FOR: BARRICK GOLD CORPORATION
LSE, NYSE, PARIS, Swiss, TSX SYMBOL: ABX
July 28, 2003
Barrick Earns $59 Million or $0.11 per Share in Second Quarter
TORONTO, ONTARIO--
SECOND QUARTER REPORT 2003
Based on US GAAP and expressed in US dollars.
Highlights
- Net income of $59 million or $0.11 per share includes a $21 million tax
recovery ($0.04 per share) and a $7 million after tax, non-hedge derivative
gain ($0.01 per share)
- Operating cash flow totals $66 million for second quarter, lower than the
year earlier quarter primarily due to an increase in tax payments and working
capital adjustments
- Operating results - production totals 1.47 million ounces of gold for the
quarter at a cash cost of $185 per ounce(1)
- Realized gold price during the quarter was $352 per ounce compared to an
average spot price of $347 per ounce
- Simplified forward sales hedge program - converted variable price sales
contracts to simple forward sales contracts or spot sales contracts; reduced
overall committed gold hedge position by 1.2 million ounces during the
quarter to 16.1 million ounces by quarter's end
- Exploration and business development expense totals $34 million for quarter
- full year estimate increased to $125 million with additional expensing of
Veladero development
- Repurchased a total of 3.48 million shares at an average cost of $17.95 per
share during the quarter
- For the year, production is forecast at an expected 5.4 - 5.5 million
ounces at total cash costs of $190 - $195 per ounce
(1) For an explanation of non-GAAP performance measures refer to pages 13-14
of the Management's Discussion and Analysis.
Barrick Gold Corporation today reported earnings of $59 million ($0.11 per
share) and operating cash flow of $66 million for second quarter 2003,
compared to earnings of $59 million ($0.11 per share) and operating cash flow
of $148 million in the year earlier period. Lower operating cash flow in the
current quarter primarily relates to higher tax payments and working capital
adjustments.
"While we still have operating issues to resolve at some properties, overall,
our portfolio of operations turned in a good quarter," said Greg Wilkins,
President and Chief Executive Officer.
For the first half of 2003, net income was $88 million ($0.16 per share) and
operating cash flow was $197 million, compared to net income of $105 million
($0.20 per share) and operating cash flow of $268 million in the year earlier
period.
BARRICK SELLS PRODUCTION AT SPOT PRICES FOR MOST OF THE QUARTER
During the quarter, spot gold prices ranged from a high of $372 per ounce to
a low of $323 per ounce, averaging $347 per ounce, compared to an average
spot price of $313 per ounce in the year earlier quarter. Barrick realized
$352 per ounce on its gold sales during second quarter 2003, delivering
production into the forward sales program when spot gold prices were lower in
April, and selling production into the higher spot market as gold prices
increased in May and June.
"Our forward sales program is working as designed, maximizing the price for
each ounce we produce," added Mr. Wilkins.
During the quarter, the Company continued to reduce and simplify its overall
forward sales position. By quarter's end, the forward sales hedge program was
reduced to 16.1 million ounces, while the elimination of variable price sales
contracts further simplified the forward sales program.
At quarter's end, the unrealized mark-to-market on our derivative instruments
position, including the gold and silver forward sales, and currency and
interest rate hedge programs, was negative $354 million.
The Company maintains a strong balance sheet with a cash position of nearly
$1 billion, after paying out $60 million in dividends and $63 million to
repurchase 3.48 million Barrick common shares under the share repurchase
program during the quarter.
PRODUCTION AND COSTS
For the quarter, Barrick produced 1.47 million ounces of gold at total cash
costs of $185 per ounce, compared to 1.35 million ounces of gold at total
cash costs of $178 per ounce for the year earlier quarter. Higher production
from Betze-Post, Pierina and Kalgoorlie more than offset lower production
from Meikle and Bulyanhulu. Cash costs were up $7 per ounce over the prior
year period, primarily due to higher energy costs as well as royalties and
other gold-linked costs.
"Overall, we had a solid quarter, operationally driven by significant
contributions from our large open pit operations," said John Carrington, Vice
Chairman and Chief Operating Officer. "Lower production and higher costs from
Meikle during the quarter were due to a reline of the backfill raise which
was originally scheduled for the third quarter. With the reline complete,
Meikle production and costs should improve in second half 2003." Mr.
Carrington noted that "at Bulyanhulu, we're working on a longer timetable, as
our new management team digs in to address operational and cost issues."
Overall, for the full year, the Company is forecast to produce between 5.4
million ounces and 5.5 million ounces at total cash costs of $190 to $195 per
ounce. For the year administration expense is expected to total $75 million
and exploration and business development expense is expected to total $125
million. Currency fluctuations are expected to have minimal impact on cash
costs as the equivalent of two to three years of local Canadian and Australia
dollar costs have been hedged.
SHARE BUYBACK
During the quarter Barrick repurchased 3.48 million common shares at an
average purchase price of $17.95 for a total cost of $63 million.
DEVELOPMENT PROJECTS UPDATE
During the quarter, the Company responded to comments received from public
hearings and mining authorities as part of the Environment Impact Statement
(EIS) process at Veladero in Argentina. Construction of the access road
continued through second quarter 2003. Camp facilities were completed at the
site to facilitate a targeted fourth quarter construction start up. At Alto
Chicama in Peru, infill drilling on 50 meter centers, as well as step out and
geotechnical drilling were completed during second quarter 2003. The work has
confirmed the probable oxide reserve of 6.5 million ounces(2) as well as the
original concepts for the process facilities. Work continued on completing a
final feasibility study which will support the submission of Alto Chicama's
EIS. At Cowal in Australia, a milestone was reached with the signing of a
Native Title Agreement, followed by the granting of a mining lease for the
project, developments which pave the way for a production decision in the
second half of 2003 - subject to the successful completion of the
optimization plan. The Company plans periodic updates on its development
activity in the second half of the year.
Barrick's shares are traded under the ticker symbol ABX on the Toronto, New
York, London and Swiss stock exchanges and the Paris Bourse.
(2) For Canadian reporting purposes
Key Statistics
(in United States dollars, US GAAP basis)
Three months ended Six months ended
June 30, June 30,
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(Unaudited) 2003 2002 2003 2002
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Operating Results
Gold production (thousands of
ounces) 1,467 1,349 2,730 2,722
Gold sold (thousands of
ounces) 1,395 1,437 2,687 2,881
Per Ounce Data
Average spot gold price $347 $313 $349 $302
Average realized gold price 352 341 353 335
Cash operating costs(3) 175 171 178 170
Total cash costs(1) (3) 185 178 189 177
Total production costs(3) 274 268 279 265
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Financial Results (millions)
Gold sales $491 $490 $950 $968
Income before accounting
changes 59 59 105 105
Net income 59 59 88 105
Operating cash flow(4) 66 148 197 268
Per Share Data (dollars)
Income before accounting
changes 0.11 0.11 0.19 0.20
Net income (basic and diluted) 0.11 0.11 0.16 0.20
Operating cash flow 0.12 0.27 0.36 0.50
Common shares outstanding (as
at June 30) (millions)(2) 540 542 540 542
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As at As at
June 30, Dec. 31,
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2003 2002
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Financial Position (millions)
Cash and equivalents $992 $1,044
Working capital 985 869
Long-term debt 757 761
Shareholders' equity 3,429 3,334
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(1) Includes royalties and production taxes.
(2) Includes shares issuable upon exchange of BGI (Barrick Gold Inc.)
exchangeable shares.
(3) For an explanation of non-GAAP performance measures refer to
pages 13-14 of Management's Discussion and Analysis.
(4) Historically we classified deferred stripping expenditures as
part of payments for property, plant and equipment in investing
activities. In fourth quarter 2002, we reclassified these cash
outflows under operating activities for all periods presented to
reflect the operating nature of stripping activities.
Production and Cost Summary
Production (attributable ounces)
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3 months ended 06/30, 6 months ended 06/30,
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(Unaudited) 2003 2002 2003 2002
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North America
Betze-Post 454,431 328,577 739,727 670,015
Meikle 113,133 155,058 261,338 297,673
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Goldstrike Property Total 567,564 483,635 1,001,065 967,688
Eskay Creek 97,076 91,614 181,306 176,896
Round Mountain 113,311 95,498 209,126 189,070
Hemlo 61,549 61,552 129,902 122,532
Holt-McDermott 21,249 21,243 42,213 43,097
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860,749 753,542 1,563,612 1,499,283
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South America
Pierina 259,559 183,324 490,634 397,973
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Australia
Plutonic 79,040 79,710 149,294 141,937
Darlot 37,032 32,297 80,189 67,865
Lawlers 25,912 28,842 46,714 54,553
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Yilgarn District Total 141,984 140,849 276,197 264,355
Kalgoorlie 117,445 80,780 211,294 167,598
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259,429 221,629 487,491 431,953
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Tanzania
Bulyanhulu 76,712 84,165 166,874 169,199
Other/Mines closed in 2002 10,733 106,132 21,809 223,447
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Total 1,467,182 1,348,792 2,730,420 2,721,855
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Total Cash Costs (US$/oz)
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3 months ended 06/30, 6 months ended 06/30,
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(Unaudited) 2003 2002 2003 2002
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North America
Betze-Post $ 215 $ 228 $ 238 $ 223
Meikle 291 192 247 201
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Goldstrike Property Total 232 217 240 217
Eskay Creek 102 32 86 32
Round Mountain 167 177 167 183
Hemlo 245 249 236 241
Holt-McDermott 271 191 276 163
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209 187 216 193
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South America
Pierina 78 80 81 72
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Australia
Plutonic 207 174 199 180
Darlot 175 179 158 171
Lawlers 228 172 264 180
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Yilgarn District Total 202 172 196 178
Kalgoorlie 212 213 215 216
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206 189 204 193
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Tanzania
Bulyanhulu 233 203 211 205
Other/Mines closed in 2002 153 192 161 192
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Total $ 185 $ 178 $ 189 $ 177
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Consolidated Production Costs (US$/oz) (1)
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3 months ended 06/30, 6 months ended 06/30,
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(Unaudited) 2003 2002 2003 2002
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Direct mining costs at
current foreign exchange
rates $ 204 $ 193 $ 205 $ 192
Gains realized on currency
hedge contracts (10) (1) (7) (1)
By-product credits (19) (21) (20) (21)
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Cash operating costs 175 171 178 170
Royalties 8 6 8 6
Production taxes 2 1 3 1
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Total cash costs 185 178 189 177
Amortization and
reclamation 89 90 90 88
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Total production costs $ 274 $ 268 $ 279 $ 265
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(1) For an explanation of non-GAAP performance measures refer to
pages 13-14 of Management's Discussion and Analysis.
Management's Discussion and Analysis of Financial and Operating Results
HIGHLIGHTS
In second quarter 2003, production was 1.47 million ounces of gold at total
cash costs of $185 per ounce(1), compared to 1.35 million ounces of gold at
$178 per ounce in the year earlier quarter. The higher costs in 2003 are
primarily related to higher energy costs, as well as royalty and other costs
linked to the price of gold. Net income was $59 million ($0.11 per share),
compared to $59 million ($0.11 per share) for second quarter 2002. Compared
to the year earlier quarter, earnings benefited from a tax recovery of $21
million, partially offset by marginally higher amortization, administration
and exploration expense.
For the first time in 15 years, spot gold prices increased above the price we
could have realized through our forward gold sales contracts. This
development allowed us the opportunity to benefit from the flexibility of our
forward sales program, by realizing the higher spot price for most of our
gold production during the first two quarters of the year. In second quarter
2003, operating cash flows totaled $66 million compared to $148 million for
the year earlier quarter, while our cash balance decreased $123 million to
nearly $1 billion at June 30, 2003 due primarily to common share repurchases
and a dividend payment.
(1) For an explanation of non-GAAP performance measures refer to pages 13-14
of the Management's Discussion and Analysis.
GOLD SALES
Revenue for second quarter 2003 was $491 million on gold sales of 1.40
million ounces, compared to $490 million in revenue on gold sales of 1.44
million ounces for the year earlier quarter. Lower gold sales during the
quarter were offset by an $11 per ounce (3%) increase in the average realized
price. During the second quarter, spot gold prices ranged from a high of $372
to a low of $323 per ounce, averaging $347 per ounce. We realized an average
of $352 per ounce during the quarter exceeding the average spot price by $5
per ounce, delivering gold at the higher of our forward sales contracts or
spot gold prices.
Our forward sales hedge program remains an important tool for the Company,
particularly as a means of securing our revenue base given the large
development program planned over the next five years. The program is,
however, larger than we would like it to be in the current gold environment.
During the quarter, we continued to use market opportunities to bring the
program down from about 35% of operating mine reserves - or about three years
of production - toward a more optimal upper parameter of two years of
production or 20% of operating mine reserves. Ultimately market conditions
will impact the level of forward sales at any point in time. With higher
expected gold price volatility, we may reduce the size of the program on gold
price dips but add to the program on gold price spikes in an effort to
improve the average price of the contracts in the program. Overall, during
the quarter, we reduced the committed forward gold sales hedge position by
1.2 million ounces from 17.3 million ounces to 16.1 million ounces. In
addition, we simplified the program by converting variable price sales
contracts to simple forward sales contracts or spot sales contracts.
