TORONTO--(BUSINESS WIRE)--Feb. 12, 2004--
FOURTH QUARTER REPORT 2003
Based on US GAAP and expressed in US dollars
Highlights
-- Fourth quarter net income was $77 million, or $0.14 per share,
and full year net income was $200 million, or $0.37 per share
-- Fourth quarter production was 1.3 million ounces of gold at a
total cash cost of $199(1) per ounce. Full year production was
5.51 million ounces at a total cash cost of $189(1) per ounce,
the lowest cash cost of the senior producers
-- Excluding the $86 million Inmet settlement, fourth quarter and
full year cash flow from operations in 2003 exceeded 2002
-- Reserves as at December 31, 2003 stood at 86 million ounces(2)
based on a $325 gold price, amongst the largest in the
industry
-- The Company announced a No-Hedge Policy for gold with a goal
of reducing the hedge position to zero over time. The position
was reduced by 600,000 ounces in the quarter and 2.6 million
ounces for the year.
-- Veladero's construction commenced; Alto Chicama's
Environmental Impact Study (EIS) was submitted and public
hearings were completed in the fourth quarter 2003, with
approval anticipated in the second quarter of 2004; Tulawaka
received development approval and is now under construction
-- The Company announced today that it has appointed Mr. Peter
Godsoe, Chairman of Scotiabank, as an independent member of
the Board of Directors
-- The Company announced today that Barrick and Falconbridge
agreed to partner on the Kabanga Nickel Project in Tanzania
(1) For an explanation of non-GAAP performance measures refer to
pages 17-18 of Management's Discussion and Analysis.
(2) Calculated in accordance with National Instrument 43-101 as
required by Canadian securities regulatory authorities. For United
States reporting purposes, Industry Guide 7 (under the Securities
Exchange Act of 1934), as interpreted by the Staff of the SEC, applies
different standards in order to classify mineralization as a reserve.
Accordingly, for U.S. reporting purposes, Alto Chicama is classified
as mineralized material. For additional information on reserves see
the tables and related footnotes on pages 48-51.
Barrick Gold Corporation today reported earnings of $77 million
($0.14 per share) and operating cash flow of $134 million ($220
million prior to the Inmet settlement of $86 million) for fourth
quarter 2003, compared to earnings of $54 million ($0.10 per share)
and operating cash flow of $195 million in the year earlier period.
Higher earnings for the fourth quarter 2003 compared to the same
period in 2002 reflect a $51 per ounce higher realized gold price and
a $60 million increase in non-hedge derivative gains (2003 -
$46million gain versus 2002 $14 million loss). These were partly
offset by higher cash operating costs, provisions of $14 million for
the Inmet settlement and $10 million for reclamation costs and an $18
million lower income tax recovery. Lower operating cash flow in the
current quarter and the full year primarily relates to the payment of
$86 million on the Inmet settlement. Excluding the Inmet settlement,
fourth quarter and full year cash flow from operations was higher in
2003 than 2002. For 2003, net income was $200 million ($0.37 per
share) and operating cash flow was $521 million ($607 million prior to
the Inmet settlement), compared to net income of $193 million ($0.36
per share) and operating cash flow of $589 million in the year earlier
period.
"Overall, our portfolio of properties performed well - we had a
solid operating performance in 2003 and met our guidance," said Greg
Wilkins, President and Chief Executive Officer. "Our focus for 2004
will be building our new mines and growing our production profile."
PRODUCTION AND COSTS
In fourth quarter 2003, Barrick produced 1.3 million ounces of
gold at a total cash cost of $199 per ounce, compared to 1.6 million
ounces at $174 per ounce, for the prior year quarter. Lower production
and higher costs were primarily attributable to expected lower grades
and higher energy costs, as well as higher royalties and other costs
related to the rising spot gold price.
For the year, the Company produced 5.51 million ounces of gold at
a total cash cost of $189 per ounce, achieving the Company's overall
guidance for the year, even though cash costs were impacted by rising
gold prices which increased royalty and mining tax payments. Higher
production and lower costs at Betze-Post, Kalgoorlie and Pierina more
than offset lower production and higher costs at Meikle and
Bulyanhulu.
In 2002 the Company produced 5.7 million ounces at a total cash
cost of $177 per ounce. Lower production in 2003 was due largely to
the closure of five mines during 2002.
RESERVES
At year-end the Company had proven and probable reserves of 86
million ounces of gold based on a $325 gold price, after producing
5.51 million ounces, (6.5 million ounces in-situ) compared to reserves
of 86.9 million ounces in 2002, virtually replacing 2003 production.
Using a $375 gold price for sensitivity purposes, the reserves at
December 31, 2003 would be about 92 million ounces.
Two of the Company's deposits have significant silver resources.
Pascua-Lama has one of the largest silver resources in the world, with
584 million ounces in-situ while Eskay Creek has 43 million ounces.
GOLD HEDGE POSITION REDUCED
In fourth quarter 2003, the Company announced that it had adopted
a No-Hedge Policy on its gold production. Under the new policy,
Barrick will not add any new gold hedge contracts. The Company is
committed to reducing its hedge book to zero over time. "While the
policy of hedging a portion of our gold production has contributed to
our balance sheet strength," said Mr. Wilkins, "we no longer consider
hedging to be necessary in today's business climate."
During the quarter, the Company reduced its hedge position by
600,000 ounces, by delivering a portion of production against hedge
contracts at a price that approximated the prevailing spot price. For
fourth quarter 2003, the Company averaged a realized price of $394 per
ounce, $2 per ounce higher than the average spot price. For the year,
Barrick realized an average price of $366 per ounce compared to the
average spot price of $363 per ounce. The 2003 year-end hedge position
was 15.5 million ounces, down 2.6 million ounces, or 14%, from
year-end 2002 (down 8.6 million ounces, or 36%, over the last two
years). At December 31, 2003, the Company's hedge position represented
18% of its proven and probable reserves and 14% of its reserves and
measured and indicated resources.
SHARE BUYBACK
Barrick repurchased 8.8 million of its common shares at an average
purchase price of $17.56 per share, for a total cost of $154 million
in 2003. The Company expects to continue its share buy-back program.
2004 OUTLOOK
As previously announced, the Company projects 2004 production to
be between 4.9 - 5.0 million ounces at an average total cash cost of
$205-$215 per ounce, as Pierina and Betze-Post mine lower grade ore,
and higher expected spot gold prices continue to increase gold related
costs. The Company plans to further reduce its hedge contracts in 2004
by a minimum of 1.5 million ounces, 300,000 of which has already been
accomplished. While the Company's hedge contracts allow for full
flexibility to deliver all of its production into the spot gold
market, to achieve this target it may choose to deliver a portion of
production against hedge contracts at prices below spot price.
Production and total cash costs in the first quarter 2004 are
anticipated to be weaker than the remainder of the year due to the
sequencing of the mining operations. For the year, amortization is
expected to be about $480 - $490 million, administration expense is
expected to be approximately $80 million and exploration, development
and business development expense is expected to be approximately $110
million, with the possibility that positive results could lead to
additional exploration spending. Capital expenditures for 2004 are
anticipated to be approximately $770 million, as we advance the
construction of our development projects.
DEVELOPMENT PROJECTS UPDATE
Barrick advanced on all projects in its mine development pipeline
in fourth quarter 2003. "During 2003, we focused on detailed
engineering and on delineation of our development projects as we
readied ourselves for building our four new mines," said Peter Kinver,
Chief Operating Officer. "These projects will provide additional
production and lower cash costs for years to come."
At Veladero in Argentina, the Environmental Impact Statement (EIS)
approval was received in fourth quarter 2003 and construction
commenced. Road work and pre-strip activities are currently underway
as well as construction of the valley fill heap leach, truck shops,
assay lab, and camp facilities. There are currently over 700
construction workers on-site, with peak employment expected to reach
approximately 1,500 comprising 500 permanent staff and 1,000
construction workers. Veladero is expected to commence production in
2005. As mineralization was classified as a reserve for U.S. reporting
purposes as of October 1, 2003, development costs at Veladero are now
being capitalized. Significant progress was made on advancing project
financing for Veladero in 2003. It is anticipated that the financing
will be completed in 2004.
The EIS for Alto Chicama in Peru was submitted at the end of the
third quarter 2003. Public hearings were held during the fourth
quarter 2003, and approval anticipated in second quarter 2004.
As 2003 ended, the Company received development approval for its
Tulawaka project in Tanzania. Construction on this 70% owned joint
venture commenced in the fourth quarter 2003, with projected average
annual production of 125,000 ounces at a total cash cost of $175 per
ounce on a 100% basis. Production is expected to begin in first
quarter 2005. Total capital approved for project development is $49
million.
At the Company's Cowal property in Australia, construction of mine
infrastructure commenced in January 2004. Mine development is
anticipated during the first quarter, leading to commercial production
in early 2006.
At Pascua-Lama in Chile/Argentina, work continues on the
engineering optimization of the project, with a production decision
expected in early second quarter 2004.
EXPLORATION UPDATE
During fourth quarter 2003, Barrick was actively exploring 44
projects in nine countries. Drilling was carried out on 19 projects
during the quarter. "Our investment in exploration over the past few
years will continue to yield results going forward," said Alex
Davidson, Executive Vice President, Exploration. "Our large land
position provides us with opportunities in key prospective districts."
In North America, an underground drill program was completed at
the end of December on the Rossi property in Nevada (60% joint venture
with Meridian Gold). The objective of the program was to better define
the Storm resource and an updated resource calculation is expected in
the first half of 2004. A drill program at Goldstrike was focused on
near term resource additions on targets north of the Betze-Post pit.
The results from the program were very positive and drilling will
continue during the first half of 2004. The drill program at Gold
Hill, located north of Round Mountain, confirmed and refined the
geological model, and an updated resource estimate will be completed
in the first half of 2004. At the Eskay Creek property in northern
British Columbia, results from the drill program completed in third
quarter 2003 highlighted the potential of the 22 Zone, located 2
kilometres south of the mine. A winter drill program is planned to
test for mineralization along strike and at depth.
In South America, drill programs were also completed on properties
in the Alto Chicama district where the Company has an excellent
portfolio of prospects as well as in Chile and southern Argentina.
Results are being evaluated and follow up work is planned in 2004.
Early stage exploration carried out in Peru continues to identify and
prioritize targets for detailed follow up.
During fourth quarter 2003, Barrick entered into a strategic
relationship with QGX Limited which has prospective exploration
properties in Mongolia.
NEW DEVELOPMENTS
On January 28, 2004, Barrick announced that it agreed to a share
purchase and strategic relationship in Russia with Highland Gold
Mining, based in London. In total, Barrick has now invested cash of
US$84 million for a total stake of 17% of Highland. The Highland
partnership will give Barrick the right, but not the obligation, to
participate on an exclusive basis for up to 50% on any acquisition
made by Highland Gold in Russia. Highland holds similar rights for any
acquisition made by Barrick in certain regions in Russia. "The
Highland transaction represents an important next step in the
development of Barrick's strategy in Russia - one of the most
prospective gold regions anywhere in the world," commented Mr.
Wilkins.
On February 12, 2004 Barrick and Falconbridge have signed a Letter
of Intent to negotiate Definitive Agreements regarding Barrick's
Kabanga Nickel Project.
The Kabanga Nickel Project was acquired by Barrick in the Sutton
Resources transaction in 1999. Since the acquisition, Barrick has
significantly enhanced the value of the Project by increasing the
known resource estimate at Kabanga Main and discovering the adjacent
MNB deposit. The Project is located in northwestern Tanzania,
approximately 385 kilometres west of the Bulyanhulu gold mine and 100
kilometres northwest of the Tulawaka gold project, which is currently
under construction. Kabanga has a current resource of 26.4 million
tonnes grading 2.6% nickel for approximately 700,000 tonnes of
contained nickel.
The Letter of Intent provides that Falconbridge can earn a 50%
interest in Kabanga by:
-- Meeting the next $45 million of expenditures on the execution
of a well defined Work Plan over a period not exceeding 27
months;
-- Completing the Work Plan and completing a Bankable Feasibility
Study within 3 years of reaching definitive agreements; and
-- Making certain other payments totaling US$13.5 million to
Barrick upon achieving certain milestones.
CORPORATE GOVERNANCE GUIDELINES
Following on the September 2003 appointment of Mr. Gustavo
Cisneros, Chairman of the Cisneros Group of Companies, as an
independent director to Barrick's Board, the Company announced today
that it was pleased to appoint Mr. Peter Godsoe, Chairman of
Scotiabank, as an independent Director to the Board. "Our Board will
be strengthened by his breadth of business experience and knowledge of
international capital markets," said Peter Munk, Founder and Chairman.
Barrick Gold Corporation is building new low-cost, long-life mines
in highly prospective gold mining districts around the globe. It has
the lowest cash costs among major gold producers and the only A-rated
balance sheet with a cash position of nearly $1 billion. 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 Twelve months ended
Dec. 31, Dec. 31,
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(Unaudited) 2003 2002 2003 2002
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Operating Results
Gold production (thousands
of ounces) 1,301 1,596 5,510 5,695
Gold sold (thousands of
ounces) 1,362 1,540 5,554 5,805
Per ounce data
Average spot gold price $392 $323 $363 $310
Average realized gold price 394 343 366 339
Cash operating costs(3) 186 166 177 170
Total cash costs(1) (3) 199 174 189 177
Total production costs(3) 292 267 279 268
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Financial Results (millions)
Gold sales $536 $526 $2,035 $1,967
Net income 77 54 200 193
Operating cash flow 134 195 521 589
Operating cash flow
excluding Inmet settlement 220 195 607 589
Per share data (dollars)
Net income (basic and
diluted) 0.14 0.10 0.37 0.36
Operating cash flow 0.26 0.36 0.97 1.09
Operating cash flow
excluding Inmet settlement 0.42 0.36 1.13 1.09
Common shares outstanding
(as at Dec. 31) (millions)(2) 535 542 535 542
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As at As at
Dec. 31, Dec. 31,
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2003 2002
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Financial Position (millions)
Cash and equivalents $970 $1,044
Working capital 1,015 839
Long-term debt 719 761
Shareholders' equity 3,494 3,334
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(1) Comprises cash operating costs, 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 16-18 of Management's Discussion and Analysis.
