contracts at prices below spot price.
The year-end gold hedge position declined to 15.5 million ounces, down 2.6 million ounces year over year. The fourth quarter reduction was accomplished by delivering a portion of production against hedge contracts that approximated the prevailing spot price. In keeping with the no-hedge policy, Barrick will continue to pursue opportunities to further reduce its hedge position with the objective of reducing it to zero over time. The position has been reduced by 8.6 million ounces or 36% over the past two years.
At year-end, the unrealized mark-to-market on the derivative instruments position, including gold and silver forward sales contracts, as well as currency and interest rate hedge programs, was negative $1.4 billion. This mark-to-market value represents the replacement value of these contracts based on current market levels, and does not represent an economic obligation for payment by Barrick. Barrick's obligations under its gold sales contracts are to deliver an agreed upon quantity of gold at a hedge price by the termination date on the contracts (2013 in most cases).
In accordance with hedge accounting rules, the positive mark-to-market value of $326 million relating to our currency and interest rate hedge programs is recorded as an asset on our balance sheet. The mark-to-market value of our normal sales gold and silver contracts is not recorded on the balance sheet, as accounting rules that govern these contracts do not require balance sheet recognition. Instead, in accordance with US GAAP, the economic impact of these sales contracts is reflected in the financial statements as Barrick physically delivers gold and silver under the contracts.
REVIEW OF OPERATIONS AND DEVELOPMENT PROJECTS
For the fourth quarter 2003, production of 1.3 million ounces and total cash cost of $1991 per ounce were in line with plan. Operating performance for the year was also in line with guidance, with production of 5.51 million ounces at a total cash cost of $1891 per ounce. As at December 31, 2003 reserves stood at 86 million ounces2 at a $325 gold price. Using a $375 gold price for sensitivity purposes, the reserves at December 31, 2003 would be about 92 million ounces as these mines sequence through lower grade ore.
For 2004 we expect production of 4.9 to 5.0 million ounces at a total cash cost of $205 to $215 per ounce.
1 | For an explanation of non-GAAP performance measures refer to pages 17-18 of Management's Discussion and Analysis. | |
2 | Calculated in accordance with National Instrument 43-101 as required by Canadian securities regulatory authorities. For United States reporting purposes, Industry Guide 7 (under the Securities Exchange Act of 1934), as interpreted by the Staff of the SEC, applies different standards in order to classify mineralization as a reserve. Accordingly, for U.S. reporting purposes, Alto Chicama is classified as mineralized material. For additional information on reserves see the tables and related footnotes on pages 48-51. | |
BARRICK FOURTH QUARTER 2003 |
7 |
MANAGEMENT'S DISCUSSION AND ANALYSIS |
The decline in production and increase in costs is primarily attributed to Pierina and Betze-Post due to lower grades resulting from mine sequencing.
NORTH AMERICAN REGION
Barrick's North American Region consists of seven mines: Betze-Post, Meikle, Round Mountain, Hemlo, Eskay Creek, Holt McDermott and Marigold.
For the year, production and total cash costs were in line with plan at 3,300,000 ounces at a total cash cost of $209 per ounce.
The region produced 748,000 ounces during the fourth quarter 2003, 17% lower than the prior year quarter, at a total cash cost that was 16% higher than the prior year quarter.
Goldstrike Property | (Nevada) | |||
Q4 '03 | Q4 '02 | 2003 | 2002 | |
Production | ||||
Open Pit | 324,951 | 406,224 | 1,559,461 | 1,409,985 |
Underground | 147,199 | 192,631 | 551,664 | 640,336 |
Goldstrike Total | 472,150 | 598,855 | 2,111,125 | 2,050,321 |
Total cash cost/oz | ||||
Open Pit | $ 250 | $ 220 | $ 233 | $ 228 |
Underground | 261 | 184 | 253 | 198 |
Goldstrike Total | $ 253 | $ 210 | $ 238 | $ 218 |
Goldstrike Property - Open Pit
Although the open pit met its production target for the year, production decreased 20% compared to the year earlier quarter as throughput declined 10% due to unscheduled downtime at the roaster and planned lower grades.
Goldstrike Property - Underground
Underground production and costs continued to be affected by ground conditions at Rodeo and the mining of remnant blocks at Meikle. Ground support rehabilitation efforts are on-going and have proven successful in providing increases to Rodeo production during fourth quarter 2003.
BARRICK FOURTH QUARTER 2003 |
8 |
MANAGEMENT'S DISCUSSION AND ANALYSIS |
conditions. As a result, labour, contract services, ground support material, and maintenance repairs were higher than plan. Royalties and taxes were above plan due to the increased gold price.
Eskay Creek (British Columbia) | ||||
Q4 '03 | Q4 '02 | 2003 | 2002 | |
Production | 83,387 | 96,954 | 352,070 | 358,718 |
Total cash cost / oz | $20 | $ 51 | $ 52 | $ 40 |
Fourth quarter 2003 production was 14% lower than the prior year quarter, due to a decrease in tons processed. Tons were down, as the mine focused on backfilling to eliminate a backlog affecting the availability of production stopes.
Round Mountain (Nevada) (50% share) | ||||
Q4 '03 | Q4 '02 | 2003 | 2002 | |
Production | 91,059 | 88,614 | 392,649 | 377,747 |
Total cash cost / oz | $ 190 | $ 212 | $ 173 | $ 187 |
Higher ounces produced during fourth quarter 2003 compared to the prior year period resulted from higher recoveries from the dedicated leach pad.
BARRICK FOURTH QUARTER 2003 |
9 |
MANAGEMENT'S DISCUSSION AND ANALYSIS |
Hemlo (Ontario) (50% share) | ||||
Q4 '03 | Q4 '02 | 2003 | 2002 | |
Production | 64,930 | 83,179 | 267,888 | 269,057 |
Total cash cost / oz | $ 227 | $ 184 | $ 226 | $ 224 |
Production decreased 22% in fourth quarter 2003 compared to the prior year period, due to a 25% reduction in grades. Higher grade stopes from 2002 were replaced with lower grade ore from the pit as a result of a plugged backfill line and poor ground conditions which complicated drilling and blasting. Backfill issues have now been resolved, while work continues on the drilling and blasting issues.
Holt-McDermott (Ontario) | ||||
Q4 '03 | Q4 '02 | 2003 | 2002 | |
Production | 23,203 | 21,502 | 89,515 | 83,577 |
Total cash cost / oz | $ 210 | $ 193 | $ 239 | $ 173 |
Fourth quarter 2003 production increased by 8% compared to the prior year quarter, due to improved grades and throughput (up 3% and 6% respectively).
Other Properties | ||||
Q4 '03 | Q4 '02 | 2003 | 2002 | |
Production | 12,953 | 73,443 | 47,396 | 374,774 |
Total cash cost / oz | $194 | $188 | $172 | $189 |
The only mine remaining in this category in 2003 is our 33% interest in the Marigold Mine, which produced more gold than plan at cash costs in line with plan.
SOUTH AMERICAN REGION
Barrick's South America Region consists of the Pierina mine and three significant development projects: Alto Chicama, Veladero and Pascua-Lama.
Pierina (Peru) | ||||
Q4 '03 | Q4 '02 | 2003 | 2002 | |
Production | 205,852 | 281,188 | 911,723 | 898,228 |
Total cash cost / oz | $89 | $95 | $ 83 | $ 80 |
For the year, Pierina met its production and cash costs targets.
BARRICK FOURTH QUARTER 2003 |
10 |
MANAGEMENT'S DISCUSSION AND ANALYSIS |
Development Projects
Alto Chicama (Peru)
The Company's Alto Chicama project remains on-schedule for a first gold pour in second half 2005.
The Environmental Impact Statement (EIS) for the Alto Chicama Project was submitted September 29, 2003. Public hearings were held during fourth quarter 2003, with approval expected in second quarter 2004.
During third quarter 2003, Barrick's Board of Directors approved the project for a $340 million investment. Average annual production is projected at 540,000 ounces, with a cash cost of $135 per ounce over the first decade.
Basic engineering is now complete on the Alto Chicama project, and detailed engineering commenced in fourth quarter 2003. Other project activities include:
Access road construction, with completion expected in June 2004.
Exploration in the Alto Chicama district is focused on the area around the Lagunas Norte deposit. The Company has an excellent portfolio of prospects in the area and will be accelerating the exploration of these during 2004. Prospects within 5 kilometers of Lagunas Norte, which include Lagunas Sur and La Capilla, are showing encouraging results. Other targets are being evaluated.
Veladero (Argentina)
Veladero's EIS was approved in fourth quarter 2003 and full construction has commenced.
Fourth quarter accomplishments at Veladero included:
Equipment deliveries, as major support equipment arrived on-site. Pioneering of new roads is on schedule with the first 20 operators working around-the-clock. Pre-strip activities also have begun.
Veladero is expected to produce 530,000 ounces annually at an average total cash cost of $155 per ounce (subject to exchange rate fluctuations and applicable export duties). Production is expected in late 2005.
Costs for Veladero are being capitalized from October 1, 2003, as mineralization has now been classified as a reserve for U.S. reporting purposes.
Pascua-Lama (Chile/Argentina)
Work continues with the engineering optimization of the project, with a production decision expected in early second quarter 2004. The reserves at Pascua-Lama are just under 17 million ounces of gold. The project also contains 584 million ounces of contained silver making it one of the largest silver resources in the world.
AUSTRALIA/AFRICA REGION
Barrick's Australia/Africa Region consists of four mines in Australia: Kalgoorlie, Plutonic, Darlot, Lawlers plus Bulyanhulu in Africa. Significant development projects include Cowal in Australia and Tulawaka in Tanzania. Tulawaka is expected to commence production in early 2005 with Cowal coming on in late 2005.
The region produced 347,000 ounces during the fourth quarter 2003, in line with the prior year quarter at a total cash cost that was 18% higher than the prior year quarter.
BARRICK FOURTH QUARTER 2003 |
11 |
MANAGEMENT'S DISCUSSION AND ANALYSIS |
Plutonic (Western Australia) | ||||
Q4 '03 | Q4 '02 | 2003 | 2002 | |
Production | 88,233 | 84,018 | 333,947 | 307,377 |
Total cash cost / oz | $ 196 | $ 187 | $ 193 | $ 184 |
Production for fourth quarter 2003 was 5% above the prior year period, reflecting both higher grades and mining rates from the underground. Cash costs were higher than the prior year period primarily due to a higher Australian dollar exchange rate.
Darlot (Western Australia) | ||||
Q4 '03 | Q4 '02 | 2003 | 2002 | |
Production | 37,336 | 40,061 | 154,977 | 145,443 |
Total cash cost / oz | $ 182 | $ 163 | $ 164 | $ 168 |
- Fourth quarter 2003 production was 7% lower than the prior year period, as a result of lower grades and reduced recoveries.
- Production and total cash costs for the full year were better than plan by 8% and 7% respectively.
- Production for 2004 is expected to be between 140,000 and 145,000 ounces of gold at total cash costs of $190 to $205 per ounce due to lower grades processed. The increase in total cash costs is due to an increase in direct mining costs and lower production.
Lawlers (Western Australia) | ||||
Q4 '03 | Q4 '02 | 2003 | 2002 | |
Production | 27,355 | 28,571 | 99,223 | 113,291 |
Total cash cost / oz | $ 268 | $ 188 | $ 249 | $ 179 |
Fourth quarter 2003 production was 4% lower than the prior year period, due largely to lower head grades partially offset by higher throughput. The increased cash cost per ounce is primarily due to the increased throughput.
Kalgoorlie (50% share) | ||||
Q4 '03 | Q4 '02 | 2003 | 2002 | |
Production | 115,498 | 98,356 | 436,098 | 360,025 |
Total cash cost / oz | $ 215 | $ 231 | $ 209 | $ 222 |
Kalgoorlie's strong performance continued into fourth quarter 2003, as the mine produced 17% more ounces than the prior year period. Mining continues to capture high-grade pillars.
BARRICK FOURTH QUARTER 2003 |
12 |
MANAGEMENT'S DISCUSSION AND ANALYSIS |
production is due to expected lower grades and planned maintenance on the SAG mill, while the increase in cash costs is due to lower production and marginally higher open pit costs.
Bulyanhulu (Tanzania) | ||||
Q4 '03 | Q4 '02 | 2003 | 2002 | |
Production | 78,737 | 100,776 | 313,551 | 356,319 |
Total cash cost / oz | $ 316 | $ 185 | $ 246 | $ 198 |
Fourth quarter 2003 production was 20% lower than the prior year period but in line with the stabilization plan announced at the beginning of the third quarter 2003.
Development Projects
Cowal (Australia)
At the Company's Cowal property in Australia, construction of mine infrastructure commenced in January 2004. Mine development is anticipated during the first quarter, leading to initial production in early 2006.
Tulawaka Project (Tanzania)
The Tulawaka project is under construction and reached several milestones during fourth quarter 2003:
A Special Mining Licence was granted by the Minister of Energy and Minerals of Tanzania in November 2003.
AMORTIZATION
Amortization totaled $132 million, or $93 per ounce, for fourth quarter 2003, compared to $144 million or $88 per ounce in the year earlier quarter. The decrease in fourth quarter amortization was primarily due to a decrease in ounces sold compared to the prior year period as well as corporate amortization. For the full year, amortization was $522 million, or $90 per ounce, compared to $519 million, or $85 per ounce, for 2002. Amortization was higher on a per ounce basis and also in aggregate due to a change in the production mix across our portfolio of mines, which more than offset the effect of a decrease in ounces sold.
Two accounting policy changes affecting amortization took effect in first quarter 2003. First, FAS 143 changed the method for accounting for reclamation and closure costs. Amortization increased by $2 million for fourth quarter 2003 to reflect the amortization of the increase to property, plant and equipment from adopting the new standard at the beginning of 2003.
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MANAGEMENT'S DISCUSSION AND ANALYSIS |
The second change relates to the amortization of underground development costs to exclude estimates of future underground development costs from the current period amortization. The new accounting policy for underground mines had minimal impact on our fourth quarter results. For the year-ended December 31, 2003, the effect of this change on amortization increased it by $1 million.
Amortization in 2004 is expected to be in the $480 million to $490 million range.
