FOR: BARRICK GOLD CORPORATION
TSX, Swiss, PARIS, NYSE, LSE SYMBOL: ABX
October 27, 2003
Barrick Earns $35 Million or $0.07 per Share in Third Quarter
TORONTO, ONTARIO--
THIRD QUARTER REPORT 2003
Based on US GAAP and expressed in US dollars.
Highlights
- Net income of $35 million, or $0.07 per share, includes a $11 million after
tax gain on sales of various assets; and a $20 million after tax, non-hedge
derivative loss
- Operating cash flow totals $188 million for third quarter, $62 million
higher than the year earlier quarter, primarily due to higher realized gold
prices and sales volumes
- Production totals 1.48 million ounces of gold for the quarter at a total
cash cost of $180 per ounce(1)
- All production was sold at spot prices during the quarter at an average of
$365 per ounce
- Repurchased a total of 5.3 million common shares at an average cost of
$17.30 per share during the quarter
- For the year, production is forecast at 5.4 - 5.5 million ounces, at an
expected total cash cost in the $190 - $195 per ounce range, in line with
previous guidance
- The Company expects to receive approval of the Veladero Environmental
Impact Statement during the fourth quarter, with construction to commence
soon thereafter
- On October 17th, Barrick announced that it has acquired a 10% stake in
Highland Gold, which has properties in Russia. The agreement has provisions
that could ultimately give Barrick a 29% interest in the overall company. As
a result Barrick would have the right but not the obligation to participate
in up to 50% of Highland Gold's interest in any new project Highland Gold
undertakes.
(1) For an explanation of non-GAAP performance measures refer to pages 15-16
of the Management's Discussion and Analysis.
Barrick Gold Corporation today reported earnings of $35 million ($0.07 per
share) and operating cash flow of $188 million for third quarter 2003,
compared to earnings of $34 million ($0.06 per share) and operating cash flow
of $126 million in the year earlier period. The higher operating cash flow in
the current quarter primarily relates to higher realized gold prices and
sales volumes.
"Overall we had a solid third quarter," said Greg Wilkins, President and
Chief Executive Officer: "One that keeps us on track to meet our full year
targets."
For the first nine months of 2003, net income was $123 million ($0.23 per
share) and operating cash flow was $385 million, compared to net income of
$139 million ($0.26 per share) and operating cash flow of $394 million in the
year earlier period.
The Company maintains a strong balance sheet with a cash position of over $1
billion, after paying out $91 million during the quarter to repurchase 5.3
million Barrick common shares under the share repurchase program.
PRODUCTION AND COSTS
For the quarter, Barrick produced 1.48 million ounces of gold at total cash
costs of $180 per ounce, compared to 1.38 million ounces of gold at total
cash costs of $180 per ounce for the year earlier quarter. Higher production
and lower cash costs from Betze-Post, Kalgoorlie and Eskay Creek more than
offset lower production and higher costs from the Meikle and Bulyanhulu
Mines. Despite higher energy costs, as well as royalties and other gold-
linked costs, cash costs were flat over the prior year period due to lower
costs at Betze-Post, Kalgoorlie and Eskay Creek. "This quarter's results
demonstrate the benefit of having a diversified portfolio of properties,"
Wilkins said.
"Bulyanhulu is on track with the revised targets established in July, and
while we're working on the costs at Meikle, Goldstrike as a property is doing
well," added John Carrington, Vice Chairman and Chief Operating Officer.
"Overall, we had a solid quarter, driven by significant contributions from
our large open pit operations, and cash costs for the Company were $5 an
ounce lower than our second quarter."
For the full year, the Company is forecast to produce between 5.4 and 5.5
million ounces at total cash costs at the lower end of the $190 to $195 per
ounce range, as previously reported. For the year, administration expense is
expected to total $80 million and exploration and business development
expense is expected to total approximately $125 million. For the remainder of
2003 and 2004, currency fluctuations are expected to have minimal impact on
cash costs, as the Company has hedged the equivalent of about three years of
local Canadian and Australian dollar operating costs.
BARRICK SELLS PRODUCTION AT SPOT PRICES FOR ALL OF THE THIRD QUARTER
During the quarter, spot gold prices ranged from a high of $389 per ounce to
a low of $342 per ounce, averaging $364 per ounce, compared to an average
spot price of $314 per ounce in the year earlier quarter. Barrick sold all
production at spot gold prices, and realized an average of $365 per ounce on
its gold sales during third quarter 2003.
"Our forward sales program is working as designed, allowing us the
flexibility to maximize the price for every ounce we produce," added Mr.
Wilkins.
As production was sold at spot prices during the third quarter, the total
position remained at 16.1 million ounces, unchanged from the end of second
quarter 2003.
NEW DEVELOPMENTS
Two weeks after quarter's end, Barrick announced that it had acquired a 10%
stake in Highland Gold. "This is a strategic investment opportunity for us,"
said Wilkins: "It is a prudent way for Barrick to get into Russia, and gain a
window into one of the world's most prospective gold mining areas."
After a two-month due diligence process, Barrick has the right to increase
its stake to a total of 29% of Highland Gold. As a result, Barrick would have
the right but not the obligation to participate in up to 50% of Highland
Gold's interest in any new project Highland Gold undertakes.
SHARE BUYBACK
During the quarter, Barrick continued its share buyback program, repurchasing
5.3 million common shares at an average purchase price of $17.30 per share,
for a total cost of $91 million. To date the Company has repurchased a total
of 8.8 million shares at an average purchase price of $17.56 for a total cost
of $154 million.
EXPLORATION UPDATE
During third quarter 2003, Barrick was actively exploring over 60 projects in
9 countries. Early stage exploration on over 50 targets continues to define
and prioritize targets for detailed follow up. Drilling was carried out on 17
projects during the quarter and will continue on 13 projects in fourth
quarter 2003.
Preliminary results are very encouraging. Immediately north of the Goldstrike
Pit, five of six initial holes contain mineralization. At the Rossi property
just north of Meikle, intersects have produced significantly higher grades
than previous drill programs. At Eskay Creek where drilling was completed in
September, initial results are encouraging with results from 28 holes still
pending. Exploration in the Alto Chicama district in Peru, is focused on the
area around the Lagunas Norte deposit. The Company has an excellent portfolio
of prospects in the area and will be accelerating exploration during the
fourth quarter 2003 and in 2004.
DEVELOPMENT PROJECTS UPDATE
During third quarter 2003, crews opened the camp and construction area at
Veladero in Argentina, and commenced detailed engineering, mine planning,
construction planning and manpower build-up. Approval of Veladero's
Environmental Impact Statement is anticipated in fourth quarter 2003. Once
granted, EIS approval will allow commencement of construction soon
thereafter. Starting in the fourth quarter, development costs for Veladero
will be capitalized rather than expensed, as mineralization has now been
classified as a reserve for U.S. reporting purposes.
At Alto Chicama, third quarter accomplishments include the submission of the
EIS on September 29, 2003. Public hearings at the local and regional level
are scheduled during fourth quarter 2003. The Company's Board of Directors
approved the project for a $340 million investment, with production scheduled
for second half 2005.
At Cowal in Australia, focus during the quarter was on securing government
approval for the various environmental management plans (EMPs) that are a
requirement of the Cowal development consent.
Barrick's shares are traded under the ticker symbol ABX on the Toronto, New
York, London and Swiss stock exchanges and the Paris Bourse.
Key Statistics
(in United States dollars, US GAAP basis)
Three months ended Nine months ended
Sept. 30, Sept. 30,
(Unaudited) 2003 2002 2003 2002
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Operating Results
Gold production (thousands of
ounces) 1,479 1,378 4,209 4,099
Gold sold (thousands of
ounces) 1,505 1,384 4,193 4,265
Per Ounce Data
Average spot gold price $364 $314 $354 $306
Average realized gold price 365 342 358 338
Cash operating costs(3) 168 173 174 171
Total cash costs(1) (3) 180 180 186 178
Total production costs(3) 265 273 274 268
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Financial Results (millions)
Gold sales $549 $473 $1,499 $1,441
Income before accounting
changes 35 34 140 139
Net income 35 34 123 139
Operating cash flow(4) 188 126 385 394
Per Share Data (dollars)
Income before accounting
changes 0.07 0.06 0.26 0.26
Net income (basic and diluted) 0.07 0.06 0.23 0.26
Operating cash flow 0.35 0.23 0.71 0.73
Common shares outstanding (as
at Sept. 30) (millions)(2) 534 542 534 542
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As at As at
Sept. 30, Dec. 31,
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2003 2002
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Financial Position (millions)
Cash and equivalents $1,039 $1,044
Working capital 869 869
Long-term debt 754 761
Shareholders' equity 3,372 3,334
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(1) Includes royalties and production taxes.
(2) Includes shares issuable upon exchange of BGI (Barrick Gold
Inc.), formerly Homestake Canada Inc., exchangeable shares.