Production and Cost Summary
Production (attributable ounces)
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3 months ended 12 months ended
12/31, 12/31,
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(Unaudited) 2003 2002 2003 2002
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North America
Open Pit 324,951 406,224 1,559,461 1,409,985
Underground 147,199 192,631 551,664 640,336
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Goldstrike Property Total 472,150 598,855 2,111,125 2,050,321
Eskay Creek 83,387 96,954 352,070 358,718
Round Mountain 91,059 88,614 392,649 377,747
Hemlo 64,930 83,179 267,888 269,057
Holt-McDermott 23,203 21,502 89,515 83,577
Marigold 12,953 11,086 47,396 27,422
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747,682 900,190 3,260,643 3,166,842
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South America
Pierina 205,852 281,188 911,723 898,228
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Australia/Africa
Plutonic 88,233 84,018 333,947 307,377
Darlot 37,336 40,061 154,977 145,443
Lawlers 27,355 28,571 99,223 113,291
Kalgoorlie 115,498 98,356 436,098 360,025
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268,422 251,006 1,024,245 926,136
Bulyanhulu 78,737 100,776 313,551 356,319
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347,159 351,782 1,337,796 1,282,455
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Other/Mines closed in 2002 - 62,357 - 347,352
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Total 1,300,693 1,595,517 5,510,162 5,694,877
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Total Cash Costs (US$/oz) (1)
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3 months ended 12 months ended
12/31, 12/31,
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(Unaudited) 2003 2002 2003 2002
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North America
Open Pit $ 250 $ 220 $ 233 $ 228
Underground 261 184 253 198
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Goldstrike Property Total 253 209 238 218
Eskay Creek 20 51 52 40
Round Mountain 190 212 173 187
Hemlo 227 184 226 224
Holt-McDermott 210 193 239 173
Marigold 187 144 171 187
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219 182 209 193
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South America
Pierina 89 95 83 80
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Australia/Africa
Plutonic 196 187 193 184
Darlot 182 163 164 168
Lawlers 268 188 249 179
Kalgoorlie 215 231 209 222
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208 200 200 196
Bulyanhulu 316 185 246 198
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230 195 210 196
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Other/Mines closed in 2002 - 199 - 189
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Total $ 199 $ 174 $ 189 $ 177
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Total Production Costs (US$/oz) (1)
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3 months ended 12 months ended
12/31, 12/31,
---------------------------------------------------------------------
(Unaudited) 2003 2002 2003 2002
---------------------------------------------------------------------
Direct mining costs at
market foreign exchange
rates $225 $185 $210 $191
Gains realized on currency
hedge contracts (18) (1) (12) (1)
By-product credits (21) (18) (21) (20)
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Cash operating costs 186 166 177 170
Royalties 10 7 9 6
Production taxes 3 1 3 1
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Total cash costs 199 174 189 177
Amortization and
reclamation 93 93 90 91
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Total production costs $292 $267 $279 $268
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(1) For an explanation of non-GAAP performance measures refer to
pages 16-18 of Management's Discussion and Analysis.
Management's Discussion and Analysis of Financial and Operating
Results
GOLD SALES
Revenue for fourth quarter 2003 was $536 million on gold sales of
1.36 million ounces, compared to $526 million in revenue on gold sales
of 1.54 million ounces for the year earlier quarter. A $51 per ounce
(15%) increase in the realized gold price due to higher spot gold
prices more than offset the lower sales volumes. During the fourth
quarter, spot gold prices ranged from a high of $416 to a low of $369
per ounce, averaging $392 per ounce. The Company realized an average
of $394 per ounce during the quarter, as it delivered 600,000 ounces
against gold hedge contracts, with the remainder at spot gold prices.
The Company plans to further reduce its hedge contracts in 2004 by a
minimum of 1.5 million ounces. While the Company's hedge contracts
allow for full flexibility to deliver all of its production into the
spot gold market, to achieve this target it may chose to deliver a
portion of production against hedge contracts at prices below spot
price.
The year-end gold hedge position declined to 15.5 million ounces,
down 2.6 million ounces year over year. The fourth quarter reduction
was accomplished by delivering a portion of production against hedge
contracts that approximated the prevailing spot price. In keeping with
the no-hedge policy, Barrick will continue to pursue opportunities to
further reduce its hedge position with the objective of reducing it to
zero over time. The position has been reduced by 8.6 million ounces or
36% over the past two years.
At year-end, the unrealized mark-to-market on the derivative
instruments position, including gold and silver forward sales
contracts, as well as currency and interest rate hedge programs, was
negative $1.4 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 its 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 $326 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 the balance sheet, as accounting rules
that govern these contracts do not require balance sheet recognition.
Instead, in accordance with US GAAP, the economic impact of these
sales contracts is reflected in the financial statements as Barrick
physically delivers gold and silver under the contracts.
REVIEW OF OPERATIONS AND DEVELOPMENT PROJECTS
For the fourth quarter 2003, production of 1.3 million ounces and
total cash cost of $199(1) per ounce were in line with plan. Operating
performance for the year was also in line with guidance, with
production of 5.51 million ounces at a total cash cost of $189(1) per
ounce. As at December 31, 2003 reserves stood at 86 million ounces(2)
at a $325 gold price. Using a $375 gold price for sensitivity
purposes, the reserves at December 31, 2003 would be about 92 million
ounces as these mines sequence through lower grade ore.
For 2004 we expect production of 4.9 to 5.0 million ounces at a
total cash cost of $205 to $215 per ounce.
The decline in production and increase in costs is primarily
attributed to Pierina and Betze-Post due to lower grades resulting
from mine sequencing.
(1) For an explanation of non-GAAP performance measures refer to
pages 17-18 of Management's Discussion and Analysis.
(2) Calculated in accordance with National Instrument 43-101 as
required by Canadian securities regulatory authorities. For United
States reporting purposes, Industry Guide 7 (under the Securities
Exchange Act of 1934), as interpreted by the Staff of the SEC, applies
different standards in order to classify mineralization as a reserve.
Accordingly, for U.S. reporting purposes, Alto Chicama is classified
as mineralized material. For additional information on reserves see
the tables and related footnotes on pages 48-51.
NORTH AMERICAN REGION
Barrick's North American Region consists of seven mines:
Betze-Post, Meikle, Round Mountain, Hemlo, Eskay Creek, Holt McDermott
and Marigold.
-- The region produced 748,000 ounces during the fourth quarter
2003, 17% lower than the prior year quarter, at a total cash
cost that was 16% higher than the prior year quarter.
-- For the year, production and total cash costs were in line
with plan at 3,300,000 ounces at a total cash cost of $209 per
ounce.
-- For 2004 the region is expected to produce in the range of
2,950,000 to 3,020,000 ounces of gold at a total cash cost of
$223 to $232 per ounce.
Goldstrike Property (Nevada)
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Q4 '03 Q4 '02 2003 2002
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Production
Open Pit 324,951 406,224 1,559,461 1,409,985
Underground 147,199 192,631 551,664 640,336
--------------------------------------------------------------------
Goldstrike Total 472,150 598,855 2,111,125 2,050,321
--------------------------------------------------------------------
Total cash cost/oz
Open Pit $ 250 $ 220 $ 233 $ 228
Underground 261 184 253 198
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Goldstrike Total $ 253 $ 210 $ 238 $ 218
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Goldstrike Property - Open Pit
-- Although the open pit met its production target for the year,
production decreased 20% compared to the year earlier quarter
as throughput declined 10% due to unscheduled downtime at the
roaster and planned lower grades.
-- Total cash costs during fourth quarter 2003 were 14% higher
than the prior year. The higher cash costs were due to lower
production and were partially offset by lower mining costs. As
in previous quarters, a reduced fleet size, facilitated by
in-pit dumping, has reduced overall mining costs. Costs were
negatively affected by higher processing costs, as well as
higher royalties and production taxes (up $7 per ounce over
the year earlier quarter) due to the higher spot gold price.
-- The higher processing costs were due to higher than expected
acid consumption, coupled with a higher acid unit price. The
higher acid consumption is attributable to the high carbonate
material mined during the fourth quarter 2003.
-- For the year, open pit produced 1,559,461 ounces, 60,000 more
than the 2003 plan, at marginally higher costs. Higher than
modeled tons and grade from the northeast and 8th west layback
contributed to the positive production variance.
-- Drilling at the Goldstrike-North Pit target, located
immediately north of Betze-Post, has returned positive
results, allowing an upgrade of the target to reserves.
-- Underground infill drilling at Rossi located near Goldstrike
has intersected significantly higher grades than previous
drill programs. A total of 50 holes on two stations have been
completed. This program has increased drill density to a 50
foot by 50 foot spacing in the 49er Zone. A resource
calculation will be completed during first quarter 2004.
-- Production at Betze Post for 2004 is expected to be in the
range of 1,340,000 to 1,360,000 ounces of gold at cash costs
at $250 to $260 per ounce. The production and cost variances
from 2003 are primarily due to planned lower grades.
Goldstrike Property - Underground
-- Underground production and costs continued 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 fourth quarter 2003.
-- Remnant mining at Meikle was re-sequenced to maximize ore
recovery and ground stability. Cash costs for the quarter were
pushed higher by difficult ground conditions. As a result,
labour, contract services, ground support material, and
maintenance repairs were higher than plan. Royalties and taxes
were above plan due to the increased gold price.
-- For 2003, the mine produced 551,664 ounces, 68,000 ounces less
than the 2003 plan, due to the ground conditions,
infrastructure completion, and remnant constraints mentioned
above. Total cash costs were $253 per ounce for the year.
-- Production for 2004 is expected to be in the range of 590,000
to 610,000 ounces of gold at cash costs of $245 to $255 per
ounce. Higher production is a result of higher recoveries,
while positive cost variances are due to decreased dependence
on remnant stopes.
Eskay Creek (British Columbia)
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Q4 '03 Q4 '02 2003 2002
--------------------------------------------------------------------
Production 83,387 96,954 352,070 358,718
Total cash cost / oz $ 20 $ 51 $ 52 $ 40
--------------------------------------------------------------------
-- Fourth quarter 2003 production was 14% lower than the prior
year quarter, due to a decrease in tons processed. Tons were
down, as the mine focused on backfilling to eliminate a
backlog affecting the availability of production stopes.
-- Fourth quarter costs benefited from significantly higher
silver prices, resulting in a $25 per ounce higher silver
by-product credit over the prior year quarter.
-- For the year, the mine produced 352,070 ounces at a total cash
cost of $52 per ounce. Although the mine had a strong fourth
quarter, it reduced its mining rate from plan in order to
minimize dilution.
-- An 18,000 metre drill program was completed at the end of
September. The focus has been on the 22 Zone, located south of
the mine. Results have been positive, with a 60,000 ton
mineralized zone being identified. An additional drill program
has been scheduled for first half 2004 to further define the
mineralization.
-- Production for 2004 is expected to be in the range of 300,000
to 310,000 ounces of gold at cash costs of $100 to $105 per
ounce. Lower production and higher costs are a result of
mining at lower reserve grades and mining further away from
primary facilities.
Round Mountain (Nevada) (50% share)
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Q4 '03 Q4 '02 2003 2002
--------------------------------------------------------------------
Production 91,059 88,614 392,649 377,747
Total cash cost / oz $ 190 $ 212 $ 173 $ 187
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-- Higher ounces produced during fourth quarter 2003 compared to
the prior year period resulted from higher recoveries from the
dedicated leach pad.
-- The transformer failure in third quarter 2003 continues to
limit the processing of higher-grade ore. Higher recoveries
and an increase in the tons processed from the lower grade
run-of-mine leach ore more than offset this event, allowing
the mine to exceed planned production by 3% for the quarter. A
new transformer will be in service early in first quarter
2004; at that time, normal operations are expected to resume.
-- For the year, the mine produced 392,649 ounces to Barrick's
account. This represents another new annual production record
for Round Mountain.
-- Due to positive results from the nearby Gold Hill deposit, it
will be upgraded to a resource. A 2004 underground exploration
program is currently being planned to follow up on encouraging
high grade drilling intercepts behind the existing ultimate
pit wall.
-- Production for 2004 is expected to be in the range of 355,000
and 365,000 ounces of gold at total cash costs of $205 to $215
per ounce. Production will decrease due to lower leach pad
recoveries, while higher costs are a result of lower
production and processing higher cost stockpiled ore.
Hemlo (Ontario) (50% share)
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Q4 '03 Q4 '02 2003 2002
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Production 64,930 83,179 267,888 269,057
Total cash cost / oz $ 227 $ 184 $ 226 $ 224
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-- Production decreased 22% in fourth quarter 2003 compared to
the prior year period, due to a 25% reduction in grades.
Higher grade stopes from 2002 were replaced with lower grade
ore from the pit as a result of a plugged backfill line and
poor ground conditions which complicated drilling and
blasting. Backfill issues have now been resolved, while work
continues on the drilling and blasting issues.
-- Cash costs per ounce increased due to lower production and
higher labour costs relating to the implementation of a number
of organization changes, including a manpower rationalization
program.
-- For the year, the mine produced 267,888 ounces at a total cash
cost of $226 per ounce to Barrick's account. Production and
cash costs were in line with plan.
-- Production for 2004 is expected to be in the range of 260,000
and 270,000 ounces of gold at total cash costs of $215 to $225
per ounce in line with 2003.
Holt-McDermott (Ontario)
--------------------------------------------------------------------
Q4 '03 Q4 '02 2003 2002
--------------------------------------------------------------------
Production 23,203 21,502 89,515 83,577
Total cash cost / oz $ 210 $ 193 $ 239 $ 173
--------------------------------------------------------------------
-- Fourth quarter 2003 production increased by 8% compared to the
prior year quarter, due to improved grades and throughput (up
3% and 6% 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
operations by fourth quarter 2004. As a result, production is
expected to decrease to approximately 50,000 ounces at a cash
cost of $215 to $225 per ounce.
Other Properties
--------------------------------------------------------------------
Q4 '03 Q4 '02 2003 2002
--------------------------------------------------------------------
Production 12,953 73,443 47,396 374,774
Total cash cost / oz $ 194 $ 188 $ 172 $ 189
--------------------------------------------------------------------
-- 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 in line with plan.
-- Lower production for this category during fourth quarter 2003
compared to the year earlier quarter relates to the closure of
five mines in 2002 due to the depletion of reserves.
-- Production for 2004 at Marigold is expected to be 55,000
ounces to Barrick's account at cash costs between $170 and 180
per ounce.
SOUTH AMERICAN REGION
Barrick's South America Region consists of the Pierina mine and
three significant development projects: Alto Chicama, Veladero and
Pascua-Lama.