ADMINISTRATION
Fourth quarter 2003 administration costs were $20 million, an increase of $5 million over the year earlier period. The increase relates mainly to additional salaries, reorganization, legal insurance and regulatory costs.
Administration costs in 2004 are expected to be approximately $80 million.
EXPLORATION AND BUSINESS DEVELOPMENT
Exploration and business development expenses of $36 million in fourth quarter 2003 were $9 million higher than the year earlier quarter. In the fourth quarter 2003, the Company expensed $8 million on development activities at Alto Chicama, and $19 million on its exploration program with business development initiatives accounting for the remainder. In the prior year quarter, the Company expensed $17 million on development activities at Veladero and Alto Chicama, $8 million on its exploration program, and the remainder on business development initiatives. Compared to the prior year quarter, exploration costs were up because of higher spending in North America and Tanzania. Spending on development activities at Veladero was capitalized in fourth quarter 2003 as Veladero achieved SEC reserve status in October 2003. For the full year, the Company expensed $54 million on development activities (2002 - $49 million); and $62 million on its exploration program (2002 - $38 million); with the remainder on business development initiatives. The year over year increase reflects the higher volume of expensed development activities at Veladero and Alto Chicama, and the Company's continued focus and investment in its exploration program.
Looking forward to 2004, the Company expects exploration and business development expenses to be approximately $110 million, as it continues to advance the Alto Chicama project and to support its grassroots exploration program.
INMET LITIGATION
In the fourth quarter 2003, the Company recorded a charge to earnings of $14 million following a court ruling on the Inmet litigation which awarded pre-judgment interest to Inmet. This ruling was in addition to $72 million awarded to Inmet in 2001 (including post-judgment interest), and put the full amount of the accrued litigation paid to Inmet at $86 million.
OTHER INCOME/EXPENSE
For the fourth quarter 2003, interest and other income was $11 million, an increase of $10 million compared to the prior year period. In fourth quarter 2003, the Company realized $7 million in gains on various asset sales, including $3 million on various land parcels in the United States, and earned interest on its cash balances of $9 million. These amounts were offset by other expenses totaling $5 million, mainly relating to provisions against certain investments and royalties.
In the year earlier quarter, the Company earned $12 million of interest on its cash balances, offset by losses on the write-down of various assets.
Interest and other income in 2004 is expected to be approximately $35 million.
INTEREST EXPENSE
The Company incurred $12 million in interest costs in fourth quarter 2003, compared to $14 million in the year earlier quarter, relating primarily to its $500 million of debentures and the Bulyanhulu project financing. The increase in the amount of interest capitalized - $4 million in 2003 compared to $1 million in 2002 is due to the
BARRICK FOURTH QUARTER 2003 |
14 |
MANAGEMENT'S DISCUSSION AND ANALYSIS |
capitalization of interest on Veladero project costs, which began in October 2003. The Company's $80 million variable rate bonds as well as 70% of the Company's $500 million of debentures, which have been swapped from fixed to floating rates using interest rate swaps, bear interest at variable rates. The decrease in interest incurred for the fourth quarter 2003 reflects the impact of lower market interest rates on these variable rate debt obligations.
For the full year, interest incurred decreased from $59 million to $49 million mainly due to the decline in market interest rates. Interest capitalized increased from $2 million to $5 million due to amounts capitalized at Veladero in 2003. Interest expense in 2004 is expected to be about $27 million.
NON-HEDGE DERIVATIVE GAINS
In fourth quarter 2003, non-hedge derivative gains totaled $46 million, relating mainly to currency and gold lease rate contracts. The Company recorded unrealized gains of $21 million on its gold lease rate contracts, due mainly to lower gold lease rates. The Company also transferred unrealized gains of $9 million from OCI to earnings on its Australian dollar cash flow hedge contracts due to changes in the timing of the hedged items, which caused the termination of hedge accounting under FAS 133. The loss of $14 million in the prior year quarter relates primarily to losses on interest rate contracts, including lease rate swaps, due to movements in interest rates.
Forward prices under the Company's gold sales contracts are fixed and have no lease rate exposure. For a notional amount representing approximately one fifth of the contracts, the Company swapped out of the implied fixed lease rates into floating lease rates to take advantage of lower short-term lease rates. As gold prices, gold lease rates and interest rates decline/(increase), an unrealized mark-to-market gain/(loss) on these swap contracts occurs and is recorded in earnings each quarter. The Company expects to see ongoing fluctuations, which could be significant, in the fair value of these swap contracts in the future as gold prices, gold lease rates and interest rates change.
INCOME TAXES
In fourth quarter 2003, the Company recorded a net income tax credit of $4 million, compared to a net income tax credit of $22 million in the prior year quarter. The credit in fourth quarter 2003 primarily reflects a release of valuation allowances totaling $18 million of which $15 million was in Argentina, due to the higher spot gold price. Excluding this valuation allowance release, the underlying tax expense was $14 million. The credit for fourth quarter 2002 mainly reflects the net impact of tax planning completed in the period and the outcome of certain tax uncertainties. Income tax expense for the year-ended December 31, 2003 also includes a release of valuation allowances against deferred tax assets totaling $21 million in the second quarter 2003, resulting from actions completed during that quarter which provided assurance of the future realization of such assets. Excluding the total valuation allowance release of $39 million, the Company's effective tax rate for the year-ended December 31, 2003 was 20%, compared to 9% for the year earlier period. Compared to the Canadian federal tax rate of 38%, the Company's lower effective tax rate is mainly due to: the utilization of previously unrecognized tax loss carry forwards, which mitigated extra taxes that would have arisen from the increase in average spot gold prices from $310 per ounce in 2002 to $363 per ounce in 2003. Non-hedge derivative gains taxed in a low tax rate jurisdiction also contributed to a lower effective tax rate. The Company's tax rate rises in a higher spot gold price environment, as a larger portion of its earnings are taxed in higher tax-rate jurisdictions.
For 2004, excluding the effect of non-hedge derivative gains and any changes in tax valuation allowances, the Company expects its effective tax rate to be approximately 30%, assuming a spot gold price of $400 per ounce.
BARRICK FOURTH QUARTER 2003 |
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MANAGEMENT'S DISCUSSION AND ANALYSIS |
STATEMENT OF COMPREHENSIVE INCOME
Comprehensive income consists of net income or loss, that, together with certain other economic gains and losses, that are collectively described as "other comprehensive income" and are excluded from the income statement.
Comprehensive income totaled $162 million in fourth quarter 2003, compared to $65 million in the year earlier quarter. The primary reason for the increase in 2003 relates to unrealized gains on foreign currency cash flow hedge contracts and increases in the market value of available for sale securities over the past year.
LIQUIDITY AND CAPITAL RESOURCES
The Company believes its ability to generate substantial cash flow from operations is one of its fundamental financial strengths. Combined with its large cash balance of almost $1 billion at December 31, 2003 and $1 billion undrawn bank facility, the Company has sufficient access to capital resources to develop its internal projects and maintain a strong exploration program.
OPERATING ACTIVITIES
The Company generated operating cash flow of $134 million in fourth quarter 2003, compared to $195 million in the year earlier period. Operating cash flow in fourth quarter 2003 includes the payment of $86 million on the settlement of the Inmet litigation. Excluding this item, the Company generated higher operating cash flow in 2003 due to higher realized gold prices, and lower payments of reclamation and closure costs, offset by higher cash operating costs and higher income tax payments.
The Company's operating cash flow in 2003 was significantly affected by timing differences between cash payments of tax installments, which are based on 2002 taxable income, and accruals for current taxes based on expected 2003 taxable income. In fourth quarter 2003, this timing difference resulted in a net decrease to operating cash flow of $12 million. For the twelve-month period ended December 31, 2003, this timing difference resulted in a net decrease in operating cash flow of $57 million. As taxable income is significantly affected by changes in spot gold prices, any timing differences resulting from these changes could impact the Company's future operating cash flow.
INVESTING ACTIVITIES
The Company's principal investing activities in 2003 were for sustaining capital at its existing operating mines, new mine development and acquisitions of investments.
Capital expenditures for fourth quarter 2003 totaled $106 million, compared to $62 million for the year earlier period. The increase was primarily due to amounts spent at Veladero ($49 million), which began construction in the fourth quarter. Capital expenditures also included $17 million in Australia, mainly for underground development and new mining equipment, $18 million in North America for maintenance capital, and $9 million in Tanzania spent at the Bulyanhulu Mine on underground development. In South America, capital expenditures totaled $10 million (excluding Veladero) relating to Pierina and engineering and development work at Pascua-Lama.
The Company expects capital spending to increase substantially in 2004 to approximately $770 million, as it advances the construction of Veladero, Cowal and Alto Chicama.
In fourth quarter 2003, the Company spent $44 million to acquire a 10% interest in Highland Gold. Combined with a further investment of $40 million in early 2004, the Company raised its equity interest in Highland to approximately 17%. The Company also spent a further $9 million on investments in other junior mining companies.
FINANCING ACTIVITIES
During fourth quarter 2003, the Company's cash outflow on financing activities was $54 million, compared with $81 million in the year earlier period. The lower outflow in fourth quarter 2003 was largely due to proceeds from the exercise of stock options and the timing of payments on our long-term debt obligations.
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MANAGEMENT'S DISCUSSION AND ANALYSIS |
The Company has included cost per ounce data because it understands that certain investors use this information to determine the Company's ability to generate earnings as well as cash flow for use in investing and other activities. The Company has also included a measure of operating cash flow excluding the settlement of litigation. Litigation settlements are infrequent in occurrence, and therefore including this non-GAAP1 measure of performance provides a more comparable basis for assessing the company's cash flow performance in 2003 compared with 2002. The Company believes that conventional measures of performance prepared in accordance with GAAP do not fully illustrate the ability of its operating mines to generate cash flow. Non-GAAP measures do not have any standardized meaning prescribed by US GAAP, and therefore they may not be comparable to similar measures employed by other companies. The data are intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP. The measures are not necessarily indicative of operating profit or cash flow from operations as determined under GAAP. Where cost per ounce data is computed by dividing GAAP operating cost components by ounces sold, the Company has not provided formal reconciliations of these statistics. Where GAAP operating costs are adjusted in computing cost per ounce data, the Company has provided reconciliations below.
BARRICK FOURTH QUARTER 2003 |
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MANAGEMENT'S DISCUSSION AND ANALYSIS |
Reconciliation of Total Cash Costs Per Ounce to Financial Statements1 | ||||
Three months ended | Twelve months ended | |||
December 31, | December 31, | |||
(In millions of United States dollars except per ounce amounts) | 2003 | 2002 | 2003 | 2002 |
Cost of sales and other operating expenses per financial statements | $ 310 | $ 284 | $ 1,134 | $1,071 |
Reclamation costs/other | (39) | (16) | (83) | (43) |
Cost of sales and other operating expenses for per ounce calculation | $ 271 | $268 | $1,051 | $1,028 |
Ounces sold (thousands) | 1,362 | 1,540 | 5,554 | 5,805 |
Total cash costs per ounce | $ 199 | $ 174 | $ 189 | $ 177 |
|
||||
Reconciliation of Amortization and Reclamation Costs Per Ounce to Financial Statements | ||||
Three months ended | Twelve months ended | |||
December 31, | December 31, | |||
(In millions of United States dollars except per ounce amounts) | 2003 | 2002 | 2003 | 2002 |
Amortization per financial statements | $ 132 | $ 144 | $ 522 | $ 519 |
Amortization recorded on property, plant and equipment | ||||
not at operating mine sites | (4) | (10) | (25) | (26) |
Amortization for per ounce calculation | 128 | 134 | 497 | 493 |
Reclamation costs | - | 9 | - | 35 |
Amortization and reclamation costs for per ounce calculation | $ 128 | $ 143 | $ 497 | $ 528 |
Ounces sold (thousands) | 1,362 | 1,540 | 5,554 | 5,805 |
Amortization costs per ounce | $ 93 | $ 88 | $ 90 | $ 85 |
Amortization and reclamation costs per ounce | $ 93 | $ 93 | $ 90 | $ 91 |
Reconciliation of Operating Cash Flow Excluding The Inmet Settlement | ||||
Three months ended | Twelve months ended | |||
December 31, | December 31, | |||
(In millions of United States dollars except per share amounts) | 2003 | 2002 | 2003 | 2002 |
Operating cash flow per financial statements | $ 134 | $ 195 | $ 521 | $ 589 |
Inmet settlement | 86 | -- | 86 | -- |
Operating cash flow excluding Inmet settlement | $220 | $195 | $607 | $589 |
Per share data: | ||||
Operating cash flow | $0.26 | $0.36 | $0.97 | $1.09 |
Operating cash flow excluding Inmet settlement | $0.42 | $0.36 | $1.13 | $1.09 |
BARRICK FOURTH QUARTER 2003 |
18 |
MANAGEMENT'S DISCUSSION AND ANALYSIS |
FINANCIAL RISK MANAGEMENT | |
Forward Gold Sales Hedge Position (as of December 31, 2003) | |
Gold ounces hedged | 15.5 million ounces (or slightly less than three years of expected future production) |
Current termination date of gold sales contracts | 2013 in most cases |
Average projected realizable gold sales contract price at | $400/oz1 |
2013 termination date. | |
Delivery obligations | Barrick will deliver gold production from operations against gold sales contracts by the |
termination date (which is currently 2013 in most cases). However, Barrick may choose | |
to settle any gold sales contract in advance of this termination date at any time, at its | |
discretion. Historically, delivery has occurred in advance of the contractual termination | |
date. This means Barrick can deliver gold at the higher of spot prices, or prices under | |
the hedge contracts, until the termination date of these contracts. | |
Average forecast minimum realizable contract gold | $309/oz1,2,3 |
sales price for delivery of 100% of expected future | |
production into existing sales contracts over the next | |
three years. | |
Unrealized mark to market loss at December 31, 2003 | $(1,725) billion4 |
"Capped price" variable price gold sales contracts | None |
outstanding |
1. Approximate estimated value based on current market US dollar interest
rates and an average lease rate assumption of 1.5%
2. Accelerating gold deliveries could potentially lead to reduced contango that
would otherwise have built-up over time.
3. Assumes delivery of 100% of expected future production against current gold
sales contracts which would exhaust all remaining gold hedge positions.
