Barrick Gold Corporation (NYSE:GOLD) (TSX:ABX) reported preliminary Q3 sales of 1.07 million ounces of gold and 101 million pounds of copper, as well as preliminary Q3 production of 1.09 million ounces of gold and 100 million pounds of copper. It remains on track to achieve 2021 guidance1, with both the Africa & Middle East and Latin America & Asia Pacific regions continuing to trend to the higher end of their regional gold guidance and North America at the lower end.
As previously guided, Barrick’s Q4 gold production is expected to be the strongest of 2021 following the repair of the mill at Carlin’s Goldstrike roaster late in Q3. Consequently, for Nevada Gold Mines (NGM) both Carlin and Cortez are expected to be at the low end of their annual guidance ranges, whereas Phoenix and Long Canyon are expected to be at the top end of their guidance ranges. Furthermore, production at Turquoise Ridge is expected to be below its annual guidance range, although full year production is still expected to be higher than the prior year. Production at Hemlo is also expected to be below its annual guidance range following a slower ramp-up of underground development due to Covid-19 movement restrictions.
The average market price for gold in Q3 was $1,790 per ounce, while the average market price for copper in Q3 was $4.25 per pound. The Company’s Q3 realized copper price2 is expected to be 5 to 7% below the average Q3 market price for copper, primarily as a result of provisional pricing adjustments3 that reflect the downward trend in copper prices during the quarter.
Preliminary Q3 gold production was higher than Q2, with improved performance at NGM following planned maintenance shutdowns in the previous quarter, the continuing ramp-up of operations at Bulyanhulu and improved performance at Veladero following the commissioning of the Phase 6 leach pad expansion in Q2. Q3 gold cost of sales per ounce4 and total cash costs per ounce5 are both expected to be flat to 2% higher and all-in sustaining costs per ounce5 are expected to be 4 to 6% lower than Q2.
Preliminary Q3 copper production was higher than Q2, and Q4 is expected to be the strongest quarter of the year, mainly driven by higher grades from Lumwana. Q3 copper cost of sales per pound4 is expected to be 5 to 7% higher, C1 cash costs per pound5 are expected to be flat to 2% higher and copper all-in sustaining costs per pound5 are expected to be 4 to 6% lower than Q2.
Barrick will provide additional discussion and analysis regarding its third quarter production and sales when the Company reports its quarterly results before North American markets open on November 4, 2021.
The following table includes preliminary gold and copper production and sales results from Barrick’s operations:
|Three months ended||Nine months ended|
|September 30, 2021||September 30, 2021|
|Gold (equity ounces (000))|
|Turquoise Ridge (61.5%)||82||82||252||253|
|Long Canyon (61.5%)||43||42||128||127|
|Nevada Gold Mines (61.5%)||495||485||1,432||1,428|
|Pueblo Viejo (60%)||127||125||381||384|
|North Mara (84%)||66||65||191||187|
|Copper (equity pounds (millions))|
|Jabal Sayid (50%)||19||12||55||47|
The scientific and technical information contained in this news release has been reviewed and approved by: Steven Yopps, MMSA, Manager of Growth Projects, Nevada Gold Mines; Chad Yuhasz, P.Geo, Mineral Resource Manager, Latin America and Asia Pacific; and Simon Bottoms, CGeol, MGeol, FGS, FAusIMM, Mineral Resources Manager, Africa and Middle East – each a “Qualified Person” as defined in National Instrument 43-101 – Standards of Disclosure for Mineral Projects.
Porgera was placed on temporary care and maintenance in April 2020 and is not currently included in our full year 2021 guidance. On April 9, 2021, the Government of Papua New Guinea and Barrick Niugini Limited, the operator of the Porgera joint venture, signed a framework agreement in which they agreed on a partnership for Porgera’s future ownership and operation. We expect to update our guidance to include Porgera following both the execution of definitive agreements to implement the framework agreement and the finalization of a timeline for the resumption of full mine operations.
Copper realized price is a non-GAAP financial measure which excludes from sales: (i) unrealized gains and losses on non-hedge derivative contracts; (ii) unrealized mark-to-market gains and losses on provisional pricing from copper sales contracts; (iii) sales attributable to ore purchase arrangements; and (iv) treatment and refining charges.
This measure is intended to enable management to better understand the price realized in each reporting period for copper sales because unrealized mark-to-market values of non-hedge copper derivatives are subject to change each period due to changes in market factors such as market and forward copper prices, so that prices ultimately realized may differ from those recorded. The exclusion of such unrealized mark-to-market gains and losses from the presentation of this performance measure enables investors to understand performance based on the realized proceeds of selling copper production.
