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Mark Bristow

Mark Bristow

Annual Report 2020

MESSAGE FROM THE PRESIDENT AND CHIEF EXECUTIVE OFFICER

Mark Bristow

The past year was one of delivery and development for Barrick. In the face of challenging issues across all regions, notably the Covid-19 pandemic, we met our key performance indicators and at the same time made significant progress towards our key strategic objectives.

We achieved our production guidance, delivered strong operating cash flow of $5.4 billion and set a new annual record of $3.4 billion for free cash flow Please see page 143 of the Annual Report 2020 for corresponding endnotes. , which has increased more than ninefold since the Merger was completed two years ago. Our focus on Tier One and other strategic assets has unlocked material synergies and opportunities, as well as realizing the promised $1.5 billion from the sale of non-core interests. The Barrick-led establishment of the Nevada Gold Mines joint venture created the world’s largest gold mining complex under our operatorship and added a sixth Tier One mine to our portfolio in the form of the combined Turquoise Ridge and Twin Creeks operation. In Tanzania, we solved the Acacia problem and are now building a potential Tier One complex there. We established Lumwana as a profitable longlife copper mine in Zambia and in Canada we are well on our way to transforming the previously precarious Hemlo into a robust Tier Two Please see page 143 of the Annual Report 2020 for corresponding endnotes. operation.

None of this could have been achieved without the management philosophy imported from Randgold at the time of the Merger and since proven on a global scale. It is based on a fit-for-purpose organizational structure with lean regional management teams. This decentralized structure, one of the fittest in the extractive industry relative to size, promotes high performance and agile, effective decision-making, provides the corporate executive with direct access to line operations and empowers the regional management teams to meet their business objectives.

Barrick 10-Year Gold Production Outlook Excludes Porgera. If an agreement with the Government of Papua New Guinea is reached, Porgera will be added back once the terms and timing of the settlement has been finalized. Please see Key Assumptions on page 47 of the Annual Report 2020.

Barrick 10-Year Gold Production Outlook

Barrick has more than 20,000 employees and 23,000 contractors at our operations in 13 countries across the world and we seek to make their work safer and more rewarding every day. A modern mining business needs people who share its vision and values, are entrepreneurial and profit-orientated, and alive to technological and societal advances. Through our talent development framework, we are building an effective multicultural and multi-generational workforce capable of leading Barrick into the future.

 
ESG: a clear roadmap towards realistic targets

For most, environmental, social and governance (ESG) is an issue that has only recently moved from the margins to the core of investment decision-making and hence operational management. For Barrick, however, sustainability has long been an integral part of the way we do business. In fact, its principles are deeply embedded in our organizational DNA.

The effectiveness of Barrick’s ESG strategy — which is powered at all levels by a long-established partnership philosophy and our close relationship with all stakeholders, from investors to host communities — was a key factor in the past year’s performance. This was particularly evident in our successful Covid-19 containment programs, which buffered the impact of the pandemic on our business and people, and also enabled us to provide much needed and welcomed support to our host countries.

The E in ESG has been receiving much of the attention lately but I would argue that its social dimension is as important. I am particularly concerned that the issue of poverty — perhaps the greatest problem facing mankind – is not more prominentlyon the agenda. The world’s poorest people live in its poorest countries and easing their lot will require a global and not just a local response.

This is not to say we underestimate the gravity of the environmental challenge. Barrick has a clear roadmap for the reduction of greenhouse gas emissions which is based on climate science and operational realities rather than wishful thinking or long-dated aspirations. A detailed account of our strategy, plans and practices is given in the sustainability section in this Annual Report and is even more comprehensively dealt with in our 2020 Sustainability Report, to be published in April 2021.

As will be seen from these disclosures, all our operations are transitioning to cleaner and more efficient energy sources, as well as better water usage, and our new mines are being planned with their environmental impact as a key consideration. In short, Barrick aspires to be an industry leader in ESG as well as in value creation.

 
Robust operations, real opportunities

We use our five- and 10-year plans as tools to manage our sustainable profitability, with the five-year plan focused on short-term delivery and the 10-year plan looking further ahead at strategy implementation and capital allocation.