(3) For an explanation of non-GAAP performance measures refer to
pages 15-16 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 09/30, 9 months ended 09/30,
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(Unaudited) 2003 2002 2003 2002
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North America
Betze-Post 494,782 333,746 1,234,510 1,003,761
Meikle 143,127 150,032 404,465 447,705
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Goldstrike Property Total 637,909 483,778 1,638,975 1,451,466
Eskay Creek 87,377 84,868 268,683 261,764
Round Mountain 92,464 100,063 301,590 289,133
Hemlo 73,056 63,346 202,958 185,878
Holt-McDermott 24,099 18,978 66,312 62,075
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914,905 751,033 2,478,518 2,250,316
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South America
Pierina 215,237 219,067 705,871 617,040
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Australia
Plutonic 96,420 81,422 245,714 223,359
Darlot 37,452 37,517 117,641 105,382
Lawlers 25,154 30,167 71,868 84,720
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Yilgarn District Total 159,026 149,106 435,223 413,461
Kalgoorlie 109,306 94,071 320,600 261,669
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268,332 243,177 755,823 675,130
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Tanzania
Bulyanhulu 67,940 86,344 234,814 255,543
Other/Mines closed in
2002 12,634 77,884 34,443 301,331
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Total 1,479,048 1,377,505 4,209,469 4,099,360
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Total Cash Costs (US$/oz) (1)
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3 months ended 09/30, 9 months ended 09/30,
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(Unaudited) 2003 2002 2003 2002
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North America
Betze-Post $ 212 $247 $227 $ 230
Meikle 262 206 251 204
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Goldstrike Property Total 222 233 234 222
Eskay Creek 9 43 62 36
Round Mountain 170 174 168 180
Hemlo 211 244 226 242
Holt-McDermott 202 174 248 166
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196 194 207 195
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South America
Pierina 81 77 81 74
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Australia
Plutonic 179 187 192 183
Darlot 163 164 159 169
Lawlers 201 168 242 176
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Yilgarn District Total 179 173 184 178
Kalgoorlie 195 228 207 220
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186 196 198 195
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Tanzania
Bulyanhulu 277 199 229 203
Other/Mines closed in
2002 173 180 165 188
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Total $ 180 $180 $186 $ 178
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Consolidated Production Costs (US$/oz) (1)
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3 months ended 09/30, 9 months ended 09/30,
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(Unaudited) 2003 2002 2003 2002
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Direct mining costs at
market foreign exchange
rates $ 201 $195 $204 $ 193
Gains realized on
currency hedge contracts (11) (2) (10) (1)
By-product credits (22) (20) (20) (21)
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Cash operating costs 168 173 174 171
Royalties 9 6 9 6
Production taxes 3 1 3 1
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Total cash costs 180 180 186 178
Amortization and
reclamation 85 93 88 90
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Total production costs $ 265 $273 $274 $ 268
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(1) For an explanation of non-GAAP performance measures refer to
pages 15-16 of Management's Discussion and Analysis.
Management's Discussion and Analysis of Financial and Operating Results
HIGHLIGHTS
In third quarter 2003, production was 1.48 million ounces of gold at total
cash costs of $180 per ounce, compared to 1.38 million ounces of gold at $180
per ounce(1) in the year earlier quarter. Net income was $35 million ($0.07
per share), compared to $34 million ($0.06 per share) for third quarter 2002.
Third quarter earnings benefited from higher gold sales prices and gains on
various asset sales, offset by non-hedge derivative losses and higher income
tax expense, administration costs, and exploration and business development
costs.
During the quarter, spot gold prices remained above the price we could have
realized by delivering into our forward gold sales contracts. This 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 three quarters of the year. Year to date, we have received an average
$358 per ounce for all ounces sold, compared to the average $354 per ounce
spot price.
In third quarter 2003, operating cash flow totaled $188 million, compared to
$126 million for the year earlier quarter, due primarily to higher gold sales
prices and gold sales volumes. In the third quarter, our cash balance
increased by $47 million to over $1 billion at September 30, 2003, even after
spending $81 million on capital and $91 million under our share buyback
program.
(1) For an explanation of non-GAAP performance measures refer
to pages 15-16 of the Management's Discussion and Analysis.
GOLD SALES
Revenue for third quarter 2003 was $549 million on gold sales of 1.51 million
ounces, compared to $473 million in revenue on gold sales of 1.38 million
ounces for the year earlier quarter. Higher gold sales during the quarter
were coupled with a $23 per ounce (7%) increase in the average realized
price. During the third quarter, spot gold prices ranged from a high of $389
to a low of $342 per ounce, averaging $364 per ounce. We realized an average
of $365 per ounce during the quarter by delivering all of our gold at spot
gold prices, which exceeded the prices we could have achieved through our
forward sales contracts.
Our forward sales 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. During the quarter the
position remained at 16.1 million ounces, unchanged from second quarter as we
sold all of our production at spot prices. The program is larger than we
would like it to be in the current gold environment. We will continue to use
market opportunities to bring the program down from 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.
At quarter's end, the unrealized mark-to-market on our derivative instruments
position, including gold and silver forward sales contracts, as well as
currency and interest rate hedge programs, was negative $1 billion. This
mark-to-market value represents the replacement value of these contracts
based on current market levels, and does not represent an economic obligation
for payment by Barrick. Barrick's obligations under the gold sales contracts
are to deliver an agreed upon quantity of gold at a hedge price by the
termination date on the contracts (2013 in most cases).
In accordance with hedge accounting rules, the positive mark-to-market value
of $214 million relating to our currency and interest rate hedge programs is
recorded as an asset on our balance sheet. The mark-to-market value of our
normal sales gold and silver contracts is not recorded on our balance sheet,
as accounting rules that govern these contracts do not require balance sheet
recognition. Instead, the economic impact of these sales contracts is
reflected in our financial statements as we physically deliver gold and
silver under the contracts.
OVERVIEW
For third quarter 2003, our overall production was in line with plan at 1.48
million ounces, while cash costs were better than plan at $180 per ounce,
despite the lower contributions from Meikle and Bulyanhulu. Overall
production for the year is expected to be 5.4 to 5.5 million ounces, at total
cash costs in the $190 to $195 per ounce range.
Looking forward to 2004, production is expected to be about 10% lower and
cash costs about 10% higher than the current year. This is primarily as a
result of lower grades at Pierina and Betze-Post. Pierina is now in its last
year of producing in the 900,000 ounce range, before stepping down to lower
production levels as mining moves to lower grade areas in the pit.
A further weakening of the US dollar is not expected to have a significant
impact on cash costs, due to our Canadian and Australian dollar currency
hedge positions, equivalent to about three years of local Canadian and
Australian dollar costs.
During third quarter 2003, Barrick was actively exploring over 60 projects in
9 countries. Early stage exploration on over 50 targets continues to define
and prioritize targets for detailed follow up. Drilling was carried out on 17
projects during the quarter and will continue on 13 projects in fourth
quarter 2003.
OPERATIONS REVIEW
Goldstrike Property (Nevada)
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Q3 2003 Q3 2002 2003E
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Production
Betze-Post 494,782 333,746 1,565,000
Meikle 143,127 150,032 550,000
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Goldstrike Property 637,909 483,778 2,115,000
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Total cash cost / oz
Betze-Post $212 $247 $233
Meikle 262 206 250
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Goldstrike Property $222 $233 $238
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Betze-Post
- For the quarter, Betze production increased 48%, due to a 62% increase in
ore grades processed, as mining in a higher grade area of the pit encountered
higher-than-modeled grade.
- Cash costs during third quarter 2003 were 14% lower than the prior year.
The lower cash costs were due to higher production and lower mining costs, as
reduced fleet size, facilitated by in-pit dumping, has reduced overall mining
costs while mining the same amount of material. Costs were negatively
affected by higher royalties and production taxes (up $10 per ounce over the
year earlier quarter) due to the rising gold price, and higher processing
costs (up $11 per ounce).
- The higher processing costs were due to higher acid consumption, coupled
with a higher acid unit price, and extended planned maintenance at both
plants due to harder ores. The higher acid consumption is attributable to the
high carbonate material mined. The high acid price resulted from purchases on
the open market at costs substantially above fixed contract prices.
- Recovery rates were higher than the prior year quarter, but lower than plan
due to processing more high-grade, complicated ore types. The high-grade
material was predominately high-carbonate autoclave feed; the high carbonate
levels resulted in higher acid consumption. At the roaster, high arsenic and
carbonaceous material levels affected recovery. A blending program continues
to mitigate these impacts.
- For the year, Betze Post is expected to produce 1,565,000 ounces, 70,000
more than the 2003 plan, at marginally higher costs.
- Drilling commenced at the Goldstrike-North Pit target, located immediately
north of Betze-Post. Five of six initial holes contain mineralization. Two
additional drill rigs have been added to accelerate the program.
- Underground infill drilling at Rossi located near Goldstrike has
intersected significantly higher grades than previous drill programs. A total
of 12 holes on two stations have been completed in a 50-hole program. This
program will increase drill density to a 50 foot by 50 foot spacing in the
49er Zone. A resource calculation will be completed by the end of the year.
Meikle
- Meikle production and costs continue to be affected by ground conditions at
Rodeo and the mining of remnant blocks at Meikle. Ground support
rehabilitation efforts are on-going and have proven successful in providing
increases to Rodeo production during third quarter 2003. Similar results are
expected in fourth quarter 2003.
- Remnant mining at Meikle was re-sequenced to maximize ore recovery and
ground stability. Cash costs for the quarter were also pushed higher by
difficult ground conditions. As a result, labor, contract services, ground
support material, and maintenance repairs were higher than plan. Royalties
and taxes were slightly over plan due to the increased gold price, partially
offset by lower production and increased costs.
- Significant events during the quarter included a re-commissioning of the
failed backfill raise at Rodeo.
- For the year, the mine is expected to produce 550,000 ounces -- 65,000
ounces less than the 2003 plan -- due to the ground conditions,
infrastructure completion, and remnant constraints mentioned above. Cash
costs are expected to be $250 per ounce for the year. The mine is on track to
commission the Rodeo ore pass system in October and the Rodeo backfill
station in December.
Eskay Creek (British Columbia)
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Q3 2003 Q3 2002 2003E
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Production 87,377 84,868 353,000
Total cash cost / oz $9 $43 $67
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- Third quarter 2003 production was up over the prior year quarter, as an
increase in tons processed more than offset a decline in grade.
