U.S. MINING REPORT — Barrick plans for continued growth

The 1980s saw American Barrick Resources (TSE) grow from a single, small-producing mine to one of North America’s premier gold companies, with five operations.

This growth should continue, as the company intends to expand globally by exploring for the yellow metal in South America, China and Indonesia. Meanwhile, its North American efforts will continue unabated. Spearheading the plan is Barrick’s corporate development team led by Chairman Peter Munk, President Robert Smith and Executive Vice-president Gregory Wilkins, with Alan Hill overseeing exploration and development. About $17 million will be spent on exploration in 1994, up from $7 million last year.

The expansion plan involves opening exploration offices in foreign countries where the company hopes to obtain land positions. To this end, Barrick has signed agreements for two properties in Peru covering a total of 600,000 acres. It is also earning a 75% interest in the Corona gold-copper porphyry project in the northern part of that country, where drilling is already under way. At the same time, preliminary exploration for volcanic epithermal gold deposits will be directed from its South American office in Santiago, Chile. Looking eastward, the company has positioned itself to take advantage of the burgeoning Chinese market. Besides opening an office in Beijing and appointing a managing director of Chinese exploration, Barrick has formed a joint company with Power Corp. of Canada to pursue gold projects. One property being considered is 500 miles north of Beijing in the northeastern province of Liaoning.

Further south, Barrick is making its presence felt in Indonesia. It recently proposed acquiring all outstanding shares in Bre-X Minerals (ASE) and taking a joint-venture interest in its gold properties.

In Mexico, a joint-venture agreement already exists, with Exall Resources (TSE) for the purpose of exploring gold projects in Mexico.

In the U.S., Barrick will continue pursuing properties. Hill, together with Alex Davidson (newly appointed vice-president of exploration) and John Lill (vice-president of U.S. operations), will be the chief scouts in this regard. Some of these prospects are in the company’s own backyard, near the Goldstrike and Meikle mines in Nevada. Efforts are being made to define the northern and western limits of Meikle and 30 holes have been drilled in a new zone just south of the mine. Two other zones between Goldstrike and Meikle, known as Rodeo and Screamer, are also being drilled.

Other deposits peripheral to Goldstrike are the Griffin and Deep Star. Eight holes have been drilled into the former and grades as high as 0.48 oz. gold per ton have been intersected.

Closer to home, at the Holt-McDermott mine in northeastern Ontario, the shaft is being deepened to 3,100 from 2,100 ft. And to allow for definition drilling in mid-year, a drift is being driven at the 1,800 level toward the South zone.

Barrick’s expansion plans partly depend on its ability to increase returns from current operations by boosting production and reducing operating costs. To this end, it has installed an electric trolley system at the Betze-Post deposit in Nevada. The system is expected to save more than $50 million during the life of the project. Similar efforts to reduce costs and improve recoveries are being made at the Mercur mine in Utah and at Holt-McDermott. Since 1988, the major has enjoyed steady increases in reserves, production, net income and operating cash flows.

Gold reserves rose to 30.6 million oz. in 1993 from 27.2 million oz. in 1992. In 1988, they stood at 18.5 million oz.

Last year, the company turned out more than 1.6 million oz., exceeding its projection, whereas 1992’s output totaled 1.3 million oz. Production has increased almost five times from the 1988 figure of 341,000 oz. The average operating cost for 1993 was US$170 per oz., up from US$164 the previous year. Earnings in 1993 amounted to US$213.4 million, up 22% from 1992. This increase was in part related to benefits from a gold-hedging program in which the company’s average selling price was US$409 per oz.