 
North America

Now and for the future, Nevada in the North America (NA) region is Barrick’s value foundation and we have spent the past year advancing our knowledge of its orebodies, realizing the joint venture synergies, building their production profile, tightening cost management and exploiting the opportunities created by the removal of fences. Exploration has also been laying the foundation for new near to medium term Life of Mine additions and new discoveries.

The best potential for mine additions is at North Leeville, Fourmile and Goldrush as well as the Ren project at Carlin. The most promising opportunities for significant new discoveries are in the area between Turquoise Ridge and Twin Creeks, between Pipeline and Robertson in the Cortez complex and in the Carlin Basin south of Gold Quarry. The Carlin complex is particularly well-endowed with gold deposits and this Tier One asset has some very exciting opportunities not only for resource expansion but also for new world-class discoveries.

The Cortez complex also has a wealth of opportunities for expansion and growth. The Goldrush and Fourmile discoveries are good examples of our policy of first understanding the geological framework and then building the exploration programs around that. The Goldrush project is on track to expose its first ore by mid-2021 and the government’s Record of Decision is expected in the first quarter of 2022. Once Goldrush and Fourmile are up and running, they will boost the complex’s annual production and secure its Tier One status for years to come. In the meantime, Cortez has been fully integrated as a combined underground and open pit operation.

Turquoise Ridge turned its performance around in the fourth quarter of 2020 after struggling earlier in the year and ongoing optimization should deliver further improvement. Its third shaft, scheduled for commissioning in late 2022, will also lift its efficiency level. Turquoise Ridge Underground boasts one of the highest grades in the world and has great growth prospects.

In Canada, Hemlo has made a remarkable journey from survival mode to a profitable operation. At the time of the Merger, we doubted whether it was a viable asset but after unpacking the geology and rebuilding the models we found many opportunities not only to turn it into an efficient underground operation but also to expand its reserves and extend its life.

 
Latin America and Asia Pacific

Latin America and Asia Pacific (LATAM and AP) is a region with many challenges — mainly legacy issues that impact our social licence to operate — but also hosts an abundance of opportunities. We have put a great deal of work into fixing our businesses and relationships there, and a new exploration team is looking to increase our footprint.

In the Dominican Republic, Pueblo Viejo’s expansion project is expected to realize the operation’s full potential by unlocking just over 9 million ounces of measured and indicated gold resources On a 100% basis. Please see page 143 of the Annual Report 2020 for corresponding endnotes. currently excluded from reserves due to the lack of adequate tailings storage capacity. The plant is being upgraded to handle an annual throughput of 14 million tonnes and negotiations to secure land for the proposed new tailings storage facility are under way.

Veladero in Argentina was the only Barrick mine where production was impacted by a government-imposed pandemic quarantine and movement restrictions. This also temporarily delayed the mine’s transition to a new heap leach facility, now scheduled for completion by mid-2021, after which its performance is expected to improve. Veladero’s connection to the Chilean power grid was similarly delayed but should be completed by the end of 2021. Still in the El Indio region, it appears that combining Lama with Veladero and looking at Pascua separately may make more sense. We are looking closely at this option.

In Papua New Guinea an in-principle agreement with the government on the re-opening and future operation of the Porgera mine, which has been on care and maintenance since April last year when the renewal of its special mining lease was refused, was reached in the fourth quarter of 2020. Teams from both sides continue to work on the details of a mutually acceptable settlement agreement. This has been a long and difficult negotiation, but I am optimistic that we will reach an agreement and get the mine re-opened this year.

 
Africa and Middle East

This region has largely driven the post-merger repositioning and reinvigoration of Barrick. Its five-year plan remains intact, with production steady while costs and capex are expected to come down, and there are plenty of opportunities to drive this performance into the longer term.

The Loulo district in Mali is Barrick’s most prolific generator of new ounces and Loulo-Gounkoto again more than replaced its depleted reserves last year, with more to come. Despite a coup and political unrest in Mali, the complex exceeded the top end of its production guidance, highlighting again the value of strong in-country partnerships and an agile, adaptable management team. The complex’s 10 year outlook is enhanced by its third underground mine below the very profitable Gounkoto pit, which is on track to deliver its first development ore tonnes by mid-2021.