- Third quarter costs benefited from significantly higher than expected
silver grades in a series of stopes, resulting in a $30 per ounce higher by-
product credit from silver over the prior year quarter. Silver grades are
expected to return to plan levels during fourth quarter 2003. The balance of
the cash cost improvement is primarily attributable to improved processing
rates (up 10%).
- For the year, the mine is now expected to produce 353,000 ounces at a cash
cost of $67 per ounce. Although the mine had a strong third quarter, it has
reduced its mining rate from plan in order to minimize dilution. As a result,
production for the year is expected to be 7,000 ounces below the second
quarter estimate, while projected cash costs will be lower by $10 per ounce,
due to increased silver production and a higher estimated realized silver
price.
- An 18,000 metre drill program was completed at the end of September. The
focus has been on the 22 Zone, which is located south of the mine. Results
received so far this month are encouraging. Results are still pending from 28
holes. Drilling is targeting both stratiform mineralization and structurally
controlled mineralization such as that seen in the 21C Zone at Eskay.
Round Mountain (Nevada) (50% share)
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Q3 2003 Q3 2002 2003E
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Production 92,464 100,063 384,000
Total cash cost / oz $170 $174 $175
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- Lower ounces produced during third quarter 2003 compared to the prior year
period resulted from planned lower grades, aggravated by a transformer
failure early in the quarter that limited the processing of higher-grade ore.
Higher recoveries and an increase in the tons processed from the lower grade
run-of-mine leach ore have more than offset this event, allowing the mine to
exceed planned production by 5% for the quarter. A new transformer will be in
service late in fourth quarter 2003; at that time, normal operations are
expected to resume.
- For the year, the mine is now expected to produce 384,000 ounces to
Barrick's account. This would represent another new annual production record
for the operation.
- Encouraging results from the nearby Gold Hill deposit continue, and work is
ongoing to advance this project. A 2004 underground exploration program is
currently being planned to follow up on encouraging high grade drilling
intercepts behind the existing ultimate pit wall.
Hemlo (Ontario) (50% share)
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Q3 2003 Q3 2002 2003E
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Production 73,056 63,346 272,000
Total cash cost / oz $211 $244 $224
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- Production increased 15% in third quarter 2003 over the prior year period,
due to continuous improvement efforts in the mill that have raised throughput
by 16%. Cash costs per ounce declined, due largely to the increased
production.
- The mine is currently implementing a number of organization changes and is
acquiring new pit and underground equipment during fourth quarter 2003 that
is expected to improve the cost structure in the future.
- Hemlo is on track to meet its annual production and cash costs projections
of 272,000 ounces at $224 per ounce.
Holt-McDermott (Ontario)
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Q3 2003 Q3 2002 2003E
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Production 24,099 18,978 87,000
Total cash cost / oz $202 $174 $247
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- Third quarter 2003 production increased by 27% compared to the prior year
quarter, due to improved grades and throughput (up 14% and 12% respectively).
- Due to Holt's limited mine life, drilling and development costs are being
expensed, pushing cash costs higher.
- As previously announced, the Mine is expected to cease underground
operations by fourth quarter 2004.
Pierina (Peru)
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Q3 2003 Q3 2002 2003E
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Production 215,237 219,067 910,000
Total cash cost / oz $81 $77 $82
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- Third quarter 2003 production was similar to the prior year quarter, while
cash costs per ounce ran higher as a result of planned equipment overhauls,
and increased employee profit sharing costs due to higher gold prices.
- Pierina remains 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, as mining moves to
lower grade areas in the open pit in 2004.
Yilgarn District (Western Australia)
Plutonic
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Q3 2003 Q3 2002 2003E
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Production 96,420 81,422 315,000
Total cash cost / oz $ 179 $ 187 $ 193
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- Production for the quarter was 18% above the prior year period, reflecting
both higher grades and mining rates from the underground. Cash costs were $8
per ounce lower than the prior year period, and 14% lower than second quarter
2003.
- During third quarter 2003, construction of the paste fill plant was
completed. Backfilling has commenced in some stopes to commission the plant.
The plant will be operating at design capacity in fourth quarter 2003.
Expected benefits are improved ore recovery, reduced dilution and improved
mining flexibility.
- For the full year, the mine is expected to produce 315,000 ounces, higher
than second quarter estimates, driven by increased grades, higher throughput
and improved recovery rates. Cash costs are expected to be lower than the
second quarter estimate.
Darlot
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Q3 2003 Q3 2002 2003E
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Production 37,452 37,517 157,000
Total cash cost / oz $163 $164 $161
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- Third quarter production remained essentially the same as the prior year
period, as higher underground ore production was offset by slightly lower
recoveries.
- For the full year, Darlot is expected to produce 157,000 ounces, 3,000
ounces above the second quarter 2003 estimate. The increased production is
attributable to the expected continuation of better grades in fourth quarter
2003. Cash costs are expected to remain in line with second quarter
estimates.
Lawlers
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Q3 2003 Q3 2002 2003E
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Production 25,154 30,167 98,000
Total cash cost / oz $201 $168 $242
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- Third quarter 2003 production was lower than the prior year period, due
largely to lower head grades. The increased cash cost per ounce is due
primarily to the lower production profile.
- The crusher was upgraded during the quarter to improve throughput levels.
As a result, unit processing costs should benefit by approximately 3 to 4%
per year, as fixed processing costs are offset by additional tonnage combined
with lower maintenance expense.
- Mining in the Fairyland pit continues to be suspended and is not expected
to resume in 2003.
- For the full year, the mine is expected to produce 98,000 ounces, 4,000
ounces more than the second quarter 2003 estimate, driven largely by improved
head grades. Cash costs are expected to be $18 per ounce below the second
quarter estimate.
Kalgoorlie - Super Pit (Western Australia) (50% share)
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Q3 2003 Q3 2002 2003E
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Production 109,306 94,071 415,000
Total cash cost / oz $195 $228 $212
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- Kalgoorlie's strong second quarter performance continued into third quarter
2003, producing 16% more ounces than the prior year period. Mining continues
to capture high-grade pillars due to good void management. Mt. Charlotte,
initially scheduled to cease production in 2002, continues to produce.
- Cash costs were lower than the prior year period due to higher processing
rates, grades and recoveries.
- During third quarter 2003, a fourth shovel and four additional haul trucks
were commissioned as part of the owner-operated mining fleet, allowing
operations to move towards the optimum level of material movement.
- For the year, the mine is expected to produce 415,000 ounces, 5,000 ounces
above the second quarter estimate, due to the higher grades being achieved in
the pit. Cash costs are expected to be marginally higher than the second
quarter estimate.
Bulyanhulu (Tanzania)
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Q3 2003 Q3 2002 2003E
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Production 67,940 86,344 312,000
Total cash cost / oz $277 $199 $241
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- Third quarter 2003 production was 21% lower than the prior year period, but
was in line with the stabilization plan announced at the beginning of the
third quarter.
- Cash costs for the quarter were higher than the prior year period, again
reflecting the reduced mining rate as the operation is stabilized.
- With the successful completion of the flotation expansion and adjustments
made through the first half of the year, recovery rates are now averaging
88.5%.
- The mining rate for third quarter 2003 averaged 2,342 tons per day (tpd).
The mining rate will start to ramp up in fourth quarter 2003, to a planned
level of 2,500 tpd for the quarter.
- Results for the quarter are in line with the stabilization plan, and for
the full year the mine is expected to produce 312,000 ounces at a cash cost
of $241 per ounce.
Other Properties
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Q3 2003 Q3 2002 2003E
---------------------------------------------------------------------
Production 12,634 77,884 47,000
Total cash cost / oz $173 $180 $166
---------------------------------------------------------------------
- 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 third quarter 2003 compared to
the year earlier quarter relates to the closure of five mines in 2002 due to
the depletion of reserves.
DEVELOPMENT REVIEW
Alto Chicama (Peru)
The Company's Alto Chicama project remains on-schedule for a first gold pour
in second half 2005.
The Environmental Impact Study for the Alto Chicama Project was submitted
September 29, 2003. Public hearings at the local and regional level are
scheduled during fourth quarter 2003.
During third quarter 2003, Barrick's Board of Directors approved the project
for a $340 million investment. Average annual production is projected at
540,000 ounces, with a cash cost of $ 135 per ounce over the first decade.
Basic engineering is complete on the Alto Chicama project, with detailed
engineering scheduled to commence in fourth quarter 2003.
Exploration in the Alto Chicama district is focused on the area around the
Lagunas Norte deposit. The company has an excellent portfolio of prospects in
the area and will be accelerating the exploration of these during late 2003
and in 2004. Prospects within 5 kilometres of Lagunas Norte, which include
Lagunas Sur and La Capilla, are showing encouraging results. Other targets
include Lagunas NW, Ururupa, Alumbre and Genusa.
Veladero (Argentina)
Veladero's EIS is expected to be approved in fourth quarter 2003. Once
granted, EIS approval will allow the commencement of construction. Tender
packages for camp, site development and heap leach pad will be received and
approved during fourth quarter 2003, pending EIS approval.
Third quarter accomplishments at Veladero included:
- Accessing and opening the camp and construction area.
- Commencement of construction on a portion of the road previously closed
during the Argentine winter.
- Commencement of detailed engineering and mine planning, construction
planning and manpower build-up.
- Placement of purchase orders with Caterpillar and other mine equipment
suppliers in the amount of $50 million for the initial mine fleet.
Starting in fourth quarter 2003, costs for Veladero will be capitalized
rather than expensed as mineralization has now been classified as a reserve
for U.S. reporting purposes.
Cowal (Australia)
Work continues on securing government approvals for the various environmental
management plans (EMPs) that are a requirement of the Cowal development
consent.