REVIEW OF OPERATIONS AND DEVELOPMENT PROJECTS
For second quarter 2003, our overall production and cash cost results were in
line with plan despite lower contributions from Meikle and Bulyanhulu.
Operating performance in the second half of the year should be similar to the
first half of 2003, resulting in overall production of 5.4 to 5.5 million
ounces for 2003 at total cash costs of between $190 and $195 per ounce.
As we look forward to 2004, production is expected to be lower and cash costs
higher, as we mine lower grades at Pierina. Production at Pierina is expected
to decline by approximately 400,000-500,000 ounces next year. This will
account for approximately an additional $10 per ounce of cash cost for the
Company as a whole in 2004. The weakening US dollar is not expected to have a
significant impact on cash costs, as we increased our Canadian and Australian
dollar currency hedge positions early in the quarter. As a result, we now
have the equivalent of about two to three years of local Canadian and
Australian dollar costs hedged.
Goldstrike Property (Nevada)
Betze-Post
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Q2 2003 Q2 2002 2003E
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Production 454,431 328,577 1,585,000
Total cash cost / oz $ 215 $ 228 $ 232
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- Betze-Post production increased 38% compared to the year earlier quarter,
due to a similar increase in ore grades processed. Mining activity during
second quarter 2003 took place in a higher grade area of the pit, and ore in
this area had a higher grade than the reserve model indicated.
- Cash costs during the quarter were 6% better than the prior year. The lower
cash costs were primarily due to higher grades processed and lower unit
mining costs, as the mine has begun to realize the benefits of in-pit waste
disposal, which has reduced the number of trucks and manpower required to
mine the same amount of material. However, costs were negatively affected by
higher royalties and production taxes (up $12 per ounce over the year earlier
quarter), lower recovery rates (down 1.9%) and higher processing costs (up $9
per ounce).
- The higher processing costs relate to higher propane costs and a shortage
of acid from two of our main suppliers during second quarter 2003, which
required us to purchase acid elsewhere at significantly higher costs
(increasing cash costs by $7 per ounce during the quarter).
- The lower recovery rates were due to processing more complicated ore types.
The autoclave ore included higher than normal levels of carbonate, which also
requires more acid to treat, while the roaster material had higher than
normal arsenic levels.
- For the year, the Mine is expected to produce 1,585,000 ounces, 90,000
ounces more than the original plan for 2003, at marginally higher costs (up
$7 per ounce). The higher costs relate to lower recovery rates than planned
and higher processing costs due to higher propane and acid costs.
Meikle
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Q2 2003 Q2 2002 2003E
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Production 113,133 155,058 560,000
Total cash cost / oz $ 291 $ 192 $ 247
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- Second quarter 2003 production and costs were negatively affected by the
shutdown of a backfill raise at Rodeo for relining.
- For the quarter, backfill material for Rodeo was hauled 5,000 feet from the
Meikle backfill plant. Weak ground conditions at Rodeo require that mining
and backfilling be done concurrently. Therefore, the lower backfilling
capacity led to a similar reduction in the mining rate (Rodeo mining rate
down 75,000 tons or 33%, during quarter). The backfill raise resumed
operation at the beginning of July.
- To compensate for the lower mining rate at Rodeo, certain lower grade
stopes in Meikle were mined, which resulted in lower grades processed than
the full year average.
- Cash costs for second quarter 2003 were considerably higher than in the
prior year, due to the lower production and the hiring of contractors and
equipment necessary to move backfill material to Rodeo. In addition,
processing costs were up as a result of higher carbonate levels in the ore,
resulting in higher consumption of acid, compounded by the higher unit acid
costs.
- For the year, the mine is expected to produce 560,000 ounces, 60,000 ounces
less than plan, due to lower tonnage mined at Rodeo, lower grades at Meikle
in the remnant ore, and a delay in the completion of an ore pass at Rodeo.
Cash costs are expected to be approximately $16 per ounce higher than plan
due to lower grades, higher processing costs (acid and propane costs) and
higher unit mining costs. The higher mining costs reflect a higher percentage
than planned of the higher cost cut and fill mining method, plus additional
rehabilitation work.
Eskay Creek (British Columbia)
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Q2 2003 Q2 2002 2003E
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Production 97,076 91,614 360,000
Total cash cost / oz $ 102 $ 32 $ 80
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- Production at Eskay was up in second quarter 2003 over the prior year
quarter, as an increase in the mining and processing rate more than offset
the decline in grade.
- Second quarter cash costs were higher than the year earlier quarter, as
lower silver production and prices reduced the silver by-product credit (down
by $56 per ounce), higher smelter penalties (up $22 per ounce), were only
partially offset by lower site costs (down $10 per ounce).
- For the year, the Mine is expected to produce 360,000 ounces, while cash
costs are expected to be $80 per ounce (25% higher than the original plan),
primarily due to lower silver by-product credit and higher smelter penalties.
Round Mountain (Nevada) (50% share)
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Q2 2003 Q2 2002 2003E
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Production 113,311 95,498 375,000
Total cash cost / oz $ 167 $ 177 $ 190
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- The 19% increase in production during second quarter 2003 relates to the
commissioning of an expanded carbon plant, which had a positive impact on
recovery rates during the quarter. The lower cash costs during the quarter
reflect higher production levels.
- For the year, the Mine is expected to exceed its original production target
of 363,000 ounces by 12,000 ounces, due to the one-time recovery rate gain.
Cash costs are expected to be $8 per ounce lower than plan, due to the
higher production.
Hemlo (Ontario) (50% share)
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Q2 2003 Q2 2002 2003E
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Production 61,549 61,552 270,000
Total cash cost / oz $ 245 $ 249 $ 220
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- Production for second quarter 2003 was negatively affected by a planned
five day mill shutdown for maintenance. Cash costs were impacted by
development and maintenance costs, which were heavily loaded into the
quarter, as well as one-time charges related to workforce reductions taken
during the quarter.
- A paste fill plant commissioned in second quarter 2003 will increase ground
stability and improve stope cycling times. The mining team has been focused
on backfilling previously mined areas to prevent ground stability problems in
the future, and increasing development activity in advance of production.
- As reflected in the table above, the property expects to outperform its
original production (7% higher) and cost (5% lower) targets for the year.
Holt-McDermott (Ontario)
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Q2 2003 Q2 2002 2003E
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Production 21,249 21,243 85,000
Total cash cost / oz $ 271 $ 191 $ 260
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- As Holt approaches the end of its mine life, now scheduled for 2004, it is
mining less continuous and narrower ore lenses.
- Grades mined are 10-15% lower than plan and the previous year, resulting in
higher cash costs. Because of the short mine life, drilling and development
costs are being expensed, pushing cash costs higher.
- The Mine expects to produce 85,000 ounces this year, 12,000 ounces less
than plan, at cash costs of $260 per ounce (19% higher than plan) due to the
lower grades being mined.
Pierina (Peru)
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Q2 2003 Q2 2002 2003E
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Production 259,559 183,324 908,000
Total cash cost / oz $ 78 $ 80 $ 86
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- The higher production in second quarter 2003 (up 42%) relates to mining and
processing more tons of ore at better grades than the year earlier quarter.
- Pierina is on track to meet its full year production and cash costs
targets. The Mine is in its last year of production in the 900,000-ounce
range before stepping down to lower production levels (400,000-500,000-ounce
range) as mining moves to lower grade areas in the open pit beginning next
year.
Yilgarn District (Western Australia)
Plutonic
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Q2 2003 Q2 2002 2003E
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Production 79,040 79,710 300,000
Total cash cost / oz $ 207 $ 174 $ 194
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- During second quarter 2003, the underground operation experienced a smooth
transition from contract mining to owner mining, with underground mining
rates on plan.
- Cash costs were up over the prior year period primarily as a result of
higher cost open pit production due to poor weather, higher diesel costs and
lower grades mined. Costs were also impacted by the transition to owner
mining in the underground.
- For the full year, the Mine is expected to produce 300,000 ounces, 5,000
ounces more than plan, due to higher mill throughput than originally planned,
at cash costs in line with plan.
Darlot
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Q2 2003 Q2 2002 2003E
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Production 37,032 32,297 154,000
Total cash cost / oz $ 175 $ 179 $ 160
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- Darlot reported a 15% increase in production for second quarter 2003, due
to a similar increase in tonnage mined and processed.
- Darlot is on track to produce 154,000 ounces, 11,000 ounces higher than
plan, as a result of higher mining and processing rates than plan, at cash
costs $16 lower than plan.
Lawlers
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Q2 2003 Q2 2002 2003E
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Production 25,912 28,842 94,000
Total cash cost / oz $ 228 $ 172 $ 260
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- The transition from contract mining to owner mining in the underground was
successfully completed in first quarter 2003, with full transition achieved
in second quarter 2003.
- Lower production compared to the previous year related to processing more
tons (up 25%) at lower grade (down 27%) than the year earlier period.
- Costs rose (up 33%) as a result of lower grades processed as well as higher
unit costs.
- Suspension of mining at the Fairyland open pit in January will prevent the
mine from meeting its full year targets. Lawlers' full year production is now
projected at 94,000 ounces, at a cash cost of $260 per ounce, about 15% below
and 22% above its original targets, respectively.
Kalgoorlie - Super Pit (Western Australia) (50% share)
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Q2 2003 Q2 2002 2003E
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Production 117,445 80,780 410,000
Total cash cost / oz $ 212 $ 213 $ 210
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- Kalgoorlie had an excellent second quarter, producing 45% more ounces than
the prior year quarter due to better grades and recovery rates. Grades mined
are 29% better than plan and the previous year, due to successful mining of
high-grade pillars in the open pit and continued mining at the Mt. Charlotte
underground mine.
- Recovery rates ran almost 3% higher than the previous year and 5% higher
than plan, due to better grades, as well as increased throughput through the
roaster facility, which achieves higher recovery rates.
- Second quarter 2003 cash costs were similar to the prior year, as the
higher grades processed were offset by rising mining costs associated with
the increasing depth of the pit and higher diesel costs, as well as higher
processing and maintenance costs.
- For the year, the Mine is expected to produce 410,000 ounces, 66,000 ounces
higher than its original plan for the year, directly attributable to the
superior grades being realized from the open pit, at cash costs $27 lower
than plan.
Bulyanhulu (Tanzania)
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Q2 2003 Q2 2002 2003E
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Production 76,712 84,165 310,000
Total cash cost / oz $ 233 $ 203 $ 240
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- For second quarter 2003, production was 9% lower than the prior year
period, reflecting fewer tons mined coupled with lower grades. The lower
mining rate reflected lower equipment availability, while the lower grades
were a result of excessive dilution and mining of incremental ore.
- Cash costs for the quarter were higher than the prior year, reflecting the
lower production and higher maintenance costs.
- As announced in our July 7th press release, the Mine has appointed a new
Vice President and General Manager, and plans to reduce the mining rate until
the underground operation is stabilized. While their priorities will be
reducing dilution and increasing underground equipment availability, the new
management team will also focus on bringing down the overall cost structure
at the operation.
- Until the underground issues have been resolved, Bulyanhulu's mining rate
has been reduced by 34% to 2,100 tons per day, a reduction of 1,000 tons per
day from the original plan. As a result, the Mine will not meet its original
full year targets. Production is now expected to be 310,000 ounces (105,000
ounces lower than plan) at a cash cost of $240 per ounce ($65 per ounce
higher than plan).
Other Properties
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Q2 2003 Q2 2002 2003E
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Production 10,733 106,132 45,000
Total cash cost / oz $ 153 $ 192 $ 165
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- The only mine remaining in this category in 2003 is our 33% interest in the
Marigold Mine, which produced more gold than plan at cash costs below plan.
- Lower production for this category during second quarter 2003 compared to
the year earlier quarter relates to the closure of five mines in 2002 due to
the depletion of reserves.
PROJECT UPDATES
Alto Chicama (Peru)
During second quarter 2003, infill drilling on 50 meter centers, as well as
step out and geotechnical drilling was completed. A geologic resource model
is being prepared to support an updated mine plan.
Construction of the Alto Chicama access road is scheduled to commence in
third quarter 2003, with due diligence work on the existing power line and
the design of a 40 kilometer new line now underway.
Work during second quarter also focused on hydrological studies, project
siting and basic engineering. Metallurgical tests are complete, with basic
engineering underway for a two-stage crusher, heap leach with a Merrill-Crowe
recovery process, similar to our Pierina Mine.
On the exploration front, drill targets were outlined during a surface
mapping and sampling program carried out earlier this year. Drilling began on
one of the drill targets late in the second quarter and is expected to
continue through the balance of the year. Surface exploration will continue
during third quarter 2003, aimed at identifying and prioritizing additional
targets in the Alto Chicama district.
For the remainder of 2003, efforts will focus on the completion and
submission of the Environmental Impact Statement and final feasibility study.
The EIS is expected to be submitted in fourth quarter 2003.
Veladero/Pascua (Argentina/Chile)
The approval process of the Veladero Project EIS remains on schedule, with
permits expected in second half of 2003. As of the second quarter, responses
have been made to all comments received from public hearings and mining
authorities.