Pierina (Peru)
--------------------------------------------------------------------
Q4 '03 Q4 '02 2003 2002
--------------------------------------------------------------------
Production 205,852 281,188 911,723 898,228
Total cash cost / oz $ 89 $ 95 $ 83 $ 80
--------------------------------------------------------------------
-- For the year, Pierina met its production and cash costs
targets.
-- Fourth quarter 2003 production was 27% lower than the prior
year quarter, while cash costs per ounce ran 6% higher.
Variances to production and total cash costs are a result of
planned lower grades offset by increased tons mined. Pierina
is now mining in lower grade areas of the ore body.
-- 2003 is the Mine's 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. The Mine is expected to produce between 640,000 and
645,000 ounces of gold with total cash costs of $95 to $100
per ounce in 2004.
Development Projects
Alto Chicama (Peru)
The Company's Alto Chicama project remains on-schedule for a first
gold pour in second half 2005.
The Environmental Impact Statement (EIS) for the Alto Chicama
Project was submitted September 29, 2003. Public hearings were held
during fourth quarter 2003, with approval expected in second quarter
2004.
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 now complete on the Alto Chicama project, and
detailed engineering commenced in fourth quarter 2003. Other project
activities include:
-- Access road construction, with completion expected in June
2004.
-- Power line construction will commence immediately upon receipt
of EIS approval, anticipated in second quarter 2004.
-- Purchasing activities and tendering will commence during
second quarter 2004.
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 2004. Prospects within 5 kilometers of
Lagunas Norte, which include Lagunas Sur and La Capilla, are showing
encouraging results. Other targets are being evaluated.
Veladero (Argentina)
Veladero's EIS was approved in fourth quarter 2003 and full
construction has commenced.
Fourth quarter accomplishments at Veladero included:
-- Equipment deliveries, as major support equipment arrived
on-site. Pioneering of new roads is on schedule with the first
20 operators working around-the-clock. Pre-strip activities
also have begun.
-- Valley fill heap leach construction has commenced; truck
shops, assay lab, permanent camp and construction camp are in
progress.
-- The construction project has over 700 construction workers
on-site. Peak employment will be 500 permanent staff and 1,000
construction workers.
Veladero is expected to produce 530,000 ounces annually at an
average total cash cost of $155 per ounce (subject to exchange rate
fluctuations and applicable export duties). Production is expected in
late 2005.
Costs for Veladero are being capitalized from October 1, 2003, as
mineralization has now been classified as a reserve for U.S. reporting
purposes.
Pascua-Lama (Chile/Argentina)
Work continues with the engineering optimization of the project,
with a production decision expected in early second quarter 2004. The
reserves at Pascua-Lama are just under 17 million ounces of gold. The
project also contains 584 million ounces of contained silver making it
one of the largest silver resources in the world.
AUSTRALIA/AFRICA REGION
Barrick's Australia/Africa Region consists of four mines in
Australia: Kalgoorlie, Plutonic, Darlot, Lawlers plus Bulyanhulu in
Africa. Significant development projects include Cowal in Australia
and Tulawaka in Tanzania. Tulawaka is expected to commence production
in early 2005 with Cowal coming on in late 2005.
-- The region produced 347,000 ounces during the fourth quarter
2003, in line with the prior year quarter at a total cash cost
that was 18% higher than the prior year quarter.
-- For the year, production was in line with plan at 1,300,000
ounces and total cash costs were 6% higher than plan at $210
per ounce.
-- For 2004, the region is expected to produce in the range of
1,310,000 and 1,335,000 ounces at a total cash cost of $219 to
$233 per ounce.
Plutonic (Western Australia)
--------------------------------------------------------------------
Q4 '03 Q4 '02 2003 2002
--------------------------------------------------------------------
Production 88,233 84,018 333,947 307,377
Total cash cost / oz $ 196 $ 187 $ 193 $ 184
--------------------------------------------------------------------
-- Production for fourth quarter 2003 was 5% above the prior year
period, reflecting both higher grades and mining rates from
the underground. Cash costs were higher than the prior year
period primarily due to a higher Australian dollar exchange
rate.
-- During the quarter, construction of the paste fill plant was
completed. With the plant operating at design capacity, the
expected benefits of improved ore recovery, reduced dilution
and improved mining flexibility are being realized.
-- For the full year, the mine produced 333,947 ounces, 39,000
ounces higher than plan, driven by increased grades, higher
throughput and improved recovery rates. Total cash costs were
in line with plan.
-- Production for 2004 is expected to be between 315,000 and
320,000 ounces of gold at total cash costs of $185 to $195 per
ounce. The production decrease is due to lower open pit ore
tons being mined.
Darlot (Western Australia)
--------------------------------------------------------------------
Q4 '03 Q4 '02 2003 2002
--------------------------------------------------------------------
Production 37,336 40,061 154,977 145,443
Total cash cost / oz $ 182 $ 163 $ 164 $ 168
--------------------------------------------------------------------
-- Fourth quarter 2003 production was 7% lower than the prior
year period, as a result of lower grades and reduced
recoveries.
-- Production and total cash costs for the full year were better
than plan by 8% and 7% respectively.
-- Production for 2004 is expected to be between 140,000 and
145,000 ounces of gold at total cash costs of $190 to $205 per
ounce due to lower grades processed. The increase in total
cash costs is due to an increase in direct mining costs and
lower production.
Lawlers (Western Australia)
--------------------------------------------------------------------
Q4 '03 Q4 '02 2003 2002
--------------------------------------------------------------------
Production 27,355 28,571 99,223 113,291
Total cash cost / oz $ 268 $ 188 $ 249 $ 179
--------------------------------------------------------------------
-- Fourth quarter 2003 production was 4% lower than the prior
year period, due largely to lower head grades partially offset
by higher throughput. The increased cash cost per ounce is
primarily due to the increased throughput.
-- The upgraded crusher improved throughput levels. As a result,
unit processing costs have declined, as fixed processing costs
are offset by additional tonnage combined with lower
maintenance expense.
-- For the full year, the mine produced 99,223 ounces, 12,000
ounces lower than plan, driven largely by lower head grades.
Total cash costs were 17% higher than plan due to lower
production and higher processing costs.
-- Production and total cash costs for 2004 are expected to be
similar to 2003 - 100,000 to 105,000 ounces of gold at $250 to
$265 per ounce.
Kalgoorlie (50% share)
--------------------------------------------------------------------
Q4 '03 Q4 '02 2003 2002
--------------------------------------------------------------------
Production 115,498 98,356 436,098 360,025
Total cash cost / oz $ 215 $ 231 $ 209 $ 222
--------------------------------------------------------------------
-- Kalgoorlie's strong performance continued into fourth quarter
2003, as the mine produced 17% more ounces than the prior year
period. Mining continues to capture high-grade pillars.
-- Total cash costs were lower than the prior year period due to
higher processing rates, grades and recoveries.
-- For the year, the mine produced 436,098 ounces, 92,000 ounces
above plan, due to the higher grades being achieved in the
pit. Total cash costs were lower than plan as a result of the
increased production.
-- Production for 2004 is expected in the range of 395,000 and
400,000 ounces of gold at total cash costs of $230 to $240 per
ounce. The decrease in production is due to expected lower
grades and planned maintenance on the SAG mill, while the
increase in cash costs is due to lower production and
marginally higher open pit costs.
Bulyanhulu (Tanzania)
--------------------------------------------------------------------
Q4 '03 Q4 '02 2003 2002
--------------------------------------------------------------------
Production 78,737 100,776 313,551 356,319
Total cash cost / oz $ 316 $ 185 $ 246 $ 198
--------------------------------------------------------------------
-- Fourth quarter 2003 production was 20% lower than the prior
year period but in line with the stabilization plan announced
at the beginning of the third quarter 2003.
-- Cash costs for the quarter were higher than the prior year
period, reflecting the reduced mining rate as the operation is
being stabilized.
-- With the successful completion of the flotation expansion and
adjustments made through first half 2003, recovery rates are
now averaging 88.5%.
-- The mining rate for fourth quarter 2003 averaged 2,790 tons
per day (tpd). This was a 7% increase over the stabilization
plan rate.
-- Results for the quarter are in line with the stabilization
plan. For the full year the Mine produced 313,551 ounces at a
total cash cost of $246 per ounce.
-- Production for 2004 is expected in the range of 360,000 and
365,000 ounces of gold at total cash costs of $240 to $260 per
ounce. The increase in production is due to higher grades and
increased mining productivity as a result of the stabilization
plan.
Development Projects
Cowal (Australia)
At the Company's Cowal property in Australia, construction of mine
infrastructure commenced in January 2004. Mine development is
anticipated during the first quarter, leading to initial production in
early 2006.
Tulawaka Project (Tanzania)
The Tulawaka project is under construction and reached several
milestones during fourth quarter 2003:
-- A Special Mining Licence was granted by the Minister of Energy
and Minerals of Tanzania in November 2003.
-- Forestry rights were obtained/acquired in late November;
provisional water rights were obtained in December 2003.
-- Development Agreement (fiscal stability) was finalized on
December 29th, 2003.
-- Barrick finalized a term sheet with our Joint Venture partner
(30%), Exploration Minieres du Nord (MDN), to finance their
portion of the Tulawaka development expenditures.
-- Mobilization of contractors began in December 2003.
-- North West zone exploration drilling has outlined a new quartz
vein mineralized system approximately 15 kilometers northwest
of the East Zone deposit.
AMORTIZATION
Amortization totaled $132 million, or $93 per ounce1, for fourth
quarter 2003, compared to $144 million or $88 per ounce1 in the year
earlier quarter. The decrease in fourth quarter amortization was
primarily due to a decrease in ounces sold compared to the prior year
period as well as corporate amortization. For the full year,
amortization was $522 million, or $90 per ounce, compared to $519
million, or $85 per ounce, for 2002. Amortization was higher on a per
ounce basis and also in aggregate due to a change in the production
mix across our portfolio of mines, which more than offset the effect
of a decrease in ounces sold.
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 fourth quarter 2003 to reflect the amortization of
the increase to property, plant and equipment from adopting the new
standard at the beginning of 2003.
The second change relates to the amortization of underground
development costs to exclude estimates of future underground
development costs from the current period amortization. The new
accounting policy for underground mines had minimal impact on our
fourth quarter results. For the year-ended December 31, 2003, the
effect of this change on amortization increased it by $1 million.
Amortization in 2004 is expected to be in the $480 million to $490
million range.
ADMINISTRATION
Fourth quarter 2003 administration costs were $20 million, an
increase of $5 million over the year earlier period. The increase
relates mainly to additional salaries, reorganization, legal insurance
and regulatory costs.
Administration costs in 2004 are expected to be approximately $80
million.
EXPLORATION AND BUSINESS DEVELOPMENT
Exploration and business development expenses of $36 million in
fourth quarter 2003 were $9 million higher than the year earlier
quarter. In the fourth quarter 2003, the Company expensed $8 million
on development activities at Alto Chicama, and $19 million on its
exploration program with business development initiatives accounting
for the remainder. In the prior year quarter, the Company expensed $17
million on development activities at Veladero and Alto Chicama, $8
million on its exploration program, and the remainder on business
development initiatives. Compared to the prior year quarter,
exploration costs were up because of higher spending in North America
and Tanzania. Spending on development activities at Veladero was
capitalized in fourth quarter 2003 as Veladero achieved SEC reserve
status in October 2003. For the full year, the Company expensed $54
million on development activities (2002 - $49 million); and $62
million on its exploration program (2002 - $38 million); with the
remainder on business development initiatives. The year over year
increase reflects the higher volume of expensed development activities
at Veladero and Alto Chicama, and the Company's continued focus and
investment in its exploration program.
Looking forward to 2004, the Company expects exploration and
business development expenses to be approximately $110 million, as it
continues to advance the Alto Chicama project and to support its
grassroots exploration program.
INMET LITIGATION
In the fourth quarter 2003, the Company recorded a charge to
earnings of $14 million following a court ruling on the Inmet
litigation which awarded pre-judgment interest to Inmet. This ruling
was in addition to $72 million awarded to Inmet in 2001 (including
post-judgment interest), and put the full amount of the accrued
litigation paid to Inmet at $86 million.
OTHER INCOME/EXPENSE
For the fourth quarter 2003, interest and other income was $11
million, an increase of $10 million compared to the prior year period.
In fourth quarter 2003, the Company realized $7 million in gains on
various asset sales, including $3 million on various land parcels in
the United States, and earned interest on its cash balances of $9
million. These amounts were offset by other expenses totaling $5
million, mainly relating to provisions against certain investments and
royalties.
In the year earlier quarter, the Company earned $12 million of
interest on its cash balances, offset by losses on the write-down of
various assets.
Interest and other income in 2004 is expected to be approximately
$35 million.
INTEREST EXPENSE
The Company incurred $12 million in interest costs in fourth
quarter 2003, compared to $14 million in the year earlier quarter,
relating primarily to its $500 million of debentures and the
Bulyanhulu project financing. The increase in the amount of interest
capitalized - $4 million in 2003 compared to $1 million in 2002 is due
to the capitalization of interest on Veladero project costs, which
began in October 2003. The Company's $80 million variable rate bonds
as well as 70% of the Company's $500 million of debentures, which have
been swapped from fixed to floating rates using interest rate swaps,
bear interest at variable rates. The decrease in interest incurred for
the fourth quarter 2003 reflects the impact of lower market interest
rates on these variable rate debt obligations.
For the full year, interest incurred decreased from $59 million to
$49 million mainly due to the decline in market interest rates.
Interest capitalized increased from $2 million to $5 million due to
amounts capitalized at Veladero in 2003. Interest expense in 2004 is
expected to be about $27 million.
NON-HEDGE DERIVATIVE GAINS
In fourth quarter 2003, non-hedge derivative gains totaled $46
million, relating mainly to currency and gold lease rate contracts.
The Company recorded unrealized gains of $21 million on its gold lease
rate contracts, due mainly to lower gold lease rates. The Company also
transferred unrealized gains of $9 million from OCI to earnings on its
Australian dollar cash flow hedge contracts due to changes in the
timing of the hedged items, which caused the termination of hedge
accounting under FAS 133. The loss of $14 million in the prior year
quarter relates primarily to losses on interest rate contracts,
including lease rate swaps, due to movements in interest rates.