Pascua-Lama (Chile/Argentina)
Work continues with the engineering optimization of the project, with the
study scheduled for completion in second quarter 2004.
Tulawaka Project (Tanzania)
During the quarter, the Environmental Impact Assessment for the Tulawaka
project was approved and a Mining License application was submitted.
The Company plans an end-of-year update on its development activity with its
fourth quarter 2003 results.
AMORTIZATION
Amortization totaled $134 million, or $85 per ounce(1), for third quarter
2003, compared to $126 million or $87 per ounce(1) in the year earlier
quarter. The increase was primarily due to an increase in ounces sold
compared to the prior year period. On a per ounce basis, amortization was
slightly lower, due 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 third
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 third quarter results, and is expected to
have minimal impact on amortization for the balance of the year.
Overall amortization is expected to total between $520-$530 million in 2003.
Amortization in 2004 is expected to be about $500 million.
ADMINISTRATION
Third quarter 2003 administration costs were $21 million, an increase of $5
million over the year earlier period. The increase is primarily related to
severance costs incurred as part of our new organizational design and higher
insurance costs.
For 2003, administration costs are expected to total $80 million, an increase
of $10 million over the beginning of year estimate primarily due to
additional severance, insurance and legal costs. Administration costs in 2004
are expected to be approximately $75 million.
EXPLORATION AND BUSINESS DEVELOPMENT
Exploration and business development expenses totaled $38 million for third
quarter 2003, an increase of $8 million over the year earlier quarter. One
third of the expenses during the current quarter were attributable to two
development projects (Veladero and Alto Chicama), which had not been
classified as reserves for SEC purposes and therefore costs were expensed.
Veladero achieved reserve status under US reporting standards effective
October 1, 2003. As a result, beginning in fourth quarter 2003, future
development costs at Veladero will be capitalized.
For the year, exploration and business development expenses are expected to
total about $125 million, $25 million higher than originally planned, mainly
due to the expensing of costs at Veladero for the first nine months of the
year.
Looking forward to 2004, we would expect exploration and business development
expenses to be in the $100 million range.
INTEREST AND OTHER INCOME
For third quarter 2003, interest and other income was $24 million, an
increase of $12 million compared to the prior year period. In third quarter
2003, we realized $16 million in gains on various asset sales, including the
Bousquet mine, various land parcels in the United States, and certain
investments. We also received interest on cash of $9 million.
For the full year, interest and other income is expected to total
approximately $45 million, $20 million higher than originally anticipated,
due primarily to gains on the sale of assets.
INTEREST EXPENSE
We incurred $12 million in interest costs in third quarter 2003, compared to
$15 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 $1 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 approximately $50 million in interest
costs, of which we expect to capitalize $4 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 loss on the non-hedge derivative positions included
in third quarter 2003 earnings was $21 million (year to date gain of $25
million), compared with a loss of $3 million for the year earlier period. The
loss during the quarter primarily relates to losses on interest rate
contracts, including our lease rate swaps, due to movements in interest rates
and spot gold prices.
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
and interest rates decline/(increase), an unrealized mark-to-market
gain/(loss) on these swap contracts occurs and is recorded, which flows
through earnings each quarter. We expect to see ongoing fluctuations in these
swap contracts in the following quarters as gold prices and lease and
interest rates change.
INCOME TAXES
In third quarter 2003, we recorded a net income tax expense of $22 million,
compared to a net income tax expense of $2 million in the prior year quarter,
primarily due to the higher spot gold price. Income tax expense for the nine-
month period ended September 30, 2003 includes a release of valuation
allowances against deferred tax assets totaling $21 million, resulting from
actions completed during the second quarter that provided assurance of the
future realization of such assets. Excluding the valuation allowance release,
our effective tax rate in the first nine months of 2003 increased to 20%,
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 average
spot gold prices from $306 per ounce in 2002 to $354 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 in the current gold
price environment our effective tax rate for 2003 will be about 20%,
excluding the effect of changes in valuation allowances and any further non-
hedge derivative gains and losses arising in the fourth quarter.
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 $21 million in third quarter 2003, compared to
$7 million in the year earlier quarter. The primary reason for the increase
in 2003 relates to unrealized gains on available-for-sale securities of $10
million.
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
$1 billion at September 30, 2003 and our $1 billion undrawn bank facility, 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 $188 million in third quarter 2003,
compared to $126 million in the year earlier period. The increase in
operating cash flow in the third quarter primarily relates to higher gold
sales volumes and realized gold prices.
Our operating cash flow in 2003 has been significantly affected by timing
differences between cash payments of tax installments, which are based on
2002 taxable income, and accruals for current taxes based on expected 2003
taxable income. In second quarter 2003, this timing difference resulted in a
net increase to operating cash flow of $10 million. For the first nine months
of 2003, this timing difference resulted in a net decrease in operating cash
flow of $45 million. As taxable income is significantly affected by changes
in spot gold prices, any timing differences resulting from these changes
could impact our operating cash flow.
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 third quarter 2003 totaled $81 million, compared to
$58 million for the year earlier period. The increase was due primarily to
increased spending in Australia ($36 million), mainly for underground
development and new mining equipment. Capital expenditures also included $20
million in North America for maintenance capital, and $8 million in Tanzania
spent at the Bulyanhulu Mine on underground development. In South America,
capital expenditures totaled $17 million at Veladero and Pierina, and
included engineering and development work at Pascua-Lama. For the full year
we expect to spend about $345 million, which will be lower than plan due to
the expensing of development costs at Veladero through the first nine months
of 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 third quarter 2003, our cash outflow on financing activities was $83
million, compared with $nil in the year earlier period. The higher outflow in
third quarter 2003 principally related to the buyback of 5.3 million Barrick
common shares at an average price of $17.30 per share at a total cost of $91
million.
OUTLOOK
Our objective is to grow our business organically and through compelling
acquisition opportunities in the global mining industry. We are focused on
running our existing operations as efficiently and effectively as possible,
as we develop our new generation of mines and sustain one of the largest
exploration programs in the industry.
In third 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 were above our 2003 floor price of
$340. 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 production of 5.4 to 5.5 million ounces
at an average total cash cost in the $190 to $195 per ounce range, and a
total production cost in the $280 to $285 per ounce range. We expect
exploration and business development expenses to be approximately $125
million. Administration expense for the year is expected to be approximately
$80 million and interest expense approximately $45 million. Interest and
other income is expected to be approximately $45 million, while, in the
current gold price environment, our effective tax rate will be about 20%,
excluding the effect of changes in valuation allowances and any further non-
hedge derivative gains and losses. Capital expenditures for the year are
expected to total about $220 million at our operating mines, and a further
$125 million at our four development projects, for a total of $345 million.
In 2004, the Company expects production to be approximately 10% lower than
the current year and costs to run approximately 10% higher, as several of the
Company's key operations, primarily Pierina and Goldstrike, mine lower grade
material.
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 Nine months
ended ended
September 30, September 30,
(In millions of United States dollars
except per ounce amounts) 2003 2002 2003 2002
---------------------------------------------------------------------
Operating costs per financial statements $290 $259 $824 $787
Reclamation costs/other (19) (9) (44) (27)
---------------------------------------------------------------------
Operating costs for per ounce calculation $271 $250 $780 $760
---------------------------------------------------------------------
Ounces sold (thousands) 1,505 1,384 4,193 4,265
Total cash costs per ounce $180 $180 $186 $178
---------------------------------------------------------------------
(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 Nine months
ended ended
September 30, September 30,
(In millions of United States dollars
except per ounce amounts) 2003 2002 2003 2002
---------------------------------------------------------------------
Amortization per financial statements $134 $126 $390 $375
Amortization recorded on property,
plant and equipment
not at operating mine sites 6 4 21 16
---------------------------------------------------------------------
Amortization for per ounce calculation 128 122 369 359
Reclamation costs - 7 - 26
---------------------------------------------------------------------
Amortization and reclamation costs
for per ounce calculation $128 $129 $369 $385
---------------------------------------------------------------------
Ounces sold (thousands) 1,505 1,384 4,193 4,265
Amortization costs per ounce $85 $87 $88 $84
Amortization and reclamation costs per ounce $85 $93 $88 $90
---------------------------------------------------------------------
FINANCIAL RISK MANAGEMENT
Forward Gold Sales Hedge Position (as of September 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 realizable $414/oz (1)
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 $345/oz (3)
for remaining expected 2003
production
---------------------------------------------------------------------
Average forecast minimum $318/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 $1.2 billion (5)
loss at September 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 $385 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 September 30, 2003
was approximately $1 billion negative. The year-to-date change in the fair
value of our derivative instruments is detailed as follows:
Mark-to-Market (Fair Value) at September 30, 2003 of all derivative
instruments:
---------------------------------------------------------------------
Gold forward sales position $(1,213)
Silver forward sales position (1)
Foreign currency position 185
Interest rate position 29
---------------------------------------------------------------------
All derivative instruments $(1,000)
---------------------------------------------------------------------
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 - Unrealized loss $(639)
Impact of change in spot price
(from $347 per ounce to $385 per ounce) (613)
Contango earned period to date 105
Impact of change in valuation inputs other than spot metal prices
(e.g. interest rates, lease rates, and volatility) (66)
---------------------------------------------------------------------
Fair value as at September 30, 2003 - Unrealized loss $(1,213)
---------------------------------------------------------------------
The mark-to-market value of the gold contracts is based on a spot gold price
of $385 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 $311 per ounce, assuming all other variables are
constant. The mark-to-market value represents the replacement value of these
contracts based on current market levels, and does not represent an economic
obligation for payment by Barrick. Barrick's obligations under the gold sales
contracts are to deliver an agreed upon quantity of gold at a hedge price by
the termination date on the contracts (2013 in most cases).
