UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 6-K
Report of
Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
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For the month of: February 2015 |
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Commission File Number: 1-9059 |
BARRICK GOLD CORPORATION
(Name of Registrant)
Brookfield Place, TD Canada Trust Tower
Suite 3700
161 Bay
Street, P.O. Box 212
Toronto, Ontario
Canada M5J 2S1
(Address of
Principal Executive Offices)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T
Rule 101(b)(7):
Indicate by check mark whether by furnishing the information contained in this Form, the
registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934:
If Yes is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): N/A
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
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BARRICK GOLD CORPORATION |
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Date: February 20, 2015 |
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By: |
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/s/ Richie Haddock |
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Name: |
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Richie Haddock |
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Title: |
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Senior Vice-President and General
Counsel |
EXHIBIT
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Exhibit |
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Description of Exhibit |
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99.1 |
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Barrick Gold Corporation Fourth Quarter and Year-End Report for 2014, including the Consolidated Financial Statements prepared in accordance with International Financial Reporting Standards as at and for the years ended December 31,
2014 and December 31, 2013 and Managements Discussion and Analysis for the same periods. |
99.2 |
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Consent of PricewaterhouseCoopers LLP |
Exhibit 99.1
FOURTH QUARTER AND YEAR-END REPORT 2014
Barrick Reports Fourth Quarter and Full Year 2014 Results
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Barrick is a senior gold producer focused on growing free cash flow through disciplined capital allocation and operational excellence.
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The company produced 6.25 million ounces of gold at all-in sustaining costs (AISC)1 of $864
per ounce in 2014, generating $2.30 billion in operating cash flow. |
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In 2015, we intend to reduce our net debt by at least $3 billion to begin restoring our balance sheet to a position of strength.
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Barricks return to a lean, decentralized operating model is eliminating bureaucracy and management layers. These initiatives are freeing up
country and mine managers to be business owners with a focus on driving greater free cash flow. |
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Production guidance for 2015 is 6.2-6.6 million ounces of gold at all-in sustaining costs of $860-$895 per ounce. The company expects to generate
positive free cash flow this year at current gold prices. |
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Annual gold production from our current portfolio is expected to exceed six million ounces in 2016 and 2017, with all-in sustaining costs lower than
this year by 2017. |
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This year Barrick will complete four prefeasibility studies, advancing growth projects near existing mines in Nevada. |
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Innovation success reflected by the ramp-up of our proprietary cyanide-free processing technology at Goldstrike, accelerating cash flow from about
four million stockpiled ounces of gold. |
TORONTO, February 18, 2015 Barrick Gold Corporation (NYSE: ABX,
TSX: ABX) (Barrick or the company) today reported a fourth quarter net loss of $2.85 billion ($2.45 per share), reflecting the impact of $2.8 billion in after-tax impairment charges, primarily related to the
Lumwana mine ($930 million) and the Cerro Casale project ($778 million). Fourth quarter adjusted net earnings2 were $174 million ($0.15 per share) and operating cash flow was $371 million.
For the full year 2014, Barrick recorded a net loss of $2.91 billion ($2.50 per share), reflecting the impact of $3.4 billion in
after-tax impairment charges. Adjusted net earnings for 2014 were $793 million ($0.68 per share) and operating cash flow was $2.30 billion.
TAKING
BARRICK BACK TO THE FUTURE
Barrick became the worlds leading gold company by pursuing its founding purpose: the
generation of wealth for its owners, employees, and the communities with which it partners. Those who founded
1 All-in sustaining costs per ounce is a non-GAAP financial performance measure. The company believes that
all-in sustaining costs more fully defines the total costs associated with the production of gold. See pages 81-91 of Barricks Fourth Quarter and Year-End 2014 Report.
2 Adjusted net earnings is a non-GAAP financial performance measure. The company believes that, in addition to
conventional measures prepared in accordance with GAAP, the company and certain investors use this information to evaluate company performance. See pages 81-91 of Barricks Fourth Quarter and Year-End 2014 Report.
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BARRICK FOURTH QUARTER AND YEAR-END 2014 |
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1 |
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PRESS RELEASE |
and first led the company were committed to a culture of partnership and the values underpinning such a culture: trust, transparency, shared responsibility and accountability, and a sense of
emotional and financial ownership.
That culture also nurtured a powerful operating model. In its early years, Barrick was
lean and nimble, with minimal bureaucracy. A small head office managed the company with a balance of entrepreneurialism and prudence, focusing on only a few core activities: defining and implementing strategy, allocating human and financial capital,
and fulfilling the obligations required of a public company. Leaders at the operational level had greater autonomy, responsibility, and accountability, functioning as business owners. Free from bureaucracy and middle management, they focused on
maximizing free cash flow, and the head office focused on allocating that cash flow to maximize shareholder returns.
Over the
last year, Barrick has been returning to this partnership culture and the operating model that made it so successful. We have cut our head office by close to half and eliminated all management layers between Toronto and the mines. What remains are
shared service centers in the field that provide support directly to our mines and projects, with costs charged directly to the relevant operation.
Along with managing financial capital, managing our talent is a central responsibility of Barricks leaders. Attracting,
retaining and developing exceptional people is a fundamental component of our partnership culture. In 2014, Darian Rich was promoted to the role of Executive Vice President, Talent Management, elevating this critical function. Over the last six
months we attracted 12 new leaders to Barrick who personify the companys original values and bring vital skills and experience that support our business objectives, such as strengthening the balance sheet, fixing Pascua-Lama, improving
efficiency and productivity and building partnerships in China and beyond. This group includes people such as Kevin Thomson (SEVP, Strategic Matters), Shaun Usmar (SEVP & CFO), Sergio Fuentes (Executive Project Director, Pascua-Lama) and
Melanie Miller (VP, Supply Chain) to name just a few. We have also promoted top internal talent across the organization to challenging new roles that will strengthen their capabilities. This includes Rich Haddock (SVP & General Counsel), a
lawyer who intimately understands all facets of our business, and Calvin Pon (SVP, Finance & Tax) one of the brightest analytical minds in the industry.
Going back to the future demands that our leaders be owners. Accordingly, we have extended our innovative partnership
plan to 35 leaders across the business. Each year, these leaders will be graded on their collective performance, as measured against a transparent long-term scorecard disclosed to shareholders in advance. A significant portion of their total
compensation, if earned, will be long-term in nature, awarded in units that convert into Barrick common shares which cannot be sold until an individual retires or leaves the company. A smaller proportion of total compensation, if earned, will be in
the form of annual bonuses, determined for each individual based on a personal scorecard tailored to the individuals specific responsibilities. This plan increases financial and emotional ownership among our senior leaders, and will deepen to
include new partners over time.
Our approach to capital allocation ensures that all new investments align with our strategic
focus and contribute to maximizing free cash flow in pursuit of industry-leading returns.
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BARRICK FOURTH QUARTER AND YEAR-END 2014 |
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PRESS RELEASE |
Investments in new projects will compete with share buybacks and acquisitions, along
with our objective of paying a dividend to our owners. We expect our portfolio to deliver a 10-15 percent return on invested capital through the metal price cycle and, as such, individual projects are assessed against a hurdle rate of 15 percent. We
will defer, cancel or sell projects that cannot achieve this target. We will also apply more rigor in monitoring execution to ensure that we meet our cost and schedule commitments. And we will conduct post-investment reviews to evaluate how we have
lived up to our original investment promises, using what we learn to improve execution on future projects.
A portion of our
capital budget is re-invested in existing mines to sustain or expand them. That capital is not spread evenly across the portfolio and our operations must compete for it. We will focus our investments at mines that meet our overall expectations for
returns on invested capital. Assets that are unable to meet our capital allocation objectives over time will be sold.
RESTORING A STRONG BALANCE SHEET
For many years, Barrick had the only A-rated balance sheet in the gold industry. Prudent financial management was a bedrock principle of
the company. Our current level of debt is inconsistent with that principle, and that inconsistency is reflected in the companys share price. As we return to our original values, no priority is more important than restoring a strong balance
sheet.
We intend to reduce our net debt by at least $3 billion by the end of 2015. The company has a number of options to
achieve this target, and we will take only those actions that make sense for the business, on terms we consider most favorable to our shareholders. Our debt reduction strategy includes the following levers:
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Maximizing free cash flow by implementing a leaner, decentralized operating model that reflects Barricks original culture; with more efficient capital spending, reduced general and administrative costs, and
profitable growth; |
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Disciplined non-core asset sales, beginning with a process to sell the Porgera Joint Venture and Cowal mine; |
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Joint ventures and strategic partnerships if and where they make sense. |
Our strong liquidity means the company can tackle its debt in a disciplined manner. We have less than $1 billion in debt due over
the next three years, a $4 billion undrawn credit facility, and $2.7 billion in cash at the end of 2014.
MAXIMIZING FREE CASH FLOW
A return to the lean, decentralized operating model that underpinned Barricks early success is freeing up our country and mine managers to
focus on maximizing free cash flow across the business.
As part of this transformation, we expect to realize $30 million in
savings from reduced general and administrative expenditures and overhead costs in 2015. These savings are projected to reach
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BARRICK FOURTH QUARTER AND YEAR-END 2014 |
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PRESS RELEASE |
$70 million on an annualized basis in 2016. And we expect more to follow, as our leaders focus on maximizing cash flow without the constraints of bureaucracy and unnecessary management layers.
We are reducing the size of our head office by close to half, from 260 positions in 2014 to 140 positions in 2015. As a
result, our corporate administration expense is expected to be about $145 million this year, and even lower in 2016.
We are
now reporting G&A with clarity and transparency. We have eliminated all management layers between the head office and our operations; what remains are shared service centers that provide support directly to our mines and projects. These costs
will no longer be reported as G&A. They will be charged directly to the mines and projects that use the services, and will be reflected in operating costs, as they should be. Services that are not required will be eliminated, driving further
cost savings.
G&A costs at Barrick will now include head office administration, stock-based compensation and
administration expense from Acacia Mining Plc.
For a full description of G&A expenses, please read page 34 of the
Management Discussion and Analysis.
In addition, we are taking steps to improve the efficiency of our procurement and supply
chain practices, freeing up working capital by reducing inventories. We also expect to generate additional free cash flow over the next 12 months through better integration of mine site maintenance programs and our global procurement and logistics
system.
Innovation also plays a key role in improving efficiency and unlocking the cash-generating potential of our assets.
We see this in action at Goldstrike, where a revolutionary new cyanide-free processing technology developed in-house at Barrick is allowing us to accelerate cash flow from about four million stockpiled ounces of gold (see page 11 for more details).
Our in-house research and development team has also developed a patented flotation technology capable of utilizing sea water, reducing demand on scarce fresh water resources. We will continue to develop industry-leading processing technologies,
while expanding our focus to include more efficient ways to use water and power at our operations.
BEST ASSETS AND REGIONS
Barricks five cornerstone mines in the Americas are expected to account for 60 percent of our production in 2015 at average all-in
sustaining costs of $725-$775 per ounce. At two grams per tonne, these mines have an average reserve grade more than double that of our peer group average3. They are among the most attractive
assets in the entire gold industry, generating strong free cash flow even in todays gold price environment, while offering exceptional leverage to higher gold prices.
We maintain a strong competitive advantage in Nevada and the Andean region, underpinned by proven operating experience, a critical
mass of infrastructure, technical and exploration expertise, and established partnerships with host governments and communities. We believe these regions provide the best opportunities to generate returns for shareholders, and we will therefore give
them
3 Comparison based on the average overall reserve grade for Goldcorp Inc., Kinross Gold Corporation, Newmont
Mining Corporation and Newcrest Mining Limited as reported in each of the Kinross and Newcrest reserve reports as of December 31, 2014, and as reported in each of the Goldcorp and Newmont reserve reports as of December 31, 2013.
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BARRICK FOURTH QUARTER AND YEAR-END 2014 |
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PRESS RELEASE |
the majority of our focus. Divestments outside of the Americas, including the Porgera Joint Venture and the Cowal mine, will further center the companys portfolio on its strongest assets.
Two-thirds of our 2015 exploration budget of $220-$2604 million is
focused on high-quality, brownfield projects, with the remainder targeted at emerging discoveries that have the potential to become profitable mines. Approximately 85 percent of the total exploration budget is allocated to the Americas and about
half of the budget will be directed to Nevada.
GROWTH IN THE AMERICAS
This year, Barrick is advancing growth opportunities at or near existing operations in Nevada, with four prefeasibility studies on track for
completion in 20155.
We also have within our portfolio a number of the
worlds largest undeveloped gold deposits, including Pascua-Lama, Donlin Gold and Cerro Casale. These projects offer leverage to higher gold prices, with more than 37 million ounces of gold in reserves (100 percent basis) and more than
48 million ounces of gold in measured and indicated resources (100 percent basis). They provide the company with a platform for long-term growth in a higher gold price environment. In the meantime, we will work to optimize the economics of
these projects, spending the minimum required to maintain them as development options within our portfolio. As with all our investments, we will only proceed with construction if these projects meet our capital allocation objectives, including our
target hurdle rate of 15 percent, with a robust execution plan to ensure execution on budget and on schedule.
Goldrush Major new discovery near
existing infrastructure
The Goldrush project, located six kilometers from the Cortez mine, is one of the largest gold discoveries of the
last decade. Measured and indicated resources stood at 10.6 million ounces and inferred resources were 4.9 million ounces at the end of 2014. The prefeasibility study remains on schedule for completion in mid-2015. Infill drilling in 2014
continued to demonstrate high grade continuity and led to resource upgrades, with nearly 70 percent of the overall resource now in the measured and indicated category. A permit application for twin exploration declines that will allow the company to
better explore the northern limits of the known deposit was submitted in the second quarter of 2014.
Turquoise Ridge A core mine in the making
The Turquoise Ridge mine contains 4.5 million ounces in reserves (75 percent basis) at an average grade of 16.9 grams per tonne
the highest reserve grade in the companys operating portfolio and among the highest in the entire gold industry. Turquoise Ridge has considerable untapped potential and could become a core operation for Barrick. The company is advancing
a project to develop an additional shaft, which could bring forward more than one million ounces of production, roughly doubling output to an average of 500,000 ounces per year (100 percent basis) at all-in sustaining
4 Approximately 15 percent is expected to be capitalized.
5 Complete mineral reserve and mineral resource data for each of these projects and all other mines and
projects referenced in this news release, including tonnes, grades and ounces, can be found on pages 93-98 of Barricks Fourth Quarter and Year-End 2014 Report.
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BARRICK FOURTH QUARTER AND YEAR-END 2014 |
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PRESS RELEASE |
costs of about $625-$675 per ounce6. The prefeasibility study was completed in January 2015 and key permits are expected in the third quarter.
Pending approval by the joint venture partners, construction could commence in the fourth quarter of 2015, with initial production beginning in 2019. Preliminary estimates indicate capital expenditures of approximately $300-$325 million (100 percent
basis) for additional underground development and shaft construction, and an attractive payback period of roughly two and a half years using a gold price assumption of $1,300 per ounce.
Drilling at the northern extension of the deposit confirms the ore body is larger than previously known, at higher grades. Due to
the substantial thickness of the mineralization, our engineering team is also looking at the economics of introducing bulk underground mining in some parts of the ore body. Advanced ground support technology and improved reinforcement techniques
have also mitigated ground stability issues that challenged previous mining operations at the site.
Cortez High-grade underground expansion
A prefeasibility study for underground mining at Cortez below currently permitted levels will be completed in late 2015. Mineralization
in this zone is primarily oxide and higher grade compared to the current underground mine, which is sulfide in nature. The limits of the Lower Zone have not yet been defined, and drilling has indicated the potential for new targets at depth. The
exploration drift has been extended to the south, enabling additional step-out drilling, which is anticipated to begin in June. Drill results to date include 36.6 meters at 31.5 grams per tonne and 27.4 meters at 20.9 grams per tonne, both oxide in
nature, which compare favorably with the average grade of 13.8 grams per tonne in refractory ore above the 3,800 foot level7.
Spring Valley Low capital cost, heap leach project
The Spring Valley project, 70 percent owned by Barrick and located approximately 75 miles west of Cortez, is a low capital cost, oxide heap leach
project with potential to become another standalone mine in Nevada. Barrick reported an initial measured and indicated resource of 1.3 million ounces (70 percent basis) averaging 0.66 grams per tonne and an inferred resource of 0.6 million
ounces (70 percent basis) averaging 0.62 grams per tonne for Spring Valley at the end of 2014. In addition, there is good potential to expand the current resource at higher gold prices. The company expects to complete a prefeasibility study in late
2015.
Pascua-Lama
Pascua-Lama has
15.4 million ounces of gold reserves and more than 674 million ounces of contained silver. The mine is expected to have low operating costs and the potential to generate significant free cash flow over a 25-year plus mine life.
6 Annual average for the first full eight years.
7 The drill results for the Cortez mine contained in this news release have been prepared in accordance with
National Instrument 43-101 Standards of Disclosure for Mineral Projects. For additional details regarding the Cortez exploration information included in this news release, please see Barricks most recent Form 40-F/Annual Information
Form on file with the SEC and Canadian provincial securities regulatory authorities.
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BARRICK FOURTH QUARTER AND YEAR-END 2014 |
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PRESS RELEASE |
The unique challenges of Pascua-Lama are well known, and we have acknowledged the
issues that led to the mines suspension. But those are sunk costs, and the question before Barrick now is whether Pascua-Lamas economics going forward will justify resuming development.
Pascua-Lamas new Executive Project Director, Sergio Fuentes, reports to our Co-Presidents and comes to Barrick after nearly
three decades of successfully managing the construction of complex mining projects in Chile, including high-altitude operations in the Andes. He and the team he is assembling are working hard to assess Pascua-Lamas economics going forward. To
do so, they will address the projects outstanding legal and regulatory hurdles, and will complete a new execution plan to optimize remaining construction activities. If that plan aligns with our capital allocation objectives and demonstrates
an acceptable return on invested capital of at least 15 percent, we will consider resuming development of Pascua-Lama.
In any
scenario, the company must permit and construct a new water management system in Chile. We will submit our application for the new system by June, with permitting expected to take two years.
In the meantime, we are working to minimize the costs of holding the asset. In 2015, Barrick anticipates expenditures of
approximately $170-$190 million for the project, including approximately $140-$150 million8 for care and maintenance, including water management system costs, and approximately $30-$40 million9 for other project costs, including those related to permit obligations in Argentina and Chile.
FINANCIAL
HIGHLIGHTS
Fourth quarter 2014 adjusted net earnings were $174 million ($0.15 per
share)10 compared to $406 million ($0.37 per share) in the prior year period. This reflects the impact of 257,000 fewer ounces sold in the quarter along with lower realized gold and copper prices.
The net loss for the fourth quarter was $2.85 billion ($2.45 per share) compared to a net loss of $2.83 billion ($2.61 per share) in the prior year quarter. Significant adjusting items for the quarter include:
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$2.8 billion in after-tax impairment charges, including $1.7 billion in asset impairment charges primarily related to Cerro Casale and Lumwana, and
$1.1 billion in goodwill impairments, largely related to Zaldivar and Lumwana; and, |
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$138 million in unrealized losses on non-hedge derivative instruments primarily related to fuel hedge positions. |
Fourth quarter operating cash flow of $371 million compares to $1.02 billion in the prior year period. The decrease in operating
cash flow primarily reflects lower realized gold and copper prices, partially offset by a decrease in income tax payments and a lower net loss compared to the prior year.
8 This amount is expected to be expensed.
9 This amount is expected to be capitalized.
10 Adjusted net earnings and adjusted net earnings per share are non-GAAP financial performance measures with
no standardized definition under IFRS. See pages 81-91 of Barricks Fourth Quarter and Year-End 2014 Report.
