Africa delivers ‘usual reliable performance’, Barrick’s Bristow reports

JOHANNESBURG (miningweekly.com) – The Africa region delivered “its usual reliable performance” for Barrick, Dr Mark Bristow highlighted in his presentation of the third-quarter performance of the New York- and Toronto-listed gold and copper mining company.

The now regularly dependable accomplishments of the African region follow the merging of Barrick and Randgold Resources in 2019. (Also watch attached Creamer Media video.)

It was only after the merger that the potential value of Barrick’s closed gold mines in Tanzania was unlocked and the Lumwana copper mine in Zambia was recognised as a new value creator.

These now rank among Barrick’s greatest success stories and the group’s largest cash generators.

In Tanzania, two mines that were not operational at the time of the merger are now significant contributors to Barrick’s bottom line, “showing what the right people with the right strategy can achieve”.

It was also in Tanzania that Barrick first formalised the Twiga benefit-sharing joint venture partnership with the government of Tanzania, a concept that has since been replicated by Barrick at the Porgera operation in Papua New Guinea.

Now restored to profitability, Lumwana is being groomed as a world-class operation through its super pit expansion project, the feasibility study for which is scheduled for completion by the end of the year.

The enlarged Lumwana is now expected to go into production in 2028, the same year as Reka Diq, Barrick’s developing gold and copper operation in Pakistan, which will achieve Barrick’s strategic objective of becoming a significant copper producer.

Meanwhile, Africa's largest gold mine, Kibali, has become Barrick's leader in renewable energy.

The mine’s new solar and battery energy storage plant, which has been designed to complement the operation’s three hydro power stations, will be commissioned next year, when it will increase the renewable component of Kibali’s energy requirements from 81% to 85%.

In fact, for six months of the year, the renewable portion of Kibali’s power generation will be 100%.

Despite the lower grades in quarter three, Kibali’s cost profile is still one of the lowest in the industry, and will improve further with the higher grades and production ramp-up forecast for quarter four.

In Barrick’s ongoing quest to uncover new opencast and underground opportunities around the Kibali mine, brownfield exploration work continues to develop the Agbarabo-Rhino-Kombokolo, or ARK, target area, where drilling is identifying additional mineralised loads, further confirming its potential to host a high-grade deposit less than 4 km from the Kibali plant, as well as returning significant intercepts along Kibali’s foundational main KCD orebody.

In West Africa’s Mali, Barrick’s Loulo-Gounkoto gold complex increased production by 5% quarter-on-quarter, and full-year production is expected to be at the top end of its guidance range.

“You will all be aware that we are engaged with the country's transitional government about ways of giving the country more of a share of the economic benefits generated by the complex while ensuring its sustainability.

“For more than 30 years, Barrick, and before it, Randgold, have had productive partnerships with the Malian State, which weathered many changes of government, including previous coup d'etats and a range of differences which had to be overcome from time to time.

“We are committed partners, and we are working hard to produce a mutually acceptable outcome,” Bristow told analysts in London during the presentation covered by Mining Weekly.

CYCLICAL NATURE OF MINING

As the gold price continues to be driven up to record highs, reflection on the cyclical nature of markets is viewed as prudent.

Barrick's continuing investment in its future and its ability to uncover and unlock the value opportunities embedded in its global asset portfolio position it ideally, both to capitalize on the current market fundamentals as well as to continue to thrive throughout the future cycles, which are inevitable.

“I will also reinforce how we are building a business that will grow profitably without the need for mergers or acquisitions, and therefore which has the luxury of us looking at external opportunities for the few that may meet our strict value investment criteria,” said Bristow.

While 2024 has been a challenging year in many ways, Barrick’s quarter-three performance arrows point in the right direction, and the company believes a foundation has been laid for a strong fourth quarter, which should enable it to end the year at the lower end of its group gold and copper production guidance range.

The higher margins in its gold operations, driven by the higher gold price and cost discipline, are in addition to the ongoing investments in infrastructure in Nevada gold mines in the US, ongoing plant ramp-up at the flagship growth project, Pueblo Viejo, in Dominican Republic, and the progress being made with Lumwana and Reko Diq.

Adjusted net earnings per share rose by 33%, the quarterly dividend was maintained at 10c, and it repurchased $95-million of shares through buybacks.

Gold production was in line with that of the previous quarter, while the increase in cost per ounce was a function of planned maintenance and royalties on higher gold prices, partially offset by disciplined sustaining capital spend to get stable all-in sustaining costs.

Copper production was up 12% quarter-on-quarter, and costs were reduced.

First-quarter operational cash flows totalled $1.18-billion and free cash flow was up 24% year-on-year to $444-million, the highest since the first quarter of 2021.

The 33% increase year-on-year of net earnings per share and the 25% increase in adjusted net earnings per share compare favourably to the rise in the realised gold price over the same period.

Debt net of cash was reduced by 27% quarter-on-quarter to $500-million, ensuring that the balance sheet retains the flexibility to fund future growth projects.

MINE CLOSURE MANAGEMENT

Barrick's holistic approach to business encompasses managing the many mine closure liabilities that it has accumulated along the way.

“We’re methodically moving to non-operating tailing storage facilities with the largest liabilities to safe closure. By the end of the year, we will have safely closed seven facilities, with five more planned for next year, and we are rolling out a plan for the remaining 27.

“It's worth putting this into perspective, because we have already reduced the associated closure liabilities for Barrick by more than $1-billion, which represents a 36% reduction in this liability,” added Bristow.

Barrick’s sustainable mine closure is a key part of its plan to create long-lasting value as the industry's reclamation costs and liabilities are projected to grow significantly in the coming years.

Reko Diq – another hidden gem we uncovered in the Barrick portfolio – is on track for delivery of its feasibility study by the end of this year.

In the meantime, the project management and construction teams are being recruited. Long lead items are being ordered, and the infrastructure is being prepared for the transition from the study phase to the execution of the early works.

"When Reko Diq goes into production in 2028, this multi-generational mine will be one of the largest of its kind in the world, and it remains a mystery to me why the market still doesn't recognise the enormous value it will bring to both Barrick as well as the Balochistan and Pakistan economies," Bristow noted.

GROWTH PROJECTION

Barrick is projecting a 30% growth in the production of gold equivalent ounces from its existing assets, as it continues to advance its growth projects and unlock the many other value-adding opportunities still embedded in the portfolio.

Orebody expansion has more than replaced the reserves it mined over the past five years, and gold and copper reserves are forecast to again grow significantly this year.

Since the merger in 2019, Barrick has organically built a solid balance sheet through reducing debt by $3.5-billion, while at the same time investing $11.2-billion in developing long life mine plans and returning more than $5-billion to shareholders.

Despite the multiple increases in the gold price, global gold demand is again projected to reach record levels for this year, on the back of the return of Western investors into the metal by the gold ETFs.

Gold equities, on the other hand, continue to underperform the gold price.