Barrick shuffles Bulyanhulu management

Barrick Gold (ABX-T) is shuffling management at its Bulyanhulu gold mine in Tanzania in an attempt to cut costs and improve performance.

Rene Marion, previously the company’s head of business evaluation and development, will now manage Bulyanhulu, Barrick’s sole African producer. Marion’s primary tasks will be lowering mining dilution and increasing underground equipment availability. The plan also calls for a reduction in the mining rate and elimination of nonessential fixed costs during the second half of the year.

The change follow a comprehensive review of the operation after underground equipment problems hit the mine last year, putting its 2003 production target of 415,000 oz. at US$175 per oz. out of reach.

“Our review team decided our first priority was to get the right people in the right places to execute on the changes,” says Barrick’s president and CEO Greg Wilkins.

Bulyanhulu began production in April of 2001 and went on to produce 241,575 oz. of gold at a total cash cost of US$197 per oz. over the remainder of the year. In 2002, the mine churned out 356,319 oz. at US$198 apiece. Ultimately, Barrick’s plan at Bulyanhulu envisages producing an average of between 430,000 and 570,000 oz. at around US$151 per oz. over 21 years.

Says John Carrington, Barrick’s vice chairman and COO: “In hindsight we ramped up the mining rate faster than we should have, and our performance this year has suffered for it.”

In an address at the annual Denver gold show late last year, Carrington, categorized the problems at Bulyanhulu as “an ore recovery issue,” but noted that a redesign of the stope outlines to ensure inclusion of a 6-to-8-inch gold-rich seam right on the hangingwall was helping to improve head grades.

Barrick says that the operating challenges at Bulyanhulu do not materially impact on its overall second-quarter operating results, which are due out on July 28, and will include an update on Bulyanhulu and its outlook for the balance of the year.

During the first three months of 2003, Bulyanhulu produced 90,162 oz. of gold at a total cash cost of US$192 apiece, up from the year-ago 85,034 oz. at US$208 per oz. The increase is attributed to higher grades and recovery rates.

At the end of 2002, Bulyanhulu’s proven and probable reserves stood at 27.4 million tons grading 0.425 oz. per ton, for 11.7 million contained ounces of gold.

Barrick’s first-quarter earnings were nearly halved to US$29 million (or US5 per share) on US$459 million in gold sales as most other gold companies saw their bottom lines boosted by robust gold prices.

Last year’s bad news from Bulyanhulu was accompanied by a drop in Barrick’s full-year earnings estimate to US33-35 per share (they managed to make US36 per share), well off the previous guidance of US42-47 a share. Bulyanhulu’s production shortfall cut about US1 per share from earnings.

The revised guidance was attributed to communication issues rather than management-related ones.

Barrick previously replaced managers at Meikle and Eskay Creek.

The news had Barrick shares trading a dime lower at $23.80 in late afternoon action in Toronto on July 8.