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BARRICK FOURTH QUARTER AND YEAR-END 2014 |
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PRESS RELEASE |
RESERVES AND RESOURCES
Barrick calculated its 2014 reserves using a conservative gold price assumption of $1,100 per ounce, unchanged from 2013. While this is below the
companys gold price outlook and current spot prices, it reflects Barricks emphasis on pursuing profitable ounces. Gold reserves were 93.0 million ounces11 at the end of 2014,
compared to 104.1 million ounces at the end of 2013. Approximately 65 percent of the reduction was attributable to ounces mined and processed in 2014, with the balance reflecting the divestiture of the Kanowna, Plutonic and Marigold mines, and
the partial sale of Barricks equity interest in Acacia Mining Plc during the year.
Measured and indicated gold
resources were 94.3 million ounces11 at the end of 2014, compared to 99.4 million ounces at the end of 2013. The majority of the reduction relates to a lower gold price assumption of
$1,400 per ounce (compared to $1,500 per ounce for 2013), with divestitures and movements to reserves more than offset by additions in the year. Inferred gold resources were 29.3 million
ounces11 at the end of 2014, compared to 31.9 million ounces at the end of 2013, primarily due to ounces upgraded to the measured and indicated category and from divestitures.
Copper reserves decreased to 9.6 billion pounds11 from 14.0 billion pounds
based on a copper price assumption of $3.00 per pound (unchanged from 2013), primarily reflecting the transfer of Lumwana reserves into resources following the companys decision to place the mine on care and maintenance. Measured and indicated
copper resources decreased to 4.6 billion pounds11 compared to 6.9 billion pounds at the end of 2013 based on an unchanged copper price assumption of $3.50 per pound. Inferred copper
resources were 0.1 billion pounds11 compared to 0.2 billion pounds at the end of 2013.
2015 OUTLOOK
Barricks 2015 AISC guidance is $860-$895 per ounce. The companys five cornerstone mines are forecast to contribute 60 percent
of overall production at AISC of $725-$775 per ounce in 2015.
Gold production guidance for 2015 is 6.2-6.6 million
ounces, with higher contributions from Goldstrike, Lagunas Norte and Acacia more than offsetting lower production from Veladero and the sale of Kanowna, Plutonic and Marigold in 2014. Copper guidance of 310-340 million pounds at C1 cash costs
of $1.75-$2.00 per pound primarily reflects the planned suspension of the Lumwana mine in Zambia, partially offset by higher expected production from Zaldivar.
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Calculated in accordance with National Instrument 43-101 as required by Canadian securities regulatory authorities. For a breakdown and additional
detail on tonnes, grade and ounces, see pages 93-98 of Barricks Fourth Quarter and Year-End 2014 Report. |
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BARRICK FOURTH QUARTER AND YEAR-END 2014 |
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8 |
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PRESS RELEASE |
Detailed 2015 operating and capital expenditure guidance is as follows:
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GOLD PRODUCTION AND COSTS |
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Production (millions of ounces) |
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AISC12
($ per ounce) |
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Cash Costs12,13
($ per ounce) |
Cortez |
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0.825-0.900 |
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760-835 |
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560-610 |
Goldstrike |
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1.000-1.150 |
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700-800 |
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540-590 |
Pueblo Viejo (60%) |
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0.625-0.675 |
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540-590 |
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390-425 |
Lagunas Norte |
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0.600-0.650 |
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675-725 |
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375-425 |
Veladero |
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0.575-0.625 |
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990-1,075 |
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600-650 |
Sub-total |
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3.800-4.000 |
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725-775 |
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500-540 |
Porgera (95%) |
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0.500-0.550 |
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1,025-1,125 |
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775-825 |
Acacia (63.9%) |
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0.480-0.510 |
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1,050-1,100 |
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695-725 |
KCGM (50%) |
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0.315-0.330 |
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915-940 |
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775-800 |
Cowal |
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0.250-0.280 |
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740-775 |
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630-655 |
Hemlo |
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0.200-0.225 |
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940-980 |
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675-715 |
Turquoise Ridge (75%) |
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0.175-0.200 |
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875-925 |
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570-600 |
Round Mountain (50%) |
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0.170-0.190 |
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1,180-1,205 |
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875-900 |
Bald Mountain |
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0.170-0.195 |
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1,060-1,100 |
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560-600 |
Golden Sunlight |
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0.090-0.105 |
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1,000-1,025 |
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740-765 |
Total Gold |
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6.200-6.60014 |
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860-895 |
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600-640 |
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COPPER PRODUCTION AND COSTS |
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Production
(millions of pounds) |
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C1 cash costs15
($ per pound) |
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C3 fully allocated costs13 ($ per
pound) |
Zaldivar |
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240-260 |
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1.65-1.95 |
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2.00-2.30 |
Lumwana |
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70-8016 |
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1.90-2.15 |
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3.05-3.35 |
Total Copper |
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310-340 |
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1.75-2.00 |
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2.30-2.60 |
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CAPITAL EXPENDITURES |
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($ millions) |
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Mine site sustaining |
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1,600-1,800 |
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Mine site expansion |
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150-200 |
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Projects |
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150-200 |
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Total |
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1,900-2,200 |
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12 Excludes the impact of financial hedges.
13 Unchanged from the measure previously referred to as adjusted operating costs.
14 Operating unit guidance ranges reflect expectations at each individual operating unit, but do not add up to
corporate-wide guidance range total.
15 C1 cash costs per pound and C3
fully allocated costs per pound are non-GAAP financial performance measures. See pages 81-91 of Barricks Fourth Quarter and
Year-End 2014 Report.
16 Lower production reflects decision to suspend operations at Lumwana following implementation of Zambias new royalty regime.
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BARRICK FOURTH QUARTER AND YEAR-END 2014 |
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PRESS RELEASE |
Total capital expenditures in 2015 are expected to be $1.90-$2.20 billion compared
to $2.18 billion in 2014. The lower forecast expenditures primarily reflect reduced expansion capital due to the commissioning of the Goldstrike thiosulfate project in the fourth quarter of 2014 and lower sustaining and development capital at
Lumwana following the decision to suspend operations. Sustaining capital expenditures are forecast to increase slightly at Lagunas Norte, Cortez and Turquoise Ridge and also reflect increased stripping activities at Porgera, Veladero and Bald
Mountain.
The company anticipates higher depreciation expense of $240-$260 per ounce in 2015 due to higher depreciation at
Lagunas Norte, Goldstrike, Cortez and Pueblo Viejo. We expect similar increases in depreciation expense over the next two years.
The table found in the appendix at the end of this news release outlines the material assumptions used to develop the
forward-looking statements in our outlook and guidance and provides an economic sensitivity analysis of those assumptions.
|
|
|
|
|
|
|
|
|
OPERATING HIGHLIGHTS
|
|
|
|
|
|
|
Gold |
|
Fourth Quarter 2014 |
|
|
Full Year 2014 |
|
Production (000s of ounces)17 |
|
|
1,527 |
|
|
|
6,249 |
|
All-in sustaining costs ($ per ounce) |
|
|
925 |
|
|
|
864 |
|
|
|
|
Copper |
|
|
|
|
|
|
|
|
Production (millions of pounds)17 |
|
|
134 |
|
|
|
436 |
|
C1 cash costs ($ per pound)
|
|
|
1.78 |
|
|
|
1.92 |
|
TOTAL CAPITAL EXPENDITURES ($
millions)18 |
|
|
627 |
|
|
|
2,180 |
|
Cortez
The
Cortez mine produced 902,000 ounces at AISC of $706 per ounce in 2014. After several years of exceptional performance with production surpassing one million ounces at low AISC, the Cortez mine is transitioning to a greater proportion of underground
mining. Barrick is advancing plans to expand profitable production from the underground mine at Cortez, which is characterized by higher grades and significant resource upside. Expected production of 825,000-900,000 ounces in 2015 reflects lower
open pit tonnage due to stripping requirements and a period of lower grades from the underground mine. AISC of $760-$835 per ounce in 2015 reflects lower sales and higher sustaining capital. To mitigate cost increases at Cortez, the mine is
improving shift change sequencing, revamping fleet maintenance practices, improving underground capital efficiency, installing advanced process controls, and strengthening geo-metallurgical modeling.
Cortez has considerable exploration potential, particularly in the higher grade and mostly oxide Lower Zone below the 3,800 foot
level which remains open at depth and to the south.
17 Barricks share.
18 Barricks share on an accrued basis, excluding capitalized interest.
|
|
|
|
|
BARRICK FOURTH QUARTER AND YEAR-END 2014 |
|
10 |
|
PRESS RELEASE |
Goldstrike
Goldstrike delivered another year of outstanding results, while further solidifying its position as one of the worlds most technologically
advanced gold processing centers. The mine contributed 902,000 ounces in 2014 at AISC of $854 per ounce, with the fourth quarter reflecting lower expected grades and a shutdown of the autoclave facility to complete the transition to thiosulfate
processing.
First gold from the thiosulfate circuit, an innovative and proprietary technology developed by Barrick, was
produced in late November. Since it was commissioned late last year, the new circuit has met our production and cost expectations. This new processing method, which does not use cyanide, will enable Goldstrike to accelerate cash flow from about four
million stockpiled ounces. The new circuit is expected to process an average of 350,000-450,000 ounces annually in its first full five years. Production at Goldstrike in 2015 is expected to be 1.000-1.150 million ounces at AISC of $700-$800 per
ounce including contributions from the thiosulfate leaching circuit. The mine is anticipated to continue producing at the one million ounce level for the next three years (2015-2017) at AISC below $900 per ounce.
Pueblo Viejo
Pueblo Viejo completed its ramp
up in 2014, and is now the only mine in the world with annual production of more than one million ounces (100 percent basis), at AISC below $700 per ounce for the next three years (2015-2017). Our technical experts have identified opportunities to
further optimize operations and increase cash flow at Pueblo Viejo. These include: increasing plant throughput by optimizing ore blending and autoclave availability and reducing costs by optimizing maintenance programs. Long-term, Pueblo Viejo has
significant reserves and resources with potential to extend the life of the mine.
Barricks 60 percent share of
production from Pueblo Viejo for the year was 665,000 ounces at AISC of $588 per ounce. Production in the fourth quarter was lower due to scheduled maintenance, which more than offset higher grades. Production in 2015 is forecast to be
625,000-675,000 ounces at AISC of $540-$590 per ounce.
Lagunas Norte
Lagunas Norte contributed 582,000 ounces at AISC of $543 per ounce in 2014. As expected, production in the fourth quarter improved due to higher
grade material and a faster leach cycle from stacking ore on a new area of the leach pad. Production in 2015 is anticipated to be 600,000650,000 ounces, also benefiting from increased leach pad efficiency. AISC of $675-$725 per ounce in 2015
reflect the start of construction on the next phase of the new leach pad and the expansion of existing waste rock storage facilities.
The company is currently evaluating a plan to extend the life of Lagunas Norte by mining the refractory ore body below the current
oxide ore body.
|
|
|
|
|
BARRICK FOURTH QUARTER AND YEAR-END 2014 |
|
11 |
|
PRESS RELEASE |
Veladero
The Veladero mine produced 722,000 ounces of gold in 2014 at AISC of $815 per ounce on positive grade reconciliations and a reduction in
capitalized stripping costs. Production guidance of 575,000-625,000 ounces for 2015 reflects lower grades in the mine plan. AISC guidance of $990-$1,075 per ounce reflects lower production and higher capitalized stripping compared to 2014, related
to development of the next phase of the Federico pit.
The company is working to realize cost savings at Veladero by improving
the efficiency and effectiveness of inventory management and maintenance and improving productivity in equipment availability and utilization.
Turquoise
Ridge
The Turquoise Ridge mine had a strong performance in 2014, contributing 195,000 ounces (75 percent basis) at AISC of $628 per ounce
on increased throughput, higher grades and lower sustaining capital. The mine is expected to produce 175,000-200,000 ounces (75 percent basis) in 2015 at AISC of $875-$925 per ounce. As discussed on page five, Barrick is advancing a project to
develop an additional shaft, which could nearly double production to 500,000 ounces (100 percent basis) per year at AISC of about $625-$675 per ounce.
Porgera
Higher recoveries and throughput from
improved mill availability and a focus on reducing sustaining capital contributed to improved 2014 production and AISC of 493,000 ounces and $996 per ounce, respectively. Porgera is expected to produce 500,000-550,000 ounces in 2015, reflecting
increased underground mining rates and mining from higher grade areas of the open pit. AISC of $1,025-$1,125 per ounce in 2015 reflects increased sustaining capital in line with the mine plan. The company is evaluating a number of initiatives with
the potential to further reduce costs at Porgera. These include: lowering energy costs through an alternative electricity supply project and reducing the number of expatriate staff and other external spending.
Other Mines
Barricks other mines
consisting of Bald Mountain, Round Mountain, Ruby Hill, Golden Sunlight, Hemlo, Cowal and KCGM contributed 1.2 million ounces at AISC of $1,011 per ounce in 2014.
Acacia Mining
Barricks share of full
year production was 470,000 ounces, while AISC of $1,105 per ounce were at the bottom of the guidance range. Barricks share of 2015 production from Acacia is anticipated to be 480,000-510,000 ounces at AISC of $1,050-$1,100 per ounce.
|
|
|
|
|
BARRICK FOURTH QUARTER AND YEAR-END 2014 |
|
12 |
|
PRESS RELEASE |
Global Copper
Copper production in 2014 was 436 million pounds at C1 cash costs of $1.92 per pound. Lower copper production for the year was primarily due
to the temporary shutdown of Lumwana to repair the conveyor and fewer tons processed at Zaldivar, along with a minor disruption in leaching irrigation due to piping and pump issues.
Copper production guidance for 2015 of 310-340 million pounds at C1 cash costs of $1.75-$2.00 per pound assumes the planned
suspension of Lumwana in March.
Lumwana contributed 214 million pounds at C1 cash costs of $2.08 per pound in 2014.
During the quarter, the Zambian government enacted changes to the countrys mining tax regime that replaced corporate income tax and variable profit tax with a 20 percent gross royalty which took effect on January 1, 2015. Given the
substantial impact of the new royalty and in light of current low copper prices, Barrick intends to proceed with a suspension of operations at Lumwana unless an agreement with the government of Zambia can be reached. Assuming a suspension, the mine
is expected to produce 70-80 million pounds19 of copper in 2015 at C1 cash costs of $1.90-$2.15 per pound.
The Zaldívar mine produced 222 million pounds in 2014 at C1 cash costs of $1.79 per pound. The mine continues to be a
steady generator of free cash flow and is expected to have improved production of 240-260 million pounds at C1 cash costs of $1.65-$1.95 per pound in 2015, reflecting higher mining rates and better equipment availability.
During the fourth quarter, Barrick completed the joint venture agreement with Saudi Arabian Mining Company (Maaden) to
advance and operate the Jabal Sayid copper mine. Construction to complete safety and security installations has begun and shipments of low-cost copper-in-concentrate are anticipated in early 2016. Once the mine reaches full production, the average
annual output is expected to be 100 million pounds per year, with the potential to increase to 130 million pounds.
Qualified Person
Scientific and technical information relating to exploration at the companys Cortez property contained in this news release has been
reviewed and approved by Robert Krcmarov, Senior Vice President, Global Exploration of Barrick, who is a Qualified Person as defined in National Instrument 43-101 Standards of Disclosure for Mineral Projects.
