Barrick chairman vows to continue growth through acquisitions

In an annual meeting speech, delivered with all the gusto of a southern baptist preacher’s Sunday morning sermon, American Barrick Resources (TSE) Chairman Peter Munk promised recently not to digress from a strategy which has made his company one of North America’s fastest-growing gold producers.

Since Barrick can develop the huge Goldstrike mine near Elko, Nev., without drawing on $400 million in cash reserves, Munk said the Toronto company’s growth via acquisitions strategy will remain intact.

“With $250 million in annual cash flow, we have the resources available for a potential acquisition program,” he said.

While the subject wasn’t discussed at the annual meeting, Barrick’s acquisition last summer of a 4% interest in Lac Minerals (TSE) and 1 1/2% of Consolidated Goldfields gives some indication of the route that Barrick might take.

A production increase to 305,817 oz in 1987 from 280,749 oz in 1986, made 1987 one of Lac Mineral’s strongest years to date. But a controversial ownership dispute over the Page Williams mine at Hemlo has overshadowed the company’s operating performance.

Consolidated Goldfields of Great Britain holds a 49.7% interest in New York-based Newmont Mining. However, in the wake of the Oct 19 crash, Barrick hasn’t fared so well with the Lac and ConsGold investments. Lac Minerals

When Barrick bought 3.5 million Lac and 2.9 million Consolidated Goldfields shares for about $141.4 million, they were trading at around $15 and L13 sterling respectively.

Consolidated Goldfields traded recently on the London Stock Exchange at L9 38 pence while Lac Minerals closed at $14.25 on April 27. “We lik e the assets of both companies,” said Barrick’s chief financial officer Jerry Garbutt who considers the investment a long-term proposition.

Meanwhile, some astonishing drill successes at the Goldstrike mine promises to quadruple the 225,000 oz gold which Barrick produced in 1987 from operations at six Canadian and U.S. gold mines.

A seventh — the Holt McDermott Mine near Kirkland Lake, Ont. — is scheduled to begin producing gold within weeks.

About half of Barrick’s 1987 output came from the Mercur heap leach mine where processing of higher grade oxide ore enabled Barrick to increase production to 108,278 oz at a cash cost of $216(US) per oz from 111,007 oz in 1986.

Located 35 miles southwest of Salt Lake City, Utah, it is the subject of an ownership battle involving Barrick and Utah based Gold Standard Inc. Utah lawsuit

In a lawsuit which is currently in the discovery stage, Gold Standard is seeking rescission of a 1973 agreement in which the company turned over its rights to lands in the Mercur mining tract to Getty Resources in exchange for a 25% share of production.

Through its U.S. subsidiary, Barrick acquired Getty’s interest in the mine from Texaco Inc. in 1985.

At the Barrick annual meeting, Munk admitted that he had tried to settle out of court but with the pre- trial information gathering under way, he said there is no turning back now.

In what promises to be an intriguing courtroom struggle, the fate of the Mercur mine will probably be decided by a Salt Lake City jury.

If the unthinkable happened and Barrick lost its case to Gold Standard, the blow would be softened somewhat by increased gold output from the Goldstrike property.

Goldstrike produced 40,144 oz in 1987 from heap leach operations but the discovery of two and possibly three deep sulphide deposits promises to make the mine Barrick’s leading producer. Post-Betze deposit

With 81.9 million tons grading 0.16 oz gold per ton now identified in the Deeper Post-Betze sulphide deposit, on the property, Barrick is preparing to increase its Goldstrike production to 115,000 oz in 1988, 160,000 oz in 1989, 260,000 oz in 1990, 400,000 oz in 1991 and 500,000 oz in 1992.

According to President Robert Smith, the top of the orebody includes a high grade portion of 5.5 million tons grading over 0.5 oz. “This higher-grade fraction can be treated during the early years providing rapid payback of capital,” said Smith. Since the over-all stripping ratio is less than 10:1 waste to ore, Barrick will opt for an open pit mining method, Smith said.

The open pit method permits much easier handling of water and temperatures of up to 125 degrees F and stockpiling and selective treatment of the higher-grade portion of the orebody.

A 5-million-ton-per-year crushing and agglomerating plant is scheduled to be up and running this week and a 4,500-ton-per-day carbon-in-leach mill is expected to be completed by Aug 1. A forward sale of one million oz gold at $425(US) per oz, Munk says should offer the company some insulation aga inst a plummeting gold price should it occur.

Barrick’s first quarter net earnings were $5.6 million, or 10 cents per share compared with $5.7 million or 11 cents per share at the same time last year. Revenues were up 42% to $34.7 million in the quarter from $24.4 million in 1987.