Forward prices under the Company's gold sales contracts are fixed
and have no lease rate exposure. For a notional amount representing
approximately one fifth of the contracts, the Company swapped out of
the implied fixed lease rates into floating lease rates to take
advantage of lower short-term lease rates. As gold prices, gold lease
rates and interest rates decline/(increase), an unrealized
mark-to-market gain/(loss) on these swap contracts occurs and is
recorded in earnings each quarter. The Company expects to see ongoing
fluctuations, which could be significant, in the fair value of these
swap contracts in the future as gold prices, gold lease rates and
interest rates change.
INCOME TAXES
In fourth quarter 2003, the Company recorded a net income tax
credit of $4 million, compared to a net income tax credit of $22
million in the prior year quarter. The credit in fourth quarter 2003
primarily reflects a release of valuation allowances totaling $18
million of which $15 million was in Argentina, due to the higher spot
gold price. Excluding this valuation allowance release, the underlying
tax expense was $14 million. The credit for fourth quarter 2002 mainly
reflects the net impact of tax planning completed in the period and
the outcome of certain tax uncertainties. Income tax expense for the
year-ended December 31, 2003 also includes a release of valuation
allowances against deferred tax assets totaling $21 million in the
second quarter 2003, resulting from actions completed during that
quarter which provided assurance of the future realization of such
assets. Excluding the total valuation allowance release of $39
million, the Company's effective tax rate for the year-ended December
31, 2003 was 20%, compared to 9% for the year earlier period. Compared
to the Canadian federal tax rate of 38%, the Company's 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 $310 per
ounce in 2002 to $363 per ounce in 2003. Non-hedge derivative gains
taxed in a low tax rate jurisdiction also contributed to a lower
effective tax rate. The Company's tax rate rises in a higher spot gold
price environment, as a larger portion of its earnings are taxed in
higher tax-rate jurisdictions.
For 2004, excluding the effect of non-hedge derivative gains and
any changes in tax valuation allowances, the Company expects its
effective tax rate to be approximately 30%, assuming a spot gold price
of $400 per ounce.
STATEMENT OF COMPREHENSIVE INCOME
Comprehensive income consists of net income or loss, that,
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 $162 million in fourth quarter 2003,
compared to $65 million in the year earlier quarter. The primary
reason for the increase in 2003 relates to unrealized gains on foreign
currency cash flow hedge contracts and increases in the market value
of available for sale securities over the past year.
LIQUIDITY AND CAPITAL RESOURCES
The Company believes its ability to generate substantial cash flow
from operations is one of its fundamental financial strengths.
Combined with its large cash balance of almost $1 billion at December
31, 2003 and $1 billion undrawn bank facility, the Company has
sufficient access to capital resources to develop its internal
projects and maintain a strong exploration program.
OPERATING ACTIVITIES
The Company generated operating cash flow of $134 million in
fourth quarter 2003, compared to $195 million in the year earlier
period. Operating cash flow in fourth quarter 2003 includes the
payment of $86 million on the settlement of the Inmet litigation.
Excluding this item, the Company generated higher operating cash flow
in 2003 due to higher realized gold prices, and lower payments of
reclamation and closure costs, offset by higher cash operating costs
and higher income tax payments.
The Company's operating cash flow in 2003 was 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 fourth quarter
2003, this timing difference resulted in a net decrease to operating
cash flow of $12 million. For the twelve-month period ended December
31, 2003, this timing difference resulted in a net decrease in
operating cash flow of $57 million. As taxable income is significantly
affected by changes in spot gold prices, any timing differences
resulting from these changes could impact the Company's future
operating cash flow.
INVESTING ACTIVITIES
The Company's principal investing activities in 2003 were for
sustaining capital at its existing operating mines, new mine
development and acquisitions of investments.
Capital expenditures for fourth quarter 2003 totaled $106 million,
compared to $62 million for the year earlier period. The increase was
primarily due to amounts spent at Veladero ($49 million), which began
construction in the fourth quarter. Capital expenditures also included
$17 million in Australia, mainly for underground development and new
mining equipment, $18 million in North America for maintenance
capital, and $9 million in Tanzania spent at the Bulyanhulu Mine on
underground development. In South America, capital expenditures
totaled $10 million (excluding Veladero) relating to Pierina and
engineering and development work at Pascua-Lama.
The Company expects capital spending to increase substantially in
2004 to approximately $770 million, as it advances the construction of
Veladero, Cowal and Alto Chicama.
In fourth quarter 2003, the Company spent $44 million to acquire a
10% interest in Highland Gold. Combined with a further investment of
$40 million in early 2004, the Company raised its equity interest in
Highland to approximately 17%. The Company also spent a further $9
million on investments in other junior mining companies.
FINANCING ACTIVITIES
During fourth quarter 2003, the Company's cash outflow on
financing activities was $54 million, compared with $81 million in the
year earlier period. The lower outflow in fourth quarter 2003 was
largely due to proceeds from the exercise of stock options and the
timing of payments on our long-term debt obligations.
NON-GAAP MEASURES
The Company has included cost per ounce data because it
understands 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. The Company has also included a
measure of operating cash flow excluding the settlement of litigation.
Litigation settlements are infrequent in occurrence, and therefore
including this non-GAAP1 measure of performance provides a more
comparable basis for assessing the company's cash flow performance in
2003 compared with 2002. The Company believes that conventional
measures of performance prepared in accordance with GAAP do not fully
illustrate the ability of its operating mines to generate cash flow.
Non-GAAP measures do not have any standardized meaning prescribed by
US GAAP, and therefore they may not be comparable to similar measures
employed by other companies. 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, the Company has not provided formal reconciliations of
these statistics. Where GAAP operating costs are adjusted in computing
cost per ounce data, the Company has provided reconciliations below.
Reconciliation of Total Cash Costs Per Ounce to
Financial Statements(1)
---------------------------------------------------------------------
(In millions of United Three months ended Twelve months ended
States dollars except December 31, December 31,
per ounce amounts) 2003 2002 2003 2002
---------------------------------------------------------------------
Cost of sales and other
operating expenses per
financial statements $ 310 $ 284 $ 1,134 $1,071
Reclamation costs/other (39) (16) (83) (43)
---------------------------------------------------------------------
Cost of sales and other
operating expenses for
per ounce calculation $ 271 $268 $1,051 $1,028
---------------------------------------------------------------------
Ounces sold (thousands) 1,362 1,540 5,554 5,805
Total cash costs per ounce $ 199 $ 174 $ 189 $ 177
---------------------------------------------------------------------
1. 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
---------------------------------------------------------------------
(In millions of United Three months ended Twelve months ended
States dollars except December 31, December 31,
per ounce amounts) 2003 2002 2003 2002
---------------------------------------------------------------------
Amortization per financial
statements $ 132 $ 144 $ 522 $ 519
Amortization recorded on
property, plant and equipment
not at operating mine sites (4) (10) (25) (26)
---------------------------------------------------------------------
Amortization for per ounce
calculation 128 134 497 493
Reclamation costs - 9 - 35
---------------------------------------------------------------------
Amortization and reclamation
costs for per ounce
calculation $ 128 $ 143 $ 497 $ 528
---------------------------------------------------------------------
Ounces sold (thousands) 1,362 1,540 5,554 5,805
Amortization costs per ounce $ 93 $ 88 $ 90 $ 85
Amortization and reclamation
costs per ounce $ 93 $ 93 $ 90 $ 91
---------------------------------------------------------------------
Reconciliation of Operating Cash Flow Excluding The Inmet Settlement
---------------------------------------------------------------------
(In millions of United Three months ended Twelve months ended
States dollars except per December 31, December 31,
share amounts) 2003 2002 2003 2002
---------------------------------------------------------------------
Operating cash flow per
financial statements $ 134 $ 195 $ 521 $ 589
Inmet settlement 86 -- 86 --
---------------------------------------------------------------------
Operating cash flow
excluding Inmet settlement $220 $195 $607 $589
Per share data:
Operating cash flow $0.26 $0.36 $0.97 $1.09
Operating cash flow
excluding Inmet settlement $0.42 $0.36 $1.13 $1.09
---------------------------------------------------------------------
FINANCIAL RISK MANAGEMENT
Forward Gold Sales Hedge Position (as of December 31, 2003)
---------------------------------------------------------------------
Gold ounces hedged 15.5 million ounces (or slightly less than
three years of expected future production)
---------------------------------------------------------------------
Current termination date 2013 in most cases
of gold sales contracts
---------------------------------------------------------------------
Average projected $400/oz(1)
realizable gold sales
contract price at 2013
termination date.
---------------------------------------------------------------------
Delivery obligations Barrick will deliver gold production from
operations against gold sales contracts by
the termination date (which is currently
2013 in most cases). However, Barrick may
choose to settle any gold sales contract
in advance of this termination date at any
time, at its discretion. Historically,
delivery has occurred in advance of the
contractual termination date. This means
Barrick can deliver gold at the higher of
spot prices, or prices under the hedge
contracts, until the termination date of
these contracts.
---------------------------------------------------------------------
Average forecast minimum $309/oz(1),(2),(3)
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 $(1,725) billion(4)
loss at December 31, 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. Assumes delivery of 100% of expected future production against
current gold sales contracts which would exhaust all remaining
gold hedge positions.
4. At a spot gold price of $415 per ounce.
In all of the Company's master trading agreements, which govern
the terms of its gold sales contracts with its 19 counterparties, the
following applies:
-- The counterparties do not have unilateral and discretionary
'right to break' provisions.
-- There are no credit downgrade provisions.
-- The Company is not subject to any margin calls - regardless of
the price of gold.
-- The Company has the right to accelerate the delivery of gold
at any time during the life of its contracts. This flexibility
is demonstrated by the terms that allow it to deliver under
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 the Company can sell its gold at the market
price or the hedge price, whichever is higher, to the
termination date of our contracts (2013 in most cases).
The Company's trading agreements with its counterparties do
provide for early close out of certain transactions in the event of a
material negative change in its ability to produce gold for delivery
under its 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$3.5 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.
-- Barrick's agreements exclude unrealized valuations in the
calculation of consolidated net worth.
The foregoing information is a summary of certain aspects of the
Company's 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 December
31, 2003 was approximately $1.4 billion negative. The year-to-date
change in the fair value of the Company's derivative instruments is
detailed as follows: Mark-to-Market (FairValue) at December 31, 2003
of all derivative instruments:
Mark-to-Market (Fair Value) at September 30, 2003 of all derivative
instruments:
---------------------------------------------------------------------
Gold forward sales position $ (1,725)
Silver forward sales position (20)
Foreign currency position 288
Interest rate position 38
---------------------------------------------------------------------
All derivative instruments $ (1,419)
---------------------------------------------------------------------
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
$415 per ounce) (1,088)
Contango earned period to date 138
Impact of change in valuation inputs other than spot
metal prices (e.g. interest rates and lease rates) (66)
---------------------------------------------------------------------
Fair value as at December 31, 2003 - Unrealized loss $ (1,725)
---------------------------------------------------------------------
The mark-to-market value of the gold contracts is based on a spot
gold price of $415 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 $303 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 Twelve months ended
Dec. 31, Dec. 31,
---------------------------------------------------------------------
(Unaudited) 2003 2002 2003 2002
---------------------------------------------------------------------
Gold sales (note 13) $536 $526 $2,035 $1,967
---------------------------------------------------------------------
Costs and expenses
Cost of sales and other operating
expenses (1)(notes 3 and 13) 310 284 1,134 1,071
Amortization (note 13) 132 144 522 519
Administration 20 15 83 64
Merger and related costs - (2) - (2)
Exploration and business
development 36 27 137 104
---------------------------------------------------------------------
498 468 1,876 1,756
---------------------------------------------------------------------
Other income/expense (note 4) 11 1 52 29
Inmet litigation (note 12B) (14) - (16) -
Interest expense (8) (13) (44) (57)
Non-hedge derivative gains
(losses) (note 11E) 46 (14) 71 (6)
---------------------------------------------------------------------
Income before income taxes
and other items 73 32 222 177
Income tax (expense)
recovery (note 5) 4 22 (5) 16
---------------------------------------------------------------------
Income before cumulative effect of
changes in accounting principles 77 54 217 193
Cumulative effect of changes in
accounting principles (note 2) - - (17) -
---------------------------------------------------------------------
Net income $77 $54 $200 $193
---------------------------------------------------------------------
Earnings per share data (note 6):
Income before cumulative effect
of changes in accounting
principles
Basic and diluted $0.14 $0.10 $0.40 $0.36
Net income
Basic and diluted $0.14 $0.10 $0.37 $0.36
---------------------------------------------------------------------
1. Exclusive of amortization (note 3)
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 Twelve months ended
Dec. 31, Dec. 31,
---------------------------------------------------------------------
(Unaudited) 2003 2002 2003 2002
---------------------------------------------------------------------
OPERATING ACTIVITIES
Net income for the period $77 $54 $200 $193
Amortization (note 13) 132 144 522 519
Changes in capitalized
mining costs 3 18 37 29
Deferred income taxes (note 5) 16 (66) (49) (75)
Inmet litigation settlement
(note 12B) (86) - (86) -
Gains on sale of long-lived
assets (note 4) (7) (3) (39) (8)
Other items (note 14) (1) 48 (64) (69)
---------------------------------------------------------------------
Net cash provided by
operating activities 134 195 521 589
---------------------------------------------------------------------
INVESTING ACTIVITIES
Property, plant and
equipment
Capital expenditures (note 13) (106) (62) (322) (228)
Sales proceeds 10 4 48 11
Purchase of investments (53) - (55) -
Short-term cash deposits - - - 159
---------------------------------------------------------------------
Net cash used in investing
activities (149) (58) (329) (58)
---------------------------------------------------------------------
FINANCING ACTIVITIES
Capital stock
Proceeds from shares issued on
exercise of stock options 18 - 29 83
Repurchased for cash (note 9A) - - (154) -
Long-term debt repayments (14) (22) (23) (25)
Dividends (58) (59) (118) (119)
---------------------------------------------------------------------
Net cash used in financing
activities (54) (81) (266) (61)
---------------------------------------------------------------------
Increase (decrease) in cash
and equivalents (69) 56 (74) 470
Cash and equivalents at
beginning of period 1,039 988 1,044 574
---------------------------------------------------------------------
Cash and equivalents at end
of period $970 $1,044 $970 $1,044
---------------------------------------------------------------------
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
Dec. 31, Dec. 31,
(Unaudited) 2003 2002
---------------------------------------------------------------------
ASSETS
Current assets
Cash and equivalents $970 $1,044
Accounts receivable 69 72
Inventories (note 8) 157 159
Other current assets (note 8) 169 47
---------------------------------------------------------------------
1,365 1,322
Investments 127 41
Property, plant and equipment 3,131 3,311
Capitalized mining costs, net 235 272
Unrealized fair value of derivative contracts 256 78
Other assets 248 237
---------------------------------------------------------------------
Total assets $5,362 $5,261
---------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $245 $213
Other current liabilities 105 270
---------------------------------------------------------------------
350 483
Long-term debt 719 761
Other long-term obligations 569 528
Deferred income tax liabilities 230 155
---------------------------------------------------------------------
Total liabilities 1,868 1,927
---------------------------------------------------------------------
Shareholders' equity
Capital stock 4,115 4,148
Deficit (694) (689)
Accumulated other comprehensive income
(loss) (note 7) 73 (125)
---------------------------------------------------------------------
Total shareholders' equity 3,494 3,334
---------------------------------------------------------------------
Total liabilities and shareholders' equity $5,362 $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 2002
---------------------------------------------------------------------
Common shares (number in millions)
At January 1 542 536
Issued for cash/on exercise
of stock options 2 6
Repurchased for cash (note 9A) (9) -
---------------------------------------------------------------------
At Dec. 31 535 542
---------------------------------------------------------------------
Common shares
At January 1 $4,148 $4,062
Issued for cash/on exercise of stock options 34 86
Repurchased for cash (note 9A) (67) -
---------------------------------------------------------------------
At Dec. 31 $4,115 $4,148
---------------------------------------------------------------------
Deficit
At January 1 $(689) $(763)
Net income 200 193
Dividends (118) (119)
Repurchase of common shares(1) (87) -
---------------------------------------------------------------------
At Dec. 31 $(694) $(689)
---------------------------------------------------------------------
Accumulated other comprehensive income (note 7) $73 $(125)
---------------------------------------------------------------------
Total shareholders' equity at Dec. 31 $3,494 $3,334
---------------------------------------------------------------------
(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 Twelve months ended
States dollars, US GAAP Dec. 31, Dec. 31,
basis) (Unaudited) 2003 2002 2003 2002
---------------------------------------------------------------------
Net income $77 $54 $200 $193
Foreign currency translation
adjustments (note 7) 2 2 (3) (21)
Transfers of realized gains on
cash flow hedges to earnings
(note 7) (17) (8) (61) (21)
Hedge ineffectiveness transferred
to earnings (note 7) (5) - (12) -
Change in gains accumulated in OCI
for cash flow hedges (note 7) 81 17 230 28
Additional minimum pension
liability (note 7) - (2) - (2)
Transfers of realized losses on
available-for-sale securities
to earnings (note 7) 1 4 8 4
Unrealized gains (losses) on
available-for-sale securities
(note 7) 23 (2) 36 (6)
---------------------------------------------------------------------
Comprehensive income $162 $65 $398 $175
---------------------------------------------------------------------
The accompanying notes are an integral part of these unaudited
interim consolidated financial statements
Notes to Unaudited Interim Consolidated Financial Statements
(US GAAP)
Tabular dollar amounts in millions of United States dollars,
unless otherwise indicated, US GAAP basis. References to C$ 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. 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; future estimates of
costs and expenses; and/or assumptions of future commodity prices,
interest rates and foreign currency rates. Such estimates and
assumptions include:
-- decisions as to whether exploration and mine development costs
should be capitalized or expensed;
-- assessments of whether property, plant and equipment, ore in
stockpiles and capitalized mining costs may be impaired;
-- assessments of our ability to realize the benefits of deferred
income tax assets;
-- the useful lives of long-lived assets and the rate at which we
record amortization in earnings;
-- the estimated fair value of asset retirement obligations;
-- the timing and amounts of forecasted future expenditures that
represent the hedged items underlying hedging relationships
for our cash flow hedge contracts;
-- the estimated fair values of derivative instruments;
-- the value of slow-moving and obsolete inventories (which are
stated at the lower of average cost and net realizable value);
and
-- assessments of the likelihood and amounts of 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 December 31, 2003, the effect on
earnings of adopting FAS 143 was a decrease in income before the
cumulative effect of accounting changes by $2 million ($nil per
share), and for the twelve-month period ended December 31, 2003 the
effect was a decrease in income before the cumulative effect of
accounting changes by $43 million ($ 0.08 per share).