19 |
Lower production reflects decision to suspend operations at Lumwana following
implementation of Zambias new royalty regime. |
|
|
|
|
|
BARRICK FOURTH QUARTER AND YEAR-END 2014 |
|
13 |
|
PRESS RELEASE |
APPENDIX
Outlook Assumptions and Economic Sensitivity Analysis
|
|
|
|
|
|
|
|
|
|
|
2015 Guidance Assumption |
|
Hypothetical Change |
|
Impact on AISC |
|
EBITDA20 (millions) |
Gold revenue, net of royalties |
|
$1,250/oz21 |
|
+/- $100/oz |
|
n/a |
|
$635 |
Copper revenue, net of royalties |
|
$2.50/lb22 |
|
+/- $0.50/lb |
|
n/a |
|
$163 |
Gold all-in sustaining costs |
|
|
|
|
|
|
|
|
Gold royalties & production taxes |
|
$1,250/oz |
|
$100/oz |
|
$3/oz |
|
$19 |
WTI crude oil price22, 23 |
|
$50/bbl |
|
$10/bbl |
|
$3/oz |
|
$19 |
Australian dollar exchange rate23 |
|
0.83 : 1 |
|
+10% |
|
($3)/oz |
|
($23) |
Australian dollar exchange rate23 |
|
0.83:1 |
|
-10% |
|
$3/oz |
|
$23 |
Canadian dollar exchange rate23 |
|
1.20:1 |
|
+10% |
|
($4)/oz |
|
($27) |
Canadian dollar exchange rate23 |
|
1.20:1 |
|
-10% |
|
$2/oz |
|
$11 |
Copper C1 cash costs |
|
|
|
|
|
Impact on C1 |
|
|
WTI crude oil price23, 24 |
|
$50/bbl |
|
$10/bbl |
|
$0.00/lb |
|
$1 |
Chilean peso exchange rate23 |
|
610 : 1 |
|
+10% |
|
($0.03)/lb |
|
($11) |
Chilean peso exchange rate23 |
|
610 : 1 |
|
-10% |
|
$0.00/lb |
|
$1 |
20 |
EBITDA is a non-GAAP financial performance measure with no standardized definition under IFRS. See pages 81-91 of Barricks Fourth Quarter and Year-End 2014 Report. |
21 |
We have assumed a gold price of $1,250 per ounce and copper price of $2.50 per pound, which are in line with current market prices. |
22 |
Due to our hedging activities, which are reflected in these sensitivities, we are partially protected against changes in these factors. |
23 |
Impact on EBITDA only reflects contracts that mature in 2015. |
|
|
|
|
|
BARRICK FOURTH QUARTER AND YEAR-END 2014 |
|
14 |
|
PRESS RELEASE |
Key Statistics
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Barrick Gold Corporation
(in United States dollars) |
|
|
Three months ended December 31 |
|
|
|
Twelve months ended December 31 |
|
|
|
|
2014 |
|
|
|
2013 |
|
|
|
2014 |
|
|
|
2013 |
|
Operating Results |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gold production (thousands of ounces)1 |
|
|
1,527 |
|
|
|
1,713 |
|
|
|
6,249 |
|
|
|
7,166 |
|
Gold sold (thousands of ounces)1 |
|
|
1,572 |
|
|
|
1,829 |
|
|
|
6,284 |
|
|
|
7,174 |
|
Per ounce data |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average spot gold price |
|
$ |
1,201 |
|
|
$ |
1,276 |
|
|
$ |
1,266 |
|
|
$ |
1,411 |
|
Average realized gold price2 |
|
|
1,204 |
|
|
|
1,272 |
|
|
|
1,265 |
|
|
|
1,407 |
|
Cash costs2 |
|
|
628 |
|
|
|
573 |
|
|
|
598 |
|
|
|
566 |
|
All-in sustaining costs2 |
|
|
925 |
|
|
|
899 |
|
|
|
864 |
|
|
|
915 |
|
All-in costs2 |
|
|
1,094 |
|
|
|
1,317 |
|
|
|
986 |
|
|
|
1,282 |
|
Cash costs (on a co-product basis)2 |
|
|
648 |
|
|
|
592 |
|
|
|
618 |
|
|
|
589 |
|
All-in sustaining costs (on a co-product basis)2 |
|
|
945 |
|
|
|
918 |
|
|
|
884 |
|
|
|
938 |
|
All-in costs (on a co-product basis)2 |
|
|
1,114 |
|
|
|
1,336 |
|
|
|
1,006 |
|
|
|
1,305 |
|
|
|
|
|
|
Copper production (millions of pounds) |
|
|
134 |
|
|
|
139 |
|
|
|
436 |
|
|
|
539 |
|
Copper sold (millions of pounds) |
|
|
139 |
|
|
|
134 |
|
|
|
435 |
|
|
|
519 |
|
|
|
|
|
|
Per pound data |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average spot copper price |
|
$ |
3.00 |
|
|
$ |
3.24 |
|
|
$ |
3.11 |
|
|
$ |
3.32 |
|
Average realized copper price2 |
|
|
2.91 |
|
|
|
3.34 |
|
|
|
3.03 |
|
|
|
3.39 |
|
C1 cash costs2 |
|
|
1.78 |
|
|
|
1.81 |
|
|
|
1.92 |
|
|
|
1.92 |
|
Depreciation3 |
|
|
0.38 |
|
|
|
0.37 |
|
|
|
0.39 |
|
|
|
0.35 |
|
Other4 |
|
|
0.11 |
|
|
|
0.15 |
|
|
|
0.12 |
|
|
|
0.15 |
|
C3 fully allocated costs2 |
|
|
2.27 |
|
|
|
2.33 |
|
|
|
2.43 |
|
|
|
2.42 |
|
Financial Results (millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
$ |
2,510 |
|
|
$ |
2,942 |
|
|
$ |
10,239 |
|
|
$ |
12,527 |
|
Net loss5 |
|
|
(2,851 |
) |
|
|
(2,830 |
) |
|
|
(2,907 |
) |
|
|
(10,366 |
) |
Adjusted net earnings2 |
|
|
174 |
|
|
|
406 |
|
|
|
793 |
|
|
|
2,569 |
|
Operating cash flow |
|
|
371 |
|
|
|
1,016 |
|
|
|
2,296 |
|
|
|
4,239 |
|
Adjusted operating cash flow2 |
|
|
371 |
|
|
|
1,085 |
|
|
|
2,296 |
|
|
|
4,359 |
|
|
|
|
|
|
Per Share Data (dollars) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss (basic) |
|
|
(2.45 |
) |
|
|
(2.61 |
) |
|
|
(2.50 |
) |
|
|
(10.14 |
) |
Adjusted net earnings (basic)2 |
|
|
0.15 |
|
|
|
0.37 |
|
|
|
0.68 |
|
|
|
2.51 |
|
Net loss (diluted) |
|
|
(2.45 |
) |
|
|
(2.61 |
) |
|
|
(2.50 |
) |
|
|
(10.14 |
) |
Weighted average basic common shares (millions) |
|
|
1,165 |
|
|
|
1,085 |
|
|
|
1,165 |
|
|
|
1,022 |
|
Weighted average diluted common shares
(millions)6 |
|
|
1,165 |
|
|
|
1,085 |
|
|
|
1,165 |
|
|
|
1,022 |
|
|
|
|
|
|
|
|
|
|
|
|
As at |
|
|
|
As at |
|
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
|
December 31, |
|
|
|
|
|
|
|
|
|
|
|
|
2014 |
|
|
|
2013 |
|
Financial Position (millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and equivalents |
|
|
|
|
|
|
|
|
|
$ |
2,699 |
|
|
$ |
2,404 |
|
Non-cash working capital |
|
|
|
|
|
|
|
|
|
|
3,377 |
|
|
|
3,060 |
|
1 |
Production includes Acacia on a 73.9% basis until February 28, 2014 and a 63.9% basis thereafter and Pueblo Viejo on a 60% basis, both of which reflect our equity share of production. Also includes production from
Yilgarn South up to September 30, 2013, Plutonic up to January 31, 2014, Kanowna up to March 1, 2014 and Marigold up to April 4, 2014, the effective dates of sale of these assets. Sales include our equity share of gold sales from
Acacia and Pueblo Viejo. |
2 |
Realized price, cash costs, all-in sustaining costs, all-in costs, cash costs (on a co-product basis), all-in sustaining costs (on a co-product basis), all-in costs (on a co-product basis), C1 cash costs, C3 fully
allocated costs, adjusted net earnings and adjusted operating cash flow are non-gaap financial performance measures with no standard definition under IFRS. Refer to the Non-GAAP Financial Performance Measures section of the Companys MD&A.
|
3 |
Represents equity depreciation expense divided by equity pounds of copper sold. |
4 |
For a breakdown, see reconciliation of cost of sales to C1 cash costs and C3 fully allocated costs per pound in the Non-GAAP Financial Performance Measures section of the Companys MD&A. |
5 |
Net loss represents net loss attributable to the equity holders of the Company. |
6 |
Fully diluted includes dilutive effect of stock options. |
|
|
|
|
|
BARRICK YEAR END 2014 |
|
15 |
|
SUMMARY INFORMATION |
Production and Cost Summary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gold Production (attributable ounces) (000s) |
|
|
All-in sustaining costs5 ($/oz) |
|
|
|
|
Three months ended |
|
|
|
Twelve months ended |
|
|
|
Three months ended |
|
|
|
Twelve months ended |
|
|
|
|
December 31, |
|
|
|
December 31, |
|
|
|
December 31, |
|
|
|
December 31, |
|
|
|
|
2014 |
|
|
|
2013 |
|
|
|
2014 |
|
|
|
2013 |
|
|
|
2014 |
|
|
|
2013 |
|
|
|
2014 |
|
|
|
2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gold |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goldstrike |
|
|
187 |
|
|
|
242 |
|
|
|
902 |
|
|
|
892 |
|
|
|
$877 |
|
|
|
$779 |
|
|
|
$854 |
|
|
|
$913 |
|
Cortez |
|
|
185 |
|
|
|
244 |
|
|
|
902 |
|
|
|
1,337 |
|
|
|
849 |
|
|
|
505 |
|
|
|
706 |
|
|
|
440 |
|
Pueblo Viejo |
|
|
177 |
|
|
|
157 |
|
|
|
665 |
|
|
|
488 |
|
|
|
597 |
|
|
|
720 |
|
|
|
588 |
|
|
|
735 |
|
Lagunas Norte |
|
|
176 |
|
|
|
195 |
|
|
|
582 |
|
|
|
606 |
|
|
|
522 |
|
|
|
613 |
|
|
|
543 |
|
|
|
627 |
|
Veladero |
|
|
197 |
|
|
|
142 |
|
|
|
722 |
|
|
|
641 |
|
|
|
894 |
|
|
|
969 |
|
|
|
815 |
|
|
|
833 |
|
Turquoise Ridge |
|
|
39 |
|
|
|
53 |
|
|
|
195 |
|
|
|
167 |
|
|
|
732 |
|
|
|
624 |
|
|
|
628 |
|
|
|
928 |
|
Porgera |
|
|
126 |
|
|
|
131 |
|
|
|
493 |
|
|
|
482 |
|
|
|
977 |
|
|
|
1,419 |
|
|
|
996 |
|
|
|
1,361 |
|
Kalgoorlie |
|
|
81 |
|
|
|
80 |
|
|
|
326 |
|
|
|
315 |
|
|
|
1,142 |
|
|
|
992 |
|
|
|
1,037 |
|
|
|
1,070 |
|
Acacia2 |
|
|
116 |
|
|
|
122 |
|
|
|
470 |
|
|
|
474 |
|
|
|
1,088 |
|
|
|
1,163 |
|
|
|
1,105 |
|
|
|
1,346 |
|
Other Mines - Gold1 |
|
|
237 |
|
|
|
331 |
|
|
|
975 |
|
|
|
1,667 |
|
|
|
1,017 |
|
|
|
1,058 |
|
|
|
994 |
|
|
|
1,054 |
|
Other3 |
|
|
6 |
|
|
|
16 |
|
|
|
17 |
|
|
|
97 |
|
|
|
1,946 |
|
|
|
1,794 |
|
|
|
2,277 |
|
|
|
1,349 |
|
Total |
|
|
1,527 |
|
|
|
1,713 |
|
|
|
6,249 |
|
|
|
7,166 |
|
|
|
$925 |
|
|
|
$899 |
|
|
|
$864 |
|
|
|
$915 |
|
|
|
|
|
|
|
Copper Production (attributable pounds) (millions) |
|
|
|
C1 Cash Costs5 ($/lb) |
|
|
|
|
Three months ended |
|
|
|
Twelve months ended |
|
|
|
Three months ended |
|
|
|
Twelve months ended |
|
|
|
|
December 31, |
|
|
|
December 31, |
|
|
|
December 31, |
|
|
|
December 31, |
|
|
|
|
2014 |
|
|
|
2013 |
|
|
|
2014 |
|
|
|
2013 |
|
|
|
2014 |
|
|
|
2013 |
|
|
|
2014 |
|
|
|
2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lumwana |
|
|
76 |
|
|
|
67 |
|
|
|
214 |
|
|
|
260 |
|
|
$ |
1.77 |
|
|
$ |
2.04 |
|
|
$ |
2.08 |
|
|
$ |
2.29 |
|
Zaldívar |
|
|
58 |
|
|
|
72 |
|
|
|
222 |
|
|
|
279 |
|
|
|
1.82 |
|
|
|
1.66 |
|
|
|
1.79 |
|
|
|
1.65 |
|
Total |
|
|
134 |
|
|
|
139 |
|
|
|
436 |
|
|
|
539 |
|
|
$ |
1.78 |
|
|
$ |
1.81 |
|
|
$ |
1.92 |
|
|
$ |
1.92 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Gold Production Costs ($/oz) |
|
|
|
|
Three months ended |
|
|
|
Twelve months ended |
|
|
|
|
December 31, |
|
|
|
December 31, |
|
|
|
|
2014 |
|
|
|
2013 |
|
|
|
2014 |
|
|
|
2013 |
|
|
|
|
|
|
|
Direct mining costs before impact of hedges at market foreign exchange rates |
|
$ |
616 |
|
|
$ |
597 |
|
|
$ |
597 |
|
|
$ |
604 |
|
Gains realized on currency hedge and commodity hedge/economic hedge contracts |
|
|
(3 |
) |
|
|
(34 |
) |
|
|
(16 |
) |
|
|
(41 |
) |
Other5 |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(8 |
) |
By-product credits |
|
|
(20 |
) |
|
|
(19 |
) |
|
|
(20 |
) |
|
|
(23 |
) |
Royalties |
|
|
35 |
|
|
|
29 |
|
|
|
37 |
|
|
|
34 |
|
Cash costs4 |
|
|
628 |
|
|
|
573 |
|
|
|
598 |
|
|
|
566 |
|
Depreciation |
|
|
211 |
|
|
|
146 |
|
|
|
202 |
|
|
|
190 |
|
Other5 |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
8 |
|
Total production costs |
|
$ |
839 |
|
|
$ |
719 |
|
|
$ |
800 |
|
|
$ |
764 |
|
Cash costs4 |
|
$ |
628 |
|
|
$ |
573 |
|
|
$ |
598 |
|
|
$ |
566 |
|
General & administrative costs |
|
|
52 |
|
|
|
34 |
|
|
|
48 |
|
|
|
42 |
|
Rehabilitation - accretion and amortization (operating sites) |
|
|
19 |
|
|
|
17 |
|
|
|
20 |
|
|
|
19 |
|
Mine on-site exploration and evaluation costs |
|
|
4 |
|
|
|
9 |
|
|
|
3 |
|
|
|
8 |
|
Mine development expenditures |
|
|
90 |
|
|
|
129 |
|
|
|
104 |
|
|
|
154 |
|
Sustaining capital expenditures |
|
|
132 |
|
|
|
137 |
|
|
|
91 |
|
|
|
126 |
|
All-in sustaining costs4 |
|
$ |
925 |
|
|
$ |
899 |
|
|
$ |
864 |
|
|
$ |
915 |
|
All-in costs4 |
|
$ |
1,094 |
|
|
$ |
1,317 |
|
|
$ |
986 |
|
|
$ |
1,282 |
|
|
|
|
|
Total Copper Production Costs ($/lb) |
|
|
|
|
Three months ended |
|
|
|
Twelve months ended |
|
|
|
|
December 31, |
|
|
|
December 31, |
|
|
|
|
2014 |
|
|
|
2013 |
|
|
|
2014 |
|
|
|
2013 |
|
|
|
|
|
|
|
C1 cash costs4 |
|
$ |
1.78 |
|
|
$ |
1.81 |
|
|
$ |
1.92 |
|
|
$ |
1.92 |
|
Depreciation6 |
|
|
0.38 |
|
|
|
0.37 |
|
|
|
0.39 |
|
|
|
0.35 |
|
Other7 |
|
|
0.11 |
|
|
|
0.15 |
|
|
|
0.12 |
|
|
|
0.15 |
|
C3 fully allocated costs4 |
|
$ |
2.27 |
|
|
$ |
2.33 |
|
|
$ |
2.43 |
|
|
$ |
2.42 |
|
1 |
Includes production from Yilgarn South up to September 30, 2013, Plutonic up to January 31, 2014, Kanowna up to March 1, 2014 and Marigold up to April 4, 2014, the effective dates of sale of these
assets. |
2 |
Figures relating to Acacia are presented on a 73.9% basis until February 28, 2014 and a 63.9% basis thereafter, which reflects our equity share of production.
|
3 |
Production and all-in sustaining costs include Pierina. |
4 |
Cash costs, all-in sustaining costs, all-in costs, C1 cash costs and C3 fully allocated costs are non-GAAP financial performance measures with no standard meaning under IFRS. Refer to the Non-GAAP Financial Performance
Measures section of the Companys MD&A. |
5 |
Represents the Barrick Energy gross margin divided by equity ounces of gold sold. Barrick Energy was divested in the third quarter of 2013. |
6 |
Represents equity depreciation expense divided by equity pounds of copper sold. |
7 |
For a breakdown, see reconciliation of cost of sales to C1 cash costs and C3 fully allocated costs per pound in the Non-GAAP Financial Performance Measures section of the Companys MD&A. |
|
|
|
|
|
BARRICK YEAR END 2014 |
|
16 |
|
SUMMARY INFORMATION |
MANAGEMENTS DISCUSSION AND ANALYSIS (MD&A)
Managements Discussion and Analysis (MD&A) is intended to help the reader
understand Barrick Gold Corporation (Barrick, we, our or the Company), our operations, financial performance and present and future business environment. This MD&A, which has been prepared as of
February 18, 2015, should be read in conjunction with our audited consolidated financial statements for the year ended December 31, 2014. Unless otherwise indicated, all amounts are presented in US dollars.
For the purposes of preparing our MD&A, we consider the materiality of information. Information is considered material if: (i) such
information results in, or would reasonably be expected to result in, a significant change in the market price or value of our shares; or (ii) there is a substantial likelihood that a
reasonable investor would consider it important in making an investment decision; or (iii) it
would significantly alter the total mix of information available to investors. We evaluate materiality with reference to all relevant circumstances, including potential market sensitivity.
Continuous disclosure materials, including our most recent Form 40-F/Annual Information Form, annual
MD&A, audited consolidated financial statements, and Notice of Annual Meeting of Shareholders and Proxy Circular will be available on our website at www.barrick.com, on SEDAR at www.sedar.com and on EDGAR at www.sec.gov. For an explanation of
terminology unique to the mining industry, readers should refer to the glossary on page 92.
CAUTIONARY STATEMENT ON FORWARD-LOOKING INFORMATION
Certain information contained or incorporated by reference in this MD&A, including any
information as to our strategy, projects, plans or future financial or operating performance constitutes forward-looking statements. All statements, other than statements of historical fact, are forward-looking statements. The words
believe, expect, anticipate, contemplate, target, plan, intend, 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 the Company, are inherently subject to
significant business, economic and competitive uncertainties and contingencies. Known and unknown factors could cause actual results to differ materially from those projected in the forward-looking statements. Such factors include, but are not
limited to: fluctuations in the spot and forward price of gold, copper or certain other commodities (such as silver, diesel fuel and electricity); changes in national and local government legislation, taxation, controls or regulations and/or changes
in the administration of laws, policies and practices, expropriation or nationalization of property and political or economic developments in Canada, the United States, Zambia and other jurisdictions in which the Company does or may carry on
business in the future; failure to comply with environmental and health and safety laws and regulations; timing of receipt of, or failure to comply with, necessary permits and approvals; diminishing quantities or
grades of reserves; increased costs, delays, suspensions and technical challenges associated with
the construction of capital projects; the impact of global liquidity and credit availability on the timing of cash flows and the values of assets and liabilities based on projected future cash flows; adverse changes in our credit rating; the impact
of inflation; operating or technical difficulties in connection with mining or development activities; the speculative nature of mineral exploration and development; risk of loss due to acts of war, terrorism, sabotage and civil disturbances;
fluctuations in the currency markets; changes in U.S. dollar interest rates; risks arising from holding derivative instruments; litigation; contests over title to properties, particularly title to undeveloped properties, or over access to water,
power and other required infrastructure; business opportunities that may be presented to, or pursued by, the Company; our ability to successfully integrate acquisitions or complete divestitures; employee relations; availability and increased costs
associated with mining inputs and labor; and the organization of our previously held African gold operations and properties under a separate listed company. In addition, there are risks and hazards associated with the business of mineral
exploration, development and mining, including environmental hazards, industrial accidents, unusual or unexpected formations, pressures, cave-ins, flooding and gold bullion, copper cathode or gold or copper concentrate losses (and the risk of
inadequate insurance, or inability to obtain insurance, to cover these risks). Many of these
|
|
|
|
|
BARRICK YEAR-END 2014 |
|
17 |
|
MANAGEMENTS DISCUSSION AND ANALYSIS |
uncertainties and contingencies can affect our actual results and could cause actual results to differ materially from those expressed or implied in any forward-looking statements made by, or on
behalf of, us. Readers are cautioned that forward-looking statements are not guarantees of future performance. All of the forward-looking statements made in this MD&A are qualified by these cautionary statements. Specific reference is made to
the most recent Form
40-F/Annual Information Form on file with the SEC and Canadian provincial securities regulatory
authorities for a discussion of some of the factors underlying forward-looking statements. We disclaim any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise,
except as required by applicable law.
|
|
|
|
|
BARRICK YEAR-END 2014 |
|
18 |
|
MANAGEMENTS DISCUSSION AND ANALYSIS |
INDEX
|
|
|
|
|
|
|
|
|
|
page |
|
Overview |
|
|
|
|
|
|
Our Business and Strategy |
|
|
20 |
|
|
|
Risks to Achieving our Strategy |
|
|
23 |
|
|
|
Review of 2014 Results |
|
|
25 |
|
|
|
Key Business Developments |
|
|
29 |
|
|
|
Outlook for 2015 |
|
|
31 |
|
|
|
Market Overview |
|
|
37 |
|
|
|
Review of Financial Results |
|
|
|
|
|
|
Revenue |
|
|
42 |
|
|
|
Production Costs |
|
|
42 |
|
|
|
General & Administrative Expenses |
|
|
43 |
|
|
|
Other Expense (Income) |
|
|
43 |
|
|
|
Exploration and Project Costs |
|
|
43 |
|
|
|
Capital Expenditures |
|
|
43 |
|
|
|
Finance Cost/Finance Income |
|
|
44 |
|
|
|
Impairment Charges/Reversals |
|
|
44 |
|
|
|
Income Tax Expense |
|
|
45 |
|
|
|
Operating Segments Performance |
|
|
46 |
|
|
|
Financial Condition Review |
|
|
|
|
|
|
Balance Sheet Review |
|
|
68 |
|
|
|
Shareholders Equity |
|
|
68 |
|
|
|
Comprehensive Income |
|
|
68 |
|
|
|
Financial Position and Liquidity |
|
|
69 |
|
|
|
Financial Instruments |
|
|
71 |
|
|
|
Commitments and Contingencies |
|
|
71 |
|
|
|
Internal Control over Financial Reporting and Disclosure Controls and Procedures |
|
|
72 |
|
|
|
Review of Quarterly Results |
|
|
74 |
|
|
|
IFRS Critical Accounting Policies and Accounting Estimates |
|
|
75 |
|
|
|
Non-GAAP Financial Performance Measures |
|
|
81 |
|
|
|
Glossary of Technical Terms |
|
|
92 |
|
|
|
|
|
|
BARRICK YEAR-END 2014 |
|
19 |
|
MANAGEMENTS DISCUSSION AND ANALYSIS |
OVERVIEW
Our Business and Strategy
Our Business
Barrick is one the worlds
leading gold mining companies with annual gold production and gold reserves that are the largest in the industry. We are principally engaged in the production and sale of gold and copper, as well as related activities such as exploration and mine
development. We have 14 producing gold mines, located in Canada, the United States, Peru, Argentina, Australia, the Dominican Republic and Papua New Guinea. We also hold a 63.9% equity interest in Acacia Mining plc (Acacia), formerly
African Barrick Gold plc, a company listed on the London Stock Exchange that owns gold mines and exploration properties in Africa. Our copper business contains copper mines located in Chile and Zambia and a mine progressing through operational
readiness located in Saudi Arabia. We also have projects located in South America and the United States. We sell our production in the world market through the following distribution channels: gold bullion is sold in the gold spot market; gold and
copper concentrate is sold to independent smelting companies; and copper cathode is sold to various manufacturers and traders.
