Barrick plans new mines, cuts costs

While it won’t rival the giant Goldstrike operation in size, the Pierina gold mine in Peru is expected to incur production costs considerably lower than those reported for Barrick Gold’s (ABX-T) cornerstone mine in Nevada’s Carlin trend.

Goldstrike turned out a record 1.1 million oz. gold at a cash cost of US$135 per oz. during the first six months of this year — 15% more than a year ago — and is expected to continue this strong performance for the balance of 1998. The Pierina mine, which is scheduled to come on stream by year-end, is projected to produce 750,000 oz. gold annually at US$50 per oz.

Goldstrike accounted for the bulk of Barrick’s first-half production, which totalled 1.5 million oz. worldwide. Cash operating costs at these mines fell 18% over the 6-month period, to US$157 from $191 per oz. The improvement was attributed to a renewed emphasis on productivity improvements and cost-costing measures.

The Meikle mine, part of the Goldstrike complex, enjoyed “an exceptional first half,” Barrick reports. The underground operation produced 495,072 oz.

during the period at an average grade of 1.09 oz. gold per ton and a cash operating cost of US$73 per oz.

Shaft deepening and an expansion program are under way at a cost of US$23 million. The work is designed to allow access to deeper, high-grade reserves and provide a platform for deeper exploration drilling. This program will be completed in spring 1999.

Turning to Barrick’s Canadian operations, the Bousquet mine in Quebec had “an excellent first half,” the company notes, producing 87,398 oz. gold at an average grade of 0.25 oz. and a cash operating cost of US$192 per oz.

Also, the Holt-McDermott mine, in neighboring Ontario, enjoyed its best six months ever, producing 69,058 oz. at 0.27 oz., with cash costs averaging US$124 per oz.

Helped in part by its aggressive hedging program, Barrick managed to report a 23% increase in earnings for the first half of 1998. Earnings rose to US$142 million (or 38cents per share), compared with US$117 million (31cents per share) in the corresponding period last year. Revenues declined slightly, to US$601 million from US$620 million.

While many gold producers are struggling to survive in the weak gold market, Barrick notes it has hedged 10 million oz. at an average price of US$400 per oz. through the year 2000. The company also notes that it is the only gold mining company with an “A” credit rating, and that it has the strongest balance sheet of any gold company, with US$389 million in cash on hand.

On the development front, Pierina is on budget and on schedule to become Barrick’s lowest-cost mine. The open-pit, heap-leach operation has been given a lifespan of 11 years. Reserves total 7.2 million contained ounces, plus a further 878,000 oz. in the resource category. Later this year, drilling will be carried out on several nearby properties.

In the U.S., four drill programs are under way, one of which is aimed at testing the Dee property near the Meikle mine. This 10-hole, 15,000-ft.

program will test targets identified during evaluation of historical data.

At the nearby Pinson property, a 15-hole, 30,000-ft. program is testing targets similar to the adjacent Turquoise Ridge property. The third program (which has yet to return positive results) is testing the Gold Bar property on the Battle Mountain-Eureka trend in Nevada. The fourth is testing the Golden Summit property in Alaska, with 22 holes totalling 11,000 ft.