The gains and losses on non-hedge derivatives and receivable balances relate to instruments/balances that mature in future periods, at which time the gains and losses will become realized. The amounts of these gains and losses reflect fair values based on market valuation assumptions at the end of each period and do not necessarily represent the amounts that will become realized on maturity. For those reasons, management believes that this measure provides a more accurate reflection of our Company’s past performance and is a better indicator of its expected performance in future periods.
The realized price measure is intended to provide additional information, and does not have any standardized definition under IFRS and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. The measure is not necessarily indicative of sales as determined under IFRS. Other companies may calculate this measure differently.
Barrick will provide a full reconciliation of this non-GAAP financial measure when the Company reports its quarterly results on November 4, 2021.
The sales price for Barrick’s copper production is determined provisionally at the date of sale with the final price determined based on market copper prices at a future date set by the customer, generally one to three months after the initial date of sale. Market prices for copper may fluctuate during this extended settlement period. The prices of Barrick’s copper sales are marked-to-market at the balance sheet date based on the forward copper price for the relevant quotational period. All such mark-to-market adjustments are recorded in copper sale revenues. If the market price for copper declines, the final sale price realized by the Company at settlement may be lower than the provisional sale price initially recognized by the Company, requiring negative adjustments to Barrick’s average realized copper price for the relevant period.
Gold cost of sales per ounce is calculated as cost of sales across our gold operations (excluding sites in care and maintenance) divided by ounces sold (both on an attributable basis based on Barrick’s ownership share). Copper cost of sales per pound is calculated as cost of sales across our copper operations divided by pounds sold (both on an attributable basis based on Barrick’s ownership share).
References to attributable basis means our 100% share of Hemlo and Lumwana, our 89.7% share of Tongon, our 84% share of North Mara, Bulyanhulu and Buzwagi, our 80% share of Loulo-Gounkoto, our 61.5% share of Nevada Gold Mines, our 60% share of Pueblo Viejo, our 50% share of Veladero, Zaldívar and Jabal Sayid and our 45% share of Kibali.
Total cash costs per ounce, all-in sustaining costs per ounce and all-in costs per ounce are non-GAAP financial measures which are calculated based on the definition published by the World Gold Council (“WGC”) (a market development organization for the gold industry comprised of and funded by gold mining companies from around the world, including Barrick). The WGC is not a regulatory organization. Management uses these measures to monitor the performance of our gold mining operations and its ability to generate positive cash flow, both on an individual site basis and an overall company basis.
Total cash costs start with our cost of sales related to gold production and removes depreciation, the non-controlling interest of cost of sales and includes by-product credits. All-in sustaining costs start with total cash costs and include sustaining capital expenditures, sustaining leases, general and administrative costs, minesite exploration and evaluation costs and reclamation cost accretion and amortization. These additional costs reflect the expenditures made to maintain current production levels.
We believe that our use of total cash costs, all-in sustaining costs and all-in costs will assist analysts, investors and other stakeholders of Barrick in understanding the costs associated with producing gold, understanding the economics of gold mining, assessing our operating performance and also our ability to generate free cash flow from current operations and to generate free cash flow on an overall company basis. Due to the capital-intensive nature of the industry and the long useful lives over which these items are depreciated, there can be a significant timing difference between net earnings calculated in accordance with IFRS and the amount of free cash flow that is being generated by a mine and therefore we believe these measures are useful non-GAAP operating metrics and supplement our IFRS disclosures. These measures are not representative of all of our cash expenditures as they do not include income tax payments, interest costs or dividend payments. These measures do not include depreciation or amortization.
Total cash costs per ounce, all-in sustaining costs and all-in costs are intended to provide additional information only and do not have standardized definitions under IFRS and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. These measures are not equivalent to net income or cash flow from operations as determined under IFRS. Although the WGC has published a standardized definition, other companies may calculate these measures differently.
C1 cash costs per pound and all-in sustaining costs per pound are non-GAAP financial measures related to our copper mine operations. We believe that C1 cash costs per pound enables investors to better understand the performance of our copper operations in comparison to other copper producers who present results on a similar basis. C1 cash costs per pound excludes royalties and production taxes and non-routine charges as they are not direct production costs. All-in sustaining costs per pound is similar to the gold all-in sustaining costs metric and management uses this to better evaluate the costs of copper production. We believe this measure enables investors to better understand the operating performance of our copper mines as this measure reflects all of the sustaining expenditures incurred in order to produce copper. All-in sustaining costs per pound includes C1 cash costs, sustaining capital expenditures, sustaining leases, general and administrative costs, minesite exploration and evaluation costs, royalties and production taxes, reclamation cost accretion and amortization and write-downs taken on inventory to net realizable value.
Barrick will provide a full reconciliation of these non-GAAP financial measures when the Company reports its quarterly results on November 4, 2021.
Includes Nevada Gold Mines’ 60% equity share of South Arturo.
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