Our Strategy
Barricks strategy is anchored in five pillars:
|
|
|
An entrepreneurial structure; |
|
|
|
Our balance sheet and financial flexibility; |
|
|
|
Maximizing free cash flow; |
|
|
|
A focus on our best assets and regions; and |
|
|
|
Profitable growth in the Americas. |
Entrepreneurial Structure
Barrick became the
worlds leading gold company by pursuing its founding purpose: the generation of wealth for its owners, employees, and the communities with which it partners. Those who founded and first led the company were committed to a culture of
partnership and the values underpinning such a culture: trust, transparency, shared responsibility and accountability, and a sense of emotional and financial ownership.
A small head office managed the company with a balance of entrepreneurialism and prudence, focusing on only a few core activities: defining and
implementing strategy, allocating human and financial capital, and fulfilling the obligations required of a public company. Leaders at the operational level had greater autonomy, responsibility, and accountability, functioning as business owners.
Free from bureaucracy and middle management, they focused on maximizing free cash flow, and the head office focused on allocating that cash flow to maximize shareholder returns.
We have cut our head office by close to half and eliminated all management layers between Toronto and the mines. What remains are shared service
centers in the field that provide support directly to our mines and projects, with costs charged directly to the relevant operation.
Along
with managing financial capital, managing our talent is a central responsibility of Barricks leaders. Attracting, retaining and developing exceptional people are a fundamental component of our partnership culture. Accordingly, we have extended
our innovative partnership plan to 35 leaders across the business. Each year, these leaders will be graded on their collective performance, as measured against a transparent long-term scorecard disclosed to shareholders in advance. A significant
portion of their total compensation, if earned, will be long-term in nature, awarded in units that convert into Barrick common shares which cannot be sold until an individual retires or leaves the company. A smaller proportion of total compensation,
if earned, will be in the
|
|
|
|
|
BARRICK YEAR-END 2014 |
|
20 |
|
MANAGEMENTS DISCUSSION AND ANALYSIS |
form of annual bonuses, determined for each individual based on a personal scorecard tailored to the individuals specific responsibilities. This plan increases financial and emotional
ownership among our senior leaders, and will deepen to include new partners over time.
Restoring a Strong Balance Sheet
For many years, Barrick had the only A-rated balance sheet in the gold industry. Prudent financial management was a bedrock principle of the
company. Our current level of debt is inconsistent with that principle, and that inconsistency is reflected in the companys share price. As we return to our original values, no priority is more important than restoring a strong balance sheet.
We are targeting to reduce our net debt by at least $3 billion by the end of 2015. The company has a number of options to achieve this goal,
including the following levers:
|
|
Maximizing free cash flow by implementing a leaner, decentralized operating model with more efficient capital spending, reduced general and
administrative (G&A) costs, and profitable growth; |
|
|
Disposal of non-core asset, beginning with a process to sell the Porgera Joint Venture and Cowal mine; |
|
|
Joint ventures and strategic partnerships if and where they make sense. |
Our strong liquidity means the company can tackle its debt in a disciplined manner. We have less than $1 billion in debt due over the next three
years, a $4 billion undrawn credit facility, and $2.7 billion in cash at the end of 2014.
Maximizing Free Cash Flow
A return to the lean, decentralized operating model that underpinned Barricks early success is freeing up our country and mine managers to
focus on maximizing free cash flow across the business.
As part of this transformation, we expect to realize $30 million in savings from
reduced general and administrative expenditures and overhead costs in 2015. These savings are projected to reach $70 million on an annualized basis in 2016. We expect more to follow, as our leaders focus on maximizing cash flow without the
constraints of bureaucracy and unnecessary management layers.
We are reducing the size of our head office by close to half, from 260
positions in 2014 to 140 positions in 2015. As a result, our corporate administration expense is expected to be about $145 million this year, and even lower in 2016.
We have eliminated all management layers between the head office and our operations; what remains
are shared service centers that provide support directly to our mines and projects. These costs will no longer be reported as G&A. They will be charged directly to the mines and projects that use the services, and will be reflected in operating
costs. Services that are not required will be eliminated, driving further cost savings.
In addition, we are taking steps to improve the
efficiency of our procurement and supply chain practices, freeing up working capital by reducing inventories. We also expect to generate additional free cash flow over the next 12 months through better integration of mine site maintenance programs
and our global procurement and logistics system.
Innovation also plays a key role in improving efficiency and unlocking the cash-generating
potential of our assets. We see this in action at Goldstrike, where a revolutionary new cyanide-free processing technology developed in-house at Barrick is allowing us to accelerate cash flow from about four million stockpiled ounces of gold (see
page 51 for more details). Our in-house research and development team has also developed a patented flotation technology capable of utilizing sea water, reducing demand on scarce fresh water resources. We will continue to develop industry-leading
processing technologies, while expanding our focus to include more efficient ways to use water and power at our operations.
Best Assets and Regions
Barricks five cornerstone mines in the Americas are expected to account for 60 percent of our production in 2015 at average all-in
sustaining costs of $725-$775 per ounce. At two grams per tonne, these mines have an average reserve grade more than double that of our peer group average1. They are among the most attractive
assets in the entire gold industry, generating strong free cash flow even in todays gold price environment, while offering exceptional leverage to higher gold prices.
We maintain a strong competitive advantage in Nevada and the Andean region in South America underpinned by proven operating experience, a critical
mass of infrastructure, technical and exploration expertise, and established partnerships with host governments and communities. We believe these regions provide the best opportunities to generate returns for shareholders, and
1 Comparison based on the average overall reserve grade for Goldcorp Inc., Kinross Gold
Corporation, Newmont Mining Corporation and Newcrest Mining Limited as reported in each of the Kinross and Newcrest reserve reports as of December 31, 2014, and as reported in each of the Goldcorp and Newmont reserve reports as of
December 31, 2013.
|
|
|
|
|
BARRICK YEAR-END 2014 |
|
21 |
|
MANAGEMENTS DISCUSSION AND ANALYSIS |
we will therefore give them the majority of our focus. Divestments outside of the Americas,
including the Porgera Joint Venture and the Cowal mine, will further center the companys portfolio on its strongest assets.
Two-thirds
of our 2015 exploration budget of $220-$260 million is focused on high-quality, brownfield projects, with the remainder targeted at emerging discoveries that have the potential to become profitable mines. Approximately 85 percent of the total
exploration budget is allocated to the Americas and about half of the budget will be directed to Nevada.
Growth in the Americas
This year, Barrick is advancing growth opportunities at or near existing operations in Nevada, with four prefeasibility studies on track for
completion in 20152.
We also have within our portfolio a number of the worlds
largest undeveloped gold deposits, including Pascua-Lama, Donlin Gold and Cerro Casale. These projects offer leverage to higher gold prices, with more than 38 million ounces of gold in reserves (100 percent basis) and more than 50 million
ounces of gold in measured and indicated resources (100 percent basis). They provide the company with a platform for long-term growth in a higher gold price environment. In the meantime, we will work to optimize the economics of these projects,
spending the minimum required to maintain them as development options within our portfolio. As with all our investments, we will only proceed with construction if these projects meet our capital allocation objectives and with a robust execution plan
to ensure execution on budget and on schedule.
|
|
Goldrush Major new discovery near existing infrastructure (see page 49) |
|
|
Turquoise Ridge A core mine in the making (see page 59) |
|
|
Cortez High-grade underground expansion (see page 49) |
|
|
Spring Valley Low capital cost, heap leach project |
The Spring Valley project, 70 percent owned by Barrick and located approximately 75 miles west of Cortez, is a low capital cost, oxide heap leach
project with excellent potential to become another standalone mine in Nevada. Barrick reported an initial measured and indicated resource of 1.3 million ounces (70% basis) averaging 0.66 grams per tonne and an inferred resource of
0.6 million ounces (70% basis) averaging 0.62 grams per tonne for Spring Valley at the end of 2014. In addition,
2 |
Complete mineral reserve and mineral resource data for each of these projects and all other mines
and projects referenced in this MD&A, including tonnes, grades and ounces, can be found on page 93-98.
|
there is good potential to expand the current resource at higher gold prices. The company expects to
complete a prefeasibility study in late 2015.
Pascua-Lama
During the fourth quarter of 2013, Barrick announced the temporary suspension of construction at its Pascua-Lama project, except for those
activities required for environmental and regulatory compliance. The ramp-down was completed on schedule and budget in mid-2014 and the mine is now on care and maintenance. In 2015, Barrick anticipates expenditures of approximately $170 to $190
million for the project, including approximately $140 to $150 million3 for care and maintenance, including water management system costs, and approximately $30 to $40 million4 for other project costs, including those related to permit obligations in Argentina and Chile.
Barrick is engineering the permanent water management system and assessing the permitting requirements for construction with Chilean regulators.
The engineering studies indicate that an increase in the capacity of the water management system may be required above the volume approved in the projects Chilean environmental approval. We expect to submit our application for the new water
management system by June 2015, with permitting taking about two years.
A decision to re-start development of the project will depend on
improved economics and more certainty regarding legal and permitting matters. The Company will preserve the option to resume development of this asset, including by completing a new execution plan to optimize remaining construction activities.
Donlin Gold
The 50% owned Donlin Gold project
located in Alaska is one of the largest undeveloped gold deposits in the world. In terms of size, grade, and jurisdictional safety, Donlin Gold is an excellent asset in Barricks portfolio with significant leverage to the price of gold.
The Donlin Gold project has approximately 39 million ounces of contained gold (100% basis) in the measured and indicated resource categories
(approximately 8 million tonnes grading 2.52 g/t (measured) and 533 million tonnes grading 2.24 g/t (indicated)). In addition to its already large mineral endowment, the project also has exploration potential which could expand the current
open pit resource.
3 |
This amount is expected to be expensed. |
4 |
This amount is expected to be capitalized.
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BARRICK YEAR-END 2014 |
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22 |
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MANAGEMENTS DISCUSSION AND ANALYSIS |
Under our disciplined capital allocation framework, we have continued to work with our partner,
Novagold Resources, to advance the Donlin Gold project. Current activities, by which we maintain and enhance the option value of this project at a modest cost, are focused on permitting, community outreach and workforce development. In 2014, Donlin
Gold secured long-term surface use rights and significantly advanced the permitting of the Donlin Gold project which is now about halfway complete.
Barrick is working closely with its partner on alternatives designed to minimize initial capital outlay. The outcome of that effort may include
engagement of third party operators and exploring possibilities for third party financing of some capital intensive infrastructure. Collectively, we are also investing about $3 million (100% basis) on technical studies to identify potential design
and execution enhancements. Donlin Gold has substantial leverage to gold prices and has the potential to add significant value to Barrick and its future growth pipeline in a higher gold price environment.
Any decision to proceed with development, either as currently envisaged, or in an optimized scenario, will depend on the project meeting
Barricks minimum hurdle rate which will depend in large part on the prevailing gold prices and market conditions.
Risks to Achieving our Strategy
Risk is an inherent component of our business. Delivery on our vision and strategic objectives depends on our ability to understand the
uncertainties, threats and opportunities in our world and respond effectively. Enterprise risk management (ERM) is focused on top-level business risks and provides a framework to:
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Identify, assess and communicate inherent and residual risk; |
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Embed ERM responsibilities into the operating model; |
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Integrate risk responses into strategic priorities and business plans; and |
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Provide assurance to the Executive Committee and relevant Committees to the Board of Directors on the effectiveness of control activities.
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Our business is subject to risks in financial, regulatory, strategic and operational areas. In managing risk, management
focuses on the risk factors that impact our ability to operate in a safe, profitable and responsible manner, including:
Financial and regulatory risk
factors
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fluctuations in the spot and forward prices of gold, copper and silver;
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the impact of global financial conditions such as inflation, fluctuations in the currency markets and changes in U.S. dollar interest rates;
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our liquidity profile, level of indebtedness and credit ratings; |
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changes in governments or the intervention of governments, or other political or economic developments in the jurisdictions in which we do or may carry
on business in the future; |
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changing or increasing regulatory requirements, including increasing royalties and taxes, and our ability to obtain and to maintain compliance with
permits and licenses necessary to operate in our industry; |
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our ability to maintain appropriate internal control over financial reporting and disclosure; |
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our ability to maintain compliance with anti-corruption standards; |
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our reliance on models and plans that are based on estimates, including mineral reserves and resources; and, |
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the organization of our Acacia operations and properties under a separate listed company. |
Strategic and operating risk factors
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diminishing quantities or declining grades of reserves and our ability to replace mineral reserves and resources through discovery or acquisition;
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our ability to discover or acquire new resources and integrate acquisitions or complete divestitures; |
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our ability to operate within joint ventures; |
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our ability to compete for mining properties, to obtain and maintain valid title and to obtain and maintain access to required land, water and power
infrastructure; |
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our ability to execute development and capital projects, including managing scope, costs and timelines associated with construction, to successfully
deliver expected operating and financial performance; |
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availability and increased cost of mining inputs, critical parts and equipment, and certain commodities, including fuel and electricity;
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sequencing or processing challenges resulting in lower than expected recovery rates; |
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technical complexity in connection with mining or expansion activities; |
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unusual or unexpected ore body formations, ore dilution, varying metallurgical and other ore characteristics; |
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business interruption or loss due to acts of terrorism, intrusion, sabotage, work stoppage and civil disturbances; |
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loss due to theft of gold bullion, copper cathode or gold/copper concentrate; |
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permit or regulatory breaches resulting in fines, temporary shut-down or suspension of operations, or litigation;
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BARRICK YEAR-END 2014 |
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23 |
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MANAGEMENTS DISCUSSION AND ANALYSIS |
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our ability to manage security and human rights matters; |
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relationships with the communities in which we operate; |
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employee and labor relations; and |
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availability and increased costs associated with labor. |
In addition, there are hazards associated with the business of mineral exploration, development and mining, including environmental incidents,
industrial accidents, and natural phenomena such as inclement weather conditions, flooding and earthquakes or
cave-
ins (and the risk of inadequate insurance, or inability to obtain insurance, to cover these risks) that could result in unexpected negative impacts to future cash flows.
We have provided a description of our approach to managing our top-level business risks throughout this MD&A. For a more fulsome discussion of
risks relevant to investors, see Risk Factors in our most recent Form 40-F/Annual Information Form on file with the SEC and Canadian provincial securities regulatory authorities.
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BARRICK YEAR-END 2014 |
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24 |
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MANAGEMENTS DISCUSSION AND ANALYSIS |
Review of 2014 Results
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($ millions, except where indicated) |
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For the three months ended December 31 |
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For the years ended December 31 |
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2014 |
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2013 |
|
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2014 |
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2013 |
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Financial Data |
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Revenue |
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$2,510 |
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$2,942 |
|
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$10,239 |
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$12,527 |
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Net earnings (loss)1 |
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(2,851) |
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(2,830) |
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(2,907) |
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(10,366) |
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Per share (EPS)2 |
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(2.45) |
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(2.61) |
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(2.50) |
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(10.14) |
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Adjusted net earnings3 |
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174 |
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406 |
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793 |
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2,569 |
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Per share (adjusted EPS)2,3 |
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0.15 |
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0.37 |
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0.68 |
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2.51 |
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Total project capital expenditures4,5 |
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121 |
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658 |
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234 |
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2,434 |
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Total capital expenditures expansion4 |
|
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90 |
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|
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122 |
|
|
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392 |
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468 |
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Total capital expenditures sustaining4 |
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438 |
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568 |
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1,638 |
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2,473 |
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Operating cash flow |
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371 |
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1,016 |
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2,296 |
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4,239 |
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Adjusted operating cash flow3 |
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371 |
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1,085 |
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2,296 |
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4,359 |
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Free cash flow3 |
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$(176) |
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$(280) |
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$(136) |
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$(1,142) |
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Debt to Adjusted EBITDA6 |
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3.43:1 |
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2.60:1 |
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Operating Data |
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Gold |
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Gold produced (000s ounces)7 |
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1,527 |
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1,713 |
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6,249 |
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7,166 |
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Gold sold (000s ounces)7 |
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1,572 |
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1,829 |
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6,284 |
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7,174 |
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Realized price ($ per ounce)3 |
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$1,204 |
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$1,272 |
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$1,265 |
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$1,407 |
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Cash costs ($ per ounce)3 |
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$628 |
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$573 |
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$598 |
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$566 |
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Cash costs on a co-product basis ($ per ounce)3 |
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$648 |
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$592 |
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$618 |
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$589 |
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All-in sustaining costs ($ per ounce)3 |
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$925 |
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$899 |
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$864 |
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$915 |
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All-in sustaining costs on a co-product basis ($ per ounce)3 |
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$945 |
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$918 |
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$884 |
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$938 |
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All-in costs ($ per ounce)3 |
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$1,094 |
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$1,317 |
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$986 |
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$1,282 |
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All-in costs on a co-product basis ($ per ounce)3 |
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$1,114 |
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$1,336 |
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$1,006 |
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$1,305 |
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Copper |
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Copper produced (millions of pounds) |
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134 |
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139 |
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436 |
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539 |
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Copper sold (millions of pounds) |
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139 |
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134 |
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435 |
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519 |
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Realized price ($ per pound)3 |
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$2.91 |
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$3.34 |
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$3.03 |
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$3.39 |
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C1 cash costs ($ per pound)3 |
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$1.78 |
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$1.81 |
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$1.92 |
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$1.92 |
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Safety |
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Total reportable injury frequency rate |
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0.58 |
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0.64 |
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1 |
Net loss represents net loss attributable to the equity holders of the Company. |
2 |
Calculated using weighted average number of shares outstanding under the basic method. |
3 |
These are non-GAAP financial performance measures with no standardized definition under IFRS. For further information and detailed reconciliations,
please see pages 81 91 of this MD&A. |
4 |
These amounts are presented on a 100% accrued basis. Project and expansion capital expenditures are included in our calculation of all-in costs, but
not included in our calculation of all-in sustaining costs. |
5 |
Project capital expenditures include the reversal of contract claim accruals that were closed out during the year and the reclassification of assets
from inventory to construction-in-process at Pascua-Lama. |
6 |
Represents total debt divided by Adjusted EBITDA as at December 31, 2014 and December 31, 2013. |
7 |
Gold production and sales include our pro rata share of Acacia and Pueblo Viejo at our equity share. |
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BARRICK YEAR-END 2014 |
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25 |
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MANAGEMENTS DISCUSSION AND ANALYSIS |
FULL YEAR FINANCIAL AND OPERATING HIGHLIGHTS
Net Income, Adjusted Net Income, Operating Cash Flow and Free Cash Flow
The net loss was lower in 2014 than the net loss recorded in the prior year, which was primarily due to the recognition of $11.5 billion in
impairment losses in the prior year compared to $3.4 billion in 2014. The decrease in adjusted net earnings was primarily due to lower realized gold and copper prices combined with lower gold and copper sales volumes, partially offset by lower cost
of sales applicable to gold and copper.
