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Financial Review

Graham Shuttleworth

Annual Report 2020

FINANCIAL REVIEW

Graham Shuttleworth
Senior Executive Vice-President, Chief Financial Officer

Last year, I described 2019 as a year of transformation for Barrick.

The 2020 year has now demonstrated the strength and resilience of the company following this transformation. With the impact of the pandemic so pervasive across the globe, we believe that four quarters of consistently solid operational performance is what differentiated Barrick from many of its peers.

We delivered on our full-year guidance targets and while the gold price will be regarded as a key driver of our record cash flows, it is more accurate to say that our ability to maintain operational activity throughout the year was the main driver of our superior financial performance.

Barrick 5-Year Gold Outlook1 See Key Assumptions on page 47 of the Annual Report 2020 and page 143 for corresponding endnotes. (1) 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. (2) Gold capital expenditure includes project and sustaining capital expenditure across all gold operations but does not include capital expenditure related to the copper operations. (3) Royalty expenses included in the per ounce cost metrics are based on a gold price assumption of $1,700/oz for 2021 and $1,200/oz for 2022 onwards. Our realized gold price in 2020 was $1,778/oz — please see page 143 of the Annual Report 2020 for corresponding endnotes..

Barrick 5-Year Gold Outlook

 
Barrick 5-Year Copper Outlook See Key Assumptions on page 47 of the Annual Report 2020 and page 143 for corresponding endnotes. (1) Copper capital expenditure includes project and sustaining capital expenditure across all copper operations but does not include capital expenditure related to the gold operations. (2) Royalty expenses included in the per pound cost metrics are based on a copper price assumption of $2.75/lb for 2021 onwards. Our realized copper price in 2020 was $2.92/lb — please see page 143 of the Annual Report 2020 for corresponding endnotes.

Barrick 5-Year Copper Outlook

Operating cash flow of $5.4 billion and record free cash flow Please see page 143 of the Annual Report 2020 for corresponding endnotes. of $3.4 billion in 2020 are indicative of the strong fundamentals of the ‘new Barrick’. This level of free cash flow generation also resulted in the company moving into a net cash position, which represents a decrease of more than $13 billion since 2013 when net debt peaked. Our adjusted EBITDA margin Please see page 143 of the Annual Report 2020 for corresponding endnotes. increased further from 50% in 2019 to 59% in 2020, which points to our ability to more than pass on the benefits of a higher gold price through to the bottom line. While gold cost of sales per ounce was impacted, importantly, our total cash costs Please see page 143 of the Annual Report 2020 for corresponding endnotes. and AISC Please see page 143 of the Annual Report 2020 for corresponding endnotes. per ounce metrics were within the guidance we set at the start of the year, notwithstanding that higher royalty expenses driven by a higher gold price were a significant cost headwind.

Our balance sheet is one of the strongest in the industry and we are now in the enviable position of having less than $100 million of public debt maturities falling due before 2033, and an undrawn credit facility of $3.0 billion. This strong cash flow also allowed us to further increase our quarterly dividend to 9 cents per share, consistent with our stated commitment to growing shareholder returns. This represents a tripling of the quarterly dividend since the Randgold merger was announced in September 2018.

Separately, we have announced a capital return of $750 million to further enhance returns to shareholders which, in part, was made possible by the successful achievement of our divestment target of $1.5 billion in proceeds from non-core assets. At the same time, we continue to grow the business through the execution of our pipeline of growth projects and exciting exploration opportunities, all underpinned by our sustainably profitable long-term plans. This strength will allow Barrick to leverage our superior operating model, including participation in further industry consolidation, unencumbered by the vagaries of the capital markets, should the right valueadding opportunities arise.

There are aspects of our transformation journey that are still under way. We continue to focus on simplifying the business through rationalization of our corporate structure and further disposals of non-core assets. We are at the midpoint of our group-wide systems transformation in relation to our Enterprise Resource Planning (ERP) and consolidation systems environment. In the third quarter of 2020, we implemented our new SAP ERP platform at NGM and recently had the go-live for the remaining operations and businesses in North America.

Our attention has now shifted to implementation within the LATAM & AP and AME regions, which we expect to complete by the start of 2022. This will deliver on our vision of unifying all the disparate legacy financial systems inherited from Acacia, Newmont and Equinox as well as the legacy environments from Barrick and Randgold. We are already starting to see the benefits of this investment accrue in the form of lower costs, higher operating efficiencies as well as enhanced transparency and integrity in our financial planning and reporting tools.

Identifying and effectively dealing with risk is key to a sustainable business and is an integral part of how we protect and create value. Our risk management process is designed to enable us to identify, evaluate, plan and manage risks, including new and emerging risks, that could have an impact on our business as well as allowing us to react in an agile way to deal with changing risks. We continued to drive ownership and accountability for risk management into our business, embedding fundamental processes at the operations across the company. We are focused on a risk aware culture allowing risks to be managed within agreed thresholds in a proactive and effective manner.

The Covid-19 pandemic has challenged our business both internally and externally, with the return to global recovery still uncertain. Our approach to risk enabled us to adapt and roll out our management action plans across the operations to deal with the pandemic.

We continue to monitor and evaluate the potential impact on our business, employees, host countries and supply chain.

While 2020 has been a year of delivery and achievement despite the significant challenges, we are excited by the additional value that we know is on the horizon. We will continue our unrelenting focus on capturing this upside to achieve our goal of being the world’s most valued gold mining company.

Graham Shuttleworth
Senior Executive Vice-President, Chief Financial Officer

Annual Report 2020

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