Consolidated Statements of Income
(in millions of United States dollars, except per share data,
US GAAP basis) Three months ended Nine months ended
Sept. 30, Sept. 30,
---------------------------------------------------------------------
(Unaudited) 2003 2002 2003 2002
---------------------------------------------------------------------
Gold sales (note 13) $549 $473 $1,499 $1,441
---------------------------------------------------------------------
Costs and expenses
Operating (notes 3 and 13) 290 259 824 787
Amortization (note 13) 134 126 390 375
Administration 21 16 63 49
Exploration and business
development 38 30 101 77
---------------------------------------------------------------------
483 431 1,378 1,288
---------------------------------------------------------------------
Interest and other income
(note 4) 24 12 39 28
Interest expense (12) (15) (36) (44)
Non-hedge derivative
gains (losses) (note 11E) (21) (3) 25 8
---------------------------------------------------------------------
Income before income
taxes and other items 57 36 149 145
Income tax expense (note 5) (22) (2) (9) (6)
---------------------------------------------------------------------
Income before cumulative
effect of changes in
accounting principles 35 34 140 139
Cumulative effect of
changes in accounting
principles (note 2) - - (17) -
---------------------------------------------------------------------
Net income $35 $34 $123 $139
---------------------------------------------------------------------
Earnings per share data
(note 6):
Income before cumulative
effect of changes in
accounting principles
Basic and diluted $0.07 $0.06 $0.26 $0.26
Net income
Basic and diluted $0.07 $0.06 $0.23 $0.26
---------------------------------------------------------------------
The accompanying notes are an integral part of these unaudited
interim consolidated financial statements
Consolidated Statements of Cash Flow
(in millions of United States dollars, US GAAP basis)
Three months ended Nine months ended
Sept. 30, Sept. 30,
---------------------------------------------------------------------
(Unaudited) 2003 2002 2003 2002
---------------------------------------------------------------------
OPERATING ACTIVITIES
Net income for the period $35 $34 $123 $139
Amortization (note 13) 134 126 390 375
Changes in capitalized mining costs 18 9 34 11
Deferred income taxes (note 5) (20) (3) (65) (9)
Other items (note 14) 21 (40) (97) (122)
---------------------------------------------------------------------
Net cash provided by operating
activities 188 126 385 394
---------------------------------------------------------------------
INVESTING ACTIVITIES
Property, plant and equipment
Capital expenditures (note 13) (81) (58) (216) (166)
Sales proceeds 23 4 38 7
Short-term investments - 29 - 159
---------------------------------------------------------------------
Net cash used in
investing activities (58) (25) (178) -
---------------------------------------------------------------------
FINANCING ACTIVITIES
Capital stock
Issued on exercise of stock options 8 2 11 83
Repurchased for cash (note 9A) (91) - (154) -
Long-term debt repayments - (2) (9) (3)
Dividends - - (60) (60)
---------------------------------------------------------------------
Net cash provided by (used in)
financing activities (83) - (212) 20
---------------------------------------------------------------------
Increase (decrease) in
cash and equivalents 47 101 (5) 414
Cash and equivalents at
beginning of period 992 887 1,044 574
---------------------------------------------------------------------
Cash and equivalents at
end of period $1,039 $988 $1,039 $988
---------------------------------------------------------------------
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 As at
Sept. 30, Dec. 31,
(Unaudited) 2003 2002
---------------------------------------------------------------------
ASSETS
Current assets
Cash and equivalents $1,039 $1,044
Short-term investments 32 30
Accounts receivable 67 72
Inventories (note 8) 162 159
Other current assets (note 8) 58 47
---------------------------------------------------------------------
1,358 1,352
Property, plant and equipment 3,174 3,322
Capitalized mining costs, net 238 272
Non-current derivative assets 252 78
Other assets 263 237
---------------------------------------------------------------------
Total assets $5,285 $5,261
---------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $198 $164
Other current liabilities 291 319
---------------------------------------------------------------------
489 483
Long-term debt 754 761
Other long-term obligations 408 422
Deferred income tax liabilities 262 261
---------------------------------------------------------------------
Total liabilities 1,913 1,927
---------------------------------------------------------------------
Shareholders' equity
Capital stock 4,097 4,148
Deficit (713) (689)
Accumulated other comprehensive loss
(note 7) (12) (125)
---------------------------------------------------------------------
Total shareholders' equity 3,372 3,334
---------------------------------------------------------------------
Total liabilities and shareholders' equity $5,285 $5,261
---------------------------------------------------------------------
The accompanying notes are an integral part of these unaudited
interim consolidated financial statements
Consolidated Statements of Shareholders'
Equity and Comprehensive Income
CONSOLIDATED 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) (9)
---------------------------------------------------------------------
At Sept. 30 534
---------------------------------------------------------------------
Common shares (amount in millions)
At January 1 $4,148
Issued for cash/on exercise of stock options 16
Repurchased for cash (note 9A) (67)
---------------------------------------------------------------------
At Sept. 30 $4,097
---------------------------------------------------------------------
Deficit
At January 1 $(689)
Net income 123
Dividends (60)
Repurchase of common shares(1) (87)
---------------------------------------------------------------------
At Sept. 30 $(713)
---------------------------------------------------------------------
Accumulated other comprehensive loss (note 7) $(12)
---------------------------------------------------------------------
Total shareholders' equity at Sept. 30 $3,372
---------------------------------------------------------------------
(1) Represents the excess of cash paid over the average book value
repurchased as part of the share buyback plan.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in millions of United Three months ended Nine months ended
States dollars, US GAAP basis) Sept. 30, Sept. 30,
---------------------------------------------------------------------
(Unaudited) 2003 2002 2003 2002
---------------------------------------------------------------------
Net income $35 $34 $123 $139
Foreign currency
translation adjustments
(note 7) (4) (11) (5) (23)
Transfers of realized
gains on derivative
instruments to earnings
(note 7) (19) (3) (44) (13)
Hedge ineffectiveness
transferred to earnings
(note 7) (3) - (7) -
Change in gain
accumulated in OCI for
cash flow hedges (note 7) 2 (12) 149 11
Transfers of realized
losses on
available-for-sale
securities to earnings
(note 7) - - 7 -
Unrealized gains (losses)
on available-for-sale
securities (note 7) 10 (1) 13 (4)
---------------------------------------------------------------------
Comprehensive income $21 $7 $236 $110
---------------------------------------------------------------------
The accompanying notes are an integral part of these unaudited
interim consolidated financial statements
Notes to Unaudited Interim Consolidated Financial Statements
(US GAAP)
Tabular dollar amounts in millions of United States dollars, unless otherwise
indicated, US GAAP basis. References to C$ 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 September
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 consolidated 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 we recorded on our balance sheet 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 September 30, 2003, the effect on earnings
of adopting FAS 143 was a decrease in income before the cumulative effect of
accounting changes by $5 million ($0.01 per share), and for the nine-month
period ended September 30, 2003 the effect was a decrease in income before
the cumulative effect of accounting changes by $13 million ($0.02 per share).
For the three-month period ended September 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 nine-month
period ended September 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 of the mine.
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 September 30, 2003, the effect of adopting
this accounting change was a decrease in income before the cumulative effect
of accounting changes by $0.04 million ($nil per share), and for the nine-
month period ended September 30, 2003, the effect was a decrease in income
before the cumulative effect of accounting changes by $0.12 million ($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 September 30, 2002, or
nine-month period ended September 30, 2002.
C Changes in 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.
Proven and probable reserves
For the nine-month period ended September 30, 2003, we expensed development
costs totaling $17 million at our Veladero Project in Argentina because in
accordance with our accounting policy for these costs, we do not capitalize
costs incurred until after proven and probable reserves, as defined by United
States reporting standards, have been found. Effective October 1, 2003, we
determined that the project met the definition of reserves for United States
reporting purposes. Following this determination we will begin capitalizing
development costs at the Veladero project prospectively for future periods.
3 OPERATING COSTS
---------------------------------------------------------------------
Three months ended Nine months ended
September 30, September 30,
2003 2002 2003 2002
---------------------------------------------------------------------
Cost of goods sold $ 286 $ 267 $ 818 $ 820
By-product revenues (33) (27) (86) (89)
Royalty expenses 14 9 36 26
Production taxes 4 1 12 3
Reclamation and other closure
costs (note 2A) - 9 - 27
Accretion expense on
reclamation/closure obligations
and other reclamation/closure
costs (note 2A) 19 - 44 -
---------------------------------------------------------------------
$ 290 $ 259 $ 824 $ 787
---------------------------------------------------------------------
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 September 30, 2003 resulted in an increase
in operating costs by $18 million compared to actual costs incurred (three
months ended September 30, 2002 - $9 million increase), and for the nine
months ended September 30, 2003, the application resulted in an increase in
operating costs by $34 million compared to actual costs incurred (nine months
ended September 30, 2002 - $11 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 Nine months ended
September 30, September 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
ounces in 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 Nine months ended
September 30, September 30,
2003 2002 2003 2002
---------------------------------------------------------------------
Interest income $ 9 $ 4 $ 25 $ 18
Gains (losses) on sale of
property, plant and equipment 16 - 32 5
Foreign currency translation
gains (losses) (1) 5 (6) 3
Losses on short-term investments - - (7) (4)
Other items - 3 (5) 6
---------------------------------------------------------------------
$ 24 $ 12 $ 39 $ 28
---------------------------------------------------------------------
5 INCOME TAXES
Income tax recovery (expense)
---------------------------------------------------------------------
Three months ended Nine months ended
September 30, September 30,
2003 2002 2003 2002
---------------------------------------------------------------------
Current $ (42) $ (5) $ (74) $ (15)
Deferred 20 3 65 9
---------------------------------------------------------------------
$ (22) $ (2) $ (9) $ (6)
---------------------------------------------------------------------
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 $65 million deferred income tax
credit for the nine months ended September 30, 2003.