The increase in EPS over the same prior year period reflects the lower net loss in 2014, and the
impact of our equity offering in fourth quarter 2013 that increased our total shares outstanding by 15%, and therefore decreased our per share net loss. The decrease in adjusted EPS over the prior year was primarily due to the decrease in adjusted
net earnings, as described above, combined with the increase in total shares outstanding.
Operating cash flow decreased 46% primarily
reflecting lower sales volumes and lower gross margins, partially offset by a decrease in income tax payments.
Free cash flow in 2014 was an
outflow of $136 million, an improvement of $1 billion over the prior year, primarily reflecting lower capital expenditures which more than offset lower operating cash flows.
Gold production, cash costs and all-in sustaining costs
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Gold production for 2014 was 13% lower, primarily due to the impact of the divestiture of the Yilgarn South assets in fourth quarter 2013, the Plutonic
and Kanowna assets in first quarter 2014 and the Marigold assets in second quarter 2014, which accounted for 10% of 2013 production. The lower production in 2014 also |
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reflects lower production at Cortez, partially offset by higher production at Goldstrike, Pueblo Viejo, Lagunas Norte, Veladero, Turquoise Ridge and at
Porgera. |
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BARRICK YEAR-END 2014 |
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26 |
|
MANAGEMENTS DISCUSSION AND ANALYSIS |
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Cash costs for 2014 increased 6% primarily due to the impact of lower production levels on unit production costs;
partially offset by lower total direct mining costs and lower depreciation expense. All-in sustaining costs for 2014 decreased 6% as lower minesite sustaining capital expenditures more than offset the increase in cash costs. As a result of our
actions to reduce and defer sustaining capital expenditures, we were able to finish the year below our guidance range for all-in sustaining costs, which had already been reduced twice throughout the year. We will continue this focus on controlling
our expenditures in order to maximize the free cash flow we generate from operations in this lower gold price environment, as can be seen in our 2015 guidance range of $860 to $895 per ounce. All-in costs for 2014 were 23% lower as a result of lower
all-in sustaining costs and lower non-sustaining capital, primarily as a result of the temporary suspension of construction at Pascua-Lama that occurred in fourth quarter 2013.
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Copper production and C1 costs
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Copper production for 2014 decreased 19% compared to the prior year, due to lower production at Zaldívar and at Lumwana. The decrease in copper production at
Zaldívar was due to lower tonnes processed combined with a minor disruption in leaching irrigation due to piping and pump failures. The decrease in production at Lumwana was primarily due to the partial conveyor collapse that occurred in
second quarter 2014 which shut down concentrate production for most of the second quarter. Copper C1 cash costs were similar to the prior year as the impact of lower production levels on unit production costs was offset by lower total direct mining
costs. |
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Significant Adjusting Items
Significant adjusting items (net of tax and non-controlling interest effects) in 2014 include: $3.4 billion in impairment losses; $169 million in
unrealized foreign currency translation losses; $137 million in unrealized losses on non-hedge derivative instruments, partially offset by $49 million in tax adjustments and $48 million in gains on sale of assets. |
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BARRICK YEAR-END 2014 |
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27 |
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MANAGEMENTS DISCUSSION AND ANALYSIS |
Capital Expenditures
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Capital expenditures for 2014 were down 58% primarily due to lower project capital expenditures, our initiatives to reduce sustaining capital at each of our
operating sites and lower minesite expansion capital expenditures. The lower minesite expansion capital expenditures is primarily due to a reduction in costs at Cortez as well as at Bulyanhulu due to the expansion of the carbon-in-leach
(CIL) plant which was commissioned in fourth quarter 2014. The reduction in project capital expenditures is primarily due to our decision in fourth quarter 2013 to temporarily suspend the Pascua-Lama project. |
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Safety
Nothing is more important to Barrick than the safety, health and well-being of workers and their families. In 2014, we continued a ten-year trend
of improving our total reportable injury frequency rate5 (TRIFR) and since 2004, there has been a 79 percent improvement in the TRIFR (from 2.79 to 0.58). Another example of our safety
culture was that our Turquoise Ridge mine, with more than 500 employees and contractors, operated throughout 2014 without a single medical treatment injury. Although we are pleased with these trends, this performance was overshadowed by the tragic
occurrence of a fatality in 2014 at our Zaldívar mine. |
Reserves and Resources
Barrick calculated its 2014 reserves using a conservative gold price assumption of $1,100 per ounce, unchanged from 2013. While this is below the
companys gold price outlook and current spot prices, it reflects Barricks emphasis on pursuing profitable ounces. Gold reserves were 93.0 million ounces6 at the end of 2014,
compared to 104.1 million ounces at the end of 2013. Approximately 65 percent of the reduction was attributable to ounces mined and processed in 2014, with the balance reflecting the divestiture of the Kanowna, Plutonic and Marigold mines, and
the partial sale of Barricks equity interest in Acacia Mining plc during the year. This includes 17.4 million ounces related to our 75% share of Cerro Casale which, notwithstanding the impairment we took on the project in fourth quarter
2014, still qualify as reserves pursuant to National Instrument 43-101.
Measured and indicated gold resources were 94.3 million ounces6 at the end of 2014, compared to 99.4 million ounces at the end of 2013. The majority of the reduction relates to a lower gold price assumption of $1,400 per ounce (compared to $1,500 per ounce
for 2013), with divestitures and movements to reserves more than offset by additions in the year. Inferred gold resources were 29.3 million ounces6 at the end of 2014, compared to
31.9 million ounces at the end of 2013, primarily due to ounces upgraded to the measured and indicated category and from divestitures.
Copper reserves decreased to 9.6 billion pounds6 from 14.0 billion pounds based on a copper
price assumption of $3.00 per pound (unchanged from 2013), primarily reflecting the transfer of Lumwana reserves into resources following the companys decision to place the mine on care and maintenance. Measured and indicated copper resources
decreased to 4.6 billion pounds6 compared to 6.9 billion pounds at the end of 2013 based on an unchanged copper price assumption of $3.50 per pound. Inferred copper resources were 0.1 billion
pounds6 compared to 0.2 billion pounds at the end of 2013.
5 |
Total reportable incident frequency rate (TRIFR) is a ratio calculated as follows: number of reportable injuries x 200,000 hours divided by the total
number of hours worked. Reportable injuries include fatalities, lost time injuries, restricted duty injuries, and medically treated injuries. |
6 |
Calculated in accordance with National Instrument 43-101 as required by Canadian securities regulatory authorities. For a breakdown and additional
detail on tonnes, grade and ounces, see pages 93- 98. |
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BARRICK YEAR-END 2014 |
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28 |
|
MANAGEMENTS DISCUSSION AND ANALYSIS |
Key Business Developments
Royalty Increase in Zambia
On December 18,
2014, the Zambian government passed changes to the countrys mining tax regime that would replace the current corporate income tax and variable profit tax with a 20 percent royalty which took effect on January 1, 2015. The application of a
20 percent royalty rate compared to the 6 percent royalty the company was paying challenges the economic viability of the mine. As such, on December 18, 2014 Barrick announced the initiation of procedures to suspend operations at the Lumwana
mine, transitioning the mine to care and maintenance. The transition is expected to be completed in second quarter 2015. The increased royalty has created an unsustainable level of taxation for Lumwana and this together with lower estimated
long-term copper prices resulted in the recording of an impairment to the carrying value of Lumwana of $930 million at December 31, 2014. Refer to note 20 to the annual consolidated financial statements for further details.
Electricity Price Increase in Zambia
On April 2, 2014
Zambias energy regulator approved a 28.8% electricity price increase for mining companies. Subsequently, the bulk power supply agreement tariffs between state power company ZESCO and Copperbelt Energy Corporation were increased to 6.84 cents
per KWhr from 5.31 cents per KWhr. The Lumwana Mining Company has a long-term power supply contract with ZESCO and does not believe that the rates it pays thereunder should be affected by the announced rate increase. Lumwana and several other mining
companies in Zambia have been granted leave to challenge the rate increase in court. As noted above, we have announced our intention to suspend operations at the mine and therefore this electricity price increase will not have any immediate impact.
We will continue to progress the matter.
Cerro Casale
In November 2014, we completed a strategy optimization study for our Cerro Casale project with the goal of identifying a development model that
would improve the project economics and risk by reducing the upfront capital requirements in order to generate a higher return on our investment. The study was unable to identify an alternative that provided an overall rate of return above our
hurdle rate for a project of this size and complexity. As a result, the budget for 2015 for the project has been significantly reduced, with the 2015 budget focused on preserving the optionality of the project. We will continue activities to protect
the asset and assess alternative ways to develop the project in a more economic manner, however managements expectation of achieving a
suitable rate of return in the current metal price environment has been diminished. The foregoing developments were deemed to be indicators of impairment, and as a result, we assessed the
recoverable amount of the project and have recorded an impairment loss on the project of $778 million (Barricks share). Refer to note 20 to the annual consolidated financial statements for further details.
Hemlo Land Acquisition
On December 11,
2014, Barrick entered into a definitive agreement to acquire certain surface and mineral lands adjacent to the Hemlo property in Ontario from subsidiaries of Newmont Mining Corporation. The acquisition will enable Hemlo to realize additional value
through near-term, lower-cost ounces, optimize its current operation with the potential for mine life extensions, and increase exploration potential. The transaction is expected to close in first quarter 2015.
Divestitures
On July 13, 2014 Barrick
entered into an agreement to form Maaden Barrick Copper Company, a joint venture with Maaden to operate the Jabal Sayid copper project. Maaden, which is 50% owned by the Saudi Arabian government, acquired its 50% interest in the
new joint venture company for cash consideration of $216 million. The acquisition closed on December 3, 2014. Mining operations are expected to recommence in early 2015 and commissioning of the milling and flotation circuits will begin towards
the end of the same year with first shipments of concentrate expected in early 2016. Once the mine reaches full production, the average annual output is expected to be 100 million pounds per year in the first full five years, with the potential
to increase to 130 million pounds. As at June 30, 2014, all of the assets and liabilities of Jabal Sayid were classified as held for sale, as the transaction resulted in a loss of control. Consequently the assets and liabilities were
written down to their fair value less cost of disposal, which resulted in an impairment loss of $514 million, including $316 million of goodwill and $198 million in asset impairment charges in second quarter 2014. The new joint venture is being
equity accounted for starting in fourth quarter 2014. Refer to note 20 for details of the impairment loss.
On April 4, 2014, we
completed the sale of our minority interest in the Marigold mine for cash consideration of $86 million. As a result of the sale, we recorded a pre-tax gain on sale of $21 million in 2014.
On March 11, 2014, we completed the divestment of 41 million shares in Acacia, representing in aggregate approximately 10 percent of the
issued ordinary
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BARRICK YEAR-END 2014 |
|
29 |
|
MANAGEMENTS DISCUSSION AND ANALYSIS |
shares of Acacia, for net proceeds of approximately $186 million. Subsequent to the partial
divestment, we continue to hold approximately 262 million shares of Acacia, representing approximately 64 percent of the issued ordinary share capital of Acacia.
On March 1, 2014, we completed the sale of our Kanowna mine for cash consideration of $67 million. As a result of the sale, we recorded a
pre-tax loss of $5 million in 2014.
On January 31, 2014, we completed the sale of our Plutonic mine for cash consideration of $22
million. As a result of the sale, we recorded a pre-tax gain on sale of $8 million in 2014.
Pascua-Lama
On December 30, 2014, the Chilean Supreme Court declined to consider Barricks appeal of an Environmental Court decision regarding
sanctions imposed on the project in Chile in May 2013 by that countrys environmental regulator (known as the SMA) (the Resolution). As a result of the ruling, the SMA will now re-evaluate the approximately $16 million
administrative fine it previously imposed on the project for deviations from certain requirements of the projects Chilean environmental approval in 2013. A new resolution from the SMA is pending and could include more severe sanctions against
the project such as a material increase in the amount of the fine above the approximately $16 million imposed by the SMA in May 2013 and/or the revocation of the projects environmental permit. Refer to note 35 to the annual consolidated
financial statements for further details. In fourth quarter 2014, we recorded an impairment loss on the project of $382 million. Refer to note 20 of the annual consolidated financial statements for further details.
New Executive Management Structure
In third quarter 2014, former President and Chief Executive Officer Jamie Sokalsky stepped down and we unveiled a new executive management
structure to respond to the distinct demands and challenges of the mining industry in todays environment. The new management structure places a greater emphasis on operational excellence, and acceleration of portfolio optimization and cost
reduction initiatives, while fostering a partnership culture. Our two Co-Presidents execute on Barricks operating plans and strategic priorities: Kelvin Dushnisky, formerly Senior Executive Vice President responsible for Corporate and
Government Affairs and Chairman of Acacia, and Jim Gowans, formerly Executive Vice President and Chief Operating Officer. The new structure emphasizes the critical importance of joint responsibility and accountability for the management of
operations and our key relationships with host governments and local communities that afford the company its license to operate; the Co-Presidents are responsible for the seamless execution of both functions at all times.
In addition, Darian Rich, formerly Senior Vice President, Human Resources, was promoted to Executive Vice President, Talent Management, reflecting
the critical requirement that any company seeking to be the leader in its field must attract, retain and develop exceptional people. During third quarter 2014, Barrick added to its leadership team, appointing Woo C. Lee as President, China, Kevin
Thomson as Senior Executive Vice President, Strategic Matters, and Richard Williams as Chief of Staff.
In fourth quarter 2014, we announced
the appointment of Shaun Usmar as Senior Executive Vice-President and Chief Financial Officer, effective February 18, 2015, following the departure of Ammar Al-Joundi, former Senior Executive Vice-President and Chief Financial Officer.
Two Independent Directors Appointed
In July
2014, the Board of Directors appointed Mr. J. Michael Evans, former Vice Chairman of Goldman Sachs and Mr. Brian Greenspun, former Chairman and CEO of Greenspun Media Group and a prominent Nevada business leader, to serve as independent
directors on Barricks Board.
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|
BARRICK YEAR-END 2014 |
|
30 |
|
MANAGEMENTS DISCUSSION AND ANALYSIS |
Outlook for 2015
Operating Unit Guidance
Our 2014
gold and copper production, cash costs, all-in sustaining costs and forecast gold production, cash costs and all-in sustaining costs ranges by operating unit for 2015 are as follows:
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|
Operating Unit |
|
2014 production (000s ozs) |
|
2014 cash costs ($/oz) |
|
2014
all-in sustaining costs ($/oz) |
|
2015 forecast production (000s ozs) |
|
2015 forecast cash costs
($/oz) |
|
2015 forecast all-in sustaining
costs ($/oz) |
Gold |
|
|
|
|
|
|
|
|
|
|
|
|
Cortez |
|
902 |
|
$498 |
|
$706 |
|
825 - 900 |
|
$560 - $610 |
|
$760 - $835 |
Goldstrike |
|
902 |
|
571 |
|
854 |
|
1,000 - 1,150 |
|
540 - 590 |
|
700 - 800 |
Pueblo Viejo (60%) |
|
665 |
|
446 |
|
588 |
|
625 - 675 |
|
390 - 425 |
|
540 - 590 |
Lagunas Norte |
|
582 |
|
379 |
|
543 |
|
600 - 650 |
|
375 - 425 |
|
675 - 725 |
Veladero |
|
722 |
|
566 |
|
815 |
|
575 - 625 |
|
600 - 650 |
|
990 - 1,075 |
Total Core Mines |
|
3,773 |
|
$500 |
|
$716 |
|
3,800 - 4,000 |
|
$500 - $540 |
|
$725 - $775 |
Turquoise Ridge (75%) |
|
195 |
|
473 |
|
628 |
|
175 - 200 |
|
570 - 600 |
|
875 - 925 |
Porgera (95%) |
|
493 |
|
915 |
|
996 |
|
500 - 550 |
|
775 - 825 |
|
1,025 - 1,125 |
Kalgoorlie (50%) |
|
326 |
|
817 |
|
1,037 |
|
315 - 330 |
|
775 - 800 |
|
915 - 940 |
Acacia (63.9%) |
|
470 |
|
732 |
|
1,105 |
|
480 - 510 |
|
695 - 725 |
|
1,050 - 1,100 |
Cowal |
|
268 |
|
608 |
|
787 |
|
250 - 280 |
|
630 - 655 |
|
740 - 775 |
Hemlo |
|
206 |
|
829 |
|
1,059 |
|
200 - 225 |
|
675 - 715 |
|
940 - 980 |
Round Mountain (50%) |
|
164 |
|
936 |
|
1,170 |
|
170 - 190 |
|
875 - 900 |
|
1,180 - 1,205 |
Bald Mountain |
|
161 |
|
724 |
|
1,070 |
|
170 - 195 |
|
560 - 600 |
|
1,060 - 1,100 |
Golden Sunlight |
|
86 |
|
893 |
|
1,181 |
|
90 - 105 |
|
740 - 765 |
|
1,000 - 1,025 |
Ruby Hill |
|
33 |
|
637 |
|
713 |
|
- |
|
- |
|
- |
Total Continuing Operations |
|
6,175 |
|
$608 |
|
$825 |
|
6,200 - 6,600 |
|
$580 - $620 |
|
$820 - $855 |
Kanowna |
|
39 |
|
641 |
|
674 |
|
- |
|
- |
|
- |
Pierina |
|
17 |
|
1,419 |
|
2,277 |
|
- |
|
- |
|
- |
Marigold (33%) |
|
11 |
|
1,001 |
|
1,197 |
|
- |
|
- |
|
- |
Plutonic |
|
7 |
|
1,120 |
|
1,206 |
|
- |
|
- |
|
- |
Total Divested/Closed Sites |
|
74 |
|
$945 |
|
$1,213 |
|
- |
|
- |
|
- |
Total Gold1 |
|
6,249 |
|
$614 |
|
$832 |
|
6,200 - 6,600 |
|
$580 - $620 |
|
$820 - $855 |
Total Consolidated Barrick |
|
6,249 |
|
$598 |
|
$864 |
|
6,200 -
6,6002 |
|
$600 - $640 |
|
$860 - $895 |
|
|
|
|
|
|
|
|
|
2014 production (millions lbs) |
|
2014
C1 cash costs ($/lb) |
|
2014
C3 fully allocated costs ($/lb) |
|
2015 forecast production (millions lbs) |
|
2015 forecast
C1 cash costs ($/lb) |
|
2015 forecast
C3 fully allocated costs ($/lb) |
Copper |
|
|
|
|
|
|
|
|
|
|
|
|
Zaldívar |
|
222 |
|
$1.79 |
|
$2.14 |
|
240 - 260 |
|
$1.65 - $1.95 |
|
$2.00 - $2.30 |
Lumwana |
|
214 |
|
2.08 |
|
2.76 |
|
70 - 80 |
|
$1.90 - $2.15 |
|
$3.05 - $3.35 |
Total Copper |
|
436 |
|
$1.92 |
|
$2.43 |
|
310 - 340 |
|
$1.75 - $2.00 |
|
$2.30 - $2.60 |
1 |
Total gold cash costs and all-in sustaining costs exclude the impact of hedges (2014: $16/oz gain; 2015: $20/oz loss) and/or corporate
general & administrative costs (2014: $48/oz; 2015: $20/oz). 2015 forecast cash costs include an allocation of costs that were formerly reported as general & administrative expense. |
2 |
Operating unit guidance ranges reflect expectations at each individual operating unit, but do not add up to corporate-wide guidance range total.