4. At a spot gold price of $415 per ounce.
In all of the Company's master trading agreements, which govern the terms of its gold sales contracts with its 19 counterparties, the following applies:
The counterparties do not have unilateral and discretionary 'right to break' provisions.
The Company's trading agreements with its counterparties do provide for early close out of certain transactions in the event of a material negative change in its ability to produce gold for delivery under its hedging agreements, or a lack of gold market, and for customary events of default such as covenant breaches, insolvency or bankruptcy. The significant financial covenants are:
Barrick must maintain a minimum consolidated net worth of at least US$2 billion - currently, it is US$3.5 billion.
Barrick's agreements exclude unrealized valuations in the calculation of consolidated net worth.
The foregoing information is a summary of certain aspects of the Company's forward sales program and is not intended to be comprehensive. For a more complete understanding, reference should be made to the Company's website (www.barrick.com).
BARRICK FOURTH QUARTER 2003 |
19 |
MANAGEMENT'S DISCUSSION AND ANALYSIS |
The estimated fair value of all derivative instruments at December 31, 2003 was approximately $1.4 billion negative. The year-to-date change in the fair value of the company's derivative instruments is detailed as follows; Mark-to-Market (Fair Value) at December 31, 2003 of all derivative instruments:
Mark-to-Market (Fair Value) at September 30, 2003 of all derivative instruments: | ||
Gold forward sales position | $ (1,725) | |
Silver forward sales position | (20) | |
Foreign currency position | 288 | |
Interest rate position | 38 | |
All derivative instruments | $ (1,419) | |
Continuity Schedule of the Change in the Mark-to-Market Value of our gold forward sales position (millions) | ||
Fair value as at December 31, 2002 - Unrealized loss | $ | (639) |
Impact of change in spot price (from $347 per ounce to $415 per ounce) | (1,088) | |
Contango earned period to date | 138 | |
Impact of change in valuation inputs other than spot metal prices | (66) | |
(e.g. interest rates and lease rates) | ||
Fair value as at December 31, 2003 - Unrealized loss | $ | (1,725) |
The mark-to-market value of the gold contracts is based on a spot gold price of $415 per ounce and market rates for LIBOR and gold lease rates. The mark-to-market value of the contracts would approach zero (breakeven) at a spot gold price of approximately $303 per ounce, assuming all other variables are constant. The mark-to-market value represents the replacement value of these contracts based on current market levels, and does not represent an economic obligation for payment by Barrick. Barrick's obligations under the gold sales contracts are to deliver an agreed upon quantity of gold at hedge price by the termination date on the contracts (2013 in most cases).
BARRICK FOURTH QUARTER 2003 |
20 |
MANAGEMENT'S DISCUSSION AND ANALYSIS |
Consolidated Statements of Income | ||||||||
(in millions of United States dollars, except per share data, US GAAP basis) | Three months ended Dec. 31, | Twelve months ended Dec. 31, | ||||||
(Unaudited) | 2003 | 2002 | 2003 | 2002 | ||||
Gold sales (note 13) | $ | 536 | $ | 526 | $ | 2,035 | $ | 1,967 |
Costs and expenses | ||||||||
Cost of sales and other operating expenses 1 (notes 3 and 13) | 310 | 284 | 1,134 | 1,071 | ||||
Amortization (note 13) | 132 | 144 | 522 | 519 | ||||
Administration | 20 | 15 | 83 | 64 | ||||
Merger and related costs | - | (2) | - | (2) | ||||
Exploration and business development | 36 | 27 | 137 | 104 | ||||
498 | 468 | 1,876 | 1,756 | |||||
Other income/expense (note 4) | 11 | 1 | 52 | 29 | ||||
Inmet litigation (note 12B) | (14) | - | (16) | - | ||||
Interest expense | (8) | (13) | (44) | (57) | ||||
Non-hedge derivative gains (losses) (note 11E) | 46 | (14) | 71 | (6) | ||||
Income before income taxes and other items | 73 | 32 | 222 | 177 | ||||
Income tax (expense) recovery (note 5) | 4 | 22 | (5) | 16 | ||||
Income before cumulative effect of changes in accounting principles | 77 | 54 | 217 | 193 | ||||
Cumulative effect of changes in accounting principles (note 2) | - | - | (17) | - | ||||
Net income | $ | 77 | $ | 54 | $ | 200 | $ | 193 |
Earnings per share data (note 6): | ||||||||
Income before cumulative effect of changes in accounting principles | ||||||||
Basic and diluted | $ | 0.14 | $ | 0.10 | $ | 0.40 | $ | 0.36 |
Net income | ||||||||
Basic and diluted | $ | 0.14 | $ | 0.10 | $ | 0.37 | $ | 0.36 |
1. Exclusive of amortization (note 3) | ||||||||
The accompanying notes are an integral part of these unaudited interim consolidated financial statements |
BARRICK FOURTH QUARTER 2003 |
21 |
FINANCIAL STATEMENTS |
Consolidated Statements of Cash Flow | ||||||||
(in millions of United States dollars, US GAAP basis) | Three months ended Dec. 31, | Twelve months ended Dec. 31, | ||||||
(Unaudited) | 2003 | 2002 | 2003 | 2002 | ||||
OPERATING ACTIVITIES |
||||||||
Net income for the period | $ | 77 | $ | 54 | $ | 200 | $ | 193 |
Amortization (note 13) | 132 | 144 | 522 | 519 | ||||
Changes in capitalized mining costs | 3 | 18 | 37 | 29 | ||||
Deferred income taxes (note 5) | 16 | (66) | (49) | (75) | ||||
Inmet litigation settlement (note 12B) | (86) | - | (86) | - | ||||
Gains on sale of long-lived assets (note 4) | (7) | (3) | (39) | (8) | ||||
Other items (note 14) | (1) | 48 | (64) | (69) | ||||
Net cash provided by operating activities | 134 | 195 | 521 | 589 | ||||
INVESTING ACTIVITIES | ||||||||
Property, plant and equipment | ||||||||
Capital expenditures (note 13) | (106) | (62) | (322) | (228) | ||||
Sales proceeds | 10 | 4 | 48 | 11 | ||||
Purchase of investments | (53) | - | (55) | - | ||||
Short-term cash deposits | - | - | - | 159 | ||||
Net cash used in investing activities | (149) | (58) | (329) | (58) | ||||
FINANCING ACTIVITIES | ||||||||
Capital stock | ||||||||
Proceeds from shares issued on exercise of stock options | 18 | - | 29 | 83 | ||||
Repurchased for cash (note 9A) | - | - | (154) | - | ||||
Long-term debt repayments | (14) | (22) | (23) | (25) | ||||
Dividends | (58) | (59) | (118) | (119) | ||||
Net cash used in financing activities | (54) | (81) | (266) | (61) | ||||
Increase (decrease) in cash and equivalents | (69) | 56 | (74) | 470 | ||||
Cash and equivalents at beginning of period | 1,039 | 988 | 1,044 | 574 | ||||
Cash and equivalents at end of period | $ | 970 | $ | 1,044 | $ | 970 | $ | 1,044 |
The accompanying notes are an integral part of these unaudited interim consolidated financial statements |
BARRICK FOURTH QUARTER 2003 |
22 |
FINANCIAL STATEMENTS |
Consolidated Balance Sheets | ||||
(in millions of United States dollars, US GAAP basis) | As at Dec. 31, | As at Dec. 31, | ||
(Unaudited) | 2003 | 2002 | ||
ASSETS | ||||
Current assets | ||||
Cash and equivalents | $ | 970 | $ | 1,044 |
Accounts receivable | 69 | 72 | ||
Inventories (note 8) | 157 | 159 | ||
Other current assets (note 8) | 169 | 47 | ||
1,365 | 1,322 | |||
Investments | 127 | 41 | ||
Property, plant and equipment | 3,131 | 3,311 | ||
Capitalized mining costs, net | 235 | 272 | ||
Unrealized fair value of derivative contracts | 256 | 78 | ||
Other assets | 248 | 237 | ||
Total assets | $ | 5,362 | $ | 5,261 |
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||
Current liabilities | ||||
Accounts payable | $ | 245 | $ | 213 |
Other current liabilities | 105 | 270 | ||
350 | 483 | |||
Long-term debt | 719 | 761 | ||
Other long-term obligations | 569 | 528 | ||
Deferred income tax liabilities | 230 | 155 | ||
Total liabilities | 1,868 | 1,927 | ||
Shareholders' equity | ||||
Capital stock | 4,115 | 4,148 | ||
Deficit | (694) | (689) | ||
Accumulated other comprehensive income (loss) (note 7) | 73 | (125) | ||
Total shareholders' equity | 3,494 | 3,334 | ||
Total liabilities and shareholders' equity | $ | 5,362 | $ | 5,261 |
The accompanying notes are an integral part of these unaudited interim consolidated financial statements |
BARRICK FOURTH QUARTER 2003 |
23 |
FINANCIAL STATEMENTS |
Consolidated Statements of Shareholders' Equity | ||||
and Comprehensive Income | ||||
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY | ||||
(in millions of United States dollars, US GAAP basis) (Unaudited) | 2003 | 2002 | ||
Common shares (number in millions) | ||||
At January 1 | 542 | 536 | ||
Issued for cash/on exercise of stock options | 2 | 6 | ||
Repurchased for cash (note 9A) | (9) | - | ||
At Dec. 31 | 535 | 542 | ||
Common shares | ||||
At January 1 | $ | 4,148 | $ | 4,062 |
Issued for cash/on exercise of stock options | 34 | 86 | ||
Repurchased for cash (note 9A) | (67) | - | ||
At Dec. 31 | $ | 4,115 | $ | 4,148 |
Deficit | ||||
At January 1 | $ | (689) | $ | (763) |
Net income | 200 | 193 | ||
Dividends | (118) | (119) | ||
Repurchase of common shares(1) | (87) | - | ||
At Dec. 31 | $ | (694) | $ | (689) |
Accumulated other comprehensive income (note 7) | $ | 73 | $ | (125) |
Total shareholders' equity at Dec. 31 | $ | 3,494 | $ | 3,334 |
1 Represents the excess of cash paid over the average book value repurchased as part of the share buyback plan. |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | Three months ended Dec. 31, | Twelve months ended Dec. 31, | ||||||
(in millions of United States dollars, US GAAP basis) (Unaudited) | 2003 | 2002 | 2003 | 2002 | ||||
Net income | $ | 77 | $ | 54 | $ | 200 | $ | 193 |
Foreign currency translation adjustments (note 7) | 2 | 2 | (3) | (21) | ||||
Transfers of realized gains on cash flow hedges to earnings (note 7) | (17) | (8) | (61) | (21) | ||||
Hedge ineffectiveness transferred to earnings (note 7) | (5) | - | (12) | - | ||||
Change in gains accumulated in OCI for cash flow hedges (note 7) | 81 | 17 | 230 | 28 | ||||
Additional minimum pension liability (note 7) | - | (2) | - | (2) | ||||
Transfers of realized losses on available-for-sale securities to earnings (note 7) | 1 | 4 | 8 | 4 | ||||
Unrealized gains (losses) on available-for-sale securities (note 7) | 23 | (2) | 36 | (6) | ||||
Comprehensive income | $ | 162 | $ | 65 | $ | 398 | $ | 175 |
The accompanying notes are an integral part of these unaudited interim consolidated financial statements |
BARRICK FOURTH QUARTER 2003 |
24 |
FINANCIAL STATEMENTS |
Notes to Unaudited Interim Consolidated Financial
Statements
(US GAAP)
Tabular dollar amounts in millions of United States dollars, unless otherwise indicated, US GAAP basis. References to C$ and A$ are to Canadian and Australian dollars, respectively.
1
BASIS OF PREPARATIONThe United States dollar is the principal currency of our operations. We prepare and file our primary consolidated financial statements in United States dollars and under United States generally accepted accounting principles ("US GAAP"). The accompanying unaudited interim consolidated financial statements have been prepared in accordance with US GAAP for the preparation of interim financial information. Accordingly, they do not include all of the information and disclosures required by US GAAP for annual consolidated financial statements. Except as disclosed in note 2, the accounting policies used in the preparation of the accompanying unaudited interim consolidated financial statements are the same as those described in our audited consolidated financial statements and the notes thereto for the three years ended December 31, 2002.
In the opinion of management, all adjustments considered necessary for fair presentation of results for the periods presented have been reflected in these financial statements. These unaudited interim consolidated financial statements should be read in conjunction with the audited annual consolidated financial statements and the notes thereto for the three years ended December 31, 2002.
The preparation of financial statements under US GAAP requires us to make estimates and assumptions that affect:
the reported amounts of assets and liabilities;
disclosures of contingent assets and liabilities; and
revenues and expenses recorded in each reporting period.
The most significant estimates and assumptions that affect our financial position and results of operations are those that use estimates of proven and probable gold reserves; future estimates of costs and expenses; and/or assumptions of future commodity prices, interest rates and foreign currency rates. Such estimates and assumptions include:
decisions as to whether exploration and mine development costs should be capitalized or expensed;
assessments of whether property, plant and equipment, ore in stockpiles and capitalized mining costs may be impaired;
assessments of our ability to realize the benefits of deferred income tax assets;
the useful lives of long-lived assets and the rate at which we record amortization in earnings;
the estimated fair value of asset retirement obligations;
the timing and amounts of forecasted future expenditures that represent the hedged items underlying hedging relationships for our cash flow hedge contracts;
the estimated fair values of derivative instruments; the value of slow-moving and obsolete inventories (which are stated at the lower of average cost and net realizable value); and
assessments of the likelihood and amounts of contingencies.
BARRICK FOURTH QUARTER 2003 |
25 |
NOTES TO FINANCIAL STATEMENTS |
We regularly review the estimates and assumptions that affect
our financial statements; however, what actually happens could differ from
those estimates and assumptions. 2
A FAS 143, Accounting for asset retirement obligations
On January 1, 2003, we adopted FAS 143 and changed our accounting policy for recording obligations relating to the retirement of long-lived assets. FAS 143 applies to legal obligations associated with the retirement of long-lived assets that result from the acquisition, construction, development and/or the normal operation of a long-lived asset. Under FAS 143 we record the fair value of a liability for an asset retirement obligation in the period in which it is incurred. When the liability is initially recorded, we capitalize the cost by increasing the carrying amount of the related long-lived asset. Over time, the liability is increased to reflect an interest element (accretion expense) considered in its initial measurement at fair value, and the capitalized cost is amortized over the useful life of the related asset. Upon settlement of the liability, we will record a gain or loss if the actual cost incurred is different than the liability recorded. On adoption of FAS 143 we recorded on our balance sheet an increase in property, plant and equipment by $39 million; an increase in other long-term obligations by $32 million; and an increase in deferred income tax liabilities by $3 million. In the first quarter of 2003, we recorded in our income statement a $4 million credit for the cumulative effect of this accounting change.