Excluding the $21 million valuation allowance released in second quarter
2003, our estimated underlying effective tax rate for the nine months ended
September 30, 2003 was 20%. 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 6%; and the benefits of previously unrecognized tax loss
carryforwards in various foreign subsidiaries which were utilized to offset
higher levels of taxable income due to the higher gold price environment
which caused our effective tax rate to decrease by 12%.
6 EARNINGS PER SHARE
Net income per share was calculated using the weighted average number of
common shares outstanding for the three-month period ended September 30,
2003, which amounted to 536 million shares (2002 - 540 million shares), and
for the nine-month period ended September 30, 2003 amounted to 540 million
shares (2002 - 540 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 September 30, 2003 amounted to 538 million shares
(2002 - 541 million shares) and for the nine-month period ended September 30,
2003 amounted to 540 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 Nine months ended
September 30, September 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) $ - $ (11) $ - $ (5) $ - $ (23) $ -
Transfers of
realized
gains on cash
flow hedges
to earnings
(note 11F) (27) 8 (5) 2 (62) 18 (18) 5
Hedge
ineffectiveness
transferred
to earnings
(note 11F) (4) 1 - - (10) 3 - -
Change in
gains
accumulated
in OCI for
cash flow
hedges
(note 11F) 11 (9) (19) 7 230 (81) 18 (7)
Transfers of
losses on
available-
for-sale
securities
to earnings - - - - 7 - - -
Unrealized
gains (losses)
on available-
for-sale
securities 10 - (1) - 13 - (4) -
---------------------------------------------------------------------
$ (14) $ - $ (36) $ 9 $ 173 $ (60) $ (27) $ (2)
---------------------------------------------------------------------
Accumulated other comprehensive income (loss) (OCI)
---------------------------------------------------------------------
At September 30, 2003 At December 31, 2002
---------------------------------------------------------------------
Pre-tax Tax Pre-tax Tax
amount effect Total amount effect Total
---------------------------------------------------------------------
Foreign currency
translation
adjustments $ (149) $ - $(149) $ (144) $ - $ (144)
Accumulated gains on
cash flow hedges
(note 11F) 207 (77) 130 49 (17) 32
Additional minimum
pension liability (7) - (7) (7) - (7)
Unrealized gains
(losses) on
available-for-sale
securities 14 - 14 (6) - (6)
---------------------------------------------------------------------
$ 65 $ (77) $(12) $ (108) $ (17) $ (125)
---------------------------------------------------------------------
8 INVENTORIES AND OTHER CURRENT ASSETS
---------------------------------------------------------------------
At September 30, 2003 At Dec. 31, 2002
---------------------------------------------------------------------
Inventories
Gold in process and ore in stockpiles $ 101 $ 100
Mine operating supplies 61 59
---------------------------------------------------------------------
$ 162 $ 159
---------------------------------------------------------------------
Other current assets
Derivative assets (note 11) 35 37
Prepaid expenses 23 10
---------------------------------------------------------------------
$ 58 $ 47
---------------------------------------------------------------------
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 September 30, 2003, we repurchased 5.27
million common shares at an average cost of $17.30 per share. For the nine-
month period ended September 30, 2003, we repurchased 8.75 million common
shares at an average cost of $17.56 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 September 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 Nine months ended
September 30, September 30,
2003 2002 2003 2002
---------------------------------------------------------------------
Total revenues and other income $ 60 $ 38 $ 165 $ 141
Less: costs and expenses 59 36 175 138
---------------------------------------------------------------------
Income (loss) before taxes: $ 1 $ 2 $ (10) $ 3
---------------------------------------------------------------------
Net income (loss) $ 1 $ (2) $ (11) $ (7)
---------------------------------------------------------------------
---------------------------------------------------------------------
At September 30, 2003 At December 31, 2002
---------------------------------------------------------------------
Current assets $ 137 $ 91
Non-current assets 258 236
---------------------------------------------------------------------
Total assets 395 327
---------------------------------------------------------------------
Current liabilities 88 75
Notes payable 525 407
Other long-term liabilities 14 18
Deferred income taxes 94 122
Shareholders' equity (326) (295)
---------------------------------------------------------------------
Total liabilities and shareholders'
equity $ 395 $ 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 1.0 $ 25.10 - -
Exercised (0.3) $ 24.00 (0.4) $ 11.39
Canceled or expired (0.7) $ 28.30 (0.1) $ 23.28
---------------------------------------------------------------------
At September 30, 2003 18.9 2.6
---------------------------------------------------------------------
Under Accounting Principles Board Opinion No. 25 (Accounting for Stock Issued
to Employees) (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 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 Nine months ended
September 30, September 30,
2003 2002 2003 2002
---------------------------------------------------------------------
Pro forma effects
Net income, as reported $ 35 $ 34 $ 123 $ 139
Stock-option expense (6) (5) (18) (15)
---------------------------------------------------------------------
Pro forma net income $ 29 $ 29 $ 105 $ 124
---------------------------------------------------------------------
Net income per share
As reported (1) $ 0.07 $ 0.06 $ 0.23 $ 0.26
Pro forma (1) $ 0.05 $ 0.05 $ 0.19 $ 0.23
---------------------------------------------------------------------
(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 3.7 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 September 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 September 30, 2003, we had
commitments to deliver 32.5 million ounces of silver over periods of up to 10
to 15 years. A group of these contracts totaling 20.5 million ounces of
silver are accounted for as normal sales contracts.
A separate group of contracts totaling 12 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 September 30, 2003
---------------------------------------------------------------------
Maturity 2003 2004 2005 2006 2007 2008+ Total
---------------------------------------------------------------------
Written silver call options
Ounces (thousands) - 3,000 2,000 - - - 5,000
Average exercise price
per ounce $ - $5.40 $5.00 - - - $ 5.24
---------------------------------------------------------------------
Interest rate contracts
Receive fixed - swaps
Notional amount (millions) - $ 50 $ - $ 100 $ 625 $ 375 $1,150
Fixed rate (%) - 3.6% - 3.0% 3.4% 3.8% 3.5%
Pay fixed - swaps
Notional amount (millions) - - - - - $ 334 $ 334
Fixed rate (%) - - - - - 5.6% 5.6%
---------------------------------------------------------------------
Net notional position - $ 50 $ - $ 100 $ 625 $ 41 $ 816
---------------------------------------------------------------------
Foreign currency contracts
Canadian Dollar Forwards
C$ (millions) $ 76 $ 398 $ 247 $ 38 $ 96 $ 22 $ 877
Average Price (US cents) 0.66 0.67 0.65 0.66 0.67 0.68 0.66
Canadian Dollar Min-Max
Contracts
C$ (millions) $ 18 - - - - - $ 18
Average Cap Price
(US cents) 0.69 - - - - - 0.69
Average Floor Price
(US cents) 0.67 - - - - - 0.67
Australian Dollar Forwards
A$ (millions) $ 14 $ 505 $ 307 $ 193 $ 139 $ 19 $1,177
Average Price (US cents) 0.54 0.55 0.54 0.55 0.58 0.53 0.55
Australian Dollar Min-Max
Contracts
A$ (millions) $ 118 $ 20 $ 10 $ 10 - - $ 158
Average Cap Price
(US cents) 0.55 0.54 0.52 0.52 - - 0.54
Average Floor Price
(US cents) 0.54 0.52 0.51 0.51 - - 0.53
Fuel contracts
Barrels WTI (thousands) 60 180 - - - - 240
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 cash flow hedge accounting treatment for Canadian dollar
foreign currency contracts with a total notional amount of C$893 million, and
Australian dollar foreign currency contracts with a total notional amount of
A$1,259 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 $350 million to be accounted for as a fair value hedge of our
fixed-rate debentures.
- we have elected for an amortizing pay-fixed interest rate swap with a total
notional amount of $184 million as at September 30, 2003 to be accounted for
as a cash flow hedge of future interest payments relating to the Bulyanhulu
project financing.
D Unrealized fair value of derivative instruments (excluding normal sales
contracts)
---------------------------------------------------------------------
Three months ended Nine months ended
September 30, September 30,
2003 2002 2003 2002
---------------------------------------------------------------------
Beginning of period $ 262 $ 25 $ 29 $ (16)
Derivative instruments
entered into or settled (25) 8 (55) (2)
Change in fair value of
derivative instruments:
Non-hedge derivatives (25) (3) 15 8
Cash flow hedges 11 (22) 230 18
Fair value hedges (3) - 1 -
---------------------------------------------------------------------
End of period $ 220 $ 8 $ 220 $ 8
---------------------------------------------------------------------
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 September 30, 2003.
E Non-hedge derivative gains (losses)
---------------------------------------------------------------------
Three months ended Nine months ended
September 30, September 30,
2003 2002 2003 2002
---------------------------------------------------------------------
Commodity contracts $ (6) $ 13 $ - $ 1
Currency contracts (2) (11) 4 4
Interest and lease rate contracts (17) (5) 11 3
Hedge ineffectiveness recorded
in earnings 4 - 10 -
---------------------------------------------------------------------
$ (21) $ (3) $ 25 $ 8
---------------------------------------------------------------------
F Change in gains accumulated in OCI for cash flow hedge contracts
---------------------------------------------------------------------
Foreign Interest-
Commodity currency rate
contracts contracts contracts Total
---------------------------------------------------------------------
As at December 31 , 2002 $ 9 $ 26 $ 14 $ 49
Change in fair value 3 216 11 230
Hedge gains transferred
to earnings (10) (1) (41) (2) (11) (3) (62)
Hedge ineffectiveness
transferred to earnings - (9) (1) (10)
---------------------------------------------------------------------
As at September 30, 2003 $ 2 $ 192 $ 13 $ 207
---------------------------------------------------------------------
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 of $98 million,
excluding the related deferred income tax effects, from OCI to earnings.