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|
BARRICK YEAR-END 2014 |
|
31 |
|
MANAGEMENTS DISCUSSION AND ANALYSIS |
Consolidated Expense & Capital Guidance
Our 2014 consolidated expenses and capital expenditures and forecast consolidated expenses and capital expenditures for 2015 are as follows:
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|
|
|
|
|
|
|
($ millions, except per ounce/pound data) |
|
2014 Actual |
|
|
2015 Guidance |
|
Depreciation: |
|
|
|
|
|
|
|
|
Gold ($ per ounce) |
|
|
202 |
|
|
|
240 260 |
|
Copper ($ per pound) |
|
|
0.39 |
|
|
|
0.35 0.45 |
|
Exploration and project expenses |
|
|
392 |
|
|
|
370 460 |
|
Exploration and evaluation |
|
|
184 |
|
|
|
220 270 |
|
Project expenses |
|
|
208 |
|
|
|
150 190 |
|
General and administrative1: |
|
|
|
|
|
|
|
|
Corporate Administration |
|
|
180 |
|
|
|
~145 |
|
Operating Segment Administration |
|
|
- |
|
|
|
- |
|
Stock Based Compensation |
|
|
9 |
|
|
|
~50 |
|
Acacia |
|
|
44 |
|
|
|
~30 |
|
Total General and Administrative |
|
|
233 |
|
|
|
~225 |
|
Other expense |
|
|
47 |
|
|
|
40-60 |
|
Finance costs |
|
|
796 |
|
|
|
800 825 |
|
Capital expenditures: |
|
|
|
|
|
|
|
|
Minesite sustaining |
|
|
1,584 |
|
|
|
1,600 1,800 |
|
Minesite expansion |
|
|
362 |
|
|
|
150 200 |
|
Projects |
|
|
234 |
|
|
|
150 200 |
|
Total capital expenditures |
|
|
2,180 |
|
|
|
1,900 2,200 |
|
1 |
2014 General and administrative expenses have been restated to conform with current period presentation. |
|
Total general and administrative expenses of $385 million in 2014 include $120 million in segment administration |
|
costs and $25 million in severance costs. |
2015 Guidance Analysis
Highlights
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|
|
Forecast gold production between 6.2 to 6.6 million ounces and over 6.0 million ounces in 2016 and 2017 |
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|
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All-in sustaining costs forecast to be between $860 to $895 per ounce and lower than this year by 2017 |
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|
|
Forecast capital spending to be between $1.9 to $2.2 billion |
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|
|
Free cash flow positive at current gold prices |
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|
|
Higher production and lower cash costs and all-in sustaining costs in second half of the year |
We prepare estimates of future production based on mine plans that reflect the expected method by which we will mine reserves at each site. Actual
gold and copper production may vary from these estimates due to a number of operational risk factors, including whether the volume and/or grade of ore mined differs from estimates, changing mining rates, and/or short-term mining conditions that
require different sequential development of ore bodies or mining in different areas of the mine. Mining rates are also impacted by various non-operating risks and operating risks and hazards inherent at each operation, including those described on
page 23.
We prepare estimates of cost of sales, cash costs and all-in sustaining costs based on expected costs
associated with mine plans that reflect the expected method by which we will mine reserves at each site. Cost of sales, cash costs and all-in sustaining costs per ounce, C1 cash costs, and C3
fully allocated costs are also affected by ore metallurgy that impacts gold and copper recovery rates, labor costs, the cost of mining supplies and services, foreign currency exchange rates and the accounting for stripping costs incurred during the
production phase of the mine. In the normal course of our operations, we manage these risks to mitigate, where economically feasible, the effect these risks have on our operating results.
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|
BARRICK YEAR-END 2014 |
|
32 |
|
MANAGEMENTS DISCUSSION AND ANALYSIS |
Consolidated Guidance
Operating Outlook
We expect 2015 gold
production to be about 6.2 to 6.6 million ounces. Our 2015 gold production is expected to be higher than 2014 as a result of the following:
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|
|
Higher production at Goldstrike (2014 production: 902 thousand ounces) primarily due to the commissioning of the thiosulfate circuit at the end of
2014. Goldstrike achieved first gold production through its autoclaves in fourth quarter 2014, after being successfully retrofitted with Barricks patented thiosulfate technology. In 2015, Goldstrikes production is expected to exceed
1.0 million ounces as a result of the contribution from the thiosulfate process. This process utilizes new technology, and, as with any such new process, there are risks associated with the ramp-up to full capacity. If the ramp-up progresses
slower than we currently anticipate, then our production guidance for both Goldstrike and Cortez would be at risk. |
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|
|
Higher production at Acacia (2014 production: 470 thousand ounces) primarily due to an increase in production at Bulyanhulu as a result of
improved ore grade, coupled with improved throughput, due to the mechanization of the mine and a full year of benefit from the CIL plant. |
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|
|
Higher production at Lagunas Norte (2014 production: of 582 thousand ounces) as a result of an increase in the tonnage placed on the leach pads
and an increase in the flow rate through the Merrill Crowe and Carbon in Column plant. This will allow us to convert additional leach pad inventory into production in 2015. |
These production increases are expected to be partially offset by a decrease in production at Veladero (2014 production: 722 thousand ounces)
as a result of lower ore grade in the Federico pit in line with the mine plan, and lower production following the sale of Kanowna, Plutonic and Marigold in 2014 (2014 aggregate production: 57 thousand ounces).
Cash costs are expected to be in the range of $600 to $640 per ounce, which is slightly higher than $598 per ounce in 2014, primarily due to the
impact of expected hedge losses from our currency and fuel hedging programs in 2015. In 2014, we realized about $15 per ounce in hedge gains, mainly related to our Australian dollar and Canadian dollar currency hedging programs, whereas in 2015 we
expect to record about $20 per ounce in realized hedge losses from our currency and fuel hedging programs based on our oil and exchange rate assumptions. The impact of hedge losses in 2015 is expected to be partially offset by the impact of a
decrease in overall tonnes processed and higher expected recoveries as compared to the prior year.
All-in sustaining costs are expected to be in the range of $860 to $895 per ounce for gold, up slightly from $864 per ounce in 2014, primarily due
to an increase in minesite sustaining capital expenditures at Lagunas Norte, Cortez and Turquoise Ridge and an increase in mine development capital expenditures due to capitalized stripping activities at Porgera, Veladero, and Bald Mountain in 2015.
Approximately 55% of our production is expected to occur in the second half of the year, largely due to higher production at Cortez and
Goldstrike as a result of the ramp up of the thiosulfate circuit, as well as higher second half production at Pueblo Viejo. Accordingly, cash costs and all-in sustaining costs are expected to be significantly higher in the first half of the year.
Depreciation
Depreciation applicable
to gold is expected to be in the range of $240 to $260 per ounce, which reflects an increase from $202 per ounce in 2014 primarily due to higher depreciation at Lagunas Norte, Goldstrike, Cortez and Pueblo Viejo. At Lagunas Norte, higher
depreciation is mainly due to a change in mine plan resulting in a shorter mine life from 2019 to 2018 which accelerates depreciation of straight line assets combined with higher depreciation as a result of an increase in the projected costs of
water treatment during the post-closure period. At Goldstrike depreciation is expected to increase mainly due to the commencement of depreciation on the thiosulfate circuit at the autoclave in 2015 and the impact of mining the North Betze layback
and the Banshee underground development, which both have higher capitalized costs and consequently result in higher per ounce depreciation expense. At Cortez, depreciation has increased due to a shift in mining to the Cortez Hills open pit in 2015,
which carries a higher depreciation rate than the Pipeline and GAP open pits where mining took place in 2014. At Pueblo Viejo, depreciation is expected to increase mainly due to a full year of depreciation for assets placed into service at the end
of 2014. We expect similar increases in depreciation expense and depreciation per ounce over the next two years.
Exploration and Project Expenses
We expect to incur approximately $220 to $270 million of exploration and evaluation (E&E) expenditures in 2015. This
reflects a slight increase over last years expenditure as we invest in our near mine opportunities where we can
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|
|
BARRICK YEAR-END 2014 |
|
33 |
|
MANAGEMENTS DISCUSSION AND ANALYSIS |
take advantage of existing infrastructure and advance key growth projects such as Goldrush, Cortez Hills Lower Zone, Spring Valley and Turquoise Ridge. These will provide a near term return on
this investment by adding to and upgrading our reserve and resource base, and in some cases may positively impact production.
About 85% of
the budget is allocated to our two core regions (Nevada and the Andean region in South America), of which 36% is allocated to Cortez and Goldrush and 24% predominantly towards Chile.
Project Expenses
We expect to incur
approximately $150 to $190 million of Project Expenses in 2015. Project expenses primarily relate to care and maintenance activities at Pascua-Lama, and other project expenditures associated with Cerro Casale, Donlin Gold and Reko Diq.
General and Administrative Expenses
In
2015, Barrick is returning to a lean, decentralized operating model as discussed in the Business and Strategy section of the MD&A. As part of this transformation, we expect to realize $30 million in savings in 2015 from reduced
general and administrative expenditures and overhead costs, growing to $70 million in annualized savings by 2016.
We have reduced our
corporate office by close to 50 percent, from 260 positions in 2014 to 140 people in 2015. As a result, our corporate administration expense is expected to be about $145 million in 2015, and even lower in 2016 as we benefit from a full year of
savings. We have eliminated all management layers between the head office and our operations. What remains are shared service centers that provide support directly to our mines and projects. These costs will no longer be reported as G&A. They
will be charged directly to the mines that use the services, and will be reflected in operating costs. This incentivizes country and mine managers to use only the services they truly need to support the business. Services that are not required will
be eliminated.
In 2014, Barrick reported total G&A expenses of $385 million, which included the corporate office, costs associated with
our former regional business units, stock-based compensation, expenses from Acacia plc, and $25 million in severance costs. In 2015, our total reported G&A expense is forecast to be about $225 million (exclusive of severance and other
non-recurring expenses), and no longer includes the portion of 2014 G&A costs associated with our former regional business units as such costs are now allocated to operating costs.
Finance Costs
Finance costs primarily represent interest expense on long-term debt. We expect finance costs in 2015 to be consistent with 2014 levels and do not
expect to capitalize significant interest costs in 2015.
Capital Expenditures
Total capital expenditures for 2015 are expected to be in the range of $1.9 to $2.2 billion, compared to $2.2 billion in 2014. The expected
decrease primarily relates to lower expansion capital expenditures at Goldstrike due to the completed commissioning of the thiosulfate circuit at the autoclave in fourth quarter 2014, lower sustaining and development capital expenditures at Lumwana
following the decision to suspend operations as a result of the substantial impact of the new royalty and current copper prices and lower project capital expenditures at Pascua-Lama in 2015.
These capital expenditure decreases are expected to be partially offset by an increase in minesite sustaining capital expenditures at Lagunas
Norte, Cortez and Turquoise Ridge and an increase in development capital expenditures at Porgera, Veladero and Bald Mountain due to production phase stripping activities in 2015.
Minesite sustaining capital expenditures reflect the capital spending required to support current planned
production levels and those which do not meet our definition of non-sustaining capital. This includes capitalized production phase stripping costs at our open pit mines, underground mine development and E&E expenditures that meet our criteria
for capitalization.
Minesite sustaining capital expenditures are expected to increase from 2014 expenditure levels of $1,584 million to a
range of about $1,600 to $1,800 million mainly due to an increase in sustaining capital expenditures at Lagunas Norte, Cortez and Turquoise Ridge. At Lagunas Norte, the increase is primarily due to the construction of the Leach Pad Phase 6 Expansion
and the engineering and construction of the East Waste dump expansion and ARD Treatment Plant. At Cortez, the increase is mainly due to a shift in timing of expenditures from fourth quarter 2014 to 2015, and at Turquoise Ridge the increase is
primarily due to higher sustaining capital
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|
BARRICK YEAR-END 2014 |
|
34 |
|
MANAGEMENTS DISCUSSION AND ANALYSIS |
expenditures to support ongoing infrastructure requirements in the North Zone as well as adding additional mobile equipment to expand mining into the South Zone, subject to approval by our joint
venture partner, earlier than previously planned, which is expected to benefit production beginning in 2016.
Minesite development capital
expenditures are expected to increase due to an increase in production phase stripping activities at Porgera as part of the change in mine plan related to the expansion of the open pit, at Veladero due to an increase in waste material mined as part
of the development of the Federico pit and at Bald Mountain due to a higher proportion of waste material mined in line with mine plan.
These
capital expenditure increases are expected to be partially offset by lower sustaining and development capital expenditures at Lumwana following the decision to suspend operations as a result of the enactment of the new royalty rate and lower copper
prices.
Minesite expansion capital expenditures include non-sustaining capital expenditures at new projects and existing operations that are
related to discrete projects that significantly increase the net present value of the mine and are not related to current production activity. Expansion capital expenditures are expected to decrease from 2014 expenditure levels of $362 million to a
range of about $150 to $200 million, mainly due to lower expansion capital expenditures at Goldstrike due to the completed commissioning of the thiosulfate circuit at the autoclave in fourth quarter 2014. The project will finalize some adjustments
to the system in first quarter 2015, with total project costs expected to remain in line with expectations of about $620 million. Other 2015 expansion expenditures primarily relate to feasibility and development expenditures related to the Cortez
Hills Lower Zone expansion, which is expected to extend the mine life by up to 7 years.
Project capital expenditures reflect capital
expenditures related to the initial construction of the project and include all of the expenditures required to bring the project into operation and achieve commercial production levels. In 2015, we expect our share of project capital costs to be in
the range of $150 to $200 million, a slight decrease from project capital costs of $234 million
in 2014 primarily due to lower project capital expenditures at Pascua-Lama, partially offset by an increase in capitalized construction costs at Jabal Sayid and commencement of pre-stripping
activities at South Arturo. At Pascua-Lama, capital expenditures in 2014 primarily related to capitalization of Linea Minera power line costs and water management system costs. We expect to incur approximately $30 to $40 million in capitalized costs
in 2015, primarily attributable to permitting and engineering activities related to the final water management solution, as well as commitments to support local communities.
Capital expenditures at Jabal Sayid are expected to increase in 2015 as compared to 2014, as a resumption of underground development expenditures
are expected to be incurred in order for the mine to begin producing concentrate at the end of 2015, following the completion of the joint venture agreement with Maaden in the fourth quarter of 2014.
Capital expenditures at South Arturo are expected to increase in 2015 mainly due to the commencement of pre-stripping activities following initial
site preparation and infrastructure development activities in 2014.
Effective Income Tax Rate
Our effective tax rate is 42% on all income excluding expenses from non-operating entities, which do not have a present source of gold production
or taxable income. These expenses cannot be recognized as a deferred tax asset, and therefore there is no tax recovery recorded on these expenses. The effect of these expenses in our income statement, with no corresponding tax effect, is to increase
our effective rate on total net income to 53%. In the event that there will be sources of taxable income in the future, we may recognize some or all of these deferred tax assets.
|
|
|
|
|
BARRICK YEAR-END 2014 |
|
35 |
|
MANAGEMENTS DISCUSSION AND ANALYSIS |
Outlook Assumptions and Economic Sensitivity Analysis
|
|
|
|
|
|
|
|
|
|
|
2015 Guidance Assumption |
|
Hypothetical Change |
|
Impact on AISC |
|
EBITDA1 (millions) |
Gold revenue, net of royalties |
|
$1,250/oz2 |
|
+/-$100/oz |
|
n/a |
|
$635 |
Copper revenue, net of royalties |
|
$2.50/lb2 |
|
+/-$0.50/lb |
|
n/a |
|
$163 |
Gold all-in sustaining costs |
|
|
|
|
|
|
|
|
Gold royalties & production taxes |
|
$1,250/oz |
|
$100/oz |
|
$3/oz |
|
$19 |
WTI crude oil price3, 4 |
|
$50/bbl |
|
$10/bbl |
|
$3/oz |
|
$19 |
Australian dollar exchange rate3 |
|
0.83:1 |
|
+10% |
|
($3)/oz |
|
($23) |
Australian dollar exchange rate3 |
|
0.83:1 |
|
-10% |
|
$3/oz |
|
$23 |
Canadian dollar exchange rate3 |
|
1.20:1 |
|
+10% |
|
($4)/oz |
|
($27) |
Canadian dollar exchange rate3 |
|
1.20:1 |
|
-10% |
|
$2/oz |
|
$11 |
Copper C1 cash costs |
|
|
|
|
|
Impact on C1 |
|
|
WTI crude oil price3, 4 |
|
$50/bbl |
|
$10/bbl |
|
$0.00/lb |
|
$1 |
Chilean peso exchange rate3 |
|
610:1 |
|
+10% |
|
($0.03)/lb |
|
($11) |
Chilean peso exchange rate3 |
|
610:1 |
|
-10% |
|
$0.00/lb |
|
$1 |
1 |
EBITDA is a non-GAAP financial performance measure with no standardized definition under IFRS. For further information and a detailed reconciliation,
please see pages 81 - 91 of this MD&A. |
2 |
We have assumed a gold price of $1,250 per ounce and copper price of $2.50 per pound, which are in line with current market prices.
|
3 |
Due to our hedging activities, which are reflected in these sensitivities, we are partially protected against changes in these factors.
|
4 |
Impact on EBITDA only reflects contracts that mature in 2015. |
|
|
|
|
|
BARRICK YEAR-END 2014 |
|
36 |
|
MANAGEMENTS DISCUSSION AND ANALYSIS |
Market Overview
Gold
The market prices of gold, and, to a lesser
extent copper, are the primary drivers of our profitability and our ability to generate free cash flow for our shareholders. The price of gold is subject to volatile price movements over short periods of time and is affected by numerous industry and
macroeconomic factors. During the year, the gold price ranged from $1,131 per ounce to $1,392 per ounce. The average market price for the year of $1,266 per ounce represented a decrease of 10% versus 2013.
The decline in the price of gold in 2014 primarily occurred as a result of a strengthening US dollar in the
second half of the year, which was due to increasing economic strength in the United States versus concerns over weakening economic performance in Europe and China, as well as the tapering of the unprecedented monetary stimulus provided by the US
Federal Reserve and growing expectations of US benchmark rate increases starting in 2015. Investor sentiment regarding gold remained muted, particularly in the Western world, as was evidenced by decreased holdings in Exchange Traded Funds
(ETFs) of 5 million ounces, versus a decrease in holdings of 29 million ounces in 2013. However, physical demand for jewelry and other uses, particularly in China and India, remained strong and continues to be a significant
driver of the overall gold market.
Source: UBS
Going forward, we believe that gold will attract investment interest through its role as a safe haven investment, store of value and alternative
to fiat currency due to concerns over geopolitical issues, sovereign debt and deficit levels, bank stability, future inflation prospects, and continuing accommodative monetary policies put in place by many of the worlds central banks. While
there are risks that investor interest in gold will decrease, we believe that the continuing uncertain macroeconomic environment, together with the limited choice of alternative safe haven investments, is supportive of continued strong demand for
gold.