Access road construction continues on the lower portion of the road, with
completion projected for third quarter 2004. Temporary construction camp
facilities were completed in the higher elevations to facilitate construction
start up.
Detailed engineering will commence in third quarter 2003, with some segments
of the engineering completed early to prepare for a fourth quarter 2003
construction start up, pending government approvals and financing.
Work on optimizing the Pascua-Lama feasibility study continues with a focus
on incorporating synergies with Veladero and the impact of the devaluation of
the Argentinean peso.
Cowal (Australia)
During second quarter 2003, a significant milestone was reached with the
signing of a Native Title Agreement, followed by the granting of a mining
lease for the Cowal project. These milestones pave the way for a production
decision in the second half of 2003.
Open pit optimization continues with hydrologic and geotechnical studies
completed during the quarter and incorporated into the pit optimization.
Further optimization work is ongoing to mitigate the recent increase in the
Australian dollar, which has negatively impacted the economic returns of the
project.
Progress continues on permitting for ancillary licenses and development
consent planning requirements. Construction approvals require prior
development consent of emergency management plans (EMPs) by NSW authorities;
submission of the EMPs is scheduled for third quarter 2003.
AMORTIZATION
Amortization totaled $131 million, or $89 per ounce(1), for second quarter
2003, compared to $126 million or $82 per ounce(1) in the year earlier
quarter. The increase was due largely to the change in the production mix
across our portfolio of mines.
Two accounting policy changes affecting amortization took effect in first
quarter 2003. First, FAS 143 changed the method for accounting for
reclamation and closure costs. Amortization increased by $2 million for
second quarter 2003 to reflect the amortization of the increase to property,
plant and equipment from adopting the new standard at the beginning of this
year. The second change relates to the amortization of underground
development costs to exclude estimates of future underground development
costs in the current period amortization.
The new accounting policy for our underground mines had minimal impact on our
second quarter results, and is expected to have minimal impact on
amortization for the balance of the year, while the new reclamation standard
is expected to add $15 million to costs in 2003 over the previous policy, in
line with previous guidance.
Overall amortization is expected to total between $520-$530 million in 2003,
or approximately $90 per ounce. We would anticipate amortization to remain at
approximately current levels through 2004.
(1) For an explanation of non-GAAP performance measures refer to pages 13-14
of the Management's Discussion and Analysis.
ADMINISTRATION
Second quarter 2003 administration costs were $20 million, an increase of $4
million over the year earlier period. The increase is primarily due to legal
fees incurred relating to ongoing litigation and higher insurance costs.
For 2003, administration costs are expected to total $75 million, an increase
of $5 million over the beginning of year estimate. Administration costs are
expected to remain at approximately similar levels in 2004.
EXPLORATION AND BUSINESS DEVELOPMENT
Exploration and business development expenses totaled $34 million for second
quarter 2003, an increase of $7 million over the year earlier quarter. Over
half of the expenses during the quarter were attributable to two development
projects (Veladero and Alto Chicama), which have not been classified as
reserves for SEC purposes and are therefore expensed.
For the year, exploration and business development expenses are expected to
total $125 million, $25 million higher than originally planned, as we expect
to continue to expense most Veladero expenditures through third quarter 2003.
Looking forward to 2004, we would expect exploration and business development
expenses to remain in the $100 million range.
INTEREST AND OTHER INCOME
The principal component of interest and other income is interest received on
cash and short-term investments. For second quarter 2003, interest and other
income was $10 million, an increase of $3 million compared to the year
earlier period. Interest and other income for the quarter included interest
income of $8 million and gains on the sale of various assets of $11 million,
partially offset by foreign exchange translation losses of $4 million.
For the full year, interest and other income is expected to total
approximately $30 million, $5 million higher than originally anticipated, due
primarily to gains on the sale of assets.
INTEREST EXPENSE
We incurred $11 million in interest costs in second quarter 2003, compared to
$16 million in the year earlier quarter, relating primarily to our $500
million of debentures, and the $200 million Bulyanhulu project financing. The
decrease over the year earlier period mainly reflects lower interest rates,
including a $3 million beneficial effect of an interest rate swap used to
convert interest on $250 million of our debentures from fixed to floating
during the quarter.
For the full year, we expect to incur about $55 million in interest costs, of
which we expect to capitalize $5 million to our construction projects.
NON-HEDGE DERIVATIVE GAINS (LOSSES)
The principal components of the mark-to-market gains and losses are changes
in currency, commodity, and interest and lease rate contracts, and exclude
our normal sales contracts.
The total mark-to-market gain on the non-hedge derivative positions included
in second quarter 2003 earnings was $10 million, compared with a gain of $12
million for the year earlier period. The gain during the quarter primarily
relates to gains recorded on hedges of Australian dollar capital
expenditures, which no longer qualified for hedge accounting treatment due to
changes in the timing of the underlying capital expenditures.
Our gold sales contracts have fixed lease rates; however, for about one third
of the contracts, we swapped out of the fixed lease rates for floating lease
rates to take advantage of lower short-term rates. As gold prices and lease
rates decline/(increase), an unrealized mark-to-market gain/(loss) on these
swap contracts is recorded, and flows through earnings each quarter. We
expect to see ongoing fluctuations in these swap contracts in the following
quarters as gold prices and lease rates change.
INCOME TAXES
In second quarter 2003, we recorded a net income tax recovery of $15 million.
The income tax recovery includes a release of valuation allowances against
deferred tax assets totaling $21 million resulting from actions completed
during the quarter that provided assurance of the future realization of such
assets. Excluding the valuation allowance release, our effective tax rate in
the first six months of 2003 increased slightly to 9%, compared to 4% in the
year earlier period. Compared to the Canadian federal tax rate of 38%, our
lower effective tax rate is mainly due to: the utilization of previously
unrecognized tax loss carry forwards, which mitigated extra taxes that would
have arisen from the increase in spot gold prices from $302 per ounce in 2002
to $349 per ounce in 2003; as well as non-hedge derivative gains taxed in a
low tax rate jurisdiction. Our tax rate rises as gold prices rise, as a
larger portion of our earnings are taxed in higher tax-rate jurisdictions. We
estimate that if gold prices average $350 in 2003 our effective tax rate
would be 15-20%, excluding the effect of changes in valuation allowances and
non-hedge derivative gains and losses.
STATEMENT OF COMPREHENSIVE INCOME
Comprehensive income consists of net income or loss, together with certain
other economic gains and losses that are collectively described as "other
comprehensive income" and are excluded from the income statement.
Comprehensive income totaled $146 million in second quarter 2003, compared to
$66 million in the year earlier quarter. The primary reason for the increase
in 2003 relates to the increase in value of cash flow hedges in 2003 due to
strengthening of Canadian and Australian dollars (up 8% and 10% respectively)
against the United States dollar.
LIQUIDITY AND CAPITAL RESOURCES
We believe our ability to generate free cash flow from operations is one of
our fundamental financial strengths. Combined with our large cash balance of
almost $1 billion at June 30, 2003 and our $1 billion undrawn bank facility
which, in the second quarter, was extended for an additional year to 2008, we
have sufficient access to capital resources to develop our internal projects
and maintain a strong exploration program.
OPERATING ACTIVITIES
We generated operating cash flow of $66 million in second quarter 2003,
compared to $148 million in the year earlier period. The decrease in
operating cash flow in the second quarter primarily relates to higher tax
payments (up $41 million) and working capital adjustments (up $36 million).
INVESTING ACTIVITIES
Our principal investing activities are for sustaining capital at our existing
operating properties, new mine development and property and company
acquisitions.
CAPITAL EXPENDITURES
Capital expenditures for second quarter 2003 totaled $69 million, compared to
$61 million for the year earlier period. The increase was due principally to
spending in Australia ($28 million), primarily for underground development
and new mining equipment. Capital expenditures also included $20 million in
North America for maintenance capital. In Tanzania, capital expenditures
included $9 million spent at the Bulyanhulu Mine on underground development,
while in South America capital expenditures totaled $12 million at Veladero,
Pierina and Alto Chicama, as well as re-engineering and development work at
Pascua-Lama. For the full year we expect to spend about $375 million, lower
than plan as most development costs at Veladero are expected to be expensed
through third quarter 2003. We would expect capital spending to increase in
2004, as we expect to begin construction of Veladero, Cowal and Alto Chicama.
FINANCING ACTIVITIES
During second quarter 2003, our cash outflow on financing activities was $130
million, compared with $14 million in the year earlier period. The higher
outflow in second quarter 2003 principally related to a debt repayment on the
Bulyanhulu project financing, the buyback of 3.48 million Barrick common
shares at an average price of $17.95 per share at a total cost of $63 million
and a dividend payment of $60 million.
After the share buyback was announced on May 7, 2003, we completed the
regulatory filings, including a Notice to make a normal course issuer bid
filed with the Toronto and New York stock exchanges, which are required to
allow us to make purchases of our common shares from time to time. Pursuant
to the Notice, we may buy up to a total of 35 million common shares, which
represent approximately 7% of our public float at the time, during the period
covered by the filing. Purchases of common shares pursuant to the Notice,
together with all other common share purchases, whether through the Toronto
Stock Exchange or otherwise, in any 30-day period will not aggregate more
than 2% of the common shares outstanding at the time such purchase are made.
Any common shares purchased will be cancelled. The normal course issuer bid
expires in May 2004. A copy of the Notice will be furnished without charge to
any shareholder upon written request.
OUTLOOK
Our objective is to grow our business organically and through compelling
acquisition opportunities. We are focused on running our existing operations
as efficiently and effectively as possible, as we develop our new generation
of mines, and continue with one of the largest exploration programs in the
industry.
In second quarter 2003, the flexibility in our forward sales program once
again allowed us to participate in higher gold prices, selling production at
the higher spot prices as gold prices increased above our 2003 floor price of
$340 in May and June. We plan to continue to take advantage of the
flexibility inherent in our program and spot gold price volatility to reduce
the size of our forward sales position over time, subject to market
conditions.
Overall for 2003, we are forecasting to produce 5.4 to 5.5 million ounces at
an average total cash cost of $190 to $195 per ounce and a total production
cost of $280-$285 per ounce. We expect exploration and business development
expenses to be approximately $125 million. Administration expense for the
year is expected to be approximately $75 million, reclamation and accretion
expense approximately $45 million, and interest expense approximately $50
million. Interest and other income is expected to be approximately $30
million, while at $350 per ounce gold our effective tax rate is expected to
be between 15% and 20%, excluding the impact of accounting
changes/revaluation allowances and non-derivative gains. Capital expenditures
for the year are expected to total about $220 million at our existing
operations, and a further $155 million at our four development projects, for
a total of $375 million.
NON-GAAP MEASURES
We have included cost per ounce data because we understand that certain
investors use this information to determine the Company's ability to generate
earnings as well as cash flow for use in investing and other activities. We
believe that conventional measures of performance prepared in accordance with
GAAP do not fully illustrate the ability of our operating mines to generate
cash flow. The data are intended to provide additional information and should
not be considered in isolation or as a substitute for measures of performance
prepared in accordance with GAAP. The measures are not necessarily indicative
of operating profit or cash flow from operations as determined under GAAP.
Where cost per ounce data is computed by dividing GAAP operating cost
components by ounces sold, we have not provided formal reconciliations of
these statistics. Where GAAP operating costs are adjusted in computing cost
per ounce data, we have provided reconciliations below.
Reconciliation of Total Cash Costs Per Ounce(3) to Financial
Statements
---------------------------------------------------------------------
Three months ended Six months ended
(in millions of United States June 30, June 30,
dollars except per ounce amounts) 2003 2002 2003 2002
---------------------------------------------------------------------
Operating costs per financial
statements $ 271 $ 262 $ 534 $ 528
Reclamation costs (13) (7) (25) (18)
---------------------------------------------------------------------
Operating costs for per ounce
calculation $ 258 $ 255 $ 509 $ 510
---------------------------------------------------------------------
Ounces sold (thousands) 1,395 1,437 2,687 2,881
Total cash costs per ounce $ 185 $ 178 $ 189 $ 177
---------------------------------------------------------------------
(3) Total cash costs per ounce data are calculated in accordance with
The Gold Institute Production Cost Standard (the "Standard").
Adoption of the Standard is voluntary, and the data presented may
not be comparable to data presented by other gold producers. Cash
costs per ounce are derived from amounts included in the
Statements of Income and include mine site operating costs such
as mining, processing, administration, royalties and production
taxes, but exclude amortization, reclamation costs, financing
costs, and capital, development and exploration costs.
Reconciliation of Amortization and Reclamation Costs Per Ounce to
Financial Statements
---------------------------------------------------------------------
Three months ended Six months ended
(in millions of United States June 30, June 30,
dollars except per ounce amounts) 2003 2002 2003 2002
---------------------------------------------------------------------
Amortization per financial
statements $ 131 $ 126 $ 256 $ 249
Amortization recorded on property,
plant and equipment not at
operating mine sites 7 8 14 14
---------------------------------------------------------------------
Amortization for per ounce
calculation 124 118 242 235
Reclamation costs - 11 - 18
---------------------------------------------------------------------
Amortization and reclamation costs
for per ounce calculation $ 124 $ 129 $ 242 $ 253
---------------------------------------------------------------------
Ounces sold (thousands) 1,395 1,437 2,687 2,881
Amortization costs per ounce $ 89 $ 82 $ 90 $ 82
Amortization and reclamation costs
per ounce $ 89 $ 90 $ 90 $ 88
---------------------------------------------------------------------
FINANCIAL RISK MANAGEMENT
Forward Gold Sales Hedge Position (as of June 30, 2003)
---------------------------------------------------------------------
Gold ounces hedged 16.1 million ounces (or approximately
three years of expected future
production)
---------------------------------------------------------------------
Current termination date 2013 in most cases
of gold sales contracts
---------------------------------------------------------------------
Average projected $403/oz (1)
realizable gold sales
contract price at 2013
termination date.