For the three-month period ended December 31, 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 twelve-month period ended December 31, 2002, the
effect would have been a decrease in income before the cumulative
effect of accounting changes by $5 million ($0.01 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 December 31, 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 twelve-month period ended December 31, 2003, the
effect was a decrease in income before the cumulative effect of
accounting changes by $0.16 million ($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 December 31, 2002, or twelve-month period ended December 31,
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 was to
increase pension cost expense by $2 million for the full year.
Proven and probable reserves
For the twelve-month period ended December 31, 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 development 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 began capitalizing
development costs at the Veladero project prospectively for future
periods.
3 COST OF SALES AND OTHER OPERATING EXPENSES
---------------------------------------------------------------------
Three months ended Twelve months ended
December 31, December 31,
2003 2002 2003 2002
---------------------------------------------------------------------
Cost of sales(1) $ 282 $ 294 $ 1,100 $ 1,114
By-product revenues (28) (30) (114) (119)
Royalty expenses 14 11 50 37
Production taxes 3 2 15 5
Reclamation and other closure
costs (note 2A) - 7 - 34
Accretion expense on
reclamation/closure obligations
and other reclamation/closure
costs (note 2A) 39 - 83 -
---------------------------------------------------------------------
$ 310 $ 284 $ 1,134 $ 1,071
---------------------------------------------------------------------
(1) Cost of sales includes all costs that are capitalized to
inventory, except for amortization of property, plant and
equipment.
The amount of amortization capitalized into inventory, but
excluded from cost of sales was $128 million in the three months
ended December 31, 2003 (2002 - $134 million); and $497 million
in the twelve months ended December 31, 2003 (2002 - $493
million).
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 charge to inventory 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
December 31, 2003 resulted in an increase in operating costs by $3
million compared to actual costs incurred (three months ended December
31, 2002 - $18 million increase), and for the twelve months ended
December 31, 2003, the application resulted in an increase in
operating costs by $37 million compared to actual costs incurred
(twelve months ended December 31, 2002 - $29 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 grouped with related mining property, plant and equipment for
impairment testing purposes.
Average stripping ratios (1)
---------------------------------------------------------------------
Three months ended Twelve months ended
December 31, December 31,
2003 2002 2003 2002
---------------------------------------------------------------------
Open Pit (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 8 years. The full
amount of stripping costs incurred will be expensed by the end of the
mine lives.
4 OTHER INCOME/EXPENSE
---------------------------------------------------------------------
Three months ended Twelve months ended
December 31, December 31,
2003 2002 2003 2002
---------------------------------------------------------------------
Interest income $ 9 $ 12 $ 34 $ 30
Gains on sale of long-lived assets 7 3 39 8
Foreign currency translation gains
(losses) 8 (2) 2 1
Losses on available for sale
securities (5) - (12) (4)
Other items (8) (12) (11) (6)
---------------------------------------------------------------------
$ 11 $ 1 $ 52 $ 29
---------------------------------------------------------------------
In 2003, we sold various assets, including several land positions
around inactive mine sites in the United States; as well as the East
Malartic Mill and Bousquet mine in Canada. We may continue to sell
further land positions around our inactive mine sites in the United
States. These land positions have been fully amortized, and therefore
any proceeds would likely generate gains on sale, before selling costs
and taxes.
5 INCOME TAXES
Income tax recovery (expense)
---------------------------------------------------------------------
Three months ended Twelve months ended
December 31, December 31,
2003 2002 2003 2002
---------------------------------------------------------------------
Current $ 20 $ (44) $ (54) $ (59)
Deferred (16) 66 49 75
---------------------------------------------------------------------
$ 4 $ 22 $ (5) $ 16
---------------------------------------------------------------------
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 $49 million deferred income tax credit for 2003. In
fourth quarter 2003, we released valuation allowances totaling $18
million, that mainly includes allowances of $15 million that had been
recorded against deferred tax assets in Argentina. Following the
approval to begin construction at Veladero and the classification of
mineralized material as proven and probable reserves in fourth quarter
2003, we concluded that sufficient evidence existed to support the
realization of deferred tax assets, and a valuation allowance was no
longer required. Excluding the $39 million valuation allowance release
our underlying effective tax rate for 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 carry forwards 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
December 31, 2003, which amounted to 534 million shares (2002 - 542
million shares), and for the twelve-month period ended December 31,
2003 amounted to 539 million shares (2002 - 541 million shares).
Diluted net income per share reflects the dilutive effect of the
exercise of 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 December 31, 2003
amounted to 536 million shares (2002 - 543 million shares) and for the
twelve-month period ended December 31, 2003 amounted to 539 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. These other gains and losses
consist mainly of gains and losses on derivative instruments accounted
for as cash flow hedges; unrealized gains and losses on
available-for-sale securities; and foreign currency translation
adjustments.
Parts of comprehensive income
---------------------------------------------------------------------
Three months ended Twelve months ended
December 31, December 31,
---------------------------------------------------------------------
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 $ 2 $ - $ 2 $ - $ (3) $ - $ (21) $ -
Transfers of
realized gains
on cash flow
hedges to
earnings
(note 11F) (29) 12 (7) (1) (91) 30 (25) 4
Hedge
ineffectiveness
transferred
to earnings
(note 11F) (9) 4 - - (19) 7 - -
Change in
gains
accumulated
in OCI for
cash flow
hedges
(note 11F) 119 (38) 31 (14) 349 (119) 49 (21)
Additional
minimum
pension
liability - - (2) - - - (2) -
Transfers of
realized
losses on
available for
sale securities
to earnings 1 - 4 - 8 - 4 -
Unrealized
gains (losses)
on available
for sale
securities 23 - (2) - 36 - (6) -
---------------------------------------------------------------------
$ 107 $(22) $ 26 $ (15) $ 280 $ (82) $ (1) $ (17)
---------------------------------------------------------------------
Accumulated other comprehensive income (loss) (OCI)
---------------------------------------------------------------------
At December 31, 2003 At December 31, 2002
---------------------------------------------------------------------
Pre-tax Tax Total Pre-tax Tax Total
amount effect amount effect
---------------------------------------------------------------------
Foreign currency
translation
adjustments $ (147) $ - $(147) $ (144) $ - $(144)
Accumulated gains
on cash flow
hedges (note 11F) 288 (99) 189 49 (17) 32
Additional minimum
pension liability (7) - (7) (7) - (7)
Unrealized gains (losses)
on available-for-sale
securities 38 - 38 (6) - (6)
---------------------------------------------------------------------
$ 172 $ (99) $ 73 $ (108) $ (17) $(125)
---------------------------------------------------------------------
8 INVENTORIES AND OTHER CURRENT ASSETS
---------------------------------------------------------------------
At December 31, At December 31,
2003 2002
---------------------------------------------------------------------
Inventories
Gold in process and ore in stockpiles $ 99 $ 100
Mine operating supplies 58 59
---------------------------------------------------------------------
$ 157 $ 159
---------------------------------------------------------------------
Other current assets
Derivative assets (note 11) 154 37
Prepaid expenses 15 10
---------------------------------------------------------------------
$ 169 $ 47
---------------------------------------------------------------------
Gold in process and ore in stockpiles excludes $64 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 twelve-month period ended December 31, 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 December 31, 2003, $1.5 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 Twelve months ended
December 31, December 31,
2003 2002 2003 2002
---------------------------------------------------------------------
Total revenues and other income $ 61 $ 62 $ 226 $ 203
Less: costs and expenses 70 53 245 191
---------------------------------------------------------------------
Income (loss) before taxes: (9) 9 (19) 12
---------------------------------------------------------------------
Net income (loss) $ (27) $ 6 $ (38) $ (1)
---------------------------------------------------------------------
---------------------------------------------------------------------
At December 31, 2003 At December 31, 2002
---------------------------------------------------------------------
Current assets $ 72 $ 91
Non-current assets 233 236
---------------------------------------------------------------------
Total assets 305 327
---------------------------------------------------------------------
Current liabilities 20 75
Intercompany notes payable 546 407
Other long-term liabilities 11 18
Deferred income taxes 67 122
Shareholders' equity (339) (295)
---------------------------------------------------------------------
Total liabilities and shareholders' equity $ 305 $ 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 4.8 $ 28.61 - -
Exercised (1.0) $ 23.99 (0.7) $ 13.07
Canceled or expired (1.2) $ 27.95 (0.1) $ 22.88
---------------------------------------------------------------------
At December 31, 2003 21.5 2.3
---------------------------------------------------------------------
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 Twelve months ended
December 31, December 31,
2003 2002 2003 2002
---------------------------------------------------------------------
Pro forma effects
Net income, as reported $ 77 $ 54 $ 200 $ 193
Stock option expense (6) (6) (24) (21)
---------------------------------------------------------------------
Pro forma net income $ 71 $ 48 $ 176 $ 172
---------------------------------------------------------------------
Net income per share
As reported (1) $ 0.14 $ 0.10 $ 0.37 $ 0.36
Pro forma (1) $ 0.14 $ 0.09 $ 0.33 $ 0.32
---------------------------------------------------------------------
(1) basic and diluted
11 DERIVATIVE INSTRUMENTS
A Derivative instruments
We use derivative financial instruments to mitigate the effects of
certain risks that are inherent in our business, and also to take
advantage of opportunities to secure attractive pricing for
commodities, currencies and interest rates, utilizing our credit
capacity to do so. The inherent risks that we most often attempt to
mitigate by the use of derivative instruments occur from changes in
commodity prices (gold and silver), interest rates and foreign
currency exchange rates. Because we produce gold and silver, incur
costs in foreign currencies and invest and borrow in US dollars and
are therefore subject to US interest rates, all of our derivative
contracts cover natural underlying asset or liability positions.
The purpose of the hedging elements of our derivative program is
that changes in the values of cash flows from hedged items are offset
by equivalent changes in the values of derivatives instruments.
We do not hold derivatives for the purpose of speculation; our
risk management programs are designed to enable us to plan our
business effectively and, where possible, mitigate adverse effects of
future movements in gold and silver prices, interest rates and foreign
currency exchange rates.