Gold prices continue to be influenced by long-term trends in global gold mine production and the impact of central bank gold
activities. Gold production has increased in recent years with the extension of the lives of older mines due to the rising gold price. The time requirement to bring projects to the production stage and the increasing costs and risks of building a
mine, including concerns of resource nationalism and lengthened permitting processes, are expected to continue to slow the pace of new production in future years.
In the fifth and final year of the Central Bank Gold Agreement (CBGA), which ended in September 2014, the signatory members sold 7
tonnes of gold, or less than 2% of the maximum agreed amount. In May 2014, the signing of a subsequent five-year CBGA, which is now the current agreement, was announced. There are no annual limitations on gold sales under the new agreement, but the
signatories noted that they do not have any plans to sell significant amounts of gold. In addition, for the fifth consecutive year,
|
|
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|
BARRICK YEAR-END 2014 |
|
37 |
|
MANAGEMENTS DISCUSSION AND ANALYSIS |
global central banks were net buyers of gold in 2014, with the central banks of Russia, Iraq and Kazakhstan, among others, adding to their gold reserves.
Source: World Gold Council and Thomson Reuters GFMS
The reserve gold holdings as a percentage of total reserves of emerging market countries, such as the BRIC countries (Brazil, Russia, India, and
China), are significantly lower than other developed countries. The central banks of these developing economies hold a significant portion of their reserves in US dollar denominated government assets and, as they identify a need to diversify their
portfolio and reduce their exposure to the US dollar, we believe that gold will be one of the main beneficiaries. In conjunction with the very low amount of gold sold under the CBGA, which is expected to continue in the current year of the
agreement, the net purchases of gold by global central banks provide a strong indication that gold is viewed as a reserve asset and a de facto currency.
Copper
During 2014, London Metal Exchange
(LME) copper prices traded in a range of $2.83 to $3.38 per pound, averaged $3.11 per pound, and closed the year at $2.88 per pound. The copper markets strength lies mainly in strong physical demand from emerging markets,
especially China, which has resulted in a physical deficit in recent years.
During early 2015, the price of copper has fallen to levels not
seen since the global financial crisis in 2009, reaching a low of $2.42 per pound. The decline has been the result of increasing global inventories, disappointing economic releases out of China, which is by far the largest single market for copper
demand, and a declining cost structure as a result of lower oil prices and US dollar strength.
Copper prices should continue to be influenced by demand from Asia, global economic growth, the
limited availability of scrap metal and production levels of mines and smelters in the future. While there are risks that the copper price will fall further, we believe that difficulties in bringing projects to the production stage, a limited global
development pipeline and continuing growth in demand from the developing world will lead to physical market deficits in the later part of this decade that will act as a positive catalyst for the price.
We have provisionally priced copper sales for which final price determination versus the relevant copper index
is outstanding at the balance sheet date. As at December 31, 2014, we have recorded 82 million pounds of copper sales subject to final settlement at an average provisional price of $2.88 per pound. The impact to net income before taxation
of a 10% movement in the market price of copper would be approximately $24 million, holding all other variables constant.
Silver
Silver traded in a range of $14.29 to $22.18 per ounce in 2014, averaged $19.08 per ounce and closed the year at $15.97 per ounce. The silver price
is driven by factors similar to those influencing investment demand for gold. Investment demand is expected to be the primary driver of prices in the near term.
Silver prices do not significantly impact our current operating earnings, cash flows or gold cash costs. Silver prices, however, will have a
significant impact on the overall economics for our Pascua-Lama project.
|
|
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BARRICK YEAR-END 2014 |
|
38 |
|
MANAGEMENTS DISCUSSION AND ANALYSIS |
Currency Exchange Rates
The results of our mining operations outside of the United States are affected by US dollar exchange rates. Approximately 25% of our operating and
capital expenditures are denominated in currencies other than the US dollar. We have exposure to the Australian and Canadian dollars, and the Chilean peso through a combination of mine operating, capital projects and corporate administration costs.
In addition, we have exposure to the Argentine peso, Papua New Guinea kina, Peruvian sol, Zambian kwacha, Tanzanian shilling and Dominican peso through mine and capital project operating and capital costs.
Fluctuations in the US dollar increase the volatility of our costs reported in US dollars, subject to protection that we have put in place through
our currency hedging program. In 2014, the Australian dollar traded in a range of $0.81 to $0.95 against the US dollar, while the US dollar against the Canadian dollar and Chilean peso ranged from $1.06 to $1.17 and CLP525 to CLP623, respectively.
During the second half of 2014 and continuing into the beginning of 2015, the US dollar has significantly strengthened against a basket of
global currencies as well as against our key foreign currency exposures. This US dollar strength has mainly occurred due to a reduction in monetary stimulus measures by the US Federal Reserve as a result of an improved economic outlook for the US
economy and an expectation of a process of benchmark interest rate normalization beginning later in 2015.
Due to expectations of a
strengthened US dollar, in recent years we have reduced our overall foreign currency derivative positions, whether by closing out positions before maturity or limiting the addition of new positions. As a result, our foreign currency derivative
contracts in place beyond 2015 currently consist only of AUD $85 million of contracts maturing in 2016.
Our currency hedge position has provided benefits to us in the form of hedge gains recorded within
our operating costs when contract exchange rates are compared to prevailing market exchange rates as follows: 2014 - $93 million; 2013 - $268 million; and 2012 - $336 million. As a result of the gains from our currency hedging program, cash costs
were reduced by $15 per ounce in 2014. Also for 2014, we recorded currency hedge gains in our corporate administration costs of $4 million (2013 - $11 million and 2012 - $20 million) and capitalized additional currency hedge gains of $nil (2013 -
$14 million and 2012 - $13 million). Assuming December 31, 2014 market exchange rate curves and year-end spot prices, we expect to record currency hedge losses of approximately $65 million against operating, administrative and capital costs in
2015. Despite potential future losses on currency derivative positions, a strengthening US dollar versus our key currency exposures is beneficial to our cost structure in 2015 as we are less than fully (63%) hedged against such exposures.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AUD Currency Contracts |
|
|
|
Contracts (AUD millions |
|
|
Effective Average Hedge Rate (AUDUSD) |
|
|
% of Total Expected AUD Exposure1 Hedged |
|
|
% of Expected Operating Cost Exposure Hedged |
|
|
Crystallized
Gain/(Loss) in OCI2 (USD millions) |
|
2015 |
|
|
377 |
|
|
|
0.93 |
|
|
|
49% |
|
|
|
58% |
|
|
|
(4) |
|
2016 |
|
|
85 |
|
|
|
0.91 |
|
|
|
11% |
|
|
|
13% |
|
|
|
(19) |
|
|
CAD Currency Contracts |
|
|
|
Contracts (CAD millions)3 |
|
|
Effective Average Hedge Rate (USDCAD) |
|
|
% of Total Expected CAD Exposure1 Hedged |
|
|
% of Expected Operating Cost Exposure Hedged |
|
|
Crystallized
Gain/(Loss) in OCI2 (USD millions) |
|
2015 |
|
|
240 |
|
|
|
1.03 |
|
|
|
55% |
|
|
|
62% |
|
|
|
- |
|
|
|
|
|
|
BARRICK YEAR-END 2014 |
|
39 |
|
MANAGEMENTS DISCUSSION AND ANALYSIS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CLP Currency Contracts |
|
|
|
Contracts (CLP millions)4 |
|
|
Effective Average Hedge Rate (USDCLP) |
|
|
% of Total Expected CLP Exposure1 Hedged |
|
|
% of Expected Operating Cost Exposure Hedged |
|
|
Crystallized Gain/(Loss) in OCI2 (USD millions) |
|
2015 |
|
|
102,000 |
|
|
|
521 |
|
|
|
63% |
|
|
|
100% |
|
|
|
- |
|
1 |
Includes all forecasted operating, administrative, sustainable and eligible project capital
expenditures. |
2 |
To be reclassified from Other Comprehensive Income (OCI) to earnings when indicated.
|
3 |
Includes C$240 million CAD collar contracts with an average range of $1.03 - $1.15.
|
4 |
Includes CLP 102,000 million collar contracts with an average range of 521 - 601.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contracts Maturing in 2015 |
|
|
|
Effective Average Hedge Rate |
|
|
Hedge Rate Assumption |
|
|
Expected Realized Loss (USD million) |
|
|
Hypothetical Change |
|
|
Impact of Change in Exchange Rate on Realized Loss (USD millions)1 |
|
AUD |
|
|
0.93 |
|
|
|
0.83 |
|
|
|
$42 |
|
|
|
+/-10% |
|
|
|
+/-$23 |
|
CAD |
|
|
1.03 |
|
|
|
1.20 |
|
|
|
$9 |
|
|
|
+10% |
|
|
|
(27 |
) |
CAD |
|
|
1.03 |
|
|
|
1.20 |
|
|
|
$9 |
|
|
|
-10% |
|
|
|
11 |
|
CLP |
|
|
521 |
|
|
|
610 |
|
|
|
$3 |
|
|
|
+10% |
|
|
|
(22 |
) |
CLP |
|
|
521 |
|
|
|
610 |
|
|
|
$3 |
|
|
|
-10% |
|
|
|
$7 |
|
1 Includes the impact of hedges currently in place.
Fuel
For
2014, the price of West Texas Intermediate (WTI) crude oil traded in a wide range between $52 and $108 per barrel, averaged $93 per barrel and closed the year at $53 per barrel. During the second half of 2014 and continuing into the
beginning of 2015, the price of crude oil has decreased significantly as a result of concerns over global economic growth, limiting expectations for demand at the same time that North American supply has been dramatically increasing due to advances
in extraction technology.
In addition, at a November meeting of the Organization of the Petroleum Exporting Countries, the organization
announced that its members would keep their crude oil production quota static for the time being, despite declining prices, in order to maintain market share. Following the announcement, the price of oil has continued to fall to levels not
experienced since the global financial crisis.
The price of crude oil in the remainder of 2015 will be highly dependent on the impact of lower prices on
anticipated supply, as a significant amount of the new North American production is likely uneconomic if current prices are sustained for a prolonged period.
|
|
|
|
|
BARRICK YEAR-END 2014 |
|
40 |
|
MANAGEMENTS DISCUSSION AND ANALYSIS |
In 2014, we recorded hedge losses in earnings of $4 million on our fuel hedge positions (2013 - $9
million gain and 2012 - $24 million gain). Assuming December 31, 2014 market forward curves and year-end spot prices, we expect to realize fuel hedge losses of approximately $85 million against operating, administrative and capital costs in
2015. These losses have already been recorded in the consolidated statements of income as an unrealized loss on non-hedge derivatives. Beginning in January 2015, upon early adoption of IFRS 9, our fuel hedges will qualify for hedge accounting and
unrealized gains and losses will be recorded in Other Comprehensive Income.
Financial Fuel Hedge Summary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Barrels (thousands) |
|
|
Average Price |
|
|
% of Expected Exposure |
|
|
Impact of $10 change on Realized Loss (USD millions)1 |
|
2015 |
|
|
2,755 |
|
|
|
90 |
|
|
|
58% |
|
|
|
$20 |
|
2016 |
|
|
2,811 |
|
|
|
85 |
|
|
|
65% |
|
|
|
15 |
|
2017 |
|
|
1,920 |
|
|
|
81 |
|
|
|
49% |
|
|
|
20 |
|
2018 |
|
|
1,080 |
|
|
|
79 |
|
|
|
29% |
|
|
|
$27 |
|
1 Includes the impact of hedges currently in place.
US Dollar Interest Rates
Beginning in 2008, in
response to the contraction of global credit markets and in an effort to spur economic activity and avoid potential deflation, the US Federal Reserve reduced its benchmark rate to between 0% and 0.25%. The benchmark was kept at this level through
2014. In determining how long to maintain the current 0% to 0.25% range for the benchmark rate, the FOMC has noted that it will use a wide range of information, including measures of labor market conditions, indicators of inflation pressures and
inflation expectations, and readings on financial developments, to assess progress towards its objectives of maximum employment and 2% inflation. As economic conditions in the US continue to normalize, we expect incremental increases to short-term
rates to begin in 2015.
At present, our interest rate exposure mainly relates to interest receipts on our cash balances
($2.7 billion at December 31, 2014); the mark-to-market value of derivative instruments; and to the interest payments on our variable-rate debt ($1.0 billion at December 31, 2014). Currently, the amount of interest expense recorded in our
consolidated statement of income is not materially impacted by changes in interest rates because the majority of debt was issued at fixed interest rates. The relative amounts of variable-rate financial assets and liabilities may change in the
future, depending on the amount of operating cash flow we generate, as well as the level of capital expenditures and our ability to borrow on favorable terms using fixed rate debt instruments.
|
|
|
|
|
BARRICK YEAR-END 2014 |
|
41 |
|
MANAGEMENTS DISCUSSION AND ANALYSIS |
REVIEW OF FINANCIAL RESULTS
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
($ millions, except per ounce/pound
data in dollars) |
|
For the year ended December 31 |
|
|
|
2014 |
|
|
2013 |
|
|
2012 |
|
Gold |
|
|
|
|
|
|
|
|
|
|
|
|
000s oz sold1 |
|
|
6,284 |
|
|
|
7,174 |
|
|
|
7,292 |
|
Revenue |
|
|
$ 8,744 |
|
|
|
$ 10,670 |
|
|
|
$ 12,564 |
|
Market price2 |
|
|
1,266 |
|
|
|
1,411 |
|
|
|
1,669 |
|
Realized price2,3 |
|
|
1,265 |
|
|
|
1,407 |
|
|
|
1,669 |
|
Copper |
|
|
|
|
|
|
|
|
|
|
|
|
millions lbs sold1 |
|
|
435 |
|
|
|
519 |
|
|
|
472 |
|
Revenue |
|
|
$ 1,224 |
|
|
|
$ 1,651 |
|
|
|
$ 1,689 |
|
Market price2 |
|
|
3.11 |
|
|
|
3.32 |
|
|
|
3.61 |
|
Realized price2,3 |
|
|
3.03 |
|
|
|
3.39 |
|
|
|
3.57 |
|
|
|
|
|
Oil & gas sales4 |
|
|
- |
|
|
|
93 |
|
|
|
153 |
|
Other sales |
|
|
$ 271 |
|
|
|
$ 206 |
|
|
|
$ 141 |
|
1 |
Includes our equity share of gold ounces from Acacia and Pueblo Viejo. |
2 |
Per ounce/pound weighted average. |
3 |
Realized price is a non-GAAP financial performance measure with no standard meaning under IFRS. For further information and a detailed reconciliation,
please see page 91 of this MD&A. |
4 |
Relates to revenue from our Barrick Energy segment that was sold in third quarter 2013. |
In 2014, gold revenues were down 18% compared to the prior year. The decrease was primarily due to lower realized gold prices and lower gold sales
volumes compared to the prior year. Copper revenues for 2014 were down 26% compared to the prior year. The decrease was primarily due to the impact of lower realized copper prices compared to the prior year, as well as due to lower copper sales
volumes at both Zaldívar and Lumwana.
Realized gold prices for 2014 were down $142 per ounce compared to the prior year. The decrease
in realized gold prices reflects the lower market gold prices in 2014 compared to the prior year. In 2014, realized copper prices were down $0.36 per pound compared to the prior year, due to the decline in market copper prices in 2014.
In 2014, gold production was 6.25 million ounces, a decrease of 13% compared to the prior year. The decrease was primarily due to the impact
of divestitures in 2014, including Marigold in second quarter 2014, Plutonic and Kanowna in first quarter 2014 and Yilgarn South in fourth quarter 2013 as well as lower production at Cortez. This was partially offset by higher production at
Goldstrike, Pueblo Viejo, Veladero, Turquoise Ridge and Porgera.
In 2014, copper production decreased by 19% compared to the prior year due to lower production at
Zaldívar and at Lumwana. The lower production at Zaldívar was primarily due to fewer tonnes processed combined with a higher proportion of sulfide material, which has a lower recovery rate. At Lumwana, the decrease was primarily due to
the conveyor collapse that occurred during second quarter 2014, which shut down the mill and concentrate production for much of the second quarter.
Production Costs
|
|
|
|
|
|
|
|
|
|
|
|
|
($ millions, except per ounce/pound data in dollars) |
|
For the years ended December 31 |
|
|
|
2014 |
|
|
2013 |
|
|
2012 |
|
Cost of sales |
|
|
|
|
|
|
|
|
|
|
|
|
Direct mining cost |
|
|
$ 4,803 |
|
|
|
$ 5,205 |
|
|
|
$ 5,232 |
|
Depreciation |
|
|
$ 1,648 |
|
|
|
$ 1,732 |
|
|
|
1,651 |
|
Royalty expense |
|
|
$ 303 |
|
|
|
$ 321 |
|
|
|
374 |
|
Community relations |
|
|
$ 76 |
|
|
|
$ 71 |
|
|
|
75 |
|
Cost of sales - gold1 |
|
|
5,795 |
|
|
|
6,054 |
|
|
|
5,881 |
|
Cash costs2,3 |
|
|
598 |
|
|
|
566 |
|
|
|
563 |
|
All-in sustaining costs - gold2,3 |
|
|
864 |
|
|
|
915 |
|
|
|
1,014 |
|
Cost of sales - copper1 |
|
|
954 |
|
|
|
1,100 |
|
|
|
1,238 |
|
C1 cash costs2,3 |
|
|
1.92 |
|
|
|
1.92 |
|
|
|
2.05 |
|
C3 fully allocated costs2,3 |
|
|
$ 2.43 |
|
|
|
$ 2.42 |
|
|
|
$ 2.85 |
|
1 |
2013 and 2012 figures restated to include community relations costs. |
2 |
Per ounce/pound weighted average. |
3 |
Cash costs, all-in sustaining costs, C1 cash costs and C3 fully allocated costs are non-GAAP financial performance measures with no standard meaning
under IFRS. For further information and a detailed reconciliation, please see pages 81 - 91 of this MD&A. |
In 2014, cost
of sales applicable to gold decreased 4% compared to the prior year. The decrease reflects lower direct mining costs and lower depreciation expense, primarily due to lower sales volumes as a result of the asset divestitures.
Gold cash costs for 2014 were up $32 per ounce, or 6%, compared to the prior year. The increase was primarily due to the impact of lower
production levels on unit production costs. In 2014, all-in sustaining costs were down $51 per ounce compared to the prior year. The decrease was primarily due to lower mine development and minesite sustaining capital expenditures, which more than
offset the increase in cash costs.
In 2014, cost of sales applicable to copper decreased $146 million compared to the prior year. The
decreases were primarily due to lower sales volumes due to lower production levels at Zaldívar and at Lumwana in 2014.
|
|
|
|
|
BARRICK YEAR-END 2014 |
|
42 |
|
MANAGEMENTS DISCUSSION AND ANALYSIS |
C1 cash costs per pound for 2014 were in line with the prior year. The impact of lower production
levels on unit production costs was offset by lower direct mining costs. In 2014, C3 fully allocated costs for 2014 were in line with the prior year, primarily reflecting the effect of the above factors on C1 cash costs.
General & Administrative Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
($ millions) |
|
For the years ended December 31 |
|
|
|
2014 |
|
|
20131 |
|
|
20121 |
|
Corporate administration |
|
|
$ 217 |
|
|
|
$ 192 |
|
|
|
$ 274 |
|
Operating segment administration |
|
|
168 |
|
|
|
198 |
|
|
|
229 |
|
Total general &
administrative expenses |
|
|
$ 385 |
|
|
|
$ 390 |
|
|
|
$ 503 |
|
1 |
Presentation amended to include certain general & administrative expenditures related to management of our operating unit offices, which were
previously classified within Other Expense. |
In 2014, general & administrative expenses were down $5 million
compared to the prior year. The decrease was primarily due to the impact of headcount reductions as part of the organizational restructuring that took place in 2013, combined with a decrease in deferred share-based compensation costs, partially
offset by severance costs incurred due to the departure of several senior executives during third quarter 2014 and further corporate office headcount reductions in fourth quarter 2014.