---------------------------------------------------------------------
Delivery obligations Barrick will deliver gold production
from operations against gold sales
contracts by the termination date (which
is currently 2013 in most cases).
However, Barrick may choose to settle
any gold sales contract in advance of
this termination date at any time, at
its discretion. Historically, delivery
has occurred in advance of the
contractual termination date.(2)
---------------------------------------------------------------------
Minimum gold sales price $340/oz (3)
for remaining expected
2003 production
---------------------------------------------------------------------
Average forecast minimum $317/oz (1),(2),(4)
realizable contract gold
sales price for delivery
of 100% of expected future
production into existing
sales contracts over the
next three years.
---------------------------------------------------------------------
Unrealized mark to market $615 million(5)
loss at June 30, 2003
---------------------------------------------------------------------
"Capped price" variable None
price gold sales contracts
outstanding
---------------------------------------------------------------------
1. Approximate estimated value based on current market US dollar
interest rates and an average lease rate assumption of 1.5%
2. Accelerating gold deliveries could potentially lead to reduced
contango that would otherwise have built-up over time.
3. Lowest expected realized price for 2003, assuming the use of
certain gold sales contracts, or the spot market price of gold,
whichever is higher.
4. Assumes delivery of 100% of expected future production against
current gold sales contracts which would exhaust all remaining
gold hedge positions.
5. At a spot gold price of $346 per ounce.
In all of our master trading agreements, which govern the terms of our gold
sales contracts with our 19 counterparties, the following applies:
- The counterparties do not have unilateral and discretionary 'right to
break' provisions.
- There are no credit downgrade provisions.
- We are not subject to any margin calls - regardless of the price of gold.
- We have the right to accelerate the delivery of gold at any time during the
life of our contracts. This flexibility is demonstrated by the terms that
allow us to close out hedge contracts at any time on two days notice, or keep
these hedge contracts outstanding for as long as 15 years. This feature means
that we can sell our gold at the market price or our hedge price, whichever
is higher.
Our trading agreements with our counterparties do provide for early close out
of certain transactions in the event of a material negative change in our
ability to produce gold for delivery under our hedging agreements, or a lack
of gold market, and for customary events of default such as covenant
breaches, insolvency or bankruptcy. The significant financial covenants are:
- Barrick must maintain a minimum consolidated net worth of at least US$2
billion - currently, it is US$3.4 billion.
- Barrick must maintain a maximum long-term debt to consolidated net worth
ratio of 1.5:1 - currently, it is under 0.25:1.
The foregoing information is a summary of certain aspects of our forward
sales program and is not intended to be comprehensive. For a more complete
understanding, reference should be made to the Company's website
(www.barrick.com).
The estimated fair value of all derivative instruments at June 30, 2003 was
approximately $354 million negative. The year-to-date change in the fair
value of our derivative instruments is detailed as follows:
Mark-to-Market (Fair Value) at June 30, 2003 of all derivative
instruments:
---------------------------------------------------------------------
Gold forward sales position $ (615)
Silver forward sales position 15
Foreign currency position 188
Interest rate position 58
---------------------------------------------------------------------
All derivative instruments $ (354)
---------------------------------------------------------------------
Continuity Schedule of the Change in the Mark-to-Market Value of our
gold forward sales position (millions)
---------------------------------------------------------------------
Fair value as at December 31, 2002 - Loss $ (639)
Impact of change in spot price (from $347 per ounce
to $346 per ounce) 17
Contango earned period to date 70
Impact of change in valuation inputs other than spot
metal prices (e.g. interest rates, lease rates, and
volatility) (63)
---------------------------------------------------------------------
Fair value as at June 30, 2003 - Loss $ (615)
---------------------------------------------------------------------
The mark-to-market value of the gold contracts is based on a spot gold price
of $346 per ounce and market rates for LIBOR and gold lease rates. The mark-
to-market value of the contracts would approach zero (breakeven) at a spot
gold price of approximately $312 per ounce, assuming all other variables are
constant.
Consolidated Statements of Income
(in millions of United States
dollars, except per share Three months ended Six months ended
data, US GAAP basis) June 30, June 30,
---------------------------------------------------------------------
(Unaudited) 2003 2002 2003 2002
---------------------------------------------------------------------
Gold sales (note 13) $491 $490 $950 $968
---------------------------------------------------------------------
Costs and expenses
Operating (notes 3 and 13) 271 262 534 528
Amortization (note 13) 131 126 256 249
Administration 20 16 42 33
Exploration and business
development 34 27 63 47
---------------------------------------------------------------------
456 431 895 857
---------------------------------------------------------------------
Interest and other income
(note 4) 10 7 15 16
Interest expense (11) (16) (24) (29)
Non-hedge derivative gains
(note 11E) 10 12 46 11
---------------------------------------------------------------------
Income before income taxes
and other items 44 62 92 109
Income tax recovery
(expense) (note 5) 15 (3) 13 (4)
---------------------------------------------------------------------
Income before cumulative
effect of changes in
accounting principles 59 59 105 105
Cumulative effect of
changes in accounting
principles (note 2) - - (17) -
---------------------------------------------------------------------
Net income $59 $59 $88 $105
---------------------------------------------------------------------
Earnings per share data (note 6):
Income before cumulative
effect of changes in
accounting principles
Basic and diluted $0.11 $0.11 $0.19 $0.20
Net income
Basic and diluted $0.11 $0.11 $0.16 $0.20
---------------------------------------------------------------------
The accompanying notes are an integral part of these unaudited
interim consolidated financial statements.
Consolidated Statements of Cash Flow
(in millions of United States Three months ended Six months ended
dollars, US GAAP basis) June 30, June 30,
---------------------------------------------------------------------
(Unaudited) 2003 2002 2003 2002
---------------------------------------------------------------------
OPERATING ACTIVITIES
Net income for the period $59 $59 $88 $105
Amortization (note 13) 131 126 256 249
Changes in capitalized
mining costs (3) (3) 16 2
Deferred income taxes (36) 9 (45) (6)
Other items (note 14) (85) (43) (118) (82)
---------------------------------------------------------------------
Net cash provided by
operating activities 66 148 197 268
---------------------------------------------------------------------
INVESTING ACTIVITIES
Property, plant and equipment
Purchases (note 13) (69) (61) (135) (108)
Sales proceeds 10 3 15 3
Short-term investments - 58 - 130
---------------------------------------------------------------------
Net cash provided by (used
in) investing activities (59) - (120) 25
---------------------------------------------------------------------
FINANCING ACTIVITIES
Capital stock
Issued on exercise of
stock options 2 46 3 81
Repurchased for cash (note 9A) (63) - (63) -
Long-term debt repayments (9) - (9) (1)
Dividends (60) (60) (60) (60)
---------------------------------------------------------------------
Net cash provided by (used
in) financing activities (130) (14) (129) 20
---------------------------------------------------------------------
Increase (decrease) in
cash and equivalents (123) 134 (52) 313
Cash and equivalents at
beginning of period 1,115 753 1,044 574
---------------------------------------------------------------------
Cash and equivalents at
end of period $992 $887 $992 $887
---------------------------------------------------------------------
The accompanying notes are an integral part of these unaudited
interim consolidated financial statements.
Consolidated Balance Sheets
(in millions of United States
dollars, US GAAP basis) As at June 30, As at Dec. 31,
(Unaudited) 2003 2002
---------------------------------------------------------------------
ASSETS
Current assets
Cash and equivalents $992 $1,044
Short-term investments 32 30
Accounts receivable 67 72
Inventories and other current assets (note 8) 201 206
---------------------------------------------------------------------
1,292 1,352
Property, plant and equipment 3,220 3,322
Capitalized mining costs, net 256 272
Other assets 524 315
---------------------------------------------------------------------
Total assets $5,292 $5,261
---------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $155 $164
Other current liabilities 152 319
---------------------------------------------------------------------
307 483
Long-term debt 757 761
Other long-term obligations 482 422
Net deferred income tax liabilities 317 261
---------------------------------------------------------------------
Total liabilities 1,863 1,927
---------------------------------------------------------------------
Shareholders' equity
Capital stock 4,124 4,148
Deficit (697) (689)
Accumulated other comprehensive income
(loss) (note 7) 2 (125)
---------------------------------------------------------------------
Total shareholders' equity 3,429 3,334
---------------------------------------------------------------------
Total liabilities and shareholders' equity $5,292 $5,261
---------------------------------------------------------------------
The accompanying notes are an integral part of these unaudited
interim consolidated financial statements.
Consolidated Statements of Shareholders'
Equity and Comprehensive Income
STATEMENT OF SHAREHOLDERS' EQUITY
(in millions of United States dollars, US GAAP basis)
(Unaudited) 2003
------------------------------------------------------------
Common shares (number in millions)
At January 1 542
Issued for cash/on exercise of stock options 1
Repurchased for cash (note 9A) (3)
------------------------------------------------------------
At June 30 540
------------------------------------------------------------
Common shares (amount in millions)
At January 1 $4,148
Issued for cash/on exercise of stock options 3
Repurchased for cash (note 9A) (27)
------------------------------------------------------------
At June 30 $4,124
------------------------------------------------------------
Deficit
At January 1 $(689)
Net income 88
Dividends (60)
Repurchase of common shares(1) (36)
------------------------------------------------------------
At June 30 $(697)
------------------------------------------------------------
Accumulated other comprehensive income (note 7) $2
------------------------------------------------------------
Total shareholders' equity at June 30 $3,429
------------------------------------------------------------
(1) Represents the excess of cash paid over the average book value
repurchased as part of the share buyback plan.
STATEMENT OF COMPREHENSIVE INCOME
(in millions of United States Three months ended Six months ended
dollars, US GAAP basis) June 30, June 30,
---------------------------------------------------------------------
(Unaudited) 2003 2002 2003 2002
---------------------------------------------------------------------
Net income $59 $59 $88 $105
Foreign currency translation
adjustments (note 7) 4 (4) (1) (12)
Transfers of realized gains on
derivative instruments to
earnings (note 7) (16) (7) (25) (10)
Hedge ineffectiveness
transferred to earnings (note 7) (4) - (4) -
Change in fair value of cash
flow hedges (note 7) 99 21 147 23
Transfers of realized losses
on available-for-sale
securities to earnings (note 7) - - 7 -
Unrealized gains (losses) on
available-for-sale securities
(note 7) 4 (3) 3 (3)
---------------------------------------------------------------------
Comprehensive income $146 $66 $215 $103
---------------------------------------------------------------------
The accompanying notes are an integral part of these unaudited
interim consolidated financial statements.
Notes to Unaudited Interim Consolidated Financial Statements
(US GAAP)
Tabular dollar amounts in millions of United States dollars, unless otherwise
indicated, US GAAP basis. References to C$ and A$ are to Canadian and
Australian dollars, respectively.
1 BASIS OF PREPARATION
The United States dollar is the principal currency of our operations. We
prepare and file our primary consolidated financial statements in United
States dollars and under United States generally accepted accounting
principles ("US GAAP"). The accompanying unaudited interim consolidated
financial statements have been prepared in accordance with US GAAP for the
preparation of interim financial information. Accordingly, they do not
include all of the information and disclosures required by US GAAP for annual
consolidated financial statements. Except as disclosed in note 2, the
accounting policies used in the preparation of the accompanying unaudited
interim consolidated financial statements are the same as those described in
our audited consolidated financial statements and the notes thereto for the
three years ended December 31, 2002.
In the opinion of management, all adjustments considered necessary for fair
presentation of results for the periods presented have been reflected in
these financial statements. Operating results for the period ended June 30,
2003 are not necessarily indicative of the results that may be expected for
the full year ending December 31, 2003. These unaudited interim consolidated
financial statements should be read in conjunction with the audited annual
financial statements and the notes thereto for the three years ended December
31, 2002.
The preparation of financial statements under US GAAP requires us to make
estimates and assumptions that affect:
- the reported amounts of assets and liabilities;
- disclosures of contingent assets and liabilities; and
- revenues and expenses recorded in each reporting period.
The most significant estimates and assumptions that affect our financial
position and results of operations are those that use estimates of proven and
probable gold reserves, and/or assumptions of future gold prices. Such
estimates and assumptions affect:
- the value of inventories (which are stated at the lower of average cost and
net realizable value);
- decisions as to when exploration and mine development costs should be
capitalized or expensed;
- whether property, plant and equipment and capitalized mining costs may be
impaired;
- our ability to realize income tax benefits recorded as deferred income tax
assets; and
- the rate at which we charge amortization to earnings.