For a more detailed description of the types of derivative
instruments we use, and our accounting policies 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 fixed price forward gold sales contracts with various
counterparties for 15.5 million ounces of future gold production. The
terms of the contracts are governed by master trading agreements that
we have in place with the counterparties to the contracts. The
contracts have final delivery dates over the next 10 to 15 years, but
we have the right to accelerate the delivery date at any time over
these periods. Contract prices are established at inception through to
an interim date. Based on the contractual terms of the fixed-price
contracts and current spot and forward gold market prices, the average
price that would be realized if all production in the next three years
was used to deliver into these contracts would be $309 per ounce. If
we do not deliver at this interim date, a new interim date is set. The
price for the new interim date is determined in accordance with the
master trading agreements which have contractually agreed price
adjustment mechanisms based on the market gold price. The master
trading agreements have both fixed and floating price mechanisms. The
fixed price represents the market price at the start date (or previous
interim date) of the contract plus a premium based on the difference
between the forward price of gold and the current market price of
gold. For the majority of fixed-price forward gold sales contracts,
selling prices are fixed through 2006. If at an interim date we opt
for a floating price, the floating price represents the spot market
price of gold plus or minus the difference between the previously
fixed price and the market gold price at that interim date. Forward
gold market prices, are principally influenced by the current market
price of gold, gold lease rates and U.S. dollar interest rates. The
final realized selling price under the contracts will depend on the
timing of the actual future delivery date, the market price of gold at
the start of the contract and the actual amount of the premium of the
forward price of gold over the spot price of gold on the dates that
fixed selling prices are set.
We use gold lease rate swap contracts to manage our gold lease
rate exposure. Based on the fact that historical short-term gold lease
rates have been lower than longer-term gold lease rates, and because
fixed price forward gold sales contracts have fixed gold lease rates,
we have used these gold lease rate swap contracts to economically
achieve a more optimal term structure for gold lease costs. Under
these swaps we receive a fixed gold lease rate, and pay a floating
gold lease rate on 3.3 million ounces of gold spread from 2004 to
2013. The swaps are associated with forward gold sales contracts with
expected delivery dates beyond 2006. The contracts are accounted for
as non-hedge derivatives.
Major customers
The largest single counterparty as of December 31, 2003 made up
12% 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 December 31,
2003, we had fixed-price commitments to deliver 22.3 million ounces of
silver over periods of up to 10 to 15 years.
C Derivative instruments outstanding as at December 31, 2003
---------------------------------------------------------------------
Maturity 2004 2005 2006 2007 2008+ Total
---------------------------------------------------------------------
Written silver
call options
Ounces
(thousands) 5,000 2,000 - - - 7,000
Average
exercise price
per ounce $ 6.04 $ 5.00 - - - $ 5.74
---------------------------------------------------------------------
Interest rate
contracts
Receive-fixed swaps
Notional amount
(millions) $ 50 - $ 100 $ 575 $ 275 $ 1,000
Fixed rate (%) 3.6% - 3.0% 3.5% 4.0% 3.6%
Pay-fixed swaps
Notional amount
(millions) - - - - $ 324 $ 324
Fixed rate (%) - - - - 5.7% 5.7%
---------------------------------------------------------------------
Net notional
position $ 50 - $ 100 $ 575 $ (49) $ 676
---------------------------------------------------------------------
Foreign currency
contracts
Canadian Dollar
Forwards
C$ (millions) $ 442 $ 329 $ 145 $ 96 $ 22 $ 1,034
Average Price
(US cents) 0.68 0.67 0.72 0.67 0.68 0.68
Australian
Dollar Forwards
A$ (millions) $ 591 $ 440 $ 193 $ 139 $ 19 $ 1,382
Average Price
(US cents) 0.57 0.58 0.55 0.58 0.53 0.57
Australian Dollar
Min-Max Contracts
A$ (millions) $ 20 $ 10 $ 10 - - $ 40
Average Cap Price
(US cents) 0.53 0.52 0.52 - - 0.53
Average Floor Price
(US cents) 0.52 0.51 0.51 - - 0.52
Fuel contracts
Barrels WTI
(thousands) 360 180 - - - 540
Cap $ 30 30 - - - $ 30
Floor $ 23 22 - - - $ 23
---------------------------------------------------------------------
Classification of interest rate and foreign currency contracts
---------------------------------------------------------------------
Cash flow Fair value
At December 31, 2003 hedge hedge Non-hedge Total
---------------------------------------------------------------------
Interest rate contracts
Receive-fixed swaps on
cash balances $ 650 - - $ 650
Receive-fixed swaps on
debenture - $ 350 - $ 350
Pay-fixed swaps on
Bulyanhulu project
financing $ 174 - - $ 174
Pay-fixed swaps on
lease rates - - $ 150 $ 150
Foreign currency contracts
Canadian dollar contracts $1,012 - $ 22 $1,034
Australian dollar
contracts $1,279 - $ 143 $ 1,422
---------------------------------------------------------------------
D Unrealized fair value of derivative instruments (excluding normal
sales contracts)
---------------------------------------------------------------------
Three months ended Twelve months ended
December 31, December 31,
2003 2002 2003 2002
---------------------------------------------------------------------
Beginning of period $ 220 $ 8 $ 29 $ (16)
Derivative instruments settled (36) - (91) (2)
Change in fair value of
derivative instruments:
Non-hedge derivatives 37 (14) 52 (6)
Cash flow hedges 119 31 349 49
Fair value hedges (3) 4 (2) 4
---------------------------------------------------------------------
End of period $ 337 $ 29 $ 337 $ 29
---------------------------------------------------------------------
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 December 31, 2003.
E Non-hedge derivative gains (losses)
---------------------------------------------------------------------
Three months ended Twelve months ended
December 31, December 31,
2003 2002 2003 2002
---------------------------------------------------------------------
Commodity contracts $ 3 $ (3) $ 3 $ (2)
Currency contracts 13 4 17 8
Interest and lease rate contracts 21 (15) 32 (12)
Hedge ineffectiveness recorded
in earnings 9 - 19 -
---------------------------------------------------------------------
$ 46 $ (14) $ 71 $ (6)
---------------------------------------------------------------------
F Change in gains accumulated in OCI for cash flow hedge contracts
---------------------------------------------------------------------
Foreign
Commodity currency Interest-rate
contracts contracts contracts Total
---------------------------------------------------------------------
As at December 31 , 2002 $ 9 $ 26 $ 14 $ 49
Change in fair value 3 337 9 349
Hedge gains transferred
to earnings (13)(1) (65)(2) (13)(3) (91)
Hedge ineffectiveness
transferred to earnings - (18) (1) (19)
---------------------------------------------------------------------
As at December 31, 2003 $ (1) $ 280 $ 9 $ 288
---------------------------------------------------------------------
1. Included under gold sales
2. Included under costs and expenses
3. Included under interest and other income
Based on the fair value of cash flow hedge contracts at December
31, 2003, in fiscal 2004, we expect to transfer hedge gains of $134
million, from OCI to earnings, to be matched with the related hedged
items. These gains will be reflected as a reduction in cash operating
costs, and as a component of interest income.
During 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. On determining that
these hedges are no longer effective for accounting purposes, gains
totaling $18 million on these contracts were transferred out of OCI to
earnings in 2003. For the three and twelve month periods ended
December 31, 2003, the total amount of hedge ineffectiveness,
including the gains on ineffective capital expenditure hedges,
recorded and recognized in non-hedge derivative gains was a gain of $9
million and a gain of $19 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.
B Litigation and claims
Inmet litigation
In October 1997, Barrick Gold Inc. ("BGI"), 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.
In February 1998, Inmet filed suit against BGI in the British
Columbia ("B.C.") Supreme Court disputing the termination of the
agreement and alleging that BGI had breached the agreement. In January
2002, the Court released its decision in the matter and found in
favour of Inmet. The Court awarded Inmet equitable damages C$88.2 (US
$59) million, which was recorded as an expense in fiscal December
2001. The Court did not award Inmet pre-judgment interest. Inmet made
a request to the Court to re-open the trial to make submissions on its
claim for pre-judgment interest, which was denied in May 2002.
In February 2002, BGI filed a Notice of Appeal with the B.C. Court
of Appeal, and Inmet filed a Cross-Appeal of the decision regarding
pre-judgment interest. In November 2003, the B.C. Court of Appeal
dismissed the appeal made by BGI, and also awarded Inmet pre-judgment
interest. In November 2003, BGI paid Inmet C$111 million (US $86
million), in full settlement of the lawsuit. The settlement resulted
in a further expense of US$14 million in fourth quarter 2003, combined
with post-judgment interest of $2 million in the first nine months of
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.
Discovery has commenced in the case and a trial date has been
tentatively set for February 2005. 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. Several other complaints, making the same basic
allegations against the same defendants, were 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 filed a Consolidated
and/or Amended Complaint on November 5, 2003. On January 14, 2004
Barrick filed a motion to dismiss the Wagner complaint. We intend to
defend the action vigorously.
Peruvian tax assessment
One of our Peruvian subsidiaries received a revised income tax
assessment of $32 million, excluding interest and penalties, from the
Peruvian tax authority, SUNAT. The tax assessment related to a tax
audit of our Pierina Mine for the 1999 and 2000 fiscal years. The
assessment mainly relates to the revaluation of the Pierina mining
concession for the purpose of determining its tax basis. Under the
valuation proposed by SUNAT, the tax basis of the Pierina assets would
change from what we previously assumed with a resulting increase in
current and deferred income taxes. We believe that the tax assessment
is incorrect and we are appealing the decision. The full life of mine
effect on our current and deferred income tax liabilities was fully
recorded at December 31, 2002, as well as other payments of about $21
million due for periods through 2003.
The case is pending before Peru's Tax Court. If the case is not
resolved in our favor, we intend to pursue all available remedies,
including judicial appeals. If we are successful and our original
valuation is confirmed as the appropriate tax basis of the Pierina
assets, we would benefit from a $141 million reduction in current and
deferred 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.
In the event of an unfavorable Tax Court ruling, Peruvian law is
unclear with respect to whether it is necessary to make payment of the
disputed current taxes for the years covered by the tax assessment,
pending the outcome of an appeal process, a process which can take
several years. The amount of current income taxes that is potentially
payable is $80 million. In the event of an unfavorable Tax Court
ruling; we will consider taking all available action to prevent
payment of the amount in dispute until the appeal process is complete.
We have not provided for $57 million of potential interest and
penalties on the income tax 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 continue to 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 available remedies.
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 regional basis. Our four primary regions are North
America, Australia/Africa, Peru, Chile and Argentina. Our "other
operating mines" segment includes mainly operations which have been,
or are being, closed.