Following the adoption of FAS 143, the total amount of recognized liabilities for asset retirement obligations was $334 million. These liabilities mainly relate to obligations at our active and inactive mines to perform reclamation and remediation activities to meet existing environmental laws and regulations that govern our mining properties.
The comparative amount of these liabilities would have been $353
million at December 31, 2001, using the principles of FAS 143, and using current information, assumptions and interest rates.For the three-month period ended December 31, 2003, the effect on earnings of adopting FAS 143 was a decrease in income before the cumulative effect of accounting changes by $2 million ($nil per share), and for the twelve-month period ended December 31, 2003 the effect was a decrease in income before the cumulative effect of accounting changes by $43 million ($ 0.08 per share).
For the three-month period ended December 31, 2002, the effect of adopting FAS 143 would have been a decrease in income before the cumulative effect of accounting changes by $1 million ($nil per share), and for the twelve-month period ended December 31, 2002, the effect would have been a decrease in income before the cumulative effect of accounting changes by $5 million ($0.01 per share).
B Amortization of underground development costs
Effective January 1, 2003, we changed our accounting policy for amortization of underground mine development costs to exclude estimates of future underground development costs. Future underground development costs, which are significant, are necessary to develop our underground ore bodies, expected to be mined in some cases over the next 25 years.
Previously, we amortized the total of historical capitalized costs and estimated future costs using the units of production method over total proven and probable reserves at our underground mining operations. This accounting change was made to better match amortization with ounces of gold sold and to remove the inherent uncertainty in estimating future development costs from amortization calculations.
BARRICK FOURTH QUARTER 2003 |
26 |
NOTES TO FINANCIAL STATEMENTS |
Under our revised accounting policy, costs incurred to access
specific ore blocks or areas, and that only provide benefit over the life of
that area, are amortized over the proven and probable reserves within the
specific ore block or area. Infrastructure and other common costs which have a
useful life over the entire mine life continue to be amortized over total proven
and probable reserves of the mine. The cumulative effect of this change at January 1, 2003, was to
decrease property, plant and equipment by $19 million, and increase deferred
income tax liabilities by $2 million. In the first quarter of 2003 we recorded
in our income statement a $21 million charge for the cumulative effect of this
change. For the three-month period ended December 31, 2003, the effect
of adopting this accounting change was a decrease in income before the
cumulative effect of accounting changes by $ 0.04 million ($nil per share), and
for the twelve-month period ended December 31, 2003, the effect was a decrease
in income before the cumulative effect of accounting changes by $0.16 million
($nil per share). If the comparative income statements had been adjusted for the
retroactive application of this change in amortization policy, there would have
been no effect on net income for the three-month period ended December 31, 2002,
or twelve-month period ended December 31, 2002. C Changes in estimates In 2003, we reduced the assumed rate of return on pension plan assets from
8.5% to 7%. The effect of this change in 2003 was to increase pension cost
expense by $2 million for the full year. Proven and probable reserves For the twelve-month period ended December 31, 2003, we expensed development
costs totaling $17 million at our Veladero Project in Argentina because in
accordance with our accounting policy for these costs, we do not capitalize
development costs incurred until after proven and probable reserves, as defined
by United States reporting standards, have been found. Effective October 1,
2003, we determined that the project met the definition of reserves for United
States reporting purposes. Following this determination we began capitalizing
development costs at the Veladero project prospectively for future periods.
3
Pension costs
Three months ended December 31, Twelve months ended December 31, 2003 2002 2003 2002 Cost of sales(1) $ 282 $ 294 $ 1,100 $ 1,114 By-product revenues (28) (30) (114) (119) Royalty expenses 14 11 50 37 Production taxes 3 2 15 5 Reclamation and other closure costs (note 2A) - 7 - 34 Accretion expense on reclamation/closure obligations and other reclamation/closure costs (note 2A) 39 - 83 - $ 310 $ 284 $ 1,134 $ 1,071 (1) Cost of sales includes all costs that are capitalized to inventory, except for amortization of property, plant and equipment.
The amount of amortization capitalized into inventory, but excluded from cost of sales was $128 million in the three months ended December 31, 2003 (2002 - $134 million); and $497 million in the twelve months ended December 31, 2003 (2002 - $493 million).
BARRICK FOURTH QUARTER 2003 |
27 |
NOTES TO FINANCIAL STATEMENTS |
Amortization of capitalized mining costs
We charge most mine operating costs to inventory as incurred. However, we defer and amortize certain mining costs associated with open-pit deposits that have diverse ore grades and waste-to-ore ton ratios over the mine life. These mining costs arise from the removal of waste rock at our open-pit mines, and we commonly refer to them as "deferred stripping costs". We charge to inventory amortization of amounts deferred based on a "stripping ratio" using the units-of-production method. This accounting method results in the smoothing of these costs over the life of mine, rather than expensing them as incurred. Some mining companies expense these costs as incurred, which may result in the reporting of greater volatility in period-to-period results of operations. The application of our deferred stripping accounting policy in the three months ended December 31, 2003 resulted in an increase in operating costs by $3 million compared to actual costs incurred (three months ended December 31, 2002 - $18 million increase), and for the twelve months ended December 31, 2003, the application resulted in an increase in operating costs by $37 million compared to actual costs incurred (twelve months ended December 31, 2002 - $29 million increase).
Capitalized mining costs are an asset that represents the excess of costs capitalized over the related amortization recorded, although it is possible that a liability could arise if cumulative amortization exceeds costs capitalized. The carrying amount of capitalized mining costs is grouped with related mining property, plant and equipment for impairment testing purposes.
Average stripping ratios (1) | ||||
Three months ended December 31, | Twelve months ended December 31, | |||
2003 | 2002 | 2003 | 2002 | |
Open Pit (Goldstrike) | 112:1 | 112:1 | 112:1 | 112:1 |
Pierina | 48:1 | 48:1 | 48:1 | 48:1 |
(1)
The stripping ratio is calculated as the ratio of total tons (ore and waste) of material to be moved compared to total recoverable ounces in proven and probable gold reserves.The average remaining life of the above-mentioned open-pit mine operations for which we capitalize mining costs is eight years. The full amount of stripping costs incurred will be expensed by the end of the mine lives.
4
OTHER INCOME/EXPENSE
Three months ended December 31, Twelve months ended December 31, 2003 2002 2003 2002 Interest income $ 9 $ 12 $ 34 $ 30 Gains on sale of long-lived assets 7 3 39 8 Foreign currency translation gains (losses) 8 (2) 2 1 Losses on available for sale securities (5) - (12) (4) Other items (8) (12) (11) (6) $ 11 $ 1 $ 52 $ 29 In 2003, we sold various assets, including several land positions around inactive mine sites in the United States; as well as the East Malartic Mill and Bousquet mine in Canada. We may continue to sell further land positions around our inactive mine sites in the United States. These land positions have been fully amortized, and therefore any proceeds would likely generate gains on sale, before selling costs and taxes.
BARRICK FOURTH QUARTER 2003 |
28 |
NOTES TO FINANCIAL STATEMENTS |
5
Income tax recovery (expense) Three months ended December 31, Twelve months ended December 31, 2003 2002 2003 2002 Current $ 20 $ (44) $ (54) $ (59) Deferred (16) 66 49 75 $ 4 $ 22 $ (5) $ 16 Following a corporate reorganization of certain North American subsidiaries in second quarter 2003, we released valuation allowances totaling $21 million previously recorded against certain deferred income tax assets in entities that did not have any current sources of income. The tax benefits from these previously unrecognized tax assets are now expected to be realized, and this benefit was recorded as a component of the $49 million deferred income tax credit for 2003. In fourth quarter 2003, we released valuation allowances totaling $18 million, that mainly includes allowances of $15 million that had been recorded against deferred tax assets in Argentina. Following the approval to begin construction at Veladero and the classification of mineralized material as proven and probable reserves in fourth quarter 2003, we concluded that sufficient evidence existed to support the realization of deferred tax assets, and a valuation allowance was no longer required. Excluding the $39 million valuation allowance release our underlying effective tax rate for 2003 was 20%. The two major reasons why this rate differs from the Canadian federal statutory rate of 38% include: non-hedge derivative gains in a low tax-rate jurisdiction caused our effective tax rate to decrease by 6%; and the benefits of previously unrecognized tax loss carry forwards in various foreign subsidiaries which were utilized to offset higher levels of taxable income due to the higher gold price environment which caused our effective tax rate to decrease by 12%.
6 EARNINGS PER SHARE
Net income per share was calculated using the weighted average number of common shares outstanding for the three-month period ended December 31, 2003, which amounted to 534 million shares (2002 - 542 million shares), and for the twelve-month period ended December 31, 2003 amounted to 539 million shares (2002 - - 541 million shares).
Diluted net income per share reflects the dilutive effect of the exercise of common share purchase options outstanding as at the end of the period. The number of shares for the diluted net income per share calculation for the three- month period ended December 31, 2003 amounted to 536 million shares (2002 - 543 million shares) and for the twelve-month period ended December 31, 2003 amounted to 539 million shares (2002 - 541 million shares).
BARRICK FOURTH QUARTER 2003 |
29 |
NOTES TO FINANCIAL STATEMENTS |
7
Comprehensive income consists of net income and other gains and losses that are excluded from net income. These other gains and losses consist mainly of gains and losses on derivative instruments accounted for as cash flow hedges; unrealized gains and losses on available-for-sale securities; and foreign currency translation adjustments.
Parts of comprehensive income Three months ended December 31, Twelve months ended December 31, 2003 2002 2003 2002 Pre-tax Tax Pre-tax Tax Pre-tax Tax Pre-tax Tax amount effect amount effect amount effect amount effect Foreign currency translation adjustments $ 2 $ - $ 2 $ - $ (3) $ - $ (21) $ - Transfers of realized gains on cash flow hedges to earnings (note 11F) (29) 12 (7) (1) (91) 30 (25) 4 Hedge ineffectiveness transferred to earnings (note 11F) (9) 4 - - (19) 7 - - Change in gains accumulated in OCI for cash flow hedges (note 11F) 119 (38) 31 (14) 349 (119) 49 (21) Additional minimum pension liability - - (2) - - - (2) - Transfers of realized losses on available for sale securities to earnings 1 - 4 - 8 - 4 - Unrealized gains (losses) on available for sale securities 23 - (2) - 36 - (6) - $ 107 $ (22) $ 26 $ (15) $ 280 $ (82) $ (1) $ (17)
Accumulated other comprehensive income (loss) (OCI) At December 31, 2003
At December 31, 2002 Pre-tax Tax effect Total Pre-tax Tax effect Total amount amount Foreign currency translation adjustments $ (147) $ - $ (147) $ (144) $ - $ (144) Accumulated gains on cash flow hedges (note 11F) 288 (99) 189 49 (17) 32 Additional minimum pension liability (7) - (7) (7) - (7) Unrealized gains (losses) on available-for-sale securities 38 - 38 (6) - (6) $ 172 $ (99) $ 73 $ (108) $ (17) $ (125)
BARRICK FOURTH QUARTER 2003 |
30 |
NOTES TO FINANCIAL STATEMENTS |
8
At December 31, 2003 At December 31, 2002 Inventories Gold in process and ore in stockpiles $ 99 $ 100 Mine operating supplies 58 59 $ 157 $ 159 Other current assets Derivative assets (note 11) 154 37 Prepaid expenses 15 10 $ 169 $ 47 Gold in process and ore in stockpiles excludes $64 million (December 31, 2002 - $61 million) of stockpiled ore, which is not expected to be processed in the following 12 months. This amount is included in other assets.
9 CAPITAL STOCK
A Share repurchase program
During the twelve-month period ended December 31, 2003, we repurchased 8.75 million common shares at an average cost of $17.56 per share.
B Barrick Gold Inc. ("BGI") exchangeable shares
In connection with a 1998 acquisition, BGI, formerly Homestake Canada Inc., issued 11.1 million BGI exchangeable shares. Each BGI exchangeable share is exchangeable for 0.53 of a Barrick common share at any time at the option of the holder and has essentially the same voting, dividend (payable in Canadian dollars), and other rights as 0.53 of a Barrick common share. BGI is a subsidiary that holds our interest in the Hemlo and Eskay Creek Mines.
At December 31, 2003, $1.5 million BGI exchangeable shares were outstanding, which are equivalent to $0.8 million Barrick common shares. The equivalent common share amounts are reflected in the number of common shares outstanding.
At any time on or after December 31, 2008, or when fewer than 1.4 million BGI exchangeable shares are outstanding, we have the right to require the exchange of each outstanding BGI exchangeable share for 0.53 of a Barrick common share. While there are exchangeable shares outstanding, we are required to present summary consolidated financial information relating to BGI for holders of exchangeable shares.
Summarized financial information for BGI | |||||||
Three months ended December 31, | Twelve months ended December 31, | ||||||
2003 | 2002 | 2003 | 2002 | ||||
Total revenues and other income | $ | 61 | $ | 62 | $ 226 | $ | 203 |
Less: costs and expenses | 70 | 53 | 245 | 191 | |||
Income (loss) before taxes: | (9) | 9 | (19) | 12 | |||
Net income (loss) | $ | (27) | $ | 6 | $ (38) | $ | (1) |
BARRICK FOURTH QUARTER 2003 |
31 |
NOTES TO FINANCIAL STATEMENTS |
At December 31, 2003 At December 31, 2002 Current assets $ 72 $ 91 Non-current assets 233 236 Total assets 305 327 Current liabilities 20 75 Intercompany notes payable 546 407 Other long-term liabilities 11 18 Deferred income taxes 67 122 Shareholders' equity (339) (295) Total liabilities and shareholders' equity $ 305 $ 327
10
EMPLOYEE STOCK-BASED COMPENSATION
Stock option activity (shares in millions) Common Weighted Common Weighted shares average shares average (number) price (C$) (number) price (US$) At December 31, 2002 18.9 3.1 Granted 4.8 $ 28.61 - - Exercised (1.0) $ 23.99 (0.7) $ 13.07 Canceled or expired (1.2) $ 27.95 (0.1) $ 22.88 At December 31, 2003 21.5 2.3 Under Accounting Principles Board Opinion No. 25 (Accounting for Stock Issued to Employees) (APB 25), we recognize compensation cost for stock options in earnings based on the excess, if any, of the quoted market price of the stock at the grant date of the award over the option exercise price. Generally, the exercise price for stock options granted to employees equals the fair market value of our common stock at the date of grant, resulting in no compensation cost.