During the nine months ended September 30, 2003, 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 $9 million were recorded under non-hedge derivative gains for
the nine-month period ended September 30, 2003. For the three and nine month
periods ended September 30, 2003, the total amount of hedge ineffectiveness,
including the gains on capital expenditure hedges, recorded and recognized in
non-hedge derivative gains was $4 million and a gain of $9.5 million
respectively (2002 - $nil and $nil respectively).
12 CONTINGENCIES
Certain conditions may exist as of the date the consolidated 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 loss
has been incurred and the amount of the liability can be estimated, then the
estimated liability is accrued in the consolidated 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. On June 2, 2003, the Plaintiff's submitted a proposed Trial
and Case Management Plan, suggesting that the Plan would cure the defects in
the Plaintiff's motions to certify the class. The Court has taken no action
with respect to the proposed Trial and Case Management Plan. 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 a 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. In September
2003 the Court issued an Order granting in part and denying in part Barrick's
motions to dismiss this action. Barrick has requested that the Court
reconsider portions of that Order. That request is pending. 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. In September the
cases were consolidated into a single action in the Southern District of New
York. The plaintiffs have been ordered to file a Consolidated and/or Amended
Complaint by November 4, 2003. Barrick has yet to respond to the consolidated
complaint. 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 operating mines" 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
September 30, 2003 2002 2003 2002 2003 2002
---------------------------------------------------------------------
Goldstrike $ 235 $ 162 $ 145 $ 110 $ 47 $ 14
Pierina 79 75 18 17 21 18
Bulyanhulu 23 28 18 18 (4) 1
Kalgoorlie 46 32 24 21 17 7
Eskay Creek 32 30 1 4 19 14
Hemlo 28 22 16 14 9 6
Plutonic 34 30 16 17 15 10
Round Mountain 35 36 16 18 14 12
Other operating
mines 37 58 17 31 12 20
---------------------------------------------------------------------
Segment total 549 473 271 250 150 102
Other items outside
operating segments - - 19 9 - -
---------------------------------------------------------------------
$ 549 $ 473 $ 290 $ 259 $ 150 $ 102
---------------------------------------------------------------------
---------------------------------------------------------------------
Segment income
(loss) before
Gold Sales Operating costs income taxes
---------------------------------------------------------------------
Nine months ended
September 30, 2003 2002 2003 2002 2003 2002
---------------------------------------------------------------------
Goldstrike $ 598 $ 497 $ 390 $ 326 $ 90 $ 59
Pierina 241 208 55 45 63 52
Bulyanhulu 86 92 55 57 2 8
Kalgoorlie 114 91 65 59 34 18
Eskay Creek 96 90 17 9 43 47
Hemlo 71 67 45 47 18 13
Plutonic 87 77 46 42 35 27
Round Mountain 103 103 49 54 39 33
Other operating
mines 103 216 58 121 26 65
---------------------------------------------------------------------
Segment total 1,499 1,441 780 760 350 322
Other items outside
operating segments - - 44 27 - -
---------------------------------------------------------------------
$ 1,499 $ 1,441 $ 824 $ 787 $ 350 $ 322
---------------------------------------------------------------------
Asset information
Amortization
---------------------------------------------------------------------
Three months ended Nine months ended
September 30, September 30,
2003 2002 2003 2002
---------------------------------------------------------------------
Goldstrike $ 43 $ 38 $ 118 $ 112
Pierina 40 40 123 111
Bulyanhulu 9 9 29 27
Kalgoorlie 5 4 15 14
Eskay Creek 12 12 36 34
Hemlo 3 2 8 7
Plutonic 3 3 6 8
Round Mountain 5 6 15 16
Other operating mines 8 7 19 30
---------------------------------------------------------------------
Segment total 128 121 369 359
Other amortization outside
operating segments 6 5 21 16
---------------------------------------------------------------------
$ 134 $ 126 $ 390 $ 375
---------------------------------------------------------------------
Segment capital expenditures
---------------------------------------------------------------------
Three months ended Nine months ended
September 30, September 30,
2003 2002 2003 2002
---------------------------------------------------------------------
Goldstrike $ 12 $ 11 $ 40 $ 35
Plutonic 15 6 40 14
Bulyanhulu 8 12 27 44
Kalgoorlie 10 4 12 7
Veladero 12 - 19 -
Cowal 6 5 16 7
Pierina 4 2 9 4
Hemlo 2 2 7 5
Pascua-Lama 1 3 7 9
Round Mountain 3 1 5 7
Eskay Creek 1 5 4 8
Alto Chicama - - 2 -
Other operating mines 6 6 25 24
---------------------------------------------------------------------
Segment total 80 57 213 164
Other capital expenditures
outside operating segments 1 1 3 2
---------------------------------------------------------------------
$ 81 $ 58 $ 216 $ 166
---------------------------------------------------------------------
Reconciliation of segment income to enterprise net income
---------------------------------------------------------------------
Three months ended Nine months ended
September 30, September 30,
2003 2002 2003 2002
---------------------------------------------------------------------
Segment total $ 150 $ 102 $ 350 $ 322
Non-legal reclamation/closure
costs/accretion expense/other (19) - (44) -
Reclamation and other closure
costs - (9) - (27)
Other amortization outside
operating segments (6) (5) (21) (16)
Exploration and business
development (38) (30) (101) (77)
Administration (21) (16) (63) (49)
Interest and other income 24 12 39 28
Interest expense (12) (15) (36) (44)
Non-hedge derivative gains
(losses) (21) (3) 25 8
Income tax expense (22) (2) (9) (6)
Cumulative effect of changes
in accounting principles - - (17) -
---------------------------------------------------------------------
Net income $ 35 $ 34 $ 123 $ 139
---------------------------------------------------------------------
14 COMPONENTS OF OTHER NET OPERATING ACTIVITIES
---------------------------------------------------------------------
Three months ended Nine months ended
September 30, September 30,
2003 2002 2003 2002
---------------------------------------------------------------------
Non-cash charges (credits):
Reclamation costs $ - $ 9 $ - $ 27
Losses on short-term
investments - - 7 4
Gains on sale of property,
plant and equipment (16) - (32) (5)
Cumulative effect of changes
in accounting principles - - 17 -
Accretion expense 5 - 13 -
Non-hedge derivative gains
(losses) 21 3 (25) (8)
Changes in operating assets
and liabilities:
Accounts receivable - - 5 (5)
Inventories (2) 8 (3) 49
Accounts payable 9 (15) (6) (14)
Current income taxes accrued 42 5 74 15
Other assets and liabilities (2) (14) (8) (63)
Payments of merger related
costs - - - (38)
Payments of accrued
reclamation and closure costs (4) (22) (20) (44)
Payments of income taxes (32) (14) (119) (40)
---------------------------------------------------------------------
Other net operating activities $ 21 $ (40) $ (97) $ (122)
---------------------------------------------------------------------
Mine Statistics
UNITED STATES
---------------------------------------------------------------------
Betze-Post Meikle
Three months ended Sept. 30, 2003 2002 2003 2002
---------------------------------------------------------------------
Tons mined (thousands) 35,714 35,456 426 411
Tons processed (thousands) 2,433 2,704 410 423
Average grade (ounces per
ton) 0.244 0.151 0.390 0.389
Recovery rate (percent) 83.3% 82.0% 89.5% 91.1%
---------------------------------------------------------------------
Production (thousands of
ounces) 495 334 143 150
Production costs per ounce
Cash operating costs $ 194 $ 239 $ 245 $ 190
Royalties and production
taxes 18 8 17 16
---------------------------------------------------------------------
Total cash costs 212 247 262 206
Amortization and
reclamation 49 62 132 125
---------------------------------------------------------------------
Total production costs $ 261 $ 309 $ 394 $ 331
---------------------------------------------------------------------
Capital expenditures (US$
millions) $ 6 $ 3 $ 6 $ 8
---------------------------------------------------------------------
Nine months ended Sept. 30, 2003 2002 2003 2002
---------------------------------------------------------------------
Tons mined (thousands) 108,545 108,775 1,211 1,194
Tons processed (thousands) 7,596 7,624 1,199 1,190
Average grade (ounces per
ton) 0.198 0.158 0.384 0.413
Recovery rate (percent) 82.3% 83.1% 87.9% 91.0%
---------------------------------------------------------------------
Production (thousands of
ounces) 1,235 1,004 404 448
Production costs per ounce
Cash operating costs $ 209 $ 224 $ 232 $ 191
Royalties and production
taxes 18 6 19 13
---------------------------------------------------------------------
Total cash costs 227 230 251 204
Amortization and
reclamation 52 62 123 119
---------------------------------------------------------------------
Total production costs $ 279 $ 292 $ 374 $ 323
---------------------------------------------------------------------
Capital expenditures (US$
millions) $ 20 $ 6 $ 20 $ 29
---------------------------------------------------------------------
UNITED STATES
---------------------------------------------------------------------
Goldstrike Total Round Mountain
Three months ended Sept. 30, 2003 2002 2003 2002
---------------------------------------------------------------------
Tons mined (thousands) 36,140 35,867 5,116 7,984
Tons processed (thousands) 2,843 3,127 7,688 7,425
Average grade (ounces per
ton) 0.265 0.189 0.015 0.019
Recovery rate (percent) 84.6% 84.9% N/A N/A
---------------------------------------------------------------------
Production (thousands of
ounces) 638 484 92 100
