Barrick poised for growth

Despite the market’s interest in the upcoming sale of the four Lac properties, directors and shareholders of American Barrick Resources (TSE) are more likely to be concerned with how their company will manage to sustain growth in production and earnings.

Many analysts were actually expecting Barrick’s third-quarter earnings to drop as a result of the Lac takeover. Shares of the senior dropped almost $2 before the results were announced earlier last week.

Yet, despite the negative forecasts and the drop in share price, Barrick increased its profit to US$61.3 million on revenues of US$216.1 million. This compares with earnings of US$58.3 million on revenues of US$178 million for the third quarter of 1993.

Barrick also increased gold production, to 560,544 oz. at a cash cost of US$153 per oz., compared with 413,829 oz. at US$202 per oz. in the same period in 1993.

Barrick decided to sell four properties based on a long-term strategy which involves enhancing the value of the acquired Lac assets. Barrick contends it has dominant land positions in the best gold belts within Canada, the U.S. and South America and that it is well-positioned for further growth, with properties at various stages of exploration and development within these belts.

Barrick — North America’s largest and the world’s third-largest gold producer — now operates eight gold mines in North and South America. Over the next two years, the major plans to bring two mines into production — Tambo in Chile (in 1995) and Meikle in Nevada (in 1996). Meanwhile, two other projects — the Cerro Corona in Peru and the Nevada in Chile — are undergoing feasibility studies in anticipation of startup in 1997 and 1998, respectively. As a result of the Lac takeover, the company has expanded its overall reserve base to 40 million oz. from 28 million oz.

Before the merger, Barrick operated, or had interests in, four North American gold mines: Betze-Poste, Holt McDermott, Mercur and Pinson. Together, these produced more than 1.6 million oz. in 1993, and currently they host combin- ed reserves exceeding 24 million oz.

Since acquiring Lac, Barrick has reviewed Lac’s portfolio of projects. Barrick decided to keep the Bousquet No. 1 and No. 2 mines, Lac’s 50% interest in the Doyon gold mine (all of which are in northwestern Quebec) and the Toqui gold-zinc mine and El Indio Complex (in Chile). Barrick views the Bousquet Complex and Doyon mine together as significant operations, providing it a total of 340,000 additional oz. of production from North America (using 1993 figures).

Barrick’s next phase of growth will be tied to several development projects, several of which were acquired from Lac.

Currently under development in central Chile are El Indio Complex, the Tambo mine and the Nevada project. The company plans to take a co-ordinated approach to developing, systematically, new reserves at these projects. Feed for the mill at El Indio comes from four sources: El Indio mine (with several vein systems); the Viento system (which hosts complex gold-copper ores); the Rio del Medio deposit (5 miles north of El Indio); and the Tambo mine.

Last year, El Indio produced 200,000 oz. gold and 34,100 tons copper. Barrick will sink a 600-metre shaft at the mine to explore and develop ore at depth. Modifications and improvements will also be made at the processing facilities. At Tambo, a separate 6,000-ton-per-day mill will be built; operations will also be expanded at the Rio del Medio deposit. In addition to development, Barrick plans to spend US$20 million exploring (primarily) for deep ore at El Indio, as well as strike extensions at Tambo. Further exploration will be carried out 30 miles north of El Indio on the Nevada project. Currently, four drill rigs are employed there in an effort to define pit dimensions and carry out feasibility studies.

Two other properties within the Indio project, but over the border in Argentina, will be explored. Barrick has a 60% interest in a property near Carmen and a 40% stake in ground near Veladero.

Meanwhile, exploration and development are expected to fuel additional growth at Barrick’s cornerstone property, the Goldstrike mine in Nevada. The property encompasses the Meikle project, which is expected to come on-stream in 1996, and the Betze-Post mine.

At Betze-Post, new autoclaves and trolley-assisted trucks have helped improve productivity and reduce costs. During the third quarter, production increased to 466,471 from 367,989 oz. Cash costs dropped to US$139 per oz. from US$194 per oz. in the year-ago period. Production in 1994 is expected to exceed 1.7 million oz.

Reserves should increase as exploration on the property continues to result in the discovery of mineralized zones, such as the Screamer (west of Betze-Post); North Betze; West Betze; Rodeo; and Griffin (between the Betze-Post mine and the Meikle project).

Barrick is also exploring for additional reserves in Peru, Bolivia, Brazil and China.

At its 75%-owned Cerro Corona in Peru, Barrick has outlined a resource of 3 million oz. gold and 1 billion lb. copper. Ultimately, Barrick’s share of production could be 150,000 oz. per year.

Finally, in China, the company is proceeding with prefeasibility studies on several properties.