FASB Statement No. 123 (Accounting for Stock-Based Compensation) ( FAS 123) encourages, but does not require, companies to record compensation cost for stock-based employee compensation plans based on the fair value of options granted. We have elected to continue to account for stock-based compensation using the intrinsic value method prescribed in APB 25 and its related interpretations, and to provide disclosures of the pro forma effects of adoption had we recorded compensation expense under the fair value method.
BARRICK FOURTH QUARTER 2003 |
32 |
NOTES TO FINANCIAL STATEMENTS |
1 basic and diluted
Stock option expense (per share amounts in dollars) Three months ended December 31, Twelve months ended December 31, 2003 2002 2003 2002 Pro forma effects Net income, as reported $ 77 $ 54 $ 200 $ 193 Stock option expense (6) (6) (24) (21) Pro forma net income $ 71 $ 48 $ 176 $ 172 Net income per share As reported 1 $ 0.14 $ 0.10 $ 0.37 $ 0.36 Pro forma 1 $ 0.14 $ 0.09 $ 0.33 $ 0.32
11 DERIVATIVE INSTRUMENTS
A Derivative instruments
We use derivative financial instruments to mitigate the effects of certain risks that are inherent in our business, and also to take advantage of opportunities to secure attractive pricing for commodities, currencies and interest rates, utilizing our credit capacity to do so. The inherent risks that we most often attempt to mitigate by the use of derivative instruments occur from changes in commodity prices (gold and silver), interest rates and foreign currency exchange rates. Because we produce gold and silver, incur costs in foreign currencies and invest and borrow in US dollars and are therefore subject to US interest rates, all of our derivative contracts cover natural underlying asset or liability positions. The purpose of the hedging elements of our derivative program is that changes in the values of cash flows from hedged items are offset by equivalent changes in the values of derivatives instruments.
We do not hold derivatives for the purpose of speculation; our risk management programs are designed to enable us to plan our business effectively and, where possible, mitigate adverse effects of future movements in gold and silver prices, interest rates and foreign currency exchange rates.
For a more detailed description of the types of derivative instruments we use, and our accounting policies for derivative instruments, refer to note 23 to our audited consolidated financial statements for the three years ended December 31, 2002.
B Gold and silver hedge contracts
Forward gold sales contracts
We have fixed price forward gold sales contracts with various counterparties for 15.5 million ounces of future gold production. The terms of the contracts are governed by master trading agreements that we have in place with the counterparties to the contracts. The contracts have final delivery dates over the next 10 to 15 years, but we have the right to accelerate the delivery date at any time over these periods. Contract prices are established at inception through to an interim date. Based on the contractual terms of the fixed-price contracts and current spot and forward gold market prices, the average price that would be realized if all production in the next three years was used to deliver into these contracts would be $309 per ounce. If we do not deliver at this interim date, a new interim date is set. The price for the new interim date is determined in accordance with the master trading agreements which have contractually agreed price adjustment mechanisms based on the market gold price. The master trading agreements have both fixed and floating price mechanisms. The fixed price represents the market price at the start date (or previous
BARRICK FOURTH QUARTER 2003 |
33 |
NOTES TO FINANCIAL STATEMENTS |
interim date) of the contract plus a premium based on the difference
between the forward price of gold and the current market price of gold. For
the majority of fixed-price forward gold sales contracts, selling prices are
fixed through 2006. If at an interim date we opt for a floating price, the
floating price represents the spot market price of gold plus or minus the
difference between the previously fixed price and the market gold price at
that interim date. Forward gold market prices, are principally influenced by
the current market price of gold, gold lease rates and U.S. dollar interest
rates. The final realized selling price under the contracts will depend on the
timing of the actual future delivery date, the market price of gold at the
start of the contract and the actual amount of the premium of the forward
price of gold over the spot price of gold on the dates that fixed selling
prices are set. We use gold lease rate swap contracts to manage our gold lease rate
exposure. Based on the fact that historical short-term gold lease rates have
been lower than longer-term gold lease rates, and because fixed price forward
gold sales contracts have fixed gold lease rates, we have used these gold
lease rate swap contracts to economically achieve a more optimal term
structure for gold lease costs. Under these swaps we receive a fixed gold
lease rate, and pay a floating gold lease rate on 3.3 million ounces of gold
spread from 2004 to 2013. The swaps are associated with forward gold sales
contracts with expected delivery dates beyond 2006. The contracts are
accounted for as non-hedge derivatives. Major customers The largest single counterparty as of December 31, 2003 made up 12% of the
ounces of outstanding forward gold sales contracts
.
Forward silver sales contracts
Forward silver sales contracts have similar delivery terms and pricing mechanisms as forward gold sales contracts. At December 31, 2003, we had fixed-price commitments to deliver 22.3 million ounces of silver over periods of up to 10 to 15 years.
BARRICK FOURTH QUARTER 2003 |
34 |
NOTES TO FINANCIAL STATEMENTS |
C Derivative instruments outstanding as at December 31,
2003
Maturity 2004 2005 2006 2007 2008+ Total Written silver call options Ounces (thousands) 5,000 2,000 - - - 7,000 Average exercise price per ounce $ 6.04 $ 5.00 - - - $ 5.74 Interest rate contracts Receive-fixed swaps Notional amount (millions) $ 50 - $ 100 $ 575 $ 275 $ 1,000 Fixed rate (%) 3.6% - 3.0% 3.5% 4.0% 3.6% Pay-fixed swaps Notional amount (millions) - - - - $ 324 $ 324 Fixed rate (%) - - - - 5.7% 5.7% Net notional position $ 50 - $ 100 $ 575 $ (49) $ 676 Foreign currency contracts Canadian Dollar Forwards C$ (millions) $ 442 $ 329 $ 145 $ 96 $ 22 $ 1,034 Average Price (US¢) 0.68 0.67 0.72 0.67 0.68 0.68 Australian Dollar Forwards A$ (millions) $ 591 $ 440 $ 193 $ 139 $ 19 $ 1,382 Average Price (US¢) 0.57 0.58 0.55 0.58 0.53 0.57 Australian Dollar Min-Max Contracts A$ (millions) $ 20 $ 10 $ 10 - - $ 40 Average Cap Price (US¢) 0.53 0.52 0.52 - - 0.53 Average Floor Price (US¢) 0.52 0.51 0.51 - - 0.52 Fuel contracts Barrels WTI (thousands) 360 180 - - - 540 Cap $ 30 30 - - - $ 30 Floor $ 23 22 - - - $ 23
Classification of interest rate and foreign currency contracts Cash flow Fair value At December 31, 2003 hedge hedge Non- hedge Total Interest rate contracts Receive-fixed swaps on cash balances $ 650 - - $ 650 Receive-fixed swaps on debenture - $ 350 - $ 350 Pay-fixed swaps on Bulyanhulu project financing $ 174 - - $ 174 Pay-fixed swaps on lease rates - - $ 150 $ 150 Foreign currency contracts Canadian dollar contracts $ 1,012 - $ 22 $1,034 Australian dollar contracts $ 1,279 - $ 143 $ 1,422
BARRICK FOURTH QUARTER 2003 |
35 |
NOTES TO FINANCIAL STATEMENTS |
D Unrealized fair value of derivative instruments
(excluding normal sales contracts)
Three months ended December 31, Twelve months ended December 31, 2003 2002 2003 2002 Beginning of period $ 220 $ 8 $ 29 $ (16) Derivative instruments settled (36) - (91) (2) Change in fair value of derivative instruments: Non-hedge derivatives 37 (14) 52 (6) Cash flow hedges 119 31 349 49 Fair value hedges (3) 4 (2) 4 End of period $ 337 $ 29 $ 337 $ 29 The fair values of recorded derivative assets and liabilities reflect the netting of the fair values of individual derivative instruments, and amounts due to/from counterparties that arise from derivative instruments, when the conditions of FIN No. 39, Offsetting of Amounts Related to Certain Contracts, have been met. Amounts receivable from counterparties that have been offset against derivative liabilities totaled $16 million at December 31, 2003.
E Non-hedge derivative gains (losses)
Three months ended December 31, Twelve months ended December 31, 2003 2002 2003 2002 Commodity contracts $ 3 $ (3) $ 3 $ (2) Currency contracts 13 4 17 8 Interest and lease rate contracts 21 (15) 32 (12) Hedge ineffectiveness recorded in earnings 9 - 19 - $ 46 $ (14) $ 71 $ (6)
F Change in gains accumulated in OCI for cash flow hedge contracts
Commodity Foreign currency Interest-rate Total contracts contracts contracts As at December 31 , 2002 $ 9 $ 26 $ 14 $ 49 Change in fair value 3 337 9 349 3 Hedge gains transferred to (13)1 (65)2 (13) (91) earnings Hedge ineffectiveness transferred to earnings - (18) (1) (19) As at December 31, 2003 $ (1) $ 280 $ 9 $ 288 1. Included under gold sales
2. Included under costs and expenses
3. Included under interest and other incomeBased on the fair value of cash flow hedge contracts at December 31, 2003, in fiscal 2004, we expect to transfer hedge gains of $134 million from OCI to earnings, to be matched with the related hedged items. These gains will be reflected as a reduction in cash operating costs, and as a component of interest income.
During 2003, we determined that certain Australian dollar hedge contracts designated as hedges of forecasted capital expenditures no longer met the qualifying FAS 133 hedge criteria due to changes in the expected timing of the forecasted expenditures. On determining that these hedges are no longer effective for accounting purposes,, gains totaling $18 million on these contracts were transferred out of OCI to earnings in 2003. For the three and twelve month
BARRICK FOURTH QUARTER 2003 |
36 |
NOTES TO FINANCIAL STATEMENTS |
periods ended December 31, 2003, the total amount of hedge
ineffectiveness, including the gains on ineffective capital expenditure hedges,
recorded and recognized in non-hedge derivative gains was a gain of $9 million
and a gain of $19 million respectively (2002 - $nil and $nil respectively). 12
Certain conditions may exist as of the date the consolidated financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. Management and, where appropriate, legal counsel, assess such contingent liabilities, which inherently involves an exercise of judgment.
In assessing loss contingencies related to legal proceedings that are pending against us or unasserted claims that may result in such proceedings, the Company and its legal counsel evaluate the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought.
If the assessment of a contingency suggests that it is probable that a loss has been incurred and the amount of the liability can be estimated, then the estimated liability is accrued in the consolidated financial statements. If the assessment suggests that a potentially material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent loss, together with an estimate of the range of possible loss, if determinable, is disclosed. Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case we disclose the nature of the guarantee.
A Environmental
.Our mining and exploration activities are subject to various federal, provincial and state laws and regulations governing the protection of the environment. These laws and regulations are continually changing and generally becoming more restrictive. We conduct our operations so as to protect public health and the environment, and we believe that our operations are materially in compliance with all applicable laws and regulations. We have made, and expect to make in the future, expenditures to meet such laws and regulations
B Litigation and claims
Inmet litigation
In October 1997, Barrick Gold Inc. ("BGI"), a wholly-owned subsidiary of Barrick, entered into an agreement with Inmet Mining Corporation ("Inmet") to purchase the Troilus mine in Quebec for $110 million plus working capital. In December 1997, BGI terminated the agreement after deciding that, on the basis of due diligence studies, conditions to closing the arrangement would not be satisfied.
In February 1998, Inmet filed suit against BGI in the British Columbia ("B.C.") Supreme Court disputing the termination of the agreement and alleging that BGI had breached the agreement. In January 2002, the Court released its decision in the matter and found in favour of Inmet. The Court awarded Inmet equitable damages C$88.2 (US $59) million, which was recorded as an expense in fiscal December 2001. The Court did not award Inmet pre-judgment interest. Inmet made a request to the Court to re-open the trial to make submissions on its claim for pre-judgment interest, which was denied in May 2002.
In February 2002, BGI filed a Notice of Appeal with the B.C. Court of Appeal, and Inmet filed a Cross-Appeal of the decision regarding pre-judgment interest. In November 2003, the B.C. Court of Appeal dismissed the appeal made by BGI, and also awarded Inmet pre-judgment interest. In November 2003, BGI paid Inmet C$111 million (US $86 million), in
BARRICK FOURTH QUARTER 2003 |
37 |
NOTES TO FINANCIAL STATEMENTS |
full settlement of the lawsuit. The settlement resulted in a further expense
of US$14 million in fourth quarter 2003, combined with post-judgment interest of
$2 million in the first nine months of 2003. Bre-X Minerals
On April 30, 1998, we were added as a defendant in a class action lawsuit initiated against Bre-X Minerals Ltd., certain of its directors and officers or former directors and officers and others in the United States District Court for the Eastern District of Texas, Texarkana Division. The class action alleges, among other things, that statements made by us in connection with our efforts to secure the right to develop and operate the Busang gold deposit in East Kalimantan, Indonesia were materially false and misleading and omitted to state material facts relating to the preliminary due diligence investigation undertaken by us in late 1996.
On July 13, 1999, the Court dismissed the claims against us and several other defendants on the grounds that the plaintiffs had failed to state a claim under United States securities laws. On August 19, 1999, the plaintiffs filed an amended complaint restating their claims against us and certain other defendants and on June 14, 2000 filed a further amended complaint, the Fourth Amended Complaint.
On March 31, 2001, the Court granted in part and denied in part our Motion to Dismiss the Fourth Amended Complaint. As a result, we remain a defendant in the case. We believe that the remaining claims against us are without merit. We filed our formal answer to the Fourth Amended Complaint on April 27, 2001 denying all relevant allegations of the plaintiffs against us. Discovery in the case has been stayed by the Court pending the Court's decision on whether or not to certify the case as a class action. The amount of potential loss, if any, which we may incur arising out of the plaintiffs' claims is not presently determinable.
