Barrick to continue gold acquisition

They came to the annual meeting of American Barrick Resources Corp. for a variety of reasons. But as one broker quipped, they especially came “for the religion”, — to hear Peter Munk, the chairman and chief executive officer of Barrick, philosophize about gold and its future.

Company shareholders and guests were not disappointed, as Mr. Munk described the meteoric rise of Barrick, from a fledgling company with big ideas to a major North American gold producer in three short years.

“Every one of the fundamental reasons (for moving into gold) stand today as they did three years ago,” Mr. Munk stressed. “We must carry on in the same direction without change.” And that direction is to continue acquiring gold reserves. Three years ago, Barrick amalgamated with Camflo Mines, thereby acquiring a seasoned mining team capable of placing Mr Munk’s game plan into action. Since then, Barrick’s gold output has climbed from nil to 186,072 oz in 1986. This year the company forecasts gold production of 260,000, and a further doubling during the next 18 months.

The fundamental reasons for aggressively shifting into gold Mr Munk explained, can be found in Southern Africa. Following the resignation of Ian Smith, Prime Minister of Rhodesia in 1983, “the writing was on the wall,” Mr Munk noted. “South Africa would be next.” These events, he surmised, would place pressure on the $9 billion European investment in South African golds, to seek a new, safer haven. “That to me was North America.”

Barrick’s North American acquisitions now include interests in six gold mines, of which the Mercur is the largest. Located in Utah, the Mercur produced 111,007 oz in 1986. Barrick’s management refused to elaborate on the court case over the Mercur mine.

The latest acquisition, however, is creating the most interest on the market. The Goldstrike property in Nevada is expected to produce 60,000 oz of gold in 1987, Robert M. Smith, chief operating officer, told the meeting. This will increase to 100,000 oz by 1988. Exploration below the known oxide reserves of the Post deposit on the Goldstrike property, has generated considerable excitement. Several spectacular drill holes, including 620 ft grading 0.3 oz gold per ton, have been released which suggest a large tonnage, high grade deposit exists between 1,000 ft and 2,000 ft. Unconfirmed reports estimate these reserves could host more than 6 million oz of gold. This news, combined with strong gold prices have propelled Barrick’s common shares to a high of $54, up from the $35 range just two months ago.

At the Holt-McDermott project north of Kirkland Lake, Ont., underground exploration is encountering “better than expected grades and tonnages,” Mr Smith said. “We anticipate the Holt- McDermott will be a successful operation.” Scheduled to pour its first gold in mid-1988, the mine will yield about 100,000 oz annually. The mill foundation is being excavated. First quarter financial results for the period ended March 31, reached record levels. Net profit totalled $5.7 million or 23 cents per share compared to $3 million or 15 cents per share at the same time last year. Revenues amounted to $24.4 million, up from $20.2 million in the corresponding period in 1986. Extraordinary gains were realized from sale of Barrick’s interest in Consolidated Goldfields. During the second quarter, Barrick sold its remaining interest in that company, thereby ending a bid to take control of the South African mining giant.