Production costs per ounce
Cash operating costs $ 204 $ 223 $ 143 $ 160
Royalties and production
taxes 18 10 27 14
---------------------------------------------------------------------
Total cash costs 222 233 170 174
Amortization and
reclamation 66 82 55 72
---------------------------------------------------------------------
Total production costs $ 288 $ 315 $ 225 $ 246
---------------------------------------------------------------------
Capital expenditures (US$
millions) $ 12 $ 11 $ 3 $ 1
---------------------------------------------------------------------
Nine months ended Sept. 30, 2003 2002 2003 2002
---------------------------------------------------------------------
Tons mined (thousands) 109,756 109,969 19,829 24,214
Tons processed (thousands) 8,795 8,814 22,637 23,877
Average grade (ounces per
ton) 0.223 0.198 0.018 0.019
Recovery rate (percent) 83.6% 85.7% N/A N/A
---------------------------------------------------------------------
Production (thousands of
ounces) 1,639 1,452 302 289
Production costs per ounce
Cash operating costs $ 215 $ 214 $ 148 $ 167
Royalties and production
taxes 19 8 20 13
---------------------------------------------------------------------
Total cash costs 234 222 168 180
Amortization and
reclamation 70 79 53 69
---------------------------------------------------------------------
Total production costs $ 304 $ 301 $ 221 $ 249
Capital expenditures (US$
millions) $ 40 $ 35 $ 5 $ 7
---------------------------------------------------------------------
Mine Statistics
AUSTRALIA
---------------------------------------------------------------------
Three months Plutonic Darlot Lawlers Kalgoorlie
ended Sept. 30, 2003 2002 2003 2002 2003 2002 2003 2002
---------------------------------------------------------------------
Tons mined
(thousands) 4,222 4,047 227 215 208 1,999 13,177 11,491
Tons processed
(thousands) 768 909 220 216 191 177 1,883 1,702
Average grade
(ounces per ton) 0.139 0.098 0.176 0.175 0.138 0.176 0.069 0.059
Recovery rate
(percent) 90.2% 89.8% 96.4% 97.2% 95.6% 97.6% 83.8% 82.1%
---------------------------------------------------------------------
Production
(thousands of
ounces) 97 81 38 38 25 30 110 94
Production costs
per ounce
Cash operating
costs $172 $179 $157 $156 $195 $161 $189 $221
Royalties and
production taxes 7 8 6 8 6 7 6 7
---------------------------------------------------------------------
Total cash costs 179 187 163 164 201 168 195 228
Amortization and
reclamation 34 33 53 44 44 39 40 52
---------------------------------------------------------------------
Total production
costs $213 $220 $216 $208 $245 $207 $235 $280
---------------------------------------------------------------------
Capital expenditures
(US$ millions) $15 $6 $2 $3 $3 $2 $10 $4
---------------------------------------------------------------------
Nine months ended
Sept. 30, 2003 2002 2003 2002 2003 2002 2003 2002
---------------------------------------------------------------------
Tons mined
(thousands) 11,481 10,803 665 629 952 2,786 36,229 34,181
Tons processed
(thousands) 2,279 2,594 655 629 597 535 5,327 5,266
Average grade
(ounces per ton) 0.120 0.096 0.185 0.174 0.125 0.163 0.071 0.060
Recovery rate
(percent) 89.5% 89.9% 96.9% 97.1% 95.9% 97.1% 85.1% 83.2%
---------------------------------------------------------------------
Production
(thousands of
ounces) 246 223 118 105 72 85 321 262
Production costs
per ounce
Cash operating
costs $184 $175 $152 $161 $235 $168 $199 $213
Royalties and
production taxes 8 8 7 8 7 8 8 7
---------------------------------------------------------------------
Total cash costs 192 183 159 169 242 176 207 220
Amortization and
reclamation 24 36 50 46 37 40 47 58
---------------------------------------------------------------------
Total production
costs $216 $219 $209 $215 $279 $216 $254 $278
---------------------------------------------------------------------
Capital expenditures
(US$ millions) $40 $14 $5 $5 $13 $4 $12 $7
---------------------------------------------------------------------
Mine Statistics
CANADA
---------------------------------------------------------------------
Three months Hemlo Eskay Creek Holt-McDermott
ended Sept. 30, 2003 2002 2003 2002 2003 2002
---------------------------------------------------------------------
Tons mined
(thousands) 1,050 995 71 60 132 118
Tons processed
(thousands) 528 455 71 65 133 119
Average grade
(ounces per ton) 0.145 0.146 1.387 1.448 0.192 0.168
Recovery rate
(percent) 95.3% 95.7% 93.7% 93.6% 94.5% 94.7%
---------------------------------------------------------------------
Production
(thousands of
ounces) 73 63 87 85 24 19
Production costs
per ounce
Cash operating
costs $202 $237 $4 $39 $202 $174
Royalties and
production taxes 9 7 5 4 - -
---------------------------------------------------------------------
Total cash costs 211 244 9 43 202 174
Amortization and
reclamation 41 41 139 135 134 105
---------------------------------------------------------------------
Total production
costs $252 $285 $148 $178 $336 $279
---------------------------------------------------------------------
Capital expenditures
(US$ millions) $2 $2 $1 $5 $- $2
---------------------------------------------------------------------
Nine months ended
Sept. 30, 2003 2002 2003 2002 2003 2002
---------------------------------------------------------------------
Tons mined
(thousands) 3,139 3,012 208 185 415 378
Tons processed
(thousands) 1,457 1,413 211 189 409 378
Average grade
(ounces per ton) 0.147 0.139 1.417 1.498 0.172 0.173
Recovery rate
(percent) 95.0% 94.4% 93.6% 93.7% 94.5% 94.7%
---------------------------------------------------------------------
Production
(thousands of
ounces) 203 186 269 262 66 62
Production costs
per ounce
Cash operating
costs $218 $234 $58 $32 $248 $166
Royalties and
production taxes 8 8 4 4 - -
---------------------------------------------------------------------
Total cash costs 226 242 62 36 248 166
Amortization and
reclamation 41 41 132 131 127 97
---------------------------------------------------------------------
Total production
costs $267 $283 $194 $167 $375 $263
---------------------------------------------------------------------
Capital expenditures
(US$ millions) $7 $5 $4 $8 $- $5
---------------------------------------------------------------------
Mine Statistics
PERU TANZANIA
---------------------------------------------------------------------
Pierina Bulyanhulu
Three months ended Sept. 30, 2003 2002 2003 2002
---------------------------------------------------------------------
Tons mined (thousands) 11,067 8,204 215 241
Tons processed (thousands) - - 213 265
Average grade (ounces per ton) 0.070 0.083 0.360 0.376
Recovery rate (percent) - - 88.6% 86.5%
---------------------------------------------------------------------
Production (thousands of
ounces) 215 219 68 86
Production costs per ounce
Cash operating costs $81 $77 $265 $192
Royalties and production
taxes - - 12 7
---------------------------------------------------------------------
Total cash costs 81 77 277 199
Amortization and
reclamation 183 190 136 100
---------------------------------------------------------------------
Total production costs $264 $267 $413 $299
---------------------------------------------------------------------
Capital expenditures (US$
millions) $4 $2 $8 $12
---------------------------------------------------------------------
Nine months ended Sept. 30, 2003 2002 2003 2002
---------------------------------------------------------------------
Tons mined (thousands) 29,395 23,446 687 684
Tons processed (thousands) - - 719 801
Average grade (ounces per ton) 0.075 0.075 0.371 0.371
Recovery rate (percent) - - 88.0% 85.2%
---------------------------------------------------------------------
Production (thousands of
ounces) 706 617 235 256
Production costs per ounce
Cash operating costs $81 $74 $218 $195
Royalties and production
taxes - - 11 8
---------------------------------------------------------------------
Total cash costs 81 74 229 203
Amortization and
reclamation 183 190 122 96
---------------------------------------------------------------------
Total production costs $264 $264 $351 $299
---------------------------------------------------------------------
Capital expenditures (US$
millions) $9 $4 $27 $44
---------------------------------------------------------------------
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
Fax: (416) 861-0727 North America: 1-800-387-0825
Toll-free within Canada Fax: (416) 643-5501
and 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,
The New York Stock Exchange Overpeck Center
The London Stock Exchange Ridgefield Park,
The Swiss Stock Exchange New Jersey 07660
La Bourse de Paris Tel: (201) 329-8660
Toll-free within
the United States:
RECENT RESEARCH REPORTS 1-800-589-9836
BMO Nesbitt Burns Web site:
CIBC World Markets www.mellon-investor.com
Citigroup Smith Barney
Credit Suisse First Boston INVESTOR CONTACT:
Griffiths McBurney & Partners Kathy Sipos
Goldman Sachs Manager,
HSBC Investor Relations
JP Morgan Tel: (416) 307-7441
Lehman Brothers Email: ksipos@barrick.com
Merrill Lynch MEDIA CONTACT:
National Bank Vincent Borg
Prudential Financial Vice President,
Research Capital Corporate Communications
RBC Capital Markets Tel: (416) 307-7477
Salman Partners Email: vborg@barrick.com
Scotia Capital
Smith Barney Citigroup
Westwind Partners
Barrick's exploration programs are designed and conducted under the
supervision of Alexander J. Davidson, P. Geo., Executive Vice President,
Exploration of Barrick. For information on the geology, exploration
activities generally, and drilling and analysis procedures on Barrick's
material properties, see Barrick's most recent Annual Information Form on
file with Canadian provincial securities regulatory authorities and the U.S.
Securities and Exchange Commission. Certain statements included herein,
including those regarding production, costs, timing of permitting ,
construction or production, 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