Barrick production on target

Barrick Gold (ABX-T) met its 2001 production target with output of 6.1 million oz. of gold at US$162 per oz.

The company, the world’s biggest gold miner by market capitalization, said the results benefited from its merger with Homestake Mining, which was completed in the fourth quarter, and were consistent with both companies’ production and cost targets for the year.

The company also announced that it will adopt U.S. Generally Accepted Accounting Principles. This will see its merger with Homestake accounted for using the pooling of interests method and will result in fourth-quarter charges.

Barrick said the change to U.S. accounting principles drop its earnings for the first nine months of 2001 to US$190 million, (35 per share) from the previously reported US$204 million (52 per share). Operating cash flow is now US$538 million versus US$420 million. Both figures are based on 536 million shares outstanding, against 396 million shares prior to the merger.

During 2000, Barrick produced 3.74 million oz. at a total cash cost of US$145 per oz. The company posted a net loss of US$776 million for the year (net earnings of US$334 million before the writedowns).

Barrick also said the new accounting procedures will result in a US$117-million charge related to the Homestake merger. The charge will appear in the fourth quarter. The company expects the merger to generate synergies of about US$60 million annually.

Barrick will also take a pre-tax fourth-quarter provision of US$59 million related to the court judgment in the litigation between Homestake and Inmet Mining Corporation relating to the sale of the Troilus gold mine in north-central Quebec in 1997.

A British Columbia court recently awarded $88.2 million to Inmet Mining (IMN-T) for breach of contract in the aborted sale of the Troilus gold mine in north-central Quebec. The decision went against Homestake Canada, now a wholly owned subsidiary of Barrick.

Madam Justice Deborah Satanove of the B.C. Supreme Court found that Inmet was entitled under law to specific performance of the contract, but instead awarded equitable damages. The amount of damages is the difference between the $178-million price set in the original deal, and a $90-million estimate of the mine’s value at the time of trial.

The judge’s decision ultimately came down to Homestake’s contention that the assay data Inmet had provided was inaccurate and unreliable. “The preponderance of evidence,” Madam Justice Satanove wrote in her decision, “indicates that it is more likely than not that [Inmet’s] database was sufficiently accurate to be reliable.”

Barrick is considering an appeal of the ruling.

The full report of Barrick’s 2001 results, including gold reserves, in accordance with the U.S. accounting principles will be presented on Feb. 14, 2002.