We also estimate:
- costs associated with reclamation and closure of mining properties;
- remediation costs for inactive properties;
- the timing and amounts of forecasted future expenditures that represent the
hedged items underlying hedging relationships for our cash flow hedge
contracts;
- the fair values of derivative instruments; and
- the likelihood and amounts associated with contingencies.
We regularly review the estimates and assumptions that affect our financial
statements; however, what actually happens could differ from those estimates
and assumptions.
2 ACCOUNTING CHANGES
A FAS 143, Accounting for asset retirement obligations
On January 1, 2003, we adopted FAS 143 and changed our accounting policy for
recording obligations relating to the retirement of long-lived assets. FAS
143 applies to legal obligations associated with the retirement of long-lived
assets that result from the acquisition, construction, development and/or the
normal operation of a long-lived asset. Under FAS 143 we record the fair
value of a liability for an asset retirement obligation in the period in
which it is incurred. When the liability is initially recorded, we capitalize
the cost by increasing the carrying amount of the related long-lived asset.
Over time, the liability is increased to reflect an interest element
(accretion expense) considered in its initial measurement at fair value, and
the capitalized cost is amortized over the useful life of the related asset.
Upon settlement of the liability, we will record a gain or loss if the actual
cost incurred is different than the liability recorded. On adoption of FAS
143 in our balance sheet we recorded an increase in property, plant and
equipment by $39 million; an increase in other long-term obligations by $32
million; and an increase in deferred income tax liabilities by $3 million. In
the first quarter of 2003, we recorded in our income statement a $4 million
credit for the cumulative effect of this accounting change.
Following the adoption of FAS 143, the total amount of recognized liabilities
for asset retirement obligations was $334 million. These liabilities mainly
relate to obligations at our active and inactive mines to perform reclamation
and remediation activities to meet existing environmental laws and
regulations that govern our mining properties.
The comparative amount of these liabilities would have been $353 million at
December 31, 2001, using the principles of FAS 143, and using current
information, assumptions and interest rates.
For the three-month period ended June 30, 2003, the effect on earnings of
adopting FAS 143 was a decrease in income before the cumulative effect of
accounting changes by $4 million ($0.01 per share), and for the six-month
period ended June 30, 2003 the effect was a decrease in income before the
cumulative effect of accounting changes by $8 million ($0.02 per share).
For the three-month period ended June 30, 2002, the effect of adopting FAS
143 would have been a decrease in income before the cumulative effect of
accounting changes by $1 million ($nil per share), and for the six-month
period ended June 30, 2002, the effect would have been a decrease in income
before the cumulative effect of accounting changes by $2 million ($nil per
share).
B Amortization of underground development costs
Effective January 1, 2003, we changed our accounting policy for amortization
of underground mine development costs to exclude estimates of future
underground development costs. Future underground development costs, which
are significant, are necessary to develop our underground ore bodies,
expected to be mined in some cases over the next 25 years.
Previously, we amortized the total of historical capitalized costs and
estimated future costs using the units of production method over total proven
and probable reserves at our underground mining operations. This accounting
change was made to better match amortization with ounces of gold sold and to
remove the inherent uncertainty in estimating future development costs from
amortization calculations.
Under our revised accounting policy, costs incurred to access specific ore
blocks or areas, and that only provide benefit over the life of that area,
are amortized over the proven and probable reserves within the specific ore
block or area. Infrastructure and other common costs which have a useful life
over the entire mine life continue to be amortized over total proven and
probable reserves.
The cumulative effect of this change at January 1, 2003, was to decrease
property, plant and equipment by $19 million, and increase deferred income
tax liabilities by $2 million. In the first quarter of 2003 we recorded in
our income statement a $21 million charge for the cumulative effect of this
change.
For the three-month period ended June 30, 2003, the effect of adopting this
accounting change was a decrease in income before the cumulative effect of
accounting changes by $0.2 million ($nil per share), and for the six-month
period ended June 30, 2003, the effect was a decrease in income before the
cumulative effect of accounting changes by $0.4 million ($nil per share).
If the comparative income statements had been adjusted for the retroactive
application of this change in amortization policy, there would have been no
effect on net income for the three-month period ended June 30, 2002, or six-
month period ended June 30, 2002.
C Accounting estimates
Pension costs
In 2003, we reduced the assumed rate of return on pension plan assets from
8.5% to 7%. The effect of this change in 2003 will be to increase pension
cost expense by $2 million for the full year.
3 OPERATING COSTS
---------------------------------------------------------------------
Three months ended Six months ended
June 30, June 30,
2003 2002 2003 2002
---------------------------------------------------------------------
Cost of goods sold $ 270 $ 276 $ 532 $ 552
By-product revenues (26) (31) (53) (61)
Royalty expenses 11 9 22 17
Production taxes 3 1 8 2
Reclamation and other closure
costs (note 2A) - 7 - 18
Accretion expense on
reclamation/closure
obligations and non-legal
reclamation/closure costs
(note 2A) 13 - 25 -
---------------------------------------------------------------------
$ 271 $ 262 $ 534 $ 528
---------------------------------------------------------------------
Amortization of capitalized mining costs
We charge most mine operating costs to inventory as incurred. However, we
defer and amortize certain mining costs associated with open-pit deposits
that have diverse ore grades and waste-to-ore ton ratios over the mine life.
These mining costs arise from the removal of waste rock at our open-pit
mines, and we commonly refer to them as "deferred stripping costs". We record
in cost of goods sold amortization of amounts deferred based on a "stripping
ratio" using the units-of-production method. This accounting method results
in the smoothing of these costs over the life of mine, rather than expensing
them as incurred. Some mining companies expense these costs as incurred,
which may result in the reporting of greater volatility in period-to-period
results of operations. The application of our deferred stripping accounting
policy in the three months ended June 30, 2003 resulted in a decrease in
operating costs by $3 million compared to actual costs incurred (three months
ended June 30, 2002 - $3 million decrease), and for the six months ended June
30, 2003, the application resulted in an increase in operating costs by $16
million compared to actual costs incurred (six months ended June 30, 2002 -
$2 million increase).
Capitalized mining costs are an asset that represents the excess of costs
capitalized over the related amortization recorded, although it is possible
that a liability could arise if cumulative amortization exceeds costs
capitalized. The carrying amount of capitalized mining costs is included with
related mining property, plant and equipment for impairment testing purposes.
Average stripping ratios (1)
---------------------------------------------------------------------
Three months ended Six months ended
June 30, June 30,
2003 2002 2003 2002
---------------------------------------------------------------------
Betze-Post (Goldstrike) 112:1 112:1 112:1 112:1
Pierina 48:1 48:1 48:1 48:1
---------------------------------------------------------------------
(1) The stripping ratio is calculated as the ratio of total tons (ore
and waste) of material to be moved compared to total recoverable
proven and probable gold reserves.
The average remaining life of the above-mentioned open-pit mine operations
for which we capitalize mining costs is 9 years. The full amount of stripping
costs incurred will be expensed by the end of the mine lives.
4 INTEREST AND OTHER INCOME
---------------------------------------------------------------------
Three months ended Six months ended
June 30, June 30,
2003 2002 2003 2002
---------------------------------------------------------------------
Interest income $ 8 $ 7 $ 16 $ 14
Gains on sale of property,
plant and equipment 11 4 16 5
Foreign currency translation
losses (4) (2) (5) (2)
Losses on short-term investments - - (7) (4)
Other items (5) (2) (5) 3
---------------------------------------------------------------------
$ 10 $ 7 $ 15 $ 16
---------------------------------------------------------------------
5 INCOME TAXES
Income tax recovery (expense)
---------------------------------------------------------------------
Three months ended Six months ended
June 30, June 30,
2003 2002 2003 2002
---------------------------------------------------------------------
Current $ (21) $ 6 $ (32) $ (10)
Deferred 36 (9) 45 6
---------------------------------------------------------------------
$ 15 $ (3) $ 13 $ (4)
---------------------------------------------------------------------
Following a corporate reorganization of certain North American subsidiaries
in second quarter 2003, we released valuation allowances totaling $21 million
previously recorded against certain deferred income tax assets in entities
that did not have any current sources of income. The tax benefits from these
previously unrecognized tax assets are now expected to be realized, and this
benefit was recorded as a component of the $36 million deferred income tax
credit in second quarter 2003.
Excluding the $21 million valuation allowance released in second quarter
2003, our estimated underlying effective tax rate for the six months ended
June 30, 2003 was 9%. The two major reasons why this rate differs from the
Canadian federal statutory rate of 38% include: non-hedge derivative gains in
a low tax-rate jurisdiction caused our effective tax rate to decrease by 16%;
and the benefits of previously unrecognized tax loss carryforwards in various
foreign subsidiaries were utilized to offset higher levels of taxable income
due to the higher gold price environment caused our effective tax rate to
decrease by 20%.
6 EARNINGS PER SHARE
Net income per share was calculated on the basis of the weighted average
number of common shares outstanding for the three month period ended June 30,
2003, which amounted to 540 million shares (2002 - 539 million shares), and
for the six month period ended June 30, 2003 amounted to 541 million shares
(2002 - 539 million shares).
Diluted net income per share reflects the dilutive effect of the exercise of
the common share purchase options outstanding as at the end of the period.
The number of shares for the diluted net income per share calculation for the
three month period ended June 30, 2003 amounted to 540 million shares (2002 -
541 million shares) and for the six month period ended June 30, 2003 amounted
to 541 million shares (2002 - 541 million shares).
7 COMPREHENSIVE INCOME
Comprehensive income consists of net income and other gains and losses that
are excluded from net income. Other gains and losses consist mainly of gains
and losses on derivative instruments accounted for as cash flow hedges;
unrealized gains and losses on investments; and foreign currency translation
adjustments.
Parts of comprehensive income (loss)
---------------------------------------------------------------------
Three months ended Six months ended
June 30, June 30,
2003 2002 2003 2002
---------------------------------------------------------------------
Pre-tax Tax Pre-tax Tax Pre-tax Tax Pre-tax Tax
amount effect amount effect amount effect amount effect
---------------------------------------------------------------------
Foreign currency
translation
adjustments $ 4 $ - $ (4) $ - $ (1) $ - $ (12) $ -
Transfers of
realized gains
on cash flow
hedges to
earnings (note
11F) (21) 5 (10) 3 (35) 10 (13) 3
Hedge
ineffectiveness
transferred to
earnings (note
11F) (6) 2 - - (6) 2 - -
Change in fair
value of cash
flow hedges
(note 11F) 141 (42) 35 (14) 219 (72) 37 (14)
Transfers of
losses on
available-for-sale
securities to
earnings - - - - 7 - - -
Unrealized gains
(losses) on
available-for-sale
securities 4 - (3) - 3 - (3) -
---------------------------------------------------------------------
$ 122 $(35) $ 18 $(11) $ 187 $ (60) $ 9 $(11)
---------------------------------------------------------------------
Accumulated other comprehensive income (loss) (OCI)
---------------------------------------------------------------------
At June 30, 2003 At December 31, 2002
---------------------------------------------------------------------
Pre-tax Tax Pre-tax Tax
amount effect Total amount effect Total
---------------------------------------------------------------------
Foreign currency
translation
adjustments $ (145) $ - $ (145) $ (144) $ - $ (144)
Accumulated gains
on cash flow
hedges (note 11F) 227 (77) 150 49 (17) 32
Additional minimum
pension liability (7) - (7) (7) - (7)
Unrealized gains
(losses) on
available-for-sale
securities 4 - 4 (6) - (6)
---------------------------------------------------------------------
$ 79 $ (77) $ 2 $(108) $(17) $ (125)
---------------------------------------------------------------------
8 INVENTORIES AND OTHER CURRENT ASSETS
---------------------------------------------------------------------
At June 30, 2003 At Dec. 31, 2002
---------------------------------------------------------------------
Gold in process and ore in stockpiles $ 100 $ 100
Mine operating supplies 60 59
Derivative assets (note 11) 38 37
Prepaid expenses 3 10
---------------------------------------------------------------------
$ 201 $ 206
---------------------------------------------------------------------
Gold in process and ore in stockpiles excludes $63 million (December 31, 2002
- $61 million) of stockpiled ore, which is not expected to be processed in
the following 12 months. This amount is included in other assets.
9 CAPITAL STOCK
A Share repurchase program
During the three month period ended June 30, 2003, we repurchased 3.48
million common shares at an average cost of $17.95 per share.
B Barrick Gold Inc. ("BGI") exchangeable shares
In connection with a 1998 acquisition, BGI, formerly Homestake Canada Inc.,
issued 11.1 million BGI exchangeable shares. Each BGI exchangeable share is
exchangeable for 0.53 of a Barrick common share at any time at the option of
the holder and has essentially the same voting, dividend (payable in Canadian
dollars), and other rights as 0.53 of a Barrick common share. BGI is a
subsidiary that holds our interest in the Hemlo and Eskay Creek Mines.
At June 30, 2003, 1.6 million BGI exchangeable shares were outstanding, which
are equivalent to 0.8 million Barrick common shares. The equivalent common
share amounts are reflected in the number of common shares outstanding.