On March 31, 2003, the Court denied all of the Plaintiffs' motions to certify the case as a class action. Plaintiffs have not filed an interlocutory appeal of the Court's decision denying class certification to the Fifth Circuit Court of Appeals. On June 2, 2003, the Plaintiff's submitted a proposed Trial and Case Management Plan, suggesting that the Plan would cure the defects in the Plaintiff's motions to certify the class. The Court has taken no action with respect to the proposed Trial and Case Management Plan. The Plaintiffs' case against the Defendants may now proceed in due course, but not on behalf of a class of Plaintiffs but only with respect to the specific claims of the Plaintiffs named in the lawsuit. Having failed to certify the case as a class action, we believe that the likelihood of any of the named Defendants succeeding against Barrick with respect to their claims for securities fraud is remote.
Blanchard complaint
On January 7, 2003, we were served with a Complaint for Injunctive Relief by Blanchard and Company, Inc. ("Blanchard"), and Herbert Davies ("Davies"). The complaint, which is pending in the U. S. District Court for the Eastern District of Louisiana, also names J. P. Morgan Chase & Company ("J.P. Morgan") as a defendant, along with an unspecified number of additional defendants to be named later. The complaint, which has been amended several times, alleges that we and bullion banks with which we entered into spot deferred contracts have manipulated the price of gold, in violation of U.S. antitrust laws and the Louisiana Unfair Trade Practices and Consumer Protection Law. Blanchard alleges that it has been injured as a seller of gold due to reduced interest in gold as an investment. Davies, a customer of Blanchard, alleges injury due to the reduced value of his gold investments. The complaint seeks damages and an injunction terminating certain of our trading agreements with J. P. Morgan and other bullion banks. In September 2003 the Court issued an Order granting in part and denying in part Barrick's motions to dismiss this action. Discovery has commenced in the case and a trial date has been tentatively set for February 2005. We intend to defend the action vigorously.
BARRICK FOURTH QUARTER 2003 |
38 |
NOTES TO FINANCIAL STATEMENTS |
Wagner complaint
On June 12, 2003, a complaint was filed against Barrick and several of its current or former officers in the U.S. District Court for the Southern District of New York. The complaint is on behalf of Barrick shareholders who purchased Barrick shares between February 14, 2002 and September 26, 2002. It alleges that Barrick and the individual defendants violated U.S. securities laws by making false and misleading statements concerning Barrick's projected operating results and earnings in 2002. The complaint seeks an unspecified amount of damages. Several other complaints, making the same basic allegations against the same defendants, were filed by other parties on behalf of the same proposed class of Barrick shareholders. In September the cases were consolidated into a single action in the Southern District of New York. The plaintiffs filed a Consolidated and/or Amended Complaint on November 5, 2003. On January 14, 2004 Barrick filed a motion to dismiss the Wagner complaint. We intend to defend the action vigorously.
Peruvian tax assessment
One of our Peruvian subsidiaries received a revised income tax assessment of $32 million, excluding interest and penalties, from the Peruvian tax authority, SUNAT. The tax assessment related to a tax audit of our Pierina Mine for the 1999 and 2000 fiscal years. The assessment mainly relates to the revaluation of the Pierina mining concession for the purpose of determining its tax basis. Under the valuation proposed by SUNAT, the tax basis of the Pierina assets would change from what we previously assumed with a resulting increase in current and deferred income taxes. We believe that the tax assessment is incorrect and we are appealing the decision. The full life of mine effect on our current and deferred income tax liabilities was fully recorded at December 31, 2002, as well as other payments of about $21 million due for periods through 2003.
The case is pending before Peru's Tax Court. If the case is not resolved in our favor, we intend to pursue all available remedies, including judicial appeals. If we are successful and our original valuation is confirmed as the appropriate tax basis of the Pierina assets, we would benefit from a $141 million reduction in current and deferred tax liabilities recorded at December 31, 2002. The effect of this contingent gain, if any, will be recorded in the period the contingency is resolved.
In the event of an unfavorable Tax Court ruling, Peruvian law is unclear with respect to whether it is necessary to make payment of the disputed current taxes for the years covered by the tax assessment, pending the outcome of an appeal process, a process which can take several years. The amount of current income taxes that is potentially payable is $80 million. In the event of an unfavorable Tax Court ruling; we will consider taking all available action to prevent payment of the amount in dispute until the appeal process is complete.
We have not provided for $57 million of potential interest and penalties on the income tax assessed in the audit. Even if the tax assessment is upheld, we believe that we will prevail on the interest and penalties part, because the assessment runs counter to applicable law and previous Peruvian tax audits. The potential amount of interest and penalties will continue to increase over time while we contest the tax assessment. A liability for interest and penalties will only be recorded should it become probable that SUNAT's position on interest and penalties will be upheld, or if we exhaust our available remedies.
BARRICK FOURTH QUARTER 2003 |
39 |
NOTES TO FINANCIAL STATEMENTS |
Other From time to time, we are involved in various claims, legal proceedings and
complaints arising in the ordinary course of business. We are also subject to
reassessment for income and mining taxes for certain years. We do not believe
that adverse decisions in any pending or threatened proceedings related to any
potential tax assessments or other matters, or any amount which we may be
required to pay by reason thereof, will have a material adverse effect on our
financial condition or future results of operations
13
SEGMENT INFORMATIONWe operate in the gold mining industry and our operations are managed on a regional basis. Our four primary regions are North America, Australia/Africa, Peru, Chile and Argentina. Our "other operating mines" segment includes mainly operations which have been, or are being, closed.
Income statement information | ||||||||||||
Gold sales | Cost of sales and other | Segment income (loss) before | ||||||||||
operating expenses | income taxes | |||||||||||
Three months ended December 31, | 2003 | 2002 | 2003 | 2002 | 2003 | 2002 | ||||||
Goldstrike | $ | 215 | $ | 181 | $ | 141 | $ | 111 | $ | 32 | $ | 35 |
Pierina | 91 | 95 | 21 | 26 | 27 | 19 | ||||||
Bulyanhulu | 23 | 42 | 18 | 21 | (3) | 8 | ||||||
Kalgoorlie | 39 | 33 | 22 | 23 | 12 | 5 | ||||||
Eskay Creek | 34 | 31 | 1 | 7 | 22 | 10 | ||||||
Hemlo | 27 | 30 | 15 | 17 | 9 | 10 | ||||||
Plutonic | 33 | 28 | 16 | 15 | 13 | 10 | ||||||
Round Mountain | 36 | 29 | 17 | 19 | 14 | 5 | ||||||
Other operating mines | 38 | 57 | 20 | 29 | 11 | 22 | ||||||
Segment total | 536 | 526 | 271 | 268 | 137 | 124 | ||||||
Other items outside operating segments | - | - | 39 | 16 | - | - | ||||||
$ | 536 | $ | 526 | $ | 310 | $ | 284 | $ | 137 | $ | 124 |
BARRICK FOURTH QUARTER 2003 |
40 |
NOTES TO FINANCIAL STATEMENTS |
Gold Sales Cost of sales and other Segment income (loss) before operating expenses income taxes Twelve months ended December 31, 2003 2002 2003 2002 2003 2002 Goldstrike $ 813 $ 678 $ 531 $ 437 $ 122 $ 94 Pierina 332 303 76 71 90 71 Bulyanhulu 109 134 73 78 (1) 16 Kalgoorlie 153 124 87 82 46 23 Eskay Creek 130 121 18 16 65 57 Hemlo 98 97 60 64 27 23 Plutonic 120 105 62 57 48 37 Round Mountain 139 132 66 73 53 38 Other operating mines 141 273 78 150 37 87 Segment total 2,035 1,967 1,051 1,028 487 446 Other items outside operating segments - - 83 43 - - $ 2,035 $ 1,967 $ 1,134 $ 1,071 $ 487 $ 446
Asset information Amortization Three months ended December 31, Twelve months ended December 31, 2003 2002 2003 2002 Goldstrike $ 42 $ 35 $ 160 $ 147 Pierina 43 50 166 161 Bulyanhulu 8 13 37 40 Kalgoorlie 5 5 20 19 Eskay Creek 11 14 47 48 Hemlo 3 3 11 10 Plutonic 4 3 10 11 Round Mountain 5 5 20 21 Other operating mines 7 6 26 36 Segment total 128 134 497 493 Other amortization outside operating segments 4 10 25 26 $ 132 $ 144 $ 522 $ 519
BARRICK FOURTH QUARTER 2003 |
41 |
NOTES TO FINANCIAL STATEMENTS |
Segment capital expenditures Three months ended December 31, Twelve months ended December 31, 2003 2002 2003 2002 Operating Mines: Goldstrike $ 11 $ 11 $ 51 $ 46 Plutonic 4 6 44 20 Bulyanhulu 9 12 36 56 Kalgoorlie 2 7 14 14 Pierina 8 1 17 5 Hemlo 3 1 10 6 Round Mountain 1 1 6 8 Eskay Creek 1 - 5 8 Other Operating mines 4 9 29 33 Development Projects: Veladero 49 - 68 - Cowal 8 6 24 13 Pascua-Lama 2 2 9 11 Alto Chicama 2 5 4 5 Tulawaka 1 - 1 - Segment total 105 61 318 225 Other capital expenditures outside operating segments 1 1 4 3 $ 106 $ 62 $ 322 $ 228 Reconciliation of segment income to enterprise net income
Three months ended December 31, Twelve months ended December 31, 2003 2002 2003 2002 Segment income $ 137 $ 124 $ 487 $ 446 Non-legal reclamation/closure costs/accretion expense/other (39) - (83) - Merger and other related costs - 2 - 2 Reclamation and other closure costs - (16) - (43) Amortization outside operating segments (4) (10) (25) (26) Exploration and business development (36) (27) (137) (104) Administration (20) (15) (83) (64) Other income/expense 11 1 52 29 Interest expense (8) (13) (44) (57) Non-hedge derivative gains (losses) 46 (14) 71 (6) Income tax recovery (expense) 4 22 (5) 16 Inmet litigation (14) - (16) - Cumulative effect of changes in accounting principles - - (17) - Net income $ 77 $ 54 $ 200 $ 193
BARRICK FOURTH QUARTER 2003 |
42 |
NOTES TO FINANCIAL STATEMENTS |
14
Three months ended December 31, Twelve months ended December 31, 2003 2002 2003 2002 Add (deduct): Reclamation costs $ - $ 7 $ - $ 34 Losses on available for sale securities 5 - 12 4 Cumulative effect of changes in accounting principles - - 17 - Accretion expense 4 - 17 - Non-hedge derivative (gains) losses (46) 14 (71) 6 Inmet litigation expense 14 - 16 - Changes in operating assets and liabilities: Accounts receivable (2) (7) 3 (12) Inventories 5 (17) 2 32 Accounts payable and accrued liabilities 20 5 15 (9) Current income taxes accrued (20) 44 54 59 Other assets and liabilities 16 52 7 (11) Cash payments: Merger related costs - (12) - (50) Reclamation and closure costs (5) (26) (25) (70) Income taxes 8 (12) (111) (52) Other net operating activities $ (1) $ 48 $ (64) $ (69)
BARRICK FOURTH QUARTER 2003 |
43 |
NOTES TO FINANCIAL STATEMENTS |
Mine Statistics
UNITED STATES
|
||||||||||||||||
Goldstrike Open Pit | Goldstrike Underground | Goldstrike Total | Round Mountain | |||||||||||||
Three months ended Dec. 31, | 2003 | 2002 | 2003 | 2002 | 2003 | 2002 | 2003 | 2002 | ||||||||
Tons mined (thousands) | 33,149 | 34,123 | 420 | 441 | 33,569 | 34,564 | 4,735 | 7,359 | ||||||||
