Barrick Puts Buzwagi Into Production

Barrick Gold (ABX-T, ABX-N) has poured the first gold at its Buzwagi project, in northwestern Tanzania, in the second quarter of 2009.

“This is the sixth mine Barrick has built in the last six years that has come in on time,” Barrick’s new president and chief executive, Aaron Regent, declared in a statement.

Barrick says Buzwagi, about 120 km south of the city of Mwanza, a southern port of Lake Victoria, will soon be Tanzania’s second-largest mining operation and one day its largest single open pit.

The project has a measured and indicated resource of 20.37 million tons grading 0.043 oz. per ton (1.47 grams gold per tonne) for contained gold of 886,000 oz. Proven and probable reserves total 65.09 million tons grading 0.5 oz. per ton (17.14 grams per tonne) for total contained gold of 3.3 million oz.

Buzwagi is expected to yield about 190,000-210,000 oz. gold this year at total cash costs of about US$320-335 per oz.

The Tanzanian mine’s gold will help drive up Barrick’s full-year 2009 production to 7.2-7.6 million oz. gold at total cash costs of US$450-475 per oz., the company said in a release announcing its first-quarter results.

While Barrick experienced lower production and higher costs in the first quarter due to planned mine sequencing, the gold major still managed to earn US$371 million or US42¢ a share, compared with US$514 million or US59¢ per share in the year-earlier quarter.

Gold production reached 1.76 million oz. with total cash costs of US$484 per oz. (If the company’s oil and foreign exchange hedges were not taken into account, cash costs would have been US$45 per oz. lower.)

Operating cash flow dropped to US$349 million, compared with US$718 million a year ago, while Barrick issued US$750 million in debt securities.

At the end of March, Barrick enjoyed a cash balance of US$2.1 billion, US$1.5 billion in undrawn credit, and net debt of US$2.9 billion with scheduled payments of less than US$300 million over the next four years.

Looking ahead, Barrick expects its Cortez Hills project in Nevada will start production in the first quarter of 2010. Once it does, it is expected to increase Barrick’s full-year 2010 production to about 7.7- 8.1 million oz. gold.

The company describes Cortez Hills as “another one-million-ounce producer for Barrick” at total cash costs of US$350-400 per ounce in its first full five years.

The company believes its Pueblo Viejo project in the Dominican Republic will begin initial production in the fourth quarter of 2011.

Barrick gets 60% of Pueblo Viejo’s annual gold production and in the first five years, expects its share of production will amount to 600,000-650,000 oz. annually at total cash costs of about US$275-300 per oz. Pueblo Viejo is anticipated to have a mine life of more than 25 years.

Meanwhile Barrick reports that the governments of Chile and Argentina have reached a tax-sharing deal with respect to the major’s Pascua Lama gold project, which straddles the border between the two countries.

Barrick says it will decide soon whether to go ahead with mine construction.