At any time on or after December 31, 2008, or when fewer than 1.4 million BGI
exchangeable shares are outstanding, we have the right to require the
exchange of each outstanding BGI exchangeable share for 0.53 of a Barrick
common share. While there are exchangeable shares outstanding, we are
required to present summary consolidated financial information relating to
BGI for holders of exchangeable shares.
Summarized financial information for BGI
---------------------------------------------------------------------
Three months ended Six months ended
June 30, June 30,
2003 2002 2003 2002
---------------------------------------------------------------------
Total revenues and other income $ 53 $ 48 $ 105 $ 103
Less: costs and expenses 63 53 116 102
---------------------------------------------------------------------
Income (loss) before taxes: $ (10) $ (5) $ (11) $ 1
---------------------------------------------------------------------
Net loss $ (22) $ (10) $ (44) $ (5)
---------------------------------------------------------------------
---------------------------------------------------------------------
At June 30, At December 31,
2003 2002
---------------------------------------------------------------------
Current assets $ 98 $ 91
Non-current assets 276 236
---------------------------------------------------------------------
Total assets 374 327
---------------------------------------------------------------------
Other current liabilities 14 75
Notes payable 466 407
Other long-term liabilities 84 18
Deferred income taxes 123 122
Shareholders' equity (313) (295)
---------------------------------------------------------------------
Total liabilities and shareholders' equity $ 374 $ 327
---------------------------------------------------------------------
10 EMPLOYEE STOCK-BASED COMPENSATION
Common stock options
Stock option activity (shares in millions)
---------------------------------------------------------------------
Common Weighted Common Weighted
shares average shares average
(number) price (C$) (number) price (US$)
---------------------------------------------------------------------
At December 31, 2002 18.9 3.1
Granted 0.6 $ 23.67 - -
Canceled or expired (0.4) $ 30.03 (0.1) $ 23.28
---------------------------------------------------------------------
At June 30, 2003 19.1 3.0
---------------------------------------------------------------------
Under APB 25, we recognize compensation cost for stock options in earnings
based on the excess, if any, of the quoted market price of the stock at the
grant date of the award over the option exercise price. Generally, the
exercise price for stock options granted to employees equals the fair market
value of our common stock at the date of grant, resulting in no compensation
cost.
FASB Statement No. 123 (Accounting for Stock-Based Compensation) ( FAS 123)
encourages, but does not require, companies to record compensation cost for
stock-based employee compensation plans based on the fair value of options
granted. We have elected to continue to account for stock-based compensation
using the intrinsic value method prescribed in Accounting Principles Board
Opinion No. 25 (Accounting for Stock Issued to Employees) (APB 25) and its
related interpretations, and to provide disclosures of the pro forma effects
of adoption had we recorded compensation expense under the fair value method.
Stock option expense (per share amounts in dollars)
---------------------------------------------------------------------
Three months ended Six months ended
June 30, June 30,
2003 2002 2003 2002
---------------------------------------------------------------------
Pro forma effects
Net income, as reported $ 59 $ 59 $ 88 $ 105
Stock-option expense (6) (5) (12) (10)
---------------------------------------------------------------------
Pro forma net income $ 53 $ 54 $ 76 $ 95
---------------------------------------------------------------------
Net income per share
As reported (1) $ 0.11 $ 0.11 $ 0.16 $ 0.20
Pro forma (1) $ 0.10 $ 0.10 $ 0.14 $ 0.18
---------------------------------------------------------------------
(1) basic and diluted
11 DERIVATIVE INSTRUMENTS
A Derivative instruments
We use derivative financial instruments to reduce or eliminate the inherent
risks of certain identifiable transactions and balances that occur in the
normal course of our business. The inherent risks in these transactions and
balances arise from changes in: commodity prices (gold and silver), interest
rates and foreign currency exchange rates. The purpose of our derivative
program is to ensure that disadvantageous changes in the values or cash flows
from these transactions and balances are offset by changes in the values of
the derivatives. We do not hold derivatives for the purpose of speculation;
our derivative program is designed to enable us to plan our operations on the
basis of secure assumptions that will not be jeopardized by future movements
of gold and silver prices, interest rates and currency exchange rates. For a
more detailed description of the types of derivative instruments we use, and
our accounting policy for derivative instruments, refer to note 23 to our
audited consolidated financial statements for the three years ended December
31, 2002.
B Gold and silver hedge contracts
Forward gold sales contracts
We have entered into forward gold sales contracts with various counterparties
that fix selling prices at interim dates prior to the final delivery date for
16.1 million ounces of future gold production, and that have fixed price
adjustment mechanisms based on the market gold price in the case of
rescheduling of delivery dates. These contracts act as an economic hedge
against possible price fluctuations in gold. The contracts have final
delivery dates primarily over the next 10 to 15 years, but we have the right
to accelerate the delivery date at any time during this period. At the time a
price is set for a rescheduled interim date, the original contract price is
adjusted based on the difference between the prevailing forward gold market
price and the spot price of gold.
For the large majority of contracts, future prices are presently fixed
through 2006. The contract prices are determined based on gold forward market
prices. Forward gold market prices are principally influenced by the spot
price of gold, gold lease rates and U.S. dollar interest rates. The actual
realized price will depend on the timing of the actual future delivery date
and the actual amount of the premium of the forward price of gold over the
spot price of gold on the dates that selling prices are set.
Gold lease rate contracts
In addition to the above-noted forward gold sales contracts, we also have
gold lease rate swaps (where Barrick receives a fixed gold lease rate, and
pays a floating gold lease rate) on 4.9 million ounces of gold spread from
2004 to 2013, for gold sales contracts with expected delivery dates beyond
2006.
We use gold lease rate swap contracts to manage our gold lease rate exposure.
These economic hedges do not qualify for hedge accounting under FAS 133 and
therefore the economic impact flows through our earnings each quarter as part
of non-hedge derivative gains (losses).
Major customers
The largest single counterparty as of June 30, 2003 made up 11% of the ounces
of outstanding forward gold sales contracts.
Forward silver sales contracts
Forward silver sales contracts have similar delivery terms and pricing
mechanisms as forward gold sales contracts. At June 30, 2003, we had
commitments to deliver 32.2 million ounces of silver over periods of up to 10
to 15 years. A group of these contracts totaling 13.2 million ounces of
silver are accounted for as normal sales contracts.
A separate group of contracts totaling 19 million ounces are accounted for as
derivatives under FAS 133. During the second quarter 2003, hedge accounting
treatment for these contracts was discontinued prospectively. Despite the
fact that these contracts act as effective economic hedges, we determined
that they no longer meet the strict FAS 133 hedge criteria. The effect of
reclassifying accumulated gains from OCI to the income statement was a gain
of $0.2 million.
C Other derivative instruments outstanding as at June 30, 2003
---------------------------------------------------------------------
Maturity 2003 2004 2005 2006 2007 2008+ Total
---------------------------------------------------------------------
Written silver
call options
Ounces
(thousands) 2,750 3,000 2,000 - - - 7,750
Average exercise
price per ounce $ 5.00 $ 5.40 $ 5.00 - - - $ 5.15
---------------------------------------------------------------------
Interest rate
contracts
Receive fixed - swaps
Notional amount
(millions) - $ 150 $ 75 $ 100 $ 525 $ 200 $ 1,050
Fixed rate (%) - 3.6% 2.7% 3.0% 3.5% 3.8% 3.5%
Pay fixed - swaps
Notional amount
(millions) - - - - - $ 334 $ 334
Fixed rate (%) - - - - - 5.6% 5.6%
---------------------------------------------------------------------
Net notional
position - $ 150 $ 75 $ 100 $ 525 $(134) $ 716
---------------------------------------------------------------------
Foreign currency
contracts
Canadian Dollar
Forwards
C$ (millions) $ 156 $ 295 $ 206 $ 38 $ 96 $ 22 $ 813
Average Price (US
cents) 0.65 0.65 0.64 0.66 0.67 0.68 0.65
Canadian Dollar
Min-Max Contracts
C$ (millions) $ 53 - - - - - $ 53
Average Cap Price
(US cents) 0.65 - - - - - 0.65
Average Floor
Price (US cents) 0.63 - - - - - 0.63
Australian Dollar
Forwards
A$ (millions) $ 135 $ 430 $ 320 $ 135 $ 139 $ 19 $ 1,178
Average Price (US
cents) 0.54 0.53 0.51 0.56 0.58 0.53 0.54
Australian Dollar
Min-Max Contracts
A$ (millions) $ 195 $ 20 $ 10 $ 10 - - $ 235
Average Cap Price
(US cents) 0.55 0.54 0.52 0.52 - - 0.55
Average Floor
Price (US cents) 0.53 0.52 0.51 0.51 - - 0.53
Fuel contracts
Barrels WTI
(thousands) 120 180 - - - - 300
Cap $ 30 $ 30 - - - - $ 30
Floor $ - $ 19 - - - - $ 19
---------------------------------------------------------------------
Our written silver call options, interest rate and foreign currency contracts
are recorded at fair value on our balance sheet, with changes in fair value
recorded in earnings as they occur, with the following exceptions:
- we have elected for cash flow hedge accounting treatment for Canadian
dollar foreign currency contracts with a total notional amount of C$837
million, and Australian dollar foreign currency contracts with a total
notional amount of A$1,365 million.
- we have elected for receive-fixed interest rate swaps with a total notional
amount of $800 million to be accounted for as cash flow hedges of expected
future interest receipts arising on our cash and short-term investments; and
we have elected for receive-fixed interest rate swaps with a total notional
amount of $250 million to be accounted for as a fair value hedge of fixed-
rate debentures.
- we have elected for an amortizing pay-fixed interest rate swap with a total
notional amount of $184 million as at June 30, 2003 to be accounted for as a
cash flow hedge of future interest payments relating to the project financing
for Bulyanhulu.
D Unrealized fair value of derivative instruments (excluding normal sales
contracts)
---------------------------------------------------------------------
Three months ended Six months ended
June 30, June 30,
2003 2002 2003 2002
---------------------------------------------------------------------
Beginning of period $ 127 $ (30) $ 29 $ (16)
Derivative instruments entered
into or settled (14) 5 (30) (10)
Change in fair value of
derivative instruments:
Non-hedge derivatives 4 12 40 11
Cash flow hedges 141 38 219 40
Fair value hedges 4 - 4 -
---------------------------------------------------------------------
End of period $ 262 $ 25 $ 262 $ 25
---------------------------------------------------------------------
The fair values of recorded derivative assets and liabilities reflect the
netting of the fair values of individual derivative instruments, and amounts
due to/from counterparties that arise from derivative instruments, when the
conditions of FIN No. 39, Offsetting of Amounts Related to Certain Contracts,
have been met. Amounts receivable from counterparties that have been offset
against derivative liabilities totaled $16 million at June 30, 2003.
E Non-hedge derivative gains
---------------------------------------------------------------------
Three months ended Six months ended
June 30, June 30,
2003 2002 2003 2002
---------------------------------------------------------------------
Commodity contracts $ 5 $ (2) $ 6 $ (12)
Currency contracts 5 13 6 15
Interest and lease rate contracts (6) 1 28 8
Hedge ineffectiveness recorded
in earnings 6 - 6 -
---------------------------------------------------------------------
$ 10 $ 12 $ 46 $ 11
---------------------------------------------------------------------
F Change in fair value of cash flow hedge contracts
---------------------------------------------------------------------
Foreign
Commodity currency Interest-rate
contracts contracts contracts Total
---------------------------------------------------------------------
As at December 31, 2002 $ 9 $ 26 $ 14 $ 49
Change in fair value 4 193 22 219
Hedge gains transferred
to earnings (6) (1) (22) (2) (7) (3) (35)
Hedge ineffectiveness
transferred to earnings - (5) (1) (6)
---------------------------------------------------------------------
As at June 30, 2003 $ 7 $ 192 $ 28 $ 227
---------------------------------------------------------------------
1. Included under revenues
2. Included under costs and expenses
3. Included under interest income
In the next twelve months, we expect to transfer gains, excluding the related
tax effects, of $83 million from OCI to earnings. During the quarter, we
determined that certain Australian dollar hedge contracts designated as
hedges of forecasted capital expenditures no longer met the qualifying FAS
133 hedge criteria due to changes in the expected timing of the forecasted
expenditures. Accumulated gains totaling $5 million were recorded under non-
hedge derivative gains. For the three and six month periods ended June 30,
2003, the total amount of hedge ineffectiveness, including the gains on
capital expenditure hedges, recorded and recognized in non-hedge derivative
gains was a gain of $6 million and a gain of $5.5 million respectively (2002
- $nil and $nil respectively).
12 CONTINGENCIES
Certain conditions may exist as of the date the financial statements are
issued, which may result in a loss to the Company but which will only be
resolved when one or more future events occur or fail to occur. Management
and, where appropriate, legal counsel, assess such contingent liabilities,
which inherently involves an exercise of judgment.
In assessing loss contingencies related to legal proceedings that are pending
against us or unasserted claims that may result in such proceedings, the
Company and its legal counsel evaluate the perceived merits of any legal
proceedings or unasserted claims as well as the perceived merits of the
amount of relief sought or expected to be sought.
