Barrick sees ‘new era of growth,’ discovery adds lustre to Pascua

An intersection of 280 metres grading nearly 5 grams gold per tonne — starting at surface and not far from a major new mine — would send the shares of any junior company soaring through the roof, even in this weak gold market.

For Barrick Gold (ABX-T), which has been churning out a steady stream of good news of late, the best hole ever drilled at its Pascua property appears merely part of a day’s work.

Shareholders attending the Toronto-based gold miner’s annual meeting were told that Pascua is one of several projects that will help usher in “a new era of growth.” Others are the new Pierina mine in Peru, Bulyanhulu in Tanzania, and the underground potential at the cornerstone Goldstrike property in Nevada, not to mention “the right acquisitions” farther down the road.

On the good-news front, shareholders were told that 1999 gold production should reach 3.6 million oz. at cash costs of US$125 per oz. — “the lowest ever recorded for a major gold company.” And the latest quarter ended March 31 was “the best in Barrick’s history,” with more than 1 million oz. produced at US$116 per oz.

Taking the podium for the first time as president and chief executive officer, Randall Oliphant said the record-setting performance reflects a cost-cutting program and the phasing-out of mines not making the grade, initiated in response to low gold prices. Now, two years into the program, production has climbed 18% while cash costs have fallen 31%

Another important contributor is the company’s innovative gold sales program, which has generated a premium of US$50 or more per oz. over the spot price for more than 11 years, adding up to greater than $1 billion in additional revenue.

Looking ahead, Vice-Chairman John Carrington said 1999 is shaping up to be “one of the best years ever for reserve expansion,” owing to ongoing work at the Pascua project straddling the border between Argentina and Chile, at the newly acquired Bulyanhulu project, and underground at Goldstrike.

Once in full production in 2002, the open-pit Pascua mine is expected to produce 675,000 oz. gold and 20 million oz. silver annually at an initial cash cost of US$125 per oz. from processing of the predominantly oxide reserves. However, as sulphide material is phased into the mine plan, recoveries will decline (to 75% from 90%), resulting in cash costs of US$150 over the mine life. Capital costs are estimated at US$950 million.

Barrick already has more than 20 million oz. gold in reserves and resources at Pascua, mostly in the main Pascua deposit in Chile. Exploration is continuing at the project, perched at an elevation of 4,600 ft.

“They do not even begin to reflect the potential that is unfolding on the Argentine side of the border,” Carrington said, “notably on what we call the Pascua Extension.”

Barrick’s hot hole was spotted 1 km away from known reserves along the Pascua Extension and, as might be expected, an exploration tunnel is now being driven toward the hole.

“We are halfway there,” Carrington said, “and more good news: the entire length of the drift so far [600 metres] has been in ore-grade mineralization.”

Not only is the grade 2.5 times higher than at Pascua; the newly intersected mineralization is near-surface and will have a lower stripping ratio.

The new discovery led to the inevitable question about Barrick’s failed takeover attempt for Argentina Gold (since acquired by Homestake Mining), which holds a large land package nearby, including Veladero, with its ever-expanding gold reserves and resources.

While admitting that the handling of the matter “wasn’t Barrick’s finest hour,” Oliphant defended the decision not to raise the bid further, saying it was “disciplined” and made “according to strict criteria.” As well, Barrick already holds 40% of Argentina Gold’s Veladero project.

On the other hand, he said the Bulyanhulu acquisition “met every one of the acquisition criteria,” including low-cost, high-quality reserves (about 4 million contained ounces) with potential to expand. “In fact, we expect to double the reserves this year,” he added.

As for the challenge of turning a largely unskilled local workforce into productive miners, Carrington said the company will rely largely on ex-patriates at first, then reduce this number as Tanzanians are trained. “We’ve made a major commitment for the Tanzanization of this project, and we’ve already hired local geologists.”

Peter Munk, chairman and founder, closed the meeting with a tribute to the legacy of his long-time partner, the late Robert Smith, which he described as one of “inspiring others” and helping the company achieve excellence through “a combination of operational daring and fiscal conservatism.”

Munk also chronicled some of Barrick’s social and environmental contributions at home and abroad, including “the area where Bob Smith’s legacy is most tangible” — education. To date, he said, the company’s scholarship program has allowed 2,850 young people to pursue higher education.