Income statement information
---------------------------------------------------------------------
Cost of sales and Segment income
other operating (loss) before
Gold sales expenses income taxes
---------------------------------------------------------------------
Three months ended
December 31, 2003 2002 2003 2002 2003 2002
---------------------------------------------------------------------
Goldstrike $ 215 $ 181 $ 141 $ 111 $ 32 $ 35
Pierina 91 95 21 26 27 19
Bulyanhulu 23 42 18 21 (3) 8
Kalgoorlie 39 33 22 23 12 5
Eskay Creek 34 31 1 7 22 10
Hemlo 27 30 15 17 9 10
Plutonic 33 28 16 15 13 10
Round Mountain 36 29 17 19 14 5
Other operating
mines 38 57 20 29 11 22
---------------------------------------------------------------------
Segment total 536 526 271 268 137 124
Other items outside
operating segments - - 39 16 - -
---------------------------------------------------------------------
$ 536 $ 526 $ 310 $ 284 $ 137 $ 124
---------------------------------------------------------------------
---------------------------------------------------------------------
Cost of sales and Segment income
other operating (loss) before
Gold sales expenses income taxes
---------------------------------------------------------------------
Twelve months ended
December 31, 2003 2002 2003 2002 2003 2002
---------------------------------------------------------------------
Goldstrike $ 813 $ 678 $ 531 $ 437 $ 122 $ 94
Pierina 332 303 76 71 90 71
Bulyanhulu 109 134 73 78 (1) 16
Kalgoorlie 153 124 87 82 46 23
Eskay Creek 130 121 18 16 65 57
Hemlo 98 97 60 64 27 23
Plutonic 120 105 62 57 48 37
Round Mountain 139 132 66 73 53 38
Other operating
mines 141 273 78 150 37 87
---------------------------------------------------------------------
Segment total 2,035 1,967 1,051 1,028 487 446
Other items outside
operating segments - - 83 43 - -
---------------------------------------------------------------------
$ 2,035 $ 1,967 $ 1,134 $ 1,071 $ 487 $ 446
---------------------------------------------------------------------
Asset information
Amortization
---------------------------------------------------------------------
Three months ended Twelve months ended
December 31, December 31,
2003 2002 2003 2002
---------------------------------------------------------------------
Goldstrike $ 42 $ 35 $ 160 $ 147
Pierina 43 50 166 161
Bulyanhulu 8 13 37 40
Kalgoorlie 5 5 20 19
Eskay Creek 11 14 47 48
Hemlo 3 3 11 10
Plutonic 4 3 10 11
Round Mountain 5 5 20 21
Other operating mines 7 6 26 36
---------------------------------------------------------------------
Segment total 128 134 497 493
Other amortization outside
operating segments 4 10 25 26
---------------------------------------------------------------------
$ 132 $ 144 $ 522 $ 519
---------------------------------------------------------------------
Segment capital expenditures
---------------------------------------------------------------------
Three months ended Twelve months ended
December 31, December 31,
2003 2002 2003 2002
---------------------------------------------------------------------
Operating Mines:
Goldstrike $ 11 $ 11 $ 51 $ 46
Plutonic 4 6 44 20
Bulyanhulu 9 12 36 56
Kalgoorlie 2 7 14 14
Pierina 8 1 17 5
Hemlo 3 1 10 6
Round Mountain 1 1 6 8
Eskay Creek 1 - 5 8
Other Operating mines 4 9 29 33
Development Projects:
Veladero 49 - 68 -
Cowal 8 6 24 13
Pascua-Lama 2 2 9 11
Alto Chicama 2 5 4 5
Tulawaka 1 - 1 -
---------------------------------------------------------------------
Segment total 105 61 318 225
Other capital expenditures
outside operating segments 1 1 4 3
---------------------------------------------------------------------
$ 106 $ 62 $ 322 $ 228
---------------------------------------------------------------------
Reconciliation of segment income to enterprise net income
---------------------------------------------------------------------
Three months ended Twelve months ended
December 31, December 31,
2003 2002 2003 2002
---------------------------------------------------------------------
Segment income $ 137 $ 124 $ 487 $ 446
Non-legal reclamation/closure
costs/accretion expense/other (39) - (83) -
Merger and other related costs - 2 - 2
Reclamation and other closure costs - (16) - (43)
Amortization outside operating
segments (4) (10) (25) (26)
Exploration and business
development (36) (27) (137) (104)
Administration (20) (15) (83) (64)
Other income/expense 11 1 52 29
Interest expense (8) (13) (44) (57)
Non-hedge derivative gains (losses) 46 (14) 71 (6)
Income tax recovery (expense) 4 22 (5) 16
Inmet litigation (14) - (16) -
Cumulative effect of changes
in accounting principles - - (17) -
---------------------------------------------------------------------
Net income $ 77 $ 54 $ 200 $ 193
---------------------------------------------------------------------
14 COMPONENTS OF OTHER NET OPERATING ACTIVITIES
---------------------------------------------------------------------
Three months ended Twelve months ended
December 31, December 31,
2003 2002 2003 2002
---------------------------------------------------------------------
Add (deduct):
Reclamation costs $ - $ 7 $ - $ 34
Losses on available for sale
securities 5 - 12 4
Cumulative effect of changes
in accounting principles - - 17 -
Accretion expense 4 - 17 -
Non-hedge derivative (gains)
losses (46) 14 (71) 6
Inmet litigation expense 14 - 16 -
Changes in operating assets
and liabilities:
Accounts receivable (2) (7) 3 (12)
Inventories 5 (17) 2 32
Accounts payable and accrued
liabilities 20 5 15 (9)
Current income taxes accrued (20) 44 54 59
Other assets and liabilities 16 52 7 (11)
Cash payments:
Merger related costs - (12) - (50)
Reclamation and closure costs (5) (26) (25) (70)
Income taxes 8 (12) (111) (52)
---------------------------------------------------------------------
Other net operating activities $ (1) $ 48 $ (64) $ (69)
---------------------------------------------------------------------
Mine Statistics
UNITED STATES
---------------------------------------------------------------------
Goldstrike Goldstrike
Open Pit Underground
Three months ended Dec. 31, 2003 2002 2003 2002
---------------------------------------------------------------------
Tons mined (thousands) 33,149 34,123 420 441
Tons processed (thousands) 2,445 2,697 423 448
Average grade (ounces per ton) 0.161 0.181 0.390 0.468
Recovery rate (percent) 80.8% 83.2% 89.3% 92.0%
---------------------------------------------------------------------
Production (thousands of ounces) 325 406 147 193
Production costs per ounce
Cash operating costs $ 235 $ 212 $ 240 $ 168
Royalties and production taxes 15 8 21 16
---------------------------------------------------------------------
Total cash costs 250 220 261 184
Amortization and reclamation 57 48 118 124
---------------------------------------------------------------------
Total production costs $ 307 $ 268 $ 379 $ 308
---------------------------------------------------------------------
Capital expenditures (US$ millions) $ 3 $ 6 $ 8 $ 5
---------------------------------------------------------------------
Twelve months ended Dec. 31, 2003 2002 2003 2002
---------------------------------------------------------------------
Tons mined (thousands) 141,693 142,898 1,631 1,635
Tons processed (thousands) 10,041 10,322 1,622 1,638
Average grade (ounces per ton) 0.189 0.164 0.385 0.428
Recovery rate (percent) 82.0% 83.3% 88.3% 91.3%
---------------------------------------------------------------------
Production (thousands of ounces) 1,559 1,410 552 640
Production costs per ounce
Cash operating costs $ 215 $ 221 $ 234 $ 184
Royalties and production taxes 18 7 19 14
---------------------------------------------------------------------
Total cash costs 233 228 253 198
Amortization and reclamation 53 58 122 121
---------------------------------------------------------------------
Total production costs $ 286 $ 286 $ 375 $ 319
---------------------------------------------------------------------
Capital expenditures (US$ millions) $ 23 $ 12 $ 28 $ 34
---------------------------------------------------------------------
Mine Statistics
UNITED STATES
---------------------------------------------------------------------
Goldstrike Total Round Mountain
Three months ended Dec. 31, 2003 2002 2003 2002
---------------------------------------------------------------------
Tons mined (thousands) 33,569 34,564 4,735 7,359
Tons processed (thousands) 2,868 3,145 8,832 7,234
Average grade (ounces per ton) 0.195 0.222 0.012 0.015
Recovery rate (percent) 83.3% 85.9% n/a n/a
---------------------------------------------------------------------
Production (thousands of ounces) 472 598 91 89
Production costs per ounce
Cash operating costs $ 236 $ 199 $ 159 $ 191
Royalties and production taxes 17 11 31 21
---------------------------------------------------------------------
Total cash costs 253 210 190 212
Amortization and reclamation 76 72 59 72
---------------------------------------------------------------------
Total production costs $ 329 $ 282 $ 249 $ 284
---------------------------------------------------------------------
Capital expenditures (US$ millions) $ 11 $ 11 $ 1 $ 1
---------------------------------------------------------------------
Twelve months ended Dec. 31, 2003 2002 2003 2002
---------------------------------------------------------------------
Tons mined (thousands) 143,324 144,533 24,563 31,573
Tons processed (thousands) 11,663 11,960 31,470 31,111
Average grade (ounces per ton) 0.216 0.200 0.016 0.018
Recovery rate (percent) 83.6% 85.7% n/a n/a
---------------------------------------------------------------------
Production (thousands of ounces) 2,111 2,050 393 378
Production costs per ounce
Cash operating costs $ 220 $ 209 $ 150 $ 172
Royalties and production taxes 18 9 23 15
---------------------------------------------------------------------
Total cash costs 238 218 173 187
Amortization and reclamation 72 77 54 69
---------------------------------------------------------------------
Total production costs $ 310 $ 295 $ 227 $ 256
---------------------------------------------------------------------
Capital expenditures (US$ millions) $ 51 $ 46 $ 6 $ 8
---------------------------------------------------------------------
Mine Statistics
AUSTRALIA
---------------------------------------------------------------------
Three months Plutonic Darlot Lawlers Kalgoorlie
ended Dec. 31, 2003 2002 2003 2002 2003 2002 2003 2002
---------------------------------------------------------------------
Tons mined
(thousands) 2,699 3,486 211 211 200 1,960 13,062 12,143
Tons processed
(thousands) 732 938 224 220 210 183 1,844 1,785
Average grade
(ounces per
ton) 0.132 0.101 0.172 0.182 0.135 0.161 0.071 0.063
Recovery rate
(percent) 91.0% 88.4% 96.8% 97.5% 96.9% 97.4% 87.8% 80.7%
---------------------------------------------------------------------
Production
(thousands of
ounces) 88 84 37 40 27 28 115 98
Production costs
per ounce
Cash operating
costs $187 $177 $172 $155 $259 $180 $205 $224
Royalties and
production
taxes 9 10 10 8 9 8 10 7
---------------------------------------------------------------------
Total cash
costs 196 187 182 163 268 188 215 231
Amortization and
reclamation 49 45 59 51 58 43 53 58
---------------------------------------------------------------------
Total production
costs $245 $232 $241 $214 $326 $231 $268 $289
---------------------------------------------------------------------
Capital
expenditures
(US$ millions) $4 $6 $2 $2 $1 $3 $2 $7
---------------------------------------------------------------------
Twelve months
ended Dec. 31, 2003 2002 2003 2002 2003 2002 2003 2002
---------------------------------------------------------------------
Tons mined
(thousands) 14,180 14,289 876 840 1,152 4,746 48,677 46,324
Tons processed
(thousands) 3,010 3,532 879 849 806 718 7,171 7,051
Average grade
(ounces per
ton) 0.123 0.097 0.182 0.176 0.128 0.162 0.071 0.061
Recovery rate
(percent) 89.9% 89.5% 96.9% 97.2% 95.8% 97.3% 85.8% 82.6%
---------------------------------------------------------------------
Production
(thousands of
ounces) 334 307 155 145 99 113 436 360
Production costs
per ounce
Cash operating
costs $185 $175 $156 $160 $241 $171 $201 $215
Royalties and
production
taxes 8 9 8 8 8 8 8 7
---------------------------------------------------------------------
Total cash
costs 193 184 164 168 249 179 209 222
Amortization and
reclamation 31 38 52 47 42 42 48 57
---------------------------------------------------------------------
Total production
costs $224 $222 $216 $215 $291 $221 $257 $279
---------------------------------------------------------------------
Capital
expenditures
(US$ millions) $44 $20 $7 $7 $14 $7 $14 $14
---------------------------------------------------------------------
Mine Statistics
CANADA
---------------------------------------------------------------------
Three months Hemlo Eskay Creek Holt-McDermott
ended Dec. 31, 2003 2002 2003 2002 2003 2002
---------------------------------------------------------------------
Tons mined
(thousands) 1,039 1,102 63 69 142 142
Tons processed
(thousands) 514 494 65 67 150 142
Average grade
(ounces per ton) 0.133 0.177 1.481 1.511 0.166 0.162
Recovery rate
(percent) 95.1% 95.5% 94.1% 93.5% 93.5% 94.2%
---------------------------------------------------------------------
Production
(thousands of
ounces) 65 83 83 97 23 22
Production costs
per ounce
Cash operating
costs $219 $177 $15 $47 $210 $193
Royalties and
production
taxes 8 7 5 4 - -
---------------------------------------------------------------------
Total cash costs 227 184 20 51 210 193
Amortization and
reclamation 37 38 132 142 144 90
---------------------------------------------------------------------
Total production
costs $264 $222 $152 $193 $354 $283
---------------------------------------------------------------------
Capital expenditures
(US$ millions) $3 $1 $1 $- $- $2
---------------------------------------------------------------------
Twelve months
ended Dec. 31, 2003 2002 2003 2002 2003 2002
---------------------------------------------------------------------
Tons mined
(thousands) 4,178 4,114 272 254 557 520
Tons processed
(thousands) 1,971 1,906 275 256 559 520
Average grade
(ounces per ton) 0.143 0.149 1.432 1.502 0.170 0.170
Recovery rate
(percent) 95.0% 94.7% 93.7% 93.7% 94.3% 94.6%
---------------------------------------------------------------------
Production
(thousands of
ounces) 268 269 352 359 90 84
Production costs
per ounce
Cash operating
costs $218 $216 $48 $36 $239 $173
Royalties and
production taxes 8 8 4 4 - -
---------------------------------------------------------------------
Total cash costs 226 224 52 40 239 173
Amortization and
reclamation 40 40 132 134 131 96
---------------------------------------------------------------------
Total production
costs $266 $264 $184 $174 $370 $269
---------------------------------------------------------------------
Capital expenditures
(US$ millions) $10 $6 $5 $8 $- $7
---------------------------------------------------------------------
Mine Statistics
PERU TANZANIA
---------------------------------------------------------------------
Pierina Bulyanhulu
Three months ended Dec. 31, 2003 2002 2003 2002
---------------------------------------------------------------------
Tons mined (thousands) 10,106 8,865 257 260
Tons processed (thousands) - - 261 274
Average grade (ounces per ton) 0.071 0.095 0.341 0.426
Recovery rate (percent) - - 88.5% 86.2%
---------------------------------------------------------------------
Production (thousands of ounces) 206 281 79 101
Production costs per ounce
Cash operating costs $89 $95 $301 $177
Royalties and production taxes - - 15 8
---------------------------------------------------------------------
Total cash costs 89 95 316 185
Amortization and reclamation 181 191 125 116
---------------------------------------------------------------------
Total production costs $270 $286 $441 $301
---------------------------------------------------------------------
Capital expenditures (US$ millions) $8 $1 $9 $12
---------------------------------------------------------------------
Twelve months ended Dec. 31, 2003 2002 2003 2002
---------------------------------------------------------------------
Tons mined (thousands) 39,501 32,311 945 944
Tons processed (thousands) - - 980 1,075
Average grade (ounces per ton) 0.074 0.080 0.363 0.385
Recovery rate (percent) - - 88.1% 86.1%
---------------------------------------------------------------------
Production (thousands of ounces) 912 898 314 356
Production costs per ounce
Cash operating costs $83 $80 $235 $190
Royalties and production taxes - - 11 8