If the assessment of a contingency suggests that it is probable that a
material loss has been incurred and the amount of the liability can be
estimated, then the estimated liability is accrued in the financial
statements. If the assessment suggests that a potentially material loss
contingency is not probable but is reasonably possible, or is probable but
cannot be estimated, then the nature of the contingent loss, together with an
estimate of the range of possible loss, if determinable, is disclosed. Loss
contingencies considered remote are generally not disclosed unless they
involve guarantees, in which case we disclose the nature of the guarantee.
A Environmental
Our mining and exploration activities are subject to various federal,
provincial and state laws and regulations governing the protection of the
environment. These laws and regulations are continually changing and
generally becoming more restrictive. We conduct our operations so as to
protect public health and the environment, and we believe that our operations
are materially in compliance with all applicable laws and regulations. We
have made, and expect to make in the future, expenditures to meet such laws
and regulations.
The Comprehensive Environmental Response, Compensation and Liability Act
imposes heavy liabilities on persons who discharge hazardous substances. The
Environmental Protection Agency publishes a National Priorities List ("NPL")
of known or threatened releases of such substances. Homestake's former
uranium millsite near Grants, New Mexico is listed on the NPL.
B Litigation and claims
Inmet litigation
In October 1997, Barrick Gold Inc. ("BGI"), formerly Homestake Canada Inc., a
wholly-owned subsidiary of Barrick, entered into an agreement with Inmet
Mining Corporation ("Inmet") to purchase the Troilus mine in Quebec for $110
million plus working capital. In December 1997, BGI terminated the agreement
after deciding that, on the basis of due diligence studies, conditions to
closing the arrangement would not be satisfied.
On February 23, 1998, Inmet filed suit against BGI in the British Columbia
Supreme Court disputing the termination of the agreement and alleging that
BGI had breached the agreement. On January 15, 2002, the Supreme Court of
British Columbia released its decision in the matter and found in favour of
Inmet and against BGI. Specifically, the Court held that Inmet should be
awarded equitable damages in the amount of C$88.2 (US $59) million, which was
accrued at December 31, 2001. The Court did not award Inmet pre-judgment
interest. Inmet requested the Court to re-open the trial to let Inmet make
submissions on its claim for pre-judgment interest from the date of the
breach by BGI. The request to re-open was denied by the Court on May 17,
2002.
On February 7, 2002, BGI filed a Notice of Appeal of the decision with the
British Columbia Court of Appeal. Inmet filed a Cross-Appeal of the decision
regarding pre-judgment interest. A letter of credit of about C$95 million was
posted on August 20, 2002 by BGI with the British Columbia Court of Appeal,
pending a decision on the appeal. The Appeal of BGI and the Cross-Appeal of
Inmet was heard during June 2003.
Bre-X Minerals
On April 30, 1998, we were added as a defendant in a class action lawsuit
initiated against Bre-X Minerals Ltd., certain of its directors and officers
or former directors and officers and others in the United States District
Court for the Eastern District of Texas, Texarkana Division. The class action
alleges, among other things, that statements made by us in connection with
our efforts to secure the right to develop and operate the Busang gold
deposit in East Kalimantan, Indonesia were materially false and misleading
and omitted to state material facts relating to the preliminary due diligence
investigation undertaken by us in late 1996.
On July 13, 1999, the Court dismissed the claims against us and several other
defendants on the grounds that the plaintiffs had failed to state a claim
under United States securities laws. On August 19, 1999, the plaintiffs filed
an amended complaint restating their claims against us and certain other
defendants and on June 14, 2000 filed a further amended complaint, the Fourth
Amended Complaint.
On March 31, 2001, the Court granted in part and denied in part our Motion to
Dismiss the Fourth Amended Complaint. As a result, we remain a defendant in
the case. We believe that the remaining claims against us are without merit.
We filed our formal answer to the Fourth Amended Complaint on April 27, 2001
denying all relevant allegations of the plaintiffs against us. Discovery in
the case has been stayed by the Court pending the Court's decision on whether
or not to certify the case as a class action. The amount of potential loss,
if any, which we may incur arising out of the plaintiffs' claims is not
presently determinable.
On March 31, 2003, the Court denied all of the Plaintiffs' motions to certify
the case as a class action. Plaintiffs have not filed an interlocutory appeal
of the Court's decision denying class certification to the Fifth Circuit
Court of Appeals. The Plaintiffs' case against the Defendants may now proceed
in due course, but not on behalf of a class of Plaintiffs but only with
respect to the specific claims of the Plaintiffs named in the lawsuit. Having
failed to certify the case as a class action, we believe that the likelihood
of any of the named Defendants succeeding against Barrick with respect to
their claims for securities fraud is remote.
Blanchard complaint
On January 7, 2003, we were served with a Complaint for Injunctive Relief by
Blanchard and Company, Inc. ("Blanchard"), and Herbert Davies ("Davies"). The
complaint, which is pending in the U. S. District Court for the Eastern
District of Louisiana, also names J. P. Morgan Chase & Company ("J.P.
Morgan") as the defendant, along with an unspecified number of additional
defendants to be named later. The complaint, which has been amended several
times, alleges that we and bullion banks with which we entered into spot
deferred contracts have manipulated the price of gold, in violation of U.S.
antitrust laws and the Louisiana Unfair Trade Practices and Consumer
Protection Law. Blanchard alleges that it has been injured as a seller of
gold due to reduced interest in gold as an investment. Davies, a customer of
Blanchard, alleges injury due to the reduced value of his gold investments.
The complaint seeks damages and an injunction terminating certain of our
trading agreements with J. P. Morgan and other bullion banks. We have applied
to the Court for dismissal of this action and we intend to defend the action
vigorously.
Wagner complaint
On June 12, 2003, a complaint was filed against Barrick and several of its
current or former officers in the U.S. District Court for the Southern
District of New York. The complaint is on behalf of Barrick shareholders who
purchased Barrick shares between February 14, 2002 and September 26, 2002. It
alleges that Barrick and the individual defendants violated U.S. securities
laws by making false and misleading statements concerning Barrick's projected
operating results and earnings in 2002. The complaint seeks an unspecified
amount of damages. At least two other complaints, making the same basic
allegations against the same defendants, have been filed by other parties on
behalf of the same proposed class of Barrick shareholders. Apart from the
filing of the complaints there have been no developments in any of the cases.
We intend to defend the action vigorously.
Peruvian tax assessment
On December 27, 2002, one of our Peruvian subsidiaries received an income tax
assessment of $41 million, excluding interest and penalties, from the
Peruvian tax authority SUNAT. The tax assessment relates to a recently
completed tax audit of our Pierina Mine for the 1999-2000 fiscal years. The
assessment mainly relates to the revaluation of the Pierina mining concession
and associated tax basis. Under the valuation proposed by SUNAT, the tax
basis of Pierina assets would change from what we have previously assumed
with a resulting increase in current and deferred income taxes. While we
believe the tax assessment is incorrect and we will appeal the decision, the
full life of mine effect on our current and deferred income tax liabilities
of $141 million is recorded at December 31, 2002, as well as other payments
of about $21 million due for periods through 2002.
We intend to pursue all available administrative and judicial appeals. If we
are successful on appeal and our original asset valuation is confirmed as the
appropriate tax basis of assets, we would benefit from a $141 million
reduction in tax liabilities recorded at December 31, 2002. The effect of
this contingent gain, if any, will be recorded in the period the contingency
is resolved.
Under Peruvian law, we are not required to make payment of disputed taxes for
prior years pending the outcome of the appeal process, which routinely takes
several years.
We have not provided for $51 million of potential interest and penalties
assessed in the audit. Even if the tax assessment is upheld, we believe that
we will prevail on the interest and penalties part, because the assessment
runs counter to applicable law and previous Peruvian tax audits. The
potential amount of interest and penalties will increase over time while we
contest the tax assessment. A liability for interest and penalties will only
be recorded should it become probable that SUNAT's position on interest and
penalties will be upheld, or if we exhaust our appeals.
Other
From time to time, we are involved in various claims, legal proceedings and
complaints arising in the ordinary course of business. We are also subject to
reassessment for income and mining taxes for certain years. We do not believe
that adverse decisions in any pending or threatened proceedings related to
any potential tax assessments or other matters, or any amount which we may be
required to pay by reason thereof, will have a material adverse effect on our
financial condition or future results of operations.
13 SEGMENT INFORMATION
We operate in the gold mining industry and our operations are managed on a
district basis. The Goldstrike District includes the Betze-Post and Meikle
Mines in the United States. Our "other" segment includes mainly operations
which have been, or are being, closed.
Income statement information
---------------------------------------------------------------------
Segment income
(loss) before
Gold sales Operating costs income taxes
---------------------------------------------------------------------
Three months ended
June 30, 2003 2002 2003 2002 2003 2002
---------------------------------------------------------------------
Goldstrike $ 175 $ 168 $ 115 $ 110 $ 26 $ 18
Pierina 92 63 21 17 23 14
Bulyanhulu 29 37 19 21 1 6
Kalgoorlie 35 30 21 19 8 6
Eskay Creek 33 32 10 3 11 18
Hemlo 20 20 15 16 3 2
Plutonic 28 27 17 14 9 10
Round Mountain 38 34 19 19 14 10
Other 41 79 34 43 (2) 18
---------------------------------------------------------------------
$ 491 $ 490 $ 271 $ 262 $ 93 $ 102
---------------------------------------------------------------------
---------------------------------------------------------------------
Segment income
(loss) before
Gold sales Operating costs income taxes
---------------------------------------------------------------------
Six months ended
June 30, 2003 2002 2003 2002 2003 2002
---------------------------------------------------------------------
Goldstrike $ 358 $ 333 $ 245 $ 219 $ 38 $ 40
Pierina 160 133 37 33 40 29
Bulyanhulu 62 64 37 39 5 7
Kalgoorlie 67 59 41 39 16 10
Eskay Creek 63 60 16 6 23 32
Hemlo 42 45 29 34 8 6
Plutonic 52 47 30 26 19 16
Round Mountain 67 67 33 39 24 18
Other 79 160 66 93 (5) 33
---------------------------------------------------------------------
$ 950 $ 968 $ 534 $ 528 $ 168 $ 191
---------------------------------------------------------------------
Asset information
Amortization
---------------------------------------------------------------------
Three months ended Six months ended
June 30, June 30,
2003 2002 2003 2002
---------------------------------------------------------------------
Goldstrike $ 34 $ 40 $ 75 $ 74
Pierina 48 32 83 71
Bulyanhulu 9 10 20 18
Kalgoorlie 6 5 10 10
Eskay Creek 12 11 24 22
Hemlo 2 2 5 5
Plutonic 2 3 3 5
Round Mountain 5 5 10 10
Other 13 18 26 34
---------------------------------------------------------------------
$ 131 $ 126 $ 256 $ 249
---------------------------------------------------------------------
Segment capital expenditures
---------------------------------------------------------------------
Three months ended Six months ended
June 30, June 30,
2003 2002 2003 2002
---------------------------------------------------------------------
Goldstrike $ 16 $ 12 $ 28 $ 24
Pierina 4 1 5 2
Bulyanhulu 9 16 19 32
Kalgoorlie 1 1 2 3
Eskay Creek 1 1 3 3
Hemlo 2 2 5 3
Plutonic 20 5 25 8
Round Mountain 1 6 2 6
Veladero 3 - 7 -
Pascua-Lama 4 3 6 6
Cowal 5 1 10 2
Alto Chicama 1 - 2 -
Other 2 13 21 19
---------------------------------------------------------------------
$ 69 $ 61 $ 135 $ 108
---------------------------------------------------------------------
Reconciliation of segment income to enterprise net income
--------------------------------------------------------------------
Three months ended Six months ended
June 30, June 30,
2003 2002 2003 2002
--------------------------------------------------------------------
Segment total $ 93 $ 102 $ 168 $ 191
Exploration and business
development (34) (27) (63) (47)
Corporate expenses, net (25) (25) (59) (46)
Non-hedge derivative
gains 10 12 46 11
Income tax recovery
(expense) 15 (3) 13 (4)
Cumulative effect of
changes in accounting
principles - - (17) -
--------------------------------------------------------------------
Net income $ 59 $ 59 $ 88 $ 105
--------------------------------------------------------------------
14 COMPONENTS OF OTHER NET OPERATING ACTIVITIES
--------------------------------------------------------------------
Three months ended Six months ended
June 30, June 30,
2003 2002 2003 2002
--------------------------------------------------------------------
Non-cash charges
(credits):
Reclamation costs $ - $ 7 $ - $ 18
Losses on short-term
investments - - 7 4
Gains on sale of
