Barrick trims costs at Bulyanhulu

Barrick Gold (ABX-T) is shuffling management at its Bulyanhulu gold mine in Tanzania in an attempt to cut costs and improve performance.

Ren Marion, previously the company’s head of business evaluation and development, will now manage Bulyanhulu, Barrick’s sole African producer. Marion will be responsible for lowering mining dilution and increasing the availability of underground equipment. The plan also calls for a reduction in the mining rate and elimination of non-essential fixed costs in the second half of the year.

The changes follow a comprehensive review of Bulyanhulu after underground equipment problems indicated the mine would be unable to meet its 2003 production target of 415,000 oz. at US$175 per oz.

“Our review team decided our first priority was to get the right people in the right places to [effect] the changes,” says Barrick President Greg Wilkins.

Bulyanhulu began producing in April 2001 and went on to produce 241,575 oz. gold at a total cash cost of US$197 per oz. over the remainder of the year. In 2002, the mine churned out 356,319 oz. at US$198 apiece. Ultimately, Bulyanhulu is expected to produce an average of 430,000-570,000 oz. at around US$151 per oz. over 21 years.

“In hindsight, we ramped up the mining rate faster than we should have, and our performance this year has suffered for it,” says Barrick Vice-Chairman John Carrington.

In an address at the Denver Gold Show in late 2002, Carrington said the problems at Bulyanhulu had to do with “ore recovery.” However, he stressed that head grades were improving following a redesign of the stope outlines to ensure inclusion of a 6-to-8-inch gold-rich seam on the hangingwall.

Barrick says the operating challenges at Bulyanhulu have not affected its operating results in the second quarter, which will be disclosed in late July.

During the first quarter, Bulyanhulu produced 90,162 oz. gold at a total cash cost of US$192 per oz., up from 85,034 oz. at US$208 per oz. in the corresponding period of 2002/ The increase is attributed to higher grades and recovery rates.

At the end of 2002, Bulyanhulu had proven and probable reserves of at 27.4 million tons grading 0.425 oz. per ton, or 11.7 million contained ounces of gold.

First-quarter earnings were nearly halved to US$29 million (or US5 per share) on US$459 million in gold sales at a time when most gold companies saw profits rise as a result of stronger gold prices.