Tons processed (thousands) | 2,445 | 2,697 | 423 | 448 | 2,868 | 3,145 | 8,832 | 7,234 | ||||||||
Average grade (ounces per ton) | 0.161 | 0.181 | 0.390 | 0.468 | 0.195 | 0.222 | 0.012 | 0.015 | ||||||||
Recovery rate (percent) | 80.8% | 83.2% | 89.3% | 92.0% | 83.3% | 85.9% | n/a | n/a | ||||||||
Production (thousands of ounces) | 325 | 406 | 147 | 193 | 472 | 598 | 91 | 89 | ||||||||
Production costs per ounce | ||||||||||||||||
Cash operating costs | $ | 235 | $ | 212 | $ | 240 | $ | 168 | $ | 236 | $ | 199 | $ | 159 | $ | 191 |
Royalties and production taxes | 15 | 8 | 21 | 16 | 17 | 11 | 31 | 21 | ||||||||
Total cash costs | 250 | 220 | 261 | 184 | 253 | 210 | 190 | 212 | ||||||||
Amortization and reclamation | 57 | 48 | 118 | 124 | 76 | 72 | 59 | 72 | ||||||||
Total production costs | $ | 307 | $ | 268 | $ | 379 | $ | 308 | $ | 329 | $ | 282 | $ | 249 | $ | 284 |
Capital expenditures (US$ millions) | $ | 3 | $ | 6 | $ | 8 | $ | 5 | $ | 11 | $ | 11 | $ | 1 | $ | 1 |
Twelve months ended Dec. 31, | 2003 | 2002 | 2003 | 2002 | 2003 | 2002 | 2003 | 2002 | ||||||||
Tons mined (thousands) | 141,693 | 142,898 | 1,631 | 1,635 | 143,324 | 144,533 | 24,563 | 31,573 | ||||||||
Tons processed (thousands) | 10,041 | 10,322 | 1,622 | 1,638 | 11,663 | 11,960 | 31,470 | 31,111 | ||||||||
Average grade (ounces per ton) | 0.189 | 0.164 | 0.385 | 0.428 | 0.216 | 0.200 | 0.016 | 0.018 | ||||||||
Recovery rate (percent) | 82.0% | 83.3% | 88.3% | 91.3% | 83.6% | 85.7% | n/a | n/a | ||||||||
Production (thousands of ounces) | 1,559 | 1,410 | 552 | 640 | 2,111 | 2,050 | 393 | 378 | ||||||||
Production costs per ounce | ||||||||||||||||
Cash operating costs | $ | 215 | $ | 221 | $ | 234 | $ | 184 | $ | 220 | $ | 209 | $ | 150 | $ | 172 |
Royalties and production taxes | 18 | 7 | 19 | 14 | 18 | 9 | 23 | 15 | ||||||||
Total cash costs | 233 | 228 | 253 | 198 | 238 | 218 | 173 | 187 | ||||||||
Amortization and reclamation | 53 | 58 | 122 | 121 | 72 | 77 | 54 | 69 | ||||||||
Total production costs | $ | 286 | $ | 286 | $ | 375 | $ | 319 | $ | 310 | $ | 295 | $ | 227 | $ | 256 |
Capital expenditures (US$ millions) | $ | 23 | $ | 12 | $ | 28 | $ | 34 | $ | 51 | $ | 46 | $ | 6 | $ | 8 |
BARRICK FOURTH QUARTER 2003 |
44 |
MINE STATISTICS |
Mine Statistics
AUSTRALIA | ||||||||||||||||
Plutonic | Darlot | Lawlers | Kalgoorlie | |||||||||||||
Three months ended Dec. 31, | 2003 | 2002 | 2003 | 2002 | 2003 | 2002 | 2003 | 2002 | ||||||||
Tons mined (thousands) | 2,699 | 3,486 | 211 | 211 | 200 | 1,960 | 13,062 | 12,143 | ||||||||
Tons processed (thousands) | 732 | 938 | 224 | 220 | 210 | 183 | 1,844 | 1,785 | ||||||||
Average grade (ounces per ton) | 0.132 | 0.101 | 0.172 | 0.182 | 0.135 | 0.161 | 0.071 | 0.063 | ||||||||
Recovery rate (percent) | 91.0% | 88.4% | 96.8% | 97.5% | 96.9% | 97.4% | 87.8% | 80.7% | ||||||||
Production (thousands of ounces) | 88 | 84 | 37 | 40 | 27 | 28 | 115 | 98 | ||||||||
Production costs per ounce | ||||||||||||||||
Cash operating costs | $ | 187 | $ | 177 | $ | 172 | $ | 155 | $ | 259 | $ | 180 | $ | 205 | $ | 224 |
Royalties and production taxes | 9 | 10 | 10 | 8 | 9 | 8 | 10 | 7 | ||||||||
Total cash costs | 196 | 187 | 182 | 163 | 268 | 188 | 215 | 231 | ||||||||
Amortization and reclamation | 49 | 45 | 59 | 51 | 58 | 43 | 53 | 58 | ||||||||
Total production costs | $ | 245 | $ | 232 | $ | 241 | $ | 214 | $ | 326 | $ | 231 | $ | 268 | $ | 289 |
Capital expenditures (US$ millions) | $ | 4 | $ | 6 | $ | 2 | $ | 2 | $ | 1 | $ | 3 | $ | 2 | $ | 7 |
Twelve months ended Dec. 31, | 2003 | 2002 | 2003 | 2002 | 2003 | 2002 | 2003 | 2002 | ||||||||
Tons mined (thousands) | 14,180 | 14,289 | 876 | 840 | 1,152 | 4,746 | 48,677 | 46,324 | ||||||||
Tons processed (thousands) | 3,010 | 3,532 | 879 | 849 | 806 | 718 | 7,171 | 7,051 | ||||||||
Average grade (ounces per ton) | 0.123 | 0.097 | 0.182 | 0.176 | 0.128 | 0.162 | 0.071 | 0.061 | ||||||||
Recovery rate (percent) | 89.9% | 89.5% | 96.9% | 97.2% | 95.8% | 97.3% | 85.8% | 82.6% | ||||||||
Production (thousands of ounces) | 334 | 307 | 155 | 145 | 99 | 113 | 436 | 360 | ||||||||
Production costs per ounce | ||||||||||||||||
Cash operating costs | $ | 185 | $ | 175 | $ | 156 | $ | 160 | $ | 241 | $ | 171 | $ | 201 | $ | 215 |
Royalties and production taxes | 8 | 9 | 8 | 8 | 8 | 8 | 8 | 7 | ||||||||
Total cash costs | 193 | 184 | 164 | 168 | 249 | 179 | 209 | 222 | ||||||||
Amortization and reclamation | 31 | 38 | 52 | 47 | 42 | 42 | 48 | 57 | ||||||||
Total production costs | $ | 224 | $ | 222 | $ | 216 | $ | 215 | $ | 291 | $ | 221 | $ | 257 | $ | 279 |
Capital expenditures (US$ millions) | $ | 44 | $ | 20 | $ | 7 | $ | 7 | $ | 14 | $ | 7 | $ | 14 | $ | 14 |
BARRICK FOURTH QUARTER 2003 |
45 |
MINE STATISTICS |
Mine Statistics
CANADA
|
||||||||||||
Hemlo | Eskay Creek | Holt-McDermott | ||||||||||
Three months ended Dec. 31, | 2003 | 2002 | 2003 | 2002 | 2003 | 2002 | ||||||
Tons mined (thousands) | 1,039 | 1,102 | 63 | 69 | 142 | 142 | ||||||
Tons processed (thousands) | 514 | 494 | 65 | 67 | 150 | 142 | ||||||
Average grade (ounces per ton) | 0.133 | 0.177 | 1.481 | 1.511 | 0.166 | 0.162 | ||||||
Recovery rate (percent) | 95.1% | 95.5% | 94.1% | 93.5% | 93.5% | 94.2% | ||||||
Production (thousands of ounces) | 65 | 83 | 83 | 97 | 23 | 22 | ||||||
Production costs per ounce | ||||||||||||
Cash operating costs | $ | 219 | $ | 177 | $ | 15 | $ | 47 | $ | 210 | $ | 193 |
Royalties and production taxes | 8 | 7 | 5 | 4 | - | - | ||||||
Total cash costs | 227 | 184 | 20 | 51 | 210 | 193 | ||||||
Amortization and reclamation | 37 | 38 | 132 | 142 | 144 | 90 | ||||||
Total production costs | $ | 264 | $ | 222 | $ | 152 | $ | 193 | $ | 354 | $ | 283 |
Capital expenditures (US$ millions) | $ | 3 | $ | 1 | $ | 1 | $ | - | $ | - | $ | 2 |
Twelve months ended Dec. 31, | 2003 | 2002 | 2003 | 2002 | 2003 | 2002 | ||||||
Tons mined (thousands) | 4,178 | 4,114 | 272 | 254 | 557 | 520 | ||||||
Tons processed (thousands) | 1,971 | 1,906 | 275 | 256 | 559 | 520 | ||||||
Average grade (ounces per ton) | 0.143 | 0.149 | 1.432 | 1.502 | 0.170 | 0.170 | ||||||
Recovery rate (percent) | 95.0% | 94.7% | 93.7% | 93.7% | 94.3% | 94.6% | ||||||
Production (thousands of ounces) | 268 | 269 | 352 | 359 | 90 | 84 | ||||||
Production costs per ounce | ||||||||||||
Cash operating costs | $ | 218 | $ | 216 | $ | 48 | $ | 36 | $ | 239 | $ | 173 |
Royalties and production taxes | 8 | 8 | 4 | 4 | - | - | ||||||
Total cash costs | 226 | 224 | 52 | 40 | 239 | 173 | ||||||
Amortization and reclamation | 40 | 40 | 132 | 134 | 131 | 96 | ||||||
Total production costs | $ | 266 | $ | 264 | $ | 184 | $ | 174 | $ | 370 | $ | 269 |
Capital expenditures (US$ millions) | $ | 10 | $ | 6 | $ | 5 | $ | 8 | $ | - | $ | 7 |
BARRICK FOURTH QUARTER 2003 |
46 |
MINE STATISTICS |
Mine Statistics | ||||||||
PERU | TANZANIA | |||||||
Pierina | Bulyanhulu | |||||||
Three months ended Dec. 31, | 2003 | 2002 | 2003 | 2002 | ||||
Tons mined (thousands) | 10,106 | 8,865 | 257 | 260 | ||||
Tons processed (thousands) | - | - | 261 | 274 | ||||
Average grade (ounces per ton) | 0.071 | 0.095 | 0.341 | 0.426 | ||||
Recovery rate (percent) | - | - | 88.5% | 86.2% | ||||
Production (thousands of ounces) | 206 | 281 | 79 | 101 | ||||
Production costs per ounce | ||||||||
Cash operating costs | $ | 89 | $ | 95 | $ | 301 | $ | 177 |
Royalties and production taxes | - | - | 15 | 8 | ||||
Total cash costs | 89 | 95 | 316 | 185 | ||||
Amortization and reclamation | 181 | 191 | 125 | 116 | ||||
Total production costs | $ | 270 | $ | 286 | $ | 441 | $ | 301 |
Capital expenditures (US$ millions) | $ | 8 | $ | 1 | $ | 9 | $ | 12 |
Twelve months ended Dec. 31, | 2003 | 2002 | 2003 | 2002 | ||||
Tons mined (thousands) | 39,501 | 32,311 | 945 | 944 | ||||
Tons processed (thousands) | - | - | 980 | 1,075 | ||||
Average grade (ounces per ton) | 0.074 | 0.080 | 0.363 | 0.385 | ||||
Recovery rate (percent) | - | - | 88.1% | 86.1% | ||||
Production (thousands of ounces) | 912 | 898 | 314 | 356 | ||||
Production costs per ounce | ||||||||
Cash operating costs | $ | 83 | $ | 80 | $ | 235 | $ | 190 |
Royalties and production taxes | - | - | 11 | 8 | ||||
Total cash costs | 83 | 80 | 246 | 198 | ||||
Amortization and reclamation | 182 | 191 | 123 | 102 | ||||
Total production costs | $ | 265 | $ | 271 | $ | 369 | $ | 300 |
Capital expenditures (US$ millions) | $ | 17 | $ | 5 | $ | 36 | $ | 56 |
BARRICK FOURTH QUARTER 2003 |
47 |
MINE STATISTICS |
SUMMARY GOLD MINERAL RESERVES AND MINERAL RESOURCES | ||||||||
For the year ended December 31, | 2003 | 2002 | ||||||
Tons | Grade | Ounces | Tons | Grade | Ounces | |||
Based on attributable ounces | (000's) | (oz/ton) | (000's) | (000's) | (oz/ton) | (000's) | ||
NORTH AMERICA | ||||||||
Goldstrike Open Pit | (proven and probable) | 109,742 | 0.143 | 15,685 | 107,130 | 0.150 | 16,051 | |
(mineral resource) | 37,403 | 0.061 | 2,264 | 46,400 | 0.070 | 3,231 | ||
Goldstrike Underground | (proven and probable) | 9,177 | 0.377 | 3,460 | 9,770 | 0.398 | 3,888 | |
(mineral resource) | 5,841 | 0.426 | 2,489 | 5,107 | 0.466 | 2,378 | ||
Goldstrike Property Total | (proven and probable) | 118,919 | 0.161 | 19,145 | 116,900 | 0.171 | 19,939 | |
(mineral resource) | 43,244 | 0.110 | 4,753 | 51,507 | 0.109 | 5,609 | ||
Round Mountain (50%) | (proven and probable) | 89,852 | 0.018 | 1,583 | 96,057 | 0.020 | 1,875 | |
(mineral resource) | 37,770 | 0.017 | 645 | 17,455 | 0.010 | 176 | ||
Marigold (33%) | (proven and probable) | 34,270 | 0.022 | 737 | 26,351 | 0.026 | 678 | |
(mineral resource) | 13,334 | 0.020 | 268 | 13,665 | 0.016 | 219 | ||
Eskay Creek | (proven and probable) | 927 | 1.015 | 941 | 1,433 | 0.998 | 1,430 | |
(mineral resource) | 422 | 0.287 | 121 | 384 | 0.398 | 153 | ||
Hemlo (50%) | (proven and probable) | 17,557 | 0.099 | 1,744 | 19,726 | 0.107 | 2,118 | |
(mineral resource) | 3,017 | 0.090 | 271 | 2,677 | 0.093 | 248 | ||
Holt-McDermott | (proven and probable) | 340 | 0.162 | 55 | 847 | 0.182 | 154 | |
(mineral resource) | 452 | 0.195 | 88 | 246 | 0.248 | 61 | ||
SOUTH AMERICA | ||||||||
Pascua-Lama | (proven and probable) | 296,411 | 0.057 | 16,862 | 296,411 | 0.057 | 16,862 | |
(mineral resource) | 115,845 | 0.030 | 3,487 | 115,845 | 0.030 | 3,487 | ||
Veladero | (proven and probable) | 317,187 | 0.035 | 11,115 | 254,311 | 0.037 | 9,384 | |
(mineral resource) | 67,715 | 0.023 | 1,540 | 135,760 | 0.024 | 3,260 | ||
Pierina | (proven and probable) | 61,393 | 0.045 | 2,768 | 70,343 | 0.051 | 3,602 | |
(mineral resource) | 25,421 | 0.016 | 419 | 39,938 | 0.016 | 626 | ||
Alto Chicama | (proven and probable) | 159,250 | 0.045 | 7,155 | 120,948 | 0.054 | 6,535 | |
(mineral resource) | 25,751 | 0.067 | 1,735 | 56,352 | 0.035 | 1,998 | ||
AUSTRALIA/AFRICA | ||||||||
Plutonic | (proven and probable) | 20,635 | 0.128 | 2,646 | 13,976 | 0.181 | 2,533 | |
(mineral resource) | 13,395 | 0.147 | 1,967 | 19,349 | 0.118 | 2,287 | ||
Lawlers | (proven and probable) | 3,234 | 0.124 | 402 | 3,407 | 0.149 | 509 | |
(mineral resource) | 8,777 | 0.129 | 1,136 | 8,379 | 0.133 | 1,115 | ||
Darlot | (proven and probable) | 7,627 | 0.149 | 1,135 | 8,202 | 0.155 | 1,269 | |
(mineral resource) | 4,194 | 0.130 | 546 | 4,169 | 0.130 | 540 | ||
Kalgoorlie (50%) | (proven and probable) | 97,047 | 0.061 | 5,894 | 96,898 | 0.057 | 5,551 | |
(mineral resource) | 44,584 | 0.058 | 2,580 | 41,911 | 0.054 | 2,279 | ||
Cowal | (proven and probable) | 70,107 | 0.036 | 2,495 | 75,922 | 0.037 | 2,835 | |