---------------------------------------------------------------------
Total cash costs 83 80 246 198
Amortization and reclamation 182 191 123 102
---------------------------------------------------------------------
Total production costs $265 $271 $369 $300
---------------------------------------------------------------------
Capital expenditures (US$ millions) $17 $5 $36 $56
---------------------------------------------------------------------
SUMMARY GOLD MINERAL RESERVES AND MINERAL RESOURCES(1)
For the year ended December 31, 2003
---------------------------------------------------------------------
Tons Grade Ounces
Based on attributable ounces (000's) (oz/ton) (000's)
---------------------------------------------------------------------
NORTH AMERICA
Open Pit (proven and probable) 109,742 0.143 15,685
(mineral resource) 37,403 0.061 2,264
---------------------------------------------------------------------
Underground (proven and probable) 9,177 0.377 3,460
(mineral resource) 5,841 0.426 2,489
---------------------------------------------------------------------
Goldstrike
Property
Total (proven and probable) 118,919 0.161 19,145
(mineral resource) 43,244 0.110 4,753
---------------------------------------------------------------------
Round
Mountain
(50%) (proven and probable) 89,852 0.018 1,583
(mineral resource) 37,770 0.017 645
---------------------------------------------------------------------
Marigold
(33%) (proven and probable) 34,270 0.022 737
(mineral resource) 13,334 0.020 268
---------------------------------------------------------------------
Eskay Creek (proven and probable) 927 1.015 941
(mineral resource) 422 0.287 121
---------------------------------------------------------------------
Hemlo (50%) (proven and probable) 17,557 0.099 1,744
(mineral resource) 3,017 0.090 271
---------------------------------------------------------------------
Holt-
McDermott (proven and probable) 340 0.162 55
(mineral resource) 452 0.195 88
---------------------------------------------------------------------
SOUTH AMERICA
Pascua-Lama (proven and probable) 296,411 0.057 16,862
(mineral resource) 115,845 0.030 3,487
---------------------------------------------------------------------
Veladero (proven and probable) 317,187 0.035 11,115
(mineral resource) 67,715 0.023 1,540
---------------------------------------------------------------------
Pierina (proven and probable) 61,393 0.045 2,768
(mineral resource) 25,421 0.016 419
---------------------------------------------------------------------
Alto
Chicama (proven and probable) 159,250 0.045 7,155
(mineral resource) 25,751 0.067 1,735
---------------------------------------------------------------------
AUSTRALIA/AFRICA
Plutonic (proven and probable) 20,635 0.128 2,646
(mineral resource) 13,395 0.147 1,967
---------------------------------------------------------------------
Lawlers (proven and probable) 3,234 0.124 402
(mineral resource) 8,777 0.129 1,136
---------------------------------------------------------------------
Darlot (proven and probable) 7,627 0.149 1,135
(mineral resource) 4,194 0.130 546
---------------------------------------------------------------------
Kalgoorlie
(50%) (proven and probable) 97,047 0.061 5,894
(mineral resource) 44,584 0.058 2,580
---------------------------------------------------------------------
Cowal (proven and probable) 70,107 0.036 2,495
(mineral resource) 41,027 0.039 1,596
---------------------------------------------------------------------
Bulyanhulu (proven and probable) 27,882 0.391 10,907
(mineral resource) 4,300 0.440 1,894
---------------------------------------------------------------------
Tulawaka
(70%) (proven and probable) 1,093 0.337 368
(mineral resource) 680 0.066 45
---------------------------------------------------------------------
OTHER (proven and probable) - - -
(mineral resource) 20,404 0.078 1,598
---------------------------------------------------------------------
TOTAL (proven and
probable) 1,323,731 0.065 85,952
(mineral resource) 470,332 0.052 24,689
---------------------------------------------------------------------
For the year ended December 31, 2002
---------------------------------------------------------------------
Tons Grade Ounces
Based on attributable ounces (000's) (oz/ton) (000's)
---------------------------------------------------------------------
NORTH AMERICA
Open Pit (proven and probable) 107,130 0.150 16,051
(mineral resource) 46,400 0.070 3,231
---------------------------------------------------------------------
Underground (proven and probable) 9,770 0.398 3,888
(mineral resource) 5,107 0.466 2,378
---------------------------------------------------------------------
Goldstrike
Property
Total (proven and probable) 116,900 0.171 19,939
(mineral resource) 51,507 0.109 5,609
---------------------------------------------------------------------
Round
Mountain
(50%) (proven and probable) 96,057 0.020 1,875
(mineral resource) 17,455 0.010 176
---------------------------------------------------------------------
Marigold
(33%) (proven and probable) 26,351 0.026 678
(mineral resource) 13,665 0.016 219
---------------------------------------------------------------------
Eskay Creek (proven and probable) 1,433 0.998 1,430
(mineral resource) 384 0.398 153
---------------------------------------------------------------------
Hemlo (50%) (proven and probable) 19,726 0.107 2,118
(mineral resource) 2,677 0.093 248
---------------------------------------------------------------------
Holt-
McDermott (proven and probable) 847 0.182 154
(mineral resource) 246 0.248 61
---------------------------------------------------------------------
SOUTH AMERICA
Pascua-Lama (proven and probable) 296,411 0.057 16,862
(mineral resource) 115,845 0.030 3,487
---------------------------------------------------------------------
Veladero (proven and probable) 254,311 0.037 9,384
(mineral resource) 135,760 0.024 3,260
---------------------------------------------------------------------
Pierina (proven and probable) 70,343 0.051 3,602
(mineral resource) 39,938 0.016 626
---------------------------------------------------------------------
Alto
Chicama (proven and probable) 120,948 0.054 6,535
(mineral resource) 56,352 0.035 1,998
---------------------------------------------------------------------
AUSTRALIA/AFRICA
Plutonic (proven and probable) 13,976 0.181 2,533
(mineral resource) 19,349 0.118 2,287
---------------------------------------------------------------------
Lawlers (proven and probable) 3,407 0.149 509
(mineral resource) 8,379 0.133 1,115
---------------------------------------------------------------------
Darlot (proven and probable) 8,202 0.155 1,269
(mineral resource) 4,169 0.130 540
---------------------------------------------------------------------
Kalgoorlie
(50%) (proven and probable) 96,898 0.057 5,551
(mineral resource) 41,911 0.054 2,279
---------------------------------------------------------------------
Cowal (proven and probable) 75,922 0.037 2,835
(mineral resource) 35,211 0.036 1,255
---------------------------------------------------------------------
Bulyanhulu (proven and probable) 27,420 0.425 11,653
(mineral resource) 4,765 0.352 1,678
---------------------------------------------------------------------
Tulawaka
(70%) (proven and probable) - - -
(mineral resource) - - -
---------------------------------------------------------------------
OTHER (proven and probable) - - -
(mineral resource) 1,085 0.335 364
---------------------------------------------------------------------
TOTAL (proven and
probable) 1,229,152 0.071 86,927
(mineral resource) 548,698 0.046 25,355
---------------------------------------------------------------------
(1) Includes measured and indicated resources.
GOLD MINERAL RESERVES(1)
As at December 31, 2003 PROVEN PROBABLE
---------------------------------------------------------------------
Based on
attributable Tons Grade Ounces Tons Grade Ounces
ounces (000's) (oz/ton) (000's) (000's) (oz/ton) (000's)
---------------------------------------------------------------------
NORTH AMERICA
Open Pit 61,551 0.128 7,856 48,191 0.162 7,829
Underground 3,316 0.467 1,547 5,862 0.326 1,913
Goldstrike
Property Total 64,867 0.145 9,403 54,053 0.180 9,742
Round Mountain
(50%) 64,933 0.017 1,081 24,919 0.020 502
Marigold (33%) 3,441 0.028 98 30,828 0.021 638
Eskay Creek 387 1.398 541 540 0.741 400
Hemlo (50%) 10,766 0.113 1,213 6,791 0.078 531
Holt-McDermott 31 0.161 5 309 0.162 50
---------------------------------------------------------------------
SOUTH AMERICA
Pierina 26,112 0.060 1,560 35,281 0.034 1,208
Pascua-Lama 37,738 0.062 2,355 258,673 0.056 14,507
Veladero 19,037 0.042 801 298,150 0.035 10,314
Alto Chicama 4,443 0.051 225 154,807 0.045 6,930
---------------------------------------------------------------------
AUSTRALIA/AFRICA
Plutonic 403 0.057 23 20,232 0.130 2,623
Lawlers 790 0.133 105 2,444 0.122 297
Darlot 3,181 0.119 379 4,446 0.170 756
Kalgoorlie (50%) 37,799 0.054 2,042 59,248 0.065 3,852
Cowal 5,723 0.042 238 64,384 0.035 2,257
Bulyanhulu 1,784 0.407 726 26,098 0.390 10,181
Tulawaka (70%) - - - 1,093 0.337 368
---------------------------------------------------------------------
TOTAL 281,435 0.074 20,795 1,042,296 0.063 65,156
---------------------------------------------------------------------
As at December 31, 2003 TOTAL
---------------------------------------------------------------------
Tons Grade Ounces
Based on attributable ounces (000's) (oz/ton) (000's)
---------------------------------------------------------------------
NORTH AMERICA
Open Pit 109,742 0.143 15,685
Underground 9,177 0.377 3,460
Goldstrike Property Total 118,919 0.161 19,145
Round Mountain (50%) 89,852 0.018 1,583
Marigold (33%) 34,270 0.022 737
Eskay Creek 927 1.015 941
Hemlo (50%) 17,557 0.099 1,744
Holt-McDermott 340 0.162 55
---------------------------------------------------------------------
SOUTH AMERICA
Pierina 61,393 0.045 2,768
Pascua-Lama 296,411 0.057 16,862
Veladero 317,187 0.035 11,115
Alto Chicama 159,250 0.045 7,155
---------------------------------------------------------------------
AUSTRALIA/AFRICA
Plutonic 20,635 0.128 2,646
Lawlers 3,234 0.124 402
Darlot 7,627 0.149 1,135
Kalgoorlie (50%) 97,047 0.061 5,894
Cowal 70,107 0.036 2,495
Bulyanhulu 27,882 0.391 10,907
Tulawaka (70%) 1,093 0.337 368
---------------------------------------------------------------------
TOTAL 1,323,731 0.065 85,952
---------------------------------------------------------------------
(1) See accompanying footnote on next page.
MINERAL RESERVES AND MINERAL RESOURCES NOTE
Mineral reserves ("reserves") have been calculated as at December
31, 2003 in accordance with National Instrument 43-101, as required by
Canadian securities regulatory authorities. For the United States
reporting purposes, Industry Guide 7 (under the Securities Exchange
Act of 1934, as interpreted by the Staff of the U.S. Securities and
Exchange Commission), applies different standards in order to classify
mineralization as a reserve. Accordingly, Alto Chicama is classified
for U.S. reporting purposes as mineralized material. Calculations have
been prepared by employees of Barrick under the supervision of Rene M.
Marion, P.Eng., Vice-President, Technical Services of Barrick and/or
Alexander J. Davidson, P.Geol., Executive Vice-President, Exploration
of Barrick. Reserves have been calculated using an assumed long-term
average gold price of US$325, a silver price of US$4.75 and exchange
rates of $1.50 $Can/$US and $0.57 $US/$Aus. Reserves at the KCGM
property assumed an exchange rate of $0.59 $US/$A. Reserves at the
Hemlo property assumed an exchange rate of $1.53 $Can/$US. Reserve
calculations incorporate current and/or expected mine plans and cost
levels at each property. (In 2002, except with respect to the
Australian properties, reserves have been calculated using an assumed
long-term average gold price of US$300 and a silver price of US$4.75.
Reserves at Kalgoorlie in 2002 assumed a gold price of US$297.)
Varying cut-off grades have been used depending on the mine and type
of ore contained in the reserves. Barrick's normal data verification
procedures have been employed in connection with the calculations. For
a more detailed description of the key assumptions, parameters and
methods used in calculating Barrick's reserves and resources, see
Barrick's most recent Annual Information Form on file with Canadian
provincial securities regulatory authorities and the U.S. Securities
and Exchange Commission.
GOLD MINERAL RESOURCES(1)
As at December 31, 2003 MEASURED (M) INDICATED (I)
---------------------------------------------------------------------
Based on
attributable Tons Grade Ounces Tons Grade Ounces
ounces (000's) (oz/ton) (000's) (000's) (oz/ton) (000's)
---------------------------------------------------------------------
NORTH AMERICA
Open Pit 14,077 0.059 831 23,326 0.061 1,433
Underground 1,580 0.435 687 4,261 0.423 1,802
Goldstrike
Property Total 15,657 0.097 1,518 27,587 0.117 3,235
Round Mountain
(50%) 10,050 0.013 133 27,720 0.018 512
Marigold (33%) 6,645 0.020 134 6,689 0.020 134
Eskay Creek 93 0.290 27 329 0.286 94
Hemlo (50%) 1,171 0.112 131 1,846 0.076 140
Holt-McDermott - - - 452 0.195 88
---------------------------------------------------------------------
SOUTH AMERICA
Pierina 6,017 0.017 103 19,404 0.016 316
Pascua-Lama 3,962 0.055 216 111,883 0.029 3,271
Veladero 3,423 0.021 72 64,292 0.023 1,468
Alto Chicama 1,624 0.063 103 24,127 0.068 1,632
---------------------------------------------------------------------
AUSTRALIA/AFRICA
Plutonic 190 0.216 41 13,205 0.146 1,926
Lawlers 2,009 0.153 307 6,768 0.122 829
Darlot 1,098 0.142 156 3,096 0.126 390
Kalgoorlie (50%) 14,447 0.055 794 30,137 0.059 1,786
Cowal 2,063 0.048 98 38,964 0.038 1,498
Bulyanhulu 54 0.222 12 4,246 0.443 1,882
Tulawaka (70%) - - - 680 0.066 45
---------------------------------------------------------------------
OTHER - - - 20,404 0.078 1,598
---------------------------------------------------------------------
TOTAL 68,503 0.056 3,845 401,829 0.052 20,844
---------------------------------------------------------------------
As at December 31, 2003 (M) + (I) INFERRED
---------------------------------------------------------------------
Ounces Tons Grade Ounces
Based on attributable ounces (000's) (000's) (oz/ton) (000's)
---------------------------------------------------------------------
NORTH AMERICA
Open Pit 2,264 323 0.065 21
Underground 2,489 7,725 0.366 2,827
Goldstrike Property Total 4,753 8,048 0.354 2,848
Round Mountain (50%) 645 9,790 0.018 180
Marigold (33%) 268 59,144 0.014 826
Eskay Creek 121 277 0.513 142
Hemlo (50%) 271 3,952 0.142 562
Holt-McDermott 88 133 0.271 36
---------------------------------------------------------------------
SOUTH AMERICA
Pierina 419 154 0.013 2
Pascua-Lama 3,487 126,841 0.027 3,475
Veladero 1,540 73,462 0.023 1,704
Alto Chicama 1,735 10,233 0.060 617
---------------------------------------------------------------------
AUSTRALIA/AFRICA
Plutonic 1,967 8,624 0.175 1,508
Lawlers 1,136 1,745 0.122 213
Darlot 546 144 0.194 28
Kalgoorlie (50%) 2,580 4,621 0.043 197
Cowal 1,596 31,053 0.033 1,011
Bulyanhulu 1,894 5,268 0.512 2,697
Tulawaka (70%) 45 161 0.075 12
---------------------------------------------------------------------
OTHER 1,598 11,768 0.118 1,387
---------------------------------------------------------------------
TOTAL 24,689 355,418 0.049 17,445
---------------------------------------------------------------------
(1) Resources which are not reserves have demonstrated economic
viability.
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
RECENT RESEARCH REPORTS the United States:
BMO Nesbitt Burns 1-800-589-9836
CIBC World Markets Web site:
Citigroup Smith Barney www.mellon-investor.com
Credit Suisse First Boston
Griffiths McBurney & Partners INVESTOR CONTACTS:
Goldman Sachs Darren Blasutti
HSBC Vice President,
JP Morgan Investor Relations
Lehman Brothers Tel: (416) 307-7341
Merrill Lynch Email: dblasutti@barrick.com
National Bank
Prudential Financial Kathy Sipos
Research Capital Director,
RBC Capital Markets Investor Relations
Salman Partners Tel: (416) 307-7441
Scotia Capital Email: ksipos@barrick.com
Smith Barney Citigroup
Westwind Partners MEDIA CONTACT:
Vincent Borg
Vice President,
Corporate Communications
Tel: (416) 307-7477
Email: vborg@barrick.com
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.
CONTACT: Barrick Gold Corporation
Vincent Borg, 416-307-7477; 416-861-1509
media@barrick.com
SOURCE: Barrick Gold Corporation