property, plant and
equipment (11) (4) (16) (5)
Cumulative effect of
changes in accounting
principles - - 17 -
Accretion expense 4 - 8 -
Non-hedge derivative
gains (10) (12) (46) (11)
Changes in operating
assets and liabilities:
Accounts receivable 5 21 5 (5)
Inventories and other
current assets (12) (3) 5 35
Accounts payable (8) 3 (9) (9)
Income taxes payable (30) (16) (55) (16)
Payments of merger
related costs - (10) - (38)
Payments of reclamation
and closure costs (10) (14) (16) (22)
Other items (13) (15) (18) (33)
--------------------------------------------------------------------
Other net operating
activities $ (85) $ (43) $ (118) $ (82)
--------------------------------------------------------------------
Mine Statistics
UNITED STATES
---------------------------------------------------------------------
Goldstrike Round
Three months Betze-Post Meikle Total Mountain
ended June 30, 2003 2002 2003 2002 2003 2002 2003 2002
---------------------------------------------------------------------
Tons mined
(thousands) 35,351 36,098 375 393 35,726 36,491 7,394 8,096
Tons
processed
(thousands) 2,561 2,499 382 385 2,943 2,884 7,485 8,217
Average grade
(ounces per
ton) 0.215 0.156 0.341 0.440 0.232 0.194 0.020 0.020
Recovery rate
(percent) 82.4% 84.3% 87.1% 91.8% 83.3% 86.6% N/A N/A
---------------------------------------------------------------------
Production
(thousands of
ounces) 454 329 113 155 567 484 113 95
Production costs
per ounce
Cash operating
costs $197 $222 $279 $181 $216 $209 $150 $162
Royalties and
production
taxes 18 6 12 11 16 8 17 15
---------------------------------------------------------------------
Total cash
costs 215 228 291 192 232 217 167 177
Amortization and
reclamation 51 68 122 123 66 85 48 68
---------------------------------------------------------------------
Total production
costs $266 $296 $413 $315 $298 $302 $215 $245
---------------------------------------------------------------------
Capital
expenditures
(US$ millions) $8 $2 $8 $10 $16 $12 $1 $6
---------------------------------------------------------------------
Six months
ended June 30, 2003 2002 2003 2002 2003 2002 2003 2002
---------------------------------------------------------------------
Tons mined
(thousands) 72,831 73,319 785 783 73,616 74,102 14,713 16,230
Tons
processed
(thousands) 5,163 4,920 789 767 5,952 5,687 14,949 16,452
Average grade
(ounces per
ton) 0.175 0.163 0.381 0.427 0.203 0.198 0.019 0.019
Recovery rate
(percent) 81.7% 83.7% 87.1% 91.0% 83.0% 85.8% N/A N/A
---------------------------------------------------------------------
Production
(thousands of
ounces) 740 670 261 298 1,001 968 209 189
Production costs
per ounce
Cash operating
costs $220 $217 $227 $191 $222 $210 $150 $170
Royalties and
production
taxes 18 6 20 10 18 7 17 13
---------------------------------------------------------------------
Total cash
costs 238 223 247 201 240 217 167 183
Amortization and
reclamation 55 62 119 116 73 78 52 68
---------------------------------------------------------------------
Total production
costs $293 $285 $366 $317 $313 $295 $219 $251
---------------------------------------------------------------------
Capital
expenditures
(US$ millions) $14 $3 $14 $21 $28 $24 $2 $6
---------------------------------------------------------------------
Mine Statistics
AUSTRALIA
---------------------------------------------------------------------
Three months Plutonic Darlot Lawlers Kalgoorlie
ended June 30, 2003 2002 2003 2002 2003 2002 2003 2002
---------------------------------------------------------------------
Tons mined
(thousands) 3,921 3,691 217 214 209 628 11,857 11,043
Tons
processed
(thousands) 733 821 224 205 220 175 1,807 1,818
Average grade
(ounces per
ton) 0.121 0.105 0.172 0.169 0.122 0.166 0.075 0.058
Recovery rate
(percent) 89.3% 91.1% 96.5% 96.7% 96.2% 97.6% 86.1% 83.3%
---------------------------------------------------------------------
Production
(thousands of
ounces) 79 80 37 32 26 29 117 81
Production costs
per ounce
Cash operating
costs $198 $167 $168 $171 $221 $165 $203 $205
Royalties and
production
taxes 9 7 7 8 7 7 9 8
---------------------------------------------------------------------
Total cash
costs 207 174 175 179 228 172 212 213
Amortization and
reclamation 16 40 47 48 42 41 51 62
---------------------------------------------------------------------
Total production
costs $223 $214 $222 $227 $270 $213 $263 $275
---------------------------------------------------------------------
Capital
expenditures
(US$ millions) $20 $5 $1 $1 $1 $1 $1 $1
---------------------------------------------------------------------
Six months
ended June 30, 2003 2002 2003 2002 2003 2002 2003 2002
---------------------------------------------------------------------
Tons mined
(thousands) 7,259 6,757 438 414 744 786 23,052 22,690
Tons
processed
(thousands) 1,511 1,685 434 413 406 357 3,444 3,564
Average grade
(ounces per
ton) 0.111 0.095 0.190 0.174 0.120 0.156 0.071 0.060
Recovery rate
(percent) 89.1% 90.1% 97.1% 97.0% 96.1% 96.9% 85.9% 83.7%
---------------------------------------------------------------------
Production
(thousands of
ounces) 149 142 80 68 47 55 211 168
Production costs
per ounce
Cash operating
costs $191 $172 $150 $164 $256 $172 $206 $208
Royalties and
production
taxes 8 8 8 7 8 8 9 8
---------------------------------------------------------------------
Total cash
costs 199 180 158 171 264 180 215 216
Amortization and
reclamation 19 37 48 48 33 41 52 61
---------------------------------------------------------------------
Total production
costs $218 $217 $206 $219 $297 $221 $267 $277
---------------------------------------------------------------------
Capital
expenditures
(US$ millions) $25 $8 $3 $2 $10 $2 $2 $3
---------------------------------------------------------------------
Mine Statistics
CANADA
---------------------------------------------------------------------
Three months Hemlo Eskay Creek Holt-McDermott
ended June 30, 2003 2002 2003 2002 2003 2002
---------------------------------------------------------------------
Tons mined (thousands) 1,099 1,030 69 63 139 131
Tons processed
(thousands) 474 487 74 63 137 131
Average grade (ounces
per ton) 0.137 0.134 1.427 1.612 0.164 0.172
Recovery rate (percent) 94.5% 94.1% 93.8% 93.6% 94.3% 94.7%
---------------------------------------------------------------------
Production (thousands
of ounces) 62 62 97 92 21 21
Production costs per
ounce
Cash operating costs $236 $241 $99 $28 $271 $190
Royalties and
production taxes 9 8 3 4 - 1
---------------------------------------------------------------------
Total cash costs 245 249 102 32 271 191
Amortization and
reclamation 44 40 122 129 123 54
---------------------------------------------------------------------
Total production costs $289 $289 $224 $161 $394 $245
---------------------------------------------------------------------
Capital expenditures
(US$ millions) $2 $2 $1 $1 $- $1
---------------------------------------------------------------------
Six months
ended June 30, 2003 2002 2003 2002 2003 2002
---------------------------------------------------------------------
Tons mined (thousands) 2,089 2,017 137 125 283 259
Tons processed
(thousands) 929 958 140 125 276 259
Average grade (ounces
per ton) 0.148 0.136 1.432 1.524 0.162 0.176
Recovery rate (percent) 94.7% 93.8% 93.6% 93.2% 94.6% 94.7%
---------------------------------------------------------------------
Production (thousands
of ounces) 130 123 181 177 42 43
Production costs per
ounce
Cash operating costs $228 $234 $83 $28 $275 $163
Royalties and
production taxes 8 7 3 4 1 -
---------------------------------------------------------------------
Total cash costs 236 241 86 32 276 163
Amortization and
reclamation 40 41 128 128 123 94
---------------------------------------------------------------------
Total production costs $276 $282 $214 $160 $399 $257
---------------------------------------------------------------------
Capital expenditures
(US$ millions) $5 $3 $3 $3 $- $3
---------------------------------------------------------------------
Mine Statistics
PERU TANZANIA
---------------------------------------------------------------------
Pierina Bulyanhulu
Three months ended June 30, 2003 2002 2003 2002
---------------------------------------------------------------------
Tons mined (thousands) 9,784 8,081 231 249
Tons processed (thousands) 3,987 3,418 247 273
Average grade (ounces per ton) 0.078 0.076 0.352 0.358
Recovery rate (percent) - - 88.3% 85.9%
---------------------------------------------------------------------
Production (thousands of
ounces) 260 183 77 84
Production costs per ounce
Cash operating costs $78 $80 $223 $195
Royalties and production taxes - - 10 8
---------------------------------------------------------------------
Total cash costs 78 80 233 203
Amortization and reclamation 182 189 117 94
---------------------------------------------------------------------
Total production costs $260 $269 $350 $297
---------------------------------------------------------------------
Capital expenditures (US$
millions) $4 $1 $9 $16
---------------------------------------------------------------------
Six months ended June 30, 2003 2002 2003 2002
---------------------------------------------------------------------
Tons mined (thousands) 18,328 15,243 472 443
Tons processed (thousands) 7,609 6,845 506 535
Average grade (ounces per ton) 0.080 0.071 0.376 0.369
Recovery rate (percent) - - 87.7% 85.6%
---------------------------------------------------------------------
Production (thousands of
ounces) 491 398 167 169
Production costs per ounce
Cash operating costs $81 $72 $201 $197
Royalties and production taxes - - 10 8
---------------------------------------------------------------------
Total cash costs 81 72 211 205
Amortization and reclamation 182 190 117 94
---------------------------------------------------------------------
Total production costs $263 $262 $328 $299
---------------------------------------------------------------------
Capital expenditures (US$
millions) $5 $2 $19 $32
---------------------------------------------------------------------
CORPORATE OFFICE TRANSFER AGENTS AND REGISTRARS
Barrick Gold Corporation CIBC Mellon Trust Company
BCE Place, Canada Trust Tower, P.O. Box 7010, Adelaide Street
Suite 3700 Postal Station
161 Bay Street, P.O. Box 212 Toronto, Ontario M5C 2W9
Toronto, Canada M5J 2S1 Tel: (416) 643-5500
Tel: (416) 861-9911 Toll-free throughout North
Fax: (416) 861-0727 America: 1-800-387-0825
Toll-free within Canada and Fax: (416) 643-5501
United States: 1-800-720-7415 Email: inquiries@cibcmellon.ca
Email: investor@barrick.com Web site: www.cibcmellon.com
Web site: www.barrick.com
SHARES LISTED (ABX) Mellon Investor Services L.L.C.
The Toronto Stock Exchange 85 Challenger Road, Overpeck
The New York Stock Exchange Center
The London Stock Exchange Ridgefield Park, New Jersey 07660
The Swiss Stock Exchange Tel: (201) 329-8660
La Bourse de Paris Toll-free within the United
States: 1-800-589-9836
RECENT RESEARCH REPORTS Web site: www.mellon-investor.com
Bear Stearns
BMO Nesbitt Burns INVESTOR CONTACTS: MEDIA CONTACT:
Canaccord Richard Young Vincent Borg
CIBC World Markets Vice President, Vice President,
Citigroup Smith Barney Investor Relations Corporate
Credit Suisse First Boston Communications
Griffiths McBurney & Partners Tel: Tel:
Goldman Sachs (416) 307-7431 (416) 307-7477
HSBC Email: Email:
JP Morgan ryoung@barrick.com vborg@barrick.com
Merrill Lynch
National Bank Kathy Sipos
Prudential Financial Manager, Investor Relations
Research Capital Tel: (416) 307-7441
RBC Capital Markets Email: ksipos@barrick.com
Scotia Capital
UBS Warburg Sandra Grabell
Westwind Partners Investor Relations Specialist
Tel: (416) 307-7440
Email: sgrabell@barrick.com
Certain statements included herein, including those regarding production and
costs and other statements that express management's expectations or
estimates of our future performance, constitute "forward-looking statements"
within the meaning of the United States Private Securities Litigation Reform
Act of 1995. The words "believe", "expect", "anticipate", "contemplate",
"target", "plan", "intends", "continue", "budget", "estimate", "may", "will",
"schedule", and similar expressions identify forward-looking statements.
Forward-looking statements are necessarily based upon a number of estimates
and assumptions that, while considered reasonable by management are
inherently subject to significant business, economic and competitive
uncertainties and contingencies. In particular, our Management's Discussion
and Analysis includes many such forward-looking statements and we caution you
that such forward-looking statements involve known and unknown risks,
uncertainties and other factors that may cause the actual financial results,
performance or achievements of Barrick to be materially different from our
estimated future results, performance or achievements expressed or implied by
those forward-looking statements and our forward-looking statements are not
guarantees of future performance. These risks, uncertainties and other
factors include, but are not limited to: changes in the worldwide price of
gold or certain other commodities (such as silver, copper, diesel fuel and
electricity) and currencies; changes in interest rates or gold lease rates
that could impact realized prices under our forward sales program;
legislative, political or economic developments in the jurisdictions in which
Barrick carries on business; operating or technical difficulties in
connection with mining or development activities; the speculative nature of
gold exploration and development, including the risks of diminishing
quantities or grades of reserves; and the risks involved in the exploration,
development and mining business. These factors are discussed in greater
detail in Barrick's most recent Form 40-F/Annual Information on file with the
U.S. Securities and Exchange Commission and Canadian provincial securities
regulatory authorities.
Barrick expressly disclaims any intention or obligation to update or revise
any forward-looking statements whether as a result of new information, events
or otherwise.
-30-
FOR FURTHER INFORMATION PLEASE CONTACT:
Barrick Gold Corporation
Vincent Borg
Vice President, Corporate Communications
(416) 307-7477
(416) 861-1509 (fax)
media@barrick.com