Nevada showcase for Barrick’s exploration prowess

While conventional wisdom has it that senior companies don’t find mines, those perpetuating this notion sometimes forget to take into account the deposits found by producers in sight of their existing operations.

Barrick Gold (ABX-T), for example, is better known for buying mines than for finding them. As a result, it isn’t often given credit for its exploration successes, notably at its flagship Goldstrike property, in Nevada’s prolific Carlin trend. Yet since the company took control of the project, more than a decade ago, exploration has resulted in two additional mines — the high-grade Meikle mine and the newly announced Rodeo mine (both underground operations) — while adding millions of ounces of reserves to the original Betze-Post operation.

As Barrick President Randall Olipant explained at the company’s recent annual meeting, district exploration programs are the first tier of the company’s two-tiered approach to reserve expansion. “They focus exploration on and around our [producing] properties, because this is the most likely place to find new ounces, the fastest way to develop them, and the most profitable way to produce them.”

Barrick’s strategy of minesite exploration — now officially dubbed “focused district development” — is nowhere more apparent than at Goldstrike. The property has already produced more than 16 million oz. gold in its 13-year history, including 2 million oz. annually for the past five years. However, it was a modest producer in its early years, with production of a few thousand ounces, mostly from near-surface oxide reserves.

Betze-Post churned out 1.1 million oz. last year, making it the biggest producer in Barrick’s growing stable of global operations. With additional production from Meikle, the Goldstrike property, as a whole, produced 2.1 million oz. for the same period at a record-low cash cost of US$154 per oz.

The rewards of mine site exploration became apparent in the late 1980s, when Barrick made news with its high-grade discoveries at Betze-Post. Subsequent exploration north of the Betze-Post open pit led to the discovery of what is now the Meikle mine. Cash costs at Meikle were US$96 per oz. for the 977,356 oz. produced in 1999 — the lowest in the mine’s 4-year history.

Ongoing exploration led to the discovery of the Rodeo mine, being developed between the Meikle and Betze-Post operations. This project encompasses the Rodeo, Goldbug and North Betze deposits, which together contain a reserve base of 2.7 million oz. Ongoing exploration is expected to boost this to at least 5 million oz.

Construction of the US$125-million mine began late last year and is expected to take 18 months to complete. Development work includes a 5,600-ft. haulage drift joining the Rodeo mine to the Meikle mine shaft.

Rodeo is to begin production in the second half of 2001 at an annual rate of 350,000 oz. Cash costs are expected to average US$160 per oz. over the 8-year mine life.

Meanwhile, exploration is continuing at Goldstrike in hopes of finding deposits of least 1 million oz. or more. This year’s, 47,000-ft., 33-hole program will test targets north of Meikle, north and west of Betze-post, and east of the Post fault.

At the same time, underground drilling will endeavour to boost reserves and resources at both Meikle and Rodeo. More than 100,000 ft. of underground drilling are planned, primarily south of Rodeo in the Goldbug zone. This target was acquired from Newmont Mining as a part of an asset exchange designed to allow both companies to explore and exploit targets near their respective operations.

In order to handle increased production from Goldstrike, Barrick recently built a US$330-million roaster to process refractory ores. The additional capacity will boost production this year to a record 2.45 million oz.

The roaster became operational in April, ahead of schedule and on budget. Vice-chairman John Carrington told shareholders he expects the new roaster to cut processing costs by 10% at Goldstrike, thereby saving US$500 million over the life of the operation. “Additionally, the roaster will boost gold recovery,” he said.

Looking ahead, Barrick plans to boost total production to 5 million oz. by 2003 from its current 3.7 million oz. This will be achieved by developing three new mines: Rodeo, in Nevada; Pascua-Lama, on the Chilean-Argentine border; and Bulyanhulu, in Tanzania.

Bulyanhulu is scheduled to enter production next year and ramp up to about 400,000 oz. per year at US$130 per oz., rising to 500,000 oz. in later years, when deeper ore becomes available. Pascua-Lama is expected to produce 800,000 oz. gold and 35 million oz. silver, beginning in 2003, rising to more than 1 million oz. thereafter. Costs are expected to average US$100 per oz. over the life of the mine, including US$60 per oz. in the first five years.

Barrick expects to produce 3.7 million oz. this year at a cash cost of US$145 per oz. — the lowest in the industry. The company plans to spend US$91 million on worldwide exploration and reserve development in 2000.