In Côte d’Ivoire, brownfields exploration has added to Tongon’s life and the focus now is on extending that life beyond 2023 or otherwise replacing its production. The Côte d’Ivoire remains an attractive destination for Barrick and we continue to explore generative opportunities throughout the country.

Kibali in the Democratic Republic of Congo also grew its total reserves net of depletion in 2020. Kibali was initially intended to progress to an underground-only mine but the discovery of a series of significant open-pit deposits has increased its flexibility by balancing the ore feed over the mine’s 10-year plan and beyond.

Barrick has achieved a great deal in Tanzania since taking over the operation of the Acacia mines there. Operationally, North Mara continues to improve but there is still a lot to do to realize its full potential, starting with a new oxygen plant and an upgrade of the cyclone cluster. Our enhanced understanding of the geology is delivering exceptional results, with the mine increasing its reserves net of depletion. A substantial growth of its resources indicates a significant potential for extending the Life of Mine.

Similarly, exploration at Bulyanhulu has produced exceptional results and it is becoming clear that this orebody is of worldclass proportions. The ramp-up of the underground mining and processing is on track to reach steady state annualized production in 2022. We now believe that once we have brought North Mara and Bulyanhulu into the lower half of the cost curve, we shall be able to deliver another Tier One complex into Barrick’s portfolio.

 
Our copper portfolio

The recent rise in the price of copper has confirmed its status as the world’s most valuable industrial metal, and our copper portfolio was a meaningful contributor to Barrick’s bottom line in 2020. Though the Zaldivar chloride leach project was impacted by Covid-19 restrictions in Chile, Jabal Sayid exceeded its production guidance and Lumwana was near its top end.

Lumwana is a case study in value creation. After years of operational disappointment, diligent stewardship by the Africa and Middle East (AME) team has achieved a remarkable turnaround. In the space of two years, production has increased by 23%, cost of sales per pound decreased by 20% and C1 cash costs per pound Please see page 143 of the Annual Report 2020 for corresponding endnotes. have been cut by 25%. At current copper prices, Lumwana is now capable of generating significant free cash flow Please see page 143 of the Annual Report 2020 for corresponding endnotes. annually for many years to come.

 
Sustaining our reserve profile with quality ounces

Excluding the effect of the sale of Massawa, total resources grew in 2020 on the back of an increase in inferred resources while 76% of reserves were replaced, net of depletion. Reflecting our focus on orebody quality, we maintained our above-average resource and reserve grade.

As our understanding of the legacy Barrick orebodies increases and our drilling coverage improves, the potential for the conversion of resources to reserves will grow, but it will take some time for the group to reach the reserve replacement levels of the mines in the Africa and Middle East region.

 
The benefits of re-inventing Barrick

The new Barrick’s foundational objective was to build a business capable of delivering the industry’s best returns. Since announcement of the Merger in September 2018, the Barrick share price has grown by 118% against a 92% increase in the GDX as of December 31, 2020. The quarterly dividend has been trebled and the Board has recommended that an additional $750 million of surplus cash should be returned to shareholders as a return of capital distribution in 2021.

A company that was burdened by net debt of more than $13 billion as recently as 2013 now has zero net debt, no significant maturities for the next 10 years and a robust balance sheet with strong liquidity consisting of $5.2 billion in cash and an undrawn $3.0 billion credit facility. Efficient operations and effective management enabled us to capitalize fully on the higher gold and copper prices and to pass the rewards on to our investors as well as our community stakeholders. These achievements were produced on the foundation of a great asset base, a fit-for-purpose structure and management teams that more than lived up to our ‘best people’ mantra.

I continue to be impressed by our people’s energy, creativity and ambition and I am proud of our success in further strengthening and diversifying our world-class talent, and in fostering an environment in which that talent can fully flourish. We are still only at the beginning of an exciting and rewarding journey but we are well-equipped in every way to build on what we have, and to find and exploit new opportunities, including the openings that will be offered by the ongoing dynamics of the gold industry.

Mark Bristow
President and Chief Executive

Annual Report 2020

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