(mineral resource) | 41,027 | 0.039 | 1,596 | 35,211 | 0.036 | 1,255 | ||
Bulyanhulu | (proven and probable) | 27,882 | 0.391 | 10,907 | 27,420 | 0.425 | 11,653 | |
(mineral resource) | 4,300 | 0.440 | 1,894 | 4,765 | 0.352 | 1,678 | ||
Tulawaka (70%) | (proven and probable) | 1,093 | 0.337 | 368 | - | - | - | |
(mineral resource) | 680 | 0.066 | 45 | - | - | - | ||
OTHER | (proven and probable) | - | - | - | - | - | - | |
(mineral resource) | 20,404 | 0.078 | 1,598 | 1,085 | 0.335 | 364 | ||
TOTAL | (proven and probable) | 1,323,731 | 0.065 | 85,952 | 1,229,152 | 0.071 | 86,927 | |
(mineral resource) | 470,332 | 0.052 | 24,689 | 548,698 | 0.046 | 25,355 |
BARRICK FOURTH QUARTER 2003 |
48 |
MINERAL RESERVES AND MINERAL RESOURCES |
GOLD MINERAL RESERVES 1 | |||||||||||
As at December 31, 2003 | PROVEN | PROBABLE | TOTAL | ||||||||
Tons | Grade | Ounces | Tons | Grade | Ounces | Tons | Grade | Ounces | |||
Based on attributable ounces | (000's) | (oz/ton) | (000's) | (000's) | (oz/ton) | (000's) | (000's) | (oz/ton) | (000's) | ||
NORTH AMERICA | |||||||||||
Goldstrike Open Pit | 61,551 | 0.128 | 7,856 | 48,191 | 0.162 | 7,829 | 109,742 | 0.143 | 15,685 | ||
Goldstrike Underground | 3,316 | 0.467 | 1,547 | 5,862 | 0.326 | 1,913 | 9,177 | 0.377 | 3,460 | ||
Goldstrike Property Total | 64,867 | 0.145 | 9,403 | 54,053 | 0.180 | 9,742 | 118,919 | 0.161 | 19,145 | ||
Round Mountain (50%) | 64,933 | 0.017 | 1,081 | 24,919 | 0.020 | 502 | 89,852 | 0.018 | 1,583 | ||
Marigold (33%) | 3,441 | 0.028 | 98 | 30,828 | 0.021 | 638 | 34,270 | 0.022 | 737 | ||
Eskay Creek | 387 | 1.398 | 541 | 540 | 0.741 | 400 | 927 | 1.015 | 941 | ||
Hemlo (50%) | 10,766 | 0.113 | 1,213 | 6,791 | 0.078 | 531 | 17,557 | 0.099 | 1,744 | ||
Holt-McDermott | 31 | 0.161 | 5 | 309 | 0.162 | 50 | 340 | 0.162 | 55 | ||
SOUTH AMERICA | |||||||||||
Pierina | 26,112 | 0.060 | 1,560 | 35,281 | 0.034 | 1,208 | 61,393 | 0.045 | 2,768 | ||
Pascua-Lama | 37,738 | 0.062 | 2,355 | 258,673 | 0.056 | 14,507 | 296,411 | 0.057 | 16,862 | ||
Veladero | 19,037 | 0.042 | 801 | 298,150 | 0.035 | 10,314 | 317,187 | 0.035 | 11,115 | ||
Alto Chicama | 4,443 | 0.051 | 225 | 154,807 | 0.045 | 6,930 | 159,250 | 0.045 | 7,155 | ||
AUSTRALIA/AFRICA | |||||||||||
Plutonic | 403 | 0.057 | 23 | 20,232 | 0.130 | 2,623 | 20,635 | 0.128 | 2,646 | ||
Lawlers | 790 | 0.133 | 105 | 2,444 | 0.122 | 297 | 3,234 | 0.124 | 402 | ||
Darlot | 3,181 | 0.119 | 379 | 4,446 | 0.170 | 756 | 7,627 | 0.149 | 1,135 | ||
Kalgoorlie (50%) | 37,799 | 0.054 | 2,042 | 59,248 | 0.065 | 3,852 | 97,047 | 0.061 | 5,894 | ||
Cowal | 5,723 | 0.042 | 238 | 64,384 | 0.035 | 2,257 | 70,107 | 0.036 | 2,495 | ||
Bulyanhulu | 1,784 | 0.407 | 726 | 26,098 | 0.390 | 10,181 | 27,882 | 0.391 | 10,907 | ||
Tulawaka (70%) | - | - | - | 1,093 | 0.337 | 368 | 1,093 | 0.337 | 368 | ||
TOTAL | 281,435 | 0.074 | 20,795 | 1,042,296 | 0.063 | 65,156 | 1,323,731 | 0.065 | 85,952 | ||
1 See accompanying footnote on next page. |
BARRICK FOURTH QUARTER 2003 |
49 |
MINERAL RESERVES AND MINERAL RESOURCES |
MINERAL RESERVES AND MINERAL RESOURCES NOTE
Mineral reserves ("reserves") have been calculated as at December 31, 2003 in accordance with National Instrument 43-101, as required by Canadian securities regulatory authorities. For the United States reporting purposes, Industry Guide 7 (under the Securities Exchange Act of 1934, as interpreted by the Staff of the U.S. Securities and Exchange Commission), applies different standards in order to classify mineralization as a reserve. Accordingly, Alto Chicama is classified for U.S. reporting purposes as mineralized material. Calculations have been prepared by employees of Barrick under the supervision of René M. Marion, P.Eng., Vice-President, Technical Services of Barrick and/or Alexander J. Davidson, P.Geol., Executive Vice-President, Exploration of Barrick. Reserves have been calculated using an assumed long-term average gold price of US$325, a silver price of US$4.75 and exchange rates of $1.50 $Can/$US and $0.57 $US/$Aus. Reserves at the KCGM property assumed an exchange rate of $0.59 $US/$A. Reserves at the Hemlo property assumed an exchange rate of $1.53 $Can/$US. Reserve calculations incorporate current and/or expected mine plans and cost levels at each property. Varying cut-off grades have been used depending on the mine and type of ore contained in the reserves. Barrick's normal data verification procedures have been employed in connection with the calculations. For a more detailed description of the key assumptions, parameters and methods used in calculating Barrick's reserves and resources, see Barrick's most recent Annual Information Form on file with Canadian provincial securities regulatory authorities and the U.S. Securities and Exchange Commission.
BARRICK FOURTH QUARTER 2003 |
50 |
MINERAL RESERVES AND MINERAL RESOURCES |
GOLD MINERAL RESOURCES 1 | |||||||||||||
As at December 31, 2003 | MEASURED (M) | INDICATED (I) | (M) + (I) | INFERRED | |||||||||
Tons | Grade | Ounces | Tons | Grade | Ounces | Ounces | Tons | Grade | Ounces | ||||
Based on attributable ounces | (000's) | (oz/ton) | (000's) | (000's) | (oz/ton) | (000's) | (000's) | (000's) | (oz/ton) | (000's) | |||
NORTH AMERICA | |||||||||||||
Goldstrike Open Pit | 14,077 | 0.059 | 831 | 23,326 | 0.061 | 1,433 | 2,264 | 323 | 0.065 | 21 | |||
Goldstrike Underground | 1,580 | 0.435 | 687 | 4,261 | 0.423 | 1,802 | 2,489 | 7,725 | 0.366 | 2,827 | |||
Goldstrike Property Total | 15,657 | 0.097 | 1,518 | 27,587 | 0.117 | 3,235 | 4,753 | 8,048 | 0.354 | 2,848 | |||
Round Mountain (50%) | 10,050 | 0.013 | 133 | 27,720 | 0.018 | 512 | 645 | 9,790 | 0.018 | 180 | |||
Marigold (33%) | 6,645 | 0.020 | 134 | 6,689 | 0.020 | 134 | 268 | 59,144 | 0.014 | 826 | |||
Eskay Creek | 93 | 0.290 | 27 | 329 | 0.286 | 94 | 121 | 277 | 0.513 | 142 | |||
Hemlo (50%) | 1,171 | 0.112 | 131 | 1,846 | 0.076 | 140 | 271 | 3,952 | 0.142 | 562 | |||
Holt-McDermott | - | - | - | 452 | 0.195 | 88 | 88 | 133 | 0.271 | 36 | |||
SOUTH AMERICA | |||||||||||||
Pierina | 6,017 | 0.017 | 103 | 19,404 | 0.016 | 316 | 419 | 154 | 0.013 | 2 | |||
Pascua-Lama | 3,962 | 0.055 | 216 | 111,883 | 0.029 | 3,271 | 3,487 | 126,841 | 0.027 | 3,475 | |||
Veladero | 3,423 | 0.021 | 72 | 64,292 | 0.023 | 1,468 | 1,540 | 73,462 | 0.023 | 1,704 | |||
Alto Chicama | 1,624 | 0.063 | 103 | 24,127 | 0.068 | 1,632 | 1,735 | 10,233 | 0.060 | 617 | |||
AUSTRALIA/AFRICA | |||||||||||||
Plutonic | 190 | 0.216 | 41 | 13,205 | 0.146 | 1,926 | 1,967 | 8,624 | 0.175 | 1,508 | |||
Lawlers | 2,009 | 0.153 | 307 | 6,768 | 0.122 | 829 | 1,136 | 1,745 | 0.122 | 213 | |||
Darlot | 1,098 | 0.142 | 156 | 3,096 | 0.126 | 390 | 546 | 144 | 0.194 | 28 | |||
Kalgoorlie (50%) | 14,447 | 0.055 | 794 | 30,137 | 0.059 | 1,786 | 2,580 | 4,621 | 0.043 | 197 | |||
Cowal | 2,063 | 0.048 | 98 | 38,964 | 0.038 | 1,498 | 1,596 | 31,053 | 0.033 | 1,011 | |||
Bulyanhulu | 54 | 0.222 | 12 | 4,246 | 0.443 | 1,882 | 1,894 | 5,268 | 0.512 | 2,697 | |||
Tulawaka (70%) | - | - | - | 680 | 0.066 | 45 | 45 | 161 | 0.075 | 12 | |||
OTHER | - | - | - | 20,404 | 0.078 | 1,598 | 1,598 | 11,768 | 0.118 | 1,387 | |||
TOTAL | 68,503 | 0.056 | 3,845 | 401,829 | 0.052 | 20,844 | 24,689 | 355,418 | 0.049 | 17,445 | |||
1 Resources which are not reserves have demonstrated economic viability. |
BARRICK FOURTH QUARTER 2003 |
51 |
MINERAL RESERVES AND MINERAL RESOURCES |
CORPORATE OFFICE | TRANSFER AGENTS AND REGISTRARS | |
Barrick Gold Corporation | CIBC Mellon Trust Company | |
BCE Place, Canada Trust Tower, Suite 3700 | P.O. Box 7010, Adelaide Street Postal Station | |
161 Bay Street, P.O. Box 212 | Toronto, Ontario M5C 2W9 | |
Toronto, Canada M5J 2S1 | Tel: (416) 643-5500 | |
Tel: (416) 861-9911 Fax: (416) 861-0727 | Toll-free throughout North America: 1-800-387-0825 | |
Toll-free within Canada and United States: 1-800-720-7415 | Fax: (416) 643-5501 | |
Email: investor@barrick.com | Email: inquiries@cibcmellon.ca | |
Web site: www.barrick.com | Web site: www.cibcmellon.com | |
SHARES LISTED (ABX) | Mellon Investor Services L.L.C. | |
The Toronto Stock Exchange | 85 Challenger Road, Overpeck Center | |
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The London Stock Exchange | Tel: (201) 329-8660 | |
The Swiss Stock Exchange | Toll-free within the United States: | |
La Bourse de Paris | 1-800-589-9836 | |
Web site: www.mellon-investor.com | ||
RECENT RESEARCH REPORTS | ||
BMO Nesbitt Burns | INVESTOR CONTACTS: | MEDIA CONTACT: |
CIBC World Markets | Darren Blasutti | Vincent Borg |
Citigroup Smith Barney | Vice President, | Vice President, |
Credit Suisse First Boston | Investor Relations | Corporate Communications |
Griffiths McBurney & Partners | Tel: (416) 307-7341 | Tel: (416) 307-7477 |
Goldman Sachs | Email: dblasutti@barrick.com | Email: vborg@barrick.com |
HSBC | ||
JP Morgan | Kathy Sipos | |
Lehman Brothers | Director, | |
Merrill Lynch | Investor Relations | |
National Bank | Tel: (416) 307-7441 | |
Prudential Financial | Email: ksipos@barrick.com | |
Research Capital | ||
RBC Capital Markets | ||
Salman Partners | ||
Scotia Capital | ||
Smith Barney Citigroup | ||
Westwind Partners |
Barrick's exploration programs are designed and conducted under the supervision of Alexander J. Davidson, P. Geo., Executive Vice President, Exploration of Barrick. For information on the geology, exploration activities generally, and drilling and analysis procedures on Barrick's material properties, see Barrick's most recent Annual Information Form on file with Canadian provincial securities regulatory authorities and the U.S. Securities and Exchange Commission. Certain statements included herein, including those regarding production, costs, timing of permitting, construction or production, and other statements that express management's expectations or estimates of our future performance, constitute "forward-looking statements" within the meaning of the United States Private Securities Litigation Reform Act of 1995. The words "believe", "expect", "anticipate", "contemplate", "target", "plan", "intends", "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 management are inherently subject to significant business, economic and competitive uncertainties and contingencies. In particular, our Management's Discussion and Analysis includes many such forward-looking statements and we caution you 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 our estimated future results, performance or achievements expressed or implied by those forward-looking statements and our 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 silver, copper, diesel fuel and electricity) and currencies; changes in interest rates or gold lease rates that could impact realized prices under our forward sales program; legislative, political or economic developments in the jurisdictions in which Barrick carries on business; operating or technical difficulties in connection with mining or development activities; the speculative nature of gold exploration and development, including the risks of diminishing quantities or grades of reserves; and the risks involved in the exploration, development and mining business. These factors are discussed in greater detail in Barrick's most recent Form 40-F/Annual Information on file with the U.S. Securities and Exchange Commission and Canadian provincial securities regulatory authorities.
Barrick expressly disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, events or otherwise.