Barrick Preserves Strong Balance Sheet

The economic crisis may be pushing many companies to the wall, but Barrick Gold (ABX-T, ABX-N) ended the year with a cash balance of US$1.4 billion, an undrawn US$1.5-billion credit facility, and the highest-rated balance sheet in the industry.

The Toronto-based gold major grew its reserves by 11% to 138.5 million oz. gold. Measured and indicated gold resources advanced 29% to 65 million oz., while inferred resources expanded 9% to 34.8 million oz.

Operating cash flow reached a record US$2.2 billion last year, up 27% year-on-year from US$1.73 billion. Net income fell from US$1.12 billion or US$1.29 per share in 2007 to US$790 million or US90¢ per share in 2008.

Net debt stood at US$2.9 billion at the end of December 2008 with repayments of less than US$300 million scheduled over the next four years.

For the full year, Barrick produced a total of 7.66 million oz. at total cash costs of US$443 per oz. (In the fourth quarter, Barrick produced 2.11 million oz. gold at total cash costs of US$471 per oz.)

Looking ahead, Barrick expects to open three lower-cost mines over the next three years. It anticipates pouring the first gold at its Buzwagi project in Tanzania in the second quarter of 2009; starting production at Cortez Hills in Nevada in the first quarter of 2010; and launching initial production at Pueblo Viejo in the Dominican Republic in the fourth quarter of 2011.

Barrick believes Buzwagi is likely to produce about 200,000 oz. gold this year at total cash costs of about US$320-335 per oz. Its expanded Cortez operation, meanwhile, is forecast to churn out about 1 million oz. gold a year during its first full five years, at total cash costs of about US$350-400 per oz.

Further south at Pueblo Viejo, Barrick’s 60% share of annual gold production in the first five years of operation should yield the company about 600,000-650,000 oz. gold per year at total cash costs of about US$275-300 per oz. Barrick added 1.2 million oz. to Pueblo Viejo’s reserves in 2008 and believes the mine will have a lifespan of about 25 years.

For 2009, Barrick expects to produce 7.2-7.6 million oz. gold and expects total cash costs for the year will hover in the range of US$450-475 per oz.

The company has set aside US$150-160 million for exploration, about 40% of which is earmarked for Nevada. Much of it will be weighted towards resource additions and reserve conversions.

At presstime in Toronto, Barrick shares traded at $39.37 apiece in a 52-week trading range of $22-54.08.

The gold major has 872.7 million shares outstanding.