Other Expense (Income)
|
|
|
|
|
|
|
|
|
|
|
|
|
($ millions) |
|
For the years ended
December 31 |
|
|
|
2014 |
|
|
20131 |
|
|
20121 |
|
Consulting fees |
|
|
$ 28 |
|
|
|
$ 35 |
|
|
|
$ 10 |
|
Bank charges |
|
|
16 |
|
|
|
22 |
|
|
|
15 |
|
Lease termination charges |
|
|
15 |
|
|
|
- |
|
|
|
- |
|
Mine site severance and non-operational costs |
|
|
12 |
|
|
|
47 |
|
|
|
2 |
|
Gain on sale of long-lived assets/investments |
|
|
(52 |
) |
|
|
(41 |
) |
|
|
(18 |
) |
Miscellaneous income |
|
|
(33 |
) |
|
|
(7 |
) |
|
|
(26 |
) |
Total other (income)/expense |
|
|
($ 14 |
) |
|
|
$ 56 |
|
|
|
($ 17 |
) |
1 |
Presentation amended to exclude certain general & administrative expenditures related to management of our operating unit offices, which are
now classified within general & administrative expenses. |
Other income for 2014 increased by $70 million compared
to the prior year. The increase is primarily due to the recognition of $30 million in gains arising from the sale of Marigold and Plutonic as well as $15 million in gains realized on equipment sale leaseback transactions at Pascua-Lama combined with
a 20% decrease in consulting fees.
Exploration and Project Costs
|
|
|
|
|
|
|
|
|
|
|
|
|
($ millions) |
|
For the years ended December 31 |
|
|
|
2014 |
|
|
20131 |
|
|
20121 |
|
Exploration: |
|
|
|
|
|
|
|
|
|
|
|
|
Minesite programs |
|
|
$ 32 |
|
|
|
$ 51 |
|
|
|
$ 82 |
|
Global programs |
|
|
131 |
|
|
|
128 |
|
|
|
211 |
|
|
|
|
163 |
|
|
|
179 |
|
|
|
293 |
|
Evaluation costs |
|
|
21 |
|
|
|
29 |
|
|
|
66 |
|
Exploration and evaluation expense |
|
|
$ 184 |
|
|
|
$ 208 |
|
|
|
$ 359 |
|
|
|
|
|
Advanced project costs: |
|
|
|
|
|
|
|
|
|
|
|
|
Pascua-Lama |
|
|
$ 88 |
|
|
|
$ 370 |
|
|
|
$ 33 |
|
Jabal Sayid |
|
|
30 |
|
|
|
52 |
|
|
|
33 |
|
|
|
|
|
Other project related costs: |
|
|
|
|
|
|
|
|
|
|
|
|
Cerro Casale |
|
|
14 |
|
|
|
4 |
|
|
|
1 |
|
Kainantu |
|
|
4 |
|
|
|
6 |
|
|
|
6 |
|
Reko Diq |
|
|
12 |
|
|
|
5 |
|
|
|
- |
|
Corporate development |
|
|
35 |
|
|
|
17 |
|
|
|
54 |
|
Community relations |
|
|
25 |
|
|
|
18 |
|
|
|
8 |
|
Exploration and project costs |
|
|
$ 392 |
|
|
|
$ 680 |
|
|
|
$ 494 |
|
1 |
Presentation amended to include project costs which were previously classified in Other Expense. |
Exploration and project costs for 2014 decreased $288 million compared to the prior year. The decrease is primarily due to a 76% decrease in
project costs at Pascua-Lama due to the suspension of the project in fourth quarter 2013. Exploration and evaluation costs decreased 12% compared to the prior year, primarily due to a decrease in mine site exploration activities in
Australia-Pacific.
Capital Expenditures1
|
|
|
|
|
|
|
|
|
|
|
|
|
($ millions) |
|
For the years ended December 31 |
|
|
|
2014 |
|
|
2013 |
|
|
2012 |
|
Project capital expenditures2,3 |
|
|
$ 234 |
|
|
|
$ 2,137 |
|
|
|
$ 2,951 |
|
Minesite sustaining4 |
|
|
764 |
|
|
|
1,150 |
|
|
|
1,733 |
|
Mine development |
|
|
874 |
|
|
|
1,317 |
|
|
|
1,537 |
|
Minesite expansion2 |
|
|
362 |
|
|
|
468 |
|
|
|
208 |
|
Capitalized interest |
|
|
30 |
|
|
|
303 |
|
|
|
566 |
|
Total consolidated capital expenditures |
|
|
$ 2,264 |
|
|
|
$ 5,375 |
|
|
|
$ 6,995 |
|
1 |
These amounts are presented on a 100% accrued basis. |
2 |
Project and expansion capital expenditures are included in our calculation of all-in costs, but not included in our calculation of all-in sustaining
costs. |
3 |
Project capital expenditures include the reversal of contract claim accruals that were closed out during the year and the reclassification of assets
from inventory to construction-in-process at Pascua-Lama. |
4 |
Minesite sustaining includes capital expenditures from discontinued operations of $64 million for the year ended December 31, 2013.
|
|
|
|
|
|
BARRICK YEAR-END 2014 |
|
43 |
|
MANAGEMENTS DISCUSSION AND ANALYSIS |
In 2014, capital expenditures decreased 58% compared to the prior year. The decrease is primarily
due to lower project capital expenditures due to the decision made in fourth quarter 2013 to temporarily suspend the Pascua-Lama project and the completion of the power plant at Pueblo Viejo in fourth quarter 2013. Minesite sustaining capital for
2014 decreased 34%, which reflects our continued focus on reducing and/or deferring sustaining capital at all of our sites. The decrease in minesite expansion expenditures for 2014 was primarily due to a decrease in expenditures at Cortez and at
Bulyanhulu relating to the construction of the CIL plant which is in the final stages of commissioning, partially offset by an increase in expenditures related to the construction of the thiosulfate project at Goldstrike. Capitalized interest
decreased compared to the prior year, primarily due to the cessation of interest capitalization at Pascua-Lama in fourth quarter 2013.
Finance Cost/Finance Income
|
|
|
|
|
|
|
|
|
|
|
|
|
($ millions) |
|
For the years ended December 31 |
|
|
|
2014 |
|
|
2013 |
|
|
2012 |
|
Interest incurred |
|
|
$ 751 |
|
|
|
$ 796 |
|
|
|
$ 688 |
|
Interest capitalized |
|
|
(30) |
|
|
|
(297) |
|
|
|
(567) |
|
Accretion |
|
|
75 |
|
|
|
68 |
|
|
|
53 |
|
Debt extinguishment fees |
|
|
- |
|
|
|
90 |
|
|
|
- |
|
Finance costs |
|
|
$ 796 |
|
|
|
$ 657 |
|
|
|
$ 174 |
|
In 2014, finance costs increased $139 million compared to the prior year. Interest costs incurred for 2014
decreased 6%, reflecting lower total debt levels compared to the prior year. Interest capitalized for 2014 decreased by $267 million compared to the prior year, primarily due to the cessation of interest capitalization at our Pascua-Lama project in
fourth quarter 2013.
Impairment Charges/Reversals1
|
|
|
|
|
|
|
|
|
|
|
|
|
($ millions) |
|
For the years ended December 31 |
|
|
|
2014 |
|
|
2013 |
|
|
2012 |
|
Goodwill |
|
|
|
|
|
|
|
|
|
|
|
|
Zaldivar |
|
|
$712 |
|
|
|
- |
|
|
|
- |
|
Jabal Sayid |
|
|
316 |
|
|
|
- |
|
|
|
- |
|
Lumwana |
|
|
214 |
|
|
|
- |
|
|
|
- |
|
Bald Mountain |
|
|
131 |
|
|
|
- |
|
|
|
- |
|
Round Mountain |
|
|
36 |
|
|
|
- |
|
|
|
- |
|
Copper |
|
|
|
|
|
|
$1,033 |
|
|
|
$798 |
|
Australia Pacific |
|
|
- |
|
|
|
1,200 |
|
|
|
- |
|
Capital projects |
|
|
- |
|
|
|
397 |
|
|
|
- |
|
Acacia |
|
|
- |
|
|
|
185 |
|
|
|
- |
|
Total goodwill impairment charges |
|
|
$1,409 |
|
|
|
$2,815 |
|
|
|
$798 |
|
Asset impairments |
|
|
|
|
|
|
|
|
|
|
|
|
Cerro Casale |
|
|
$1,476 |
|
|
|
- |
|
|
|
- |
|
Lumwana |
|
|
720 |
|
|
|
- |
|
|
|
$4,982 |
|
Pascua-Lama |
|
|
382 |
|
|
|
$6,061 |
|
|
|
- |
|
Jabal Sayid |
|
|
198 |
|
|
|
860 |
|
|
|
- |
|
Porgera |
|
|
(160 |
) |
|
|
746 |
|
|
|
- |
|
Buzwagi |
|
|
- |
|
|
|
721 |
|
|
|
- |
|
Veladero |
|
|
- |
|
|
|
464 |
|
|
|
- |
|
Cortez |
|
|
46 |
|
|
|
- |
|
|
|
- |
|
North Mara |
|
|
- |
|
|
|
286 |
|
|
|
- |
|
Pierina |
|
|
- |
|
|
|
140 |
|
|
|
- |
|
Exploration |
|
|
7 |
|
|
|
112 |
|
|
|
169 |
|
Reko Diq |
|
|
- |
|
|
|
- |
|
|
|
120 |
|
Highland Gold |
|
|
- |
|
|
|
- |
|
|
|
86 |
|
Round Mountain |
|
|
- |
|
|
|
78 |
|
|
|
- |
|
Granny Smith |
|
|
- |
|
|
|
73 |
|
|
|
- |
|
Marigold Mine |
|
|
- |
|
|
|
60 |
|
|
|
- |
|
Ruby Hill |
|
|
- |
|
|
|
66 |
|
|
|
- |
|
Kanowna |
|
|
- |
|
|
|
41 |
|
|
|
- |
|
Plutonic |
|
|
- |
|
|
|
37 |
|
|
|
- |
|
Darlot |
|
|
- |
|
|
|
36 |
|
|
|
- |
|
Bald Mountain |
|
|
- |
|
|
|
16 |
|
|
|
- |
|
Tulawaka |
|
|
- |
|
|
|
16 |
|
|
|
- |
|
Available for sale investments |
|
|
18 |
|
|
|
26 |
|
|
|
46 |
|
Other2 |
|
|
10 |
|
|
|
33 |
|
|
|
93 |
|
Total asset impairment charges |
|
|
$2,697 |
|
|
|
$9,872 |
|
|
|
$5,496 |
|
Total impairment charges |
|
|
$4,106 |
|
|
|
$12,687 |
|
|
|
$6,294 |
|
1 |
Impairment figures are presented on a 100% pre-tax basis. |
2 |
Includes the impairment reversal relating to the Pueblo Viejo power assets. |
Refer to note 20 to the consolidated financial statements for a full description of impairment charges.
|
|
|
|
|
BARRICK YEAR-END 2014 |
|
44 |
|
MANAGEMENTS DISCUSSION AND ANALYSIS |
Income Tax Expense
Reconciliation to Canadian Statutory Rate
|
|
|
|
|
|
|
|
|
For the years ended December 31 |
|
2014 |
|
|
2013 |
|
At 26.5% statutory rate |
|
|
$ (703) |
|
|
|
$ (2,509) |
|
Increase (decrease) due to: |
|
|
|
|
|
|
|
|
Allowances and special tax deductions1 |
|
|
(93) |
|
|
|
(181) |
|
Impact of foreign tax rates2 |
|
|
18 |
|
|
|
(169) |
|
Expenses not tax deductible |
|
|
96 |
|
|
|
111 |
|
|
|
|
Goodwill impairment charges not tax deductible |
|
|
373 |
|
|
|
837 |
|
Impairment charges not recognized in deferred tax assets |
|
|
334 |
|
|
|
1,699 |
|
Net currency translation losses on deferred tax balances |
|
|
46 |
|
|
|
49 |
|
Current year tax losses not recognized in deferred tax assets |
|
|
20 |
|
|
|
183 |
|
Restructure of internal debt to equity |
|
|
(112) |
|
|
|
- |
|
Pueblo Viejo SLA amendment |
|
|
- |
|
|
|
384 |
|
Non-recognition of US AMT credits |
|
|
43 |
|
|
|
48 |
|
Adjustments in respect of prior years |
|
|
(8) |
|
|
|
5 |
|
Impact of tax rate changes |
|
|
20 |
|
|
|
- |
|
Other withholding taxes |
|
|
40 |
|
|
|
64 |
|
Mining taxes |
|
|
227 |
|
|
|
134 |
|
Other items |
|
|
5 |
|
|
|
(25) |
|
Income tax expense (recovery) |
|
|
$ 306 |
|
|
|
$ 630 |
|
1 |
We are able to claim certain allowances and tax deductions unique to extractive industries that result in a lower effective tax rate.
|
2 |
We operate in multiple foreign tax jurisdictions that have tax rates different than the Canadian statutory rate. |
The more significant items impacting income tax expense in 2014 and 2013 include the following:
Currency Translation
Deferred tax balances are
subject to re-measurement for changes in currency exchange rates each period. The most significant balances are Argentinean deferred tax liabilities. In 2014 and 2013, tax expense of $46 million and $49 million, respectively, primarily arose from
translation losses due to the weakening of the Argentine peso against the US dollar. These losses and gains are included within deferred tax expense/recovery.
Restructure of Internal Debt to Equity
In
second quarter 2014, a deferred tax recovery of $112 million arose from a restructure of internal debt to equity in subsidiary corporations, which resulted in the release of a deferred tax liability and a net increase in deferred tax assets.
Non-Recognition of US Alternative Minimum Tax (AMT) Credits
In fourth quarter 2014 and 2013, we recorded a deferred tax expense of $43 million and $48 million, respectively, related to US AMT credits which
are not probable to be realized based on our current life of mine plans.
Tax Rate Changes
In third quarter 2014, a tax rate change was enacted in Chile, resulting in current tax expense of $2 million.
In fourth quarter 2014, a tax rate change was enacted in Peru, reducing corporate income tax rates. This resulted in a deferred tax expense of
$18 million due to recording the deferred tax asset in Peru at the lower rates.
Pueblo Viejo Special Lease Agreement (SLA) Amendment
In third quarter 2013, the Pueblo Viejo Special Lease Agreement (SLA) Amendment was substantively enacted. The amendment included the following
items: elimination of a 10 percent return embedded in the initial capital investment for purposes of the net profits tax (NPI); an extension of the period over which Pueblo Viejo will recover its capital investment; a delay of application of NPI
deductions; a reduction of the depreciation rates; and the establishment of a graduated minimum tax.
The tax impact of the amendment is a
charge of $384 million, comprised of current tax and deferred tax expense, including $36 million of graduated minimum tax related to 2012 sales proceeds.
|
|
|
|
|
BARRICK YEAR-END 2014 |
|
45 |
|
MANAGEMENTS DISCUSSION AND ANALYSIS |
Operating Segments Performance
Review of Operating Segments Performance
As a
result of the organizational changes that were implemented in third quarter 2014, we have determined that our Co-Presidents, acting together, are Barricks Chief Operating Decision Maker (CODM). Beginning in fourth quarter 2014, the
CODM reviews the operating results, assesses performance and makes capital allocation decisions at the mine site or project level, with the exception of Acacia which is reviewed and assessed as a separate business. Therefore, each individual mine
site and Acacia are operating segments for financial reporting purposes. As a result, our former North America Portfolio, Australia Pacific and Copper operating segments have been eliminated and each individual mine within those segments is now an
operating segment. For segment reporting purposes, we present our reportable operating segments as follows: eight individual gold mines, Acacia and our Pascua-Lama project. The remaining operating segments have
been grouped into two other categories: (a) our remaining gold mines and (b) our two copper mines. We have restated our prior period results to conform to the current
presentation. See note 19 to the consolidated financial statements for details regarding prospective goodwill reallocation in 2014.
Segment
performance is evaluated based on a number of measures including operating income before tax, production levels and unit production costs. Income tax, operating segment administration, finance income and costs, impairment charges and reversals,
investment write-downs and gains/losses on hedge and non-hedge derivatives are managed on a consolidated basis and are therefore not reflected in segment income.
|
|
|
|
|
BARRICK YEAR-END 2014 |
|
46 |
|
MANAGEMENTS DISCUSSION AND ANALYSIS |
Summary of Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the years ended December 31 |
|
|
2014 |
|
2013 |
|
|
Gold Produced (ozs) |
|
Gold Sold (ozs) |
|
Cash Costs ($/oz) |
|
All-In sustaining Costs (S/oz) |
|
Gold Produced (ozs) |
|
Gold Sold (ozs) |
|
Cash Costs ($/oz) |
|
All-In sustaining Costs ($/oz) |
Cortez |
|
902 |
|
865 |
|
$498 |
|
706 |
|
1,337 |
|
1,371 |
|
$229 |
|
440 |
Goldstrike |
|
902 |
|
908 |
|
571 |
|
854 |
|
892 |
|
887 |
|
618 |
|
913 |
Pueblo Viejo (60%) |
|
665 |
|
667 |
|
446 |
|
588 |
|
488 |
|
444 |
|
561 |
|
735 |
Lagunas Norte |
|
582 |
|
604 |
|
379 |
|
543 |
|
606 |
|
591 |
|
361 |
|
627 |
Veladero |
|
722 |
|
724 |
|
566 |
|
815 |
|
641 |
|
659 |
|
501 |
|
833 |
Total Core Mines |
|
3,773 |
|
3,768 |
|
$500 |
|
$716 |
|
3,964 |
|
3,952 |
|
$419 |
|
$673 |
|
|
|
|
|
|
|
|
|
Turquoise Ridge (75%) |
|
195 |
|
200 |
|
$473 |
|
628 |
|
167 |
|
162 |
|
$586 |
|
928 |
Porgera (95%) |
|
493 |
|
507 |
|
915 |
|
996 |
|
482 |
|
465 |
|
965 |
|
1,361 |
Kalgoorlie (50%) |
|
326 |
|
330 |
|
817 |
|
1,037 |
|
315 |
|
330 |
|
846 |
|
1,070 |
Acacia (63.9%)1 |
|
470 |
|
459 |
|
732 |
|
1,105 |
|
474 |
|
481 |
|
812 |
|
1,346 |
Cowal |
|
268 |
|
270 |
|
608 |
|
787 |
|
297 |
|
301 |
|
530 |
|
854 |
Hemlo |
|
206 |
|
223 |
|
829 |
|
1,059 |
|
204 |
|
198 |
|
922 |
|
1,227 |
Round Mountain (50%) |
|
164 |
|
171 |
|
936 |
|
1,170 |
|
156 |
|
159 |
|
892 |
|
1,345 |
Bald Mountain |
|
161 |
|
161 |
|
724 |
|
1,070 |
|
94 |
|
95 |
|
894 |
|
2,182 |
Golden Sunlight |
|
86 |
|
83 |
|
893 |
|
1,181 |
|
92 |
|
95 |
|
680 |
|
915 |
Ruby Hill |
|
33 |
|
33 |
|
637 |
|
713 |
|
91 |
|
91 |
|
789 |
|
910 |
Total Continuing Operations |
|
6,175 |
|
6,205 |
|
$608 |
|
$825 |
|
6,336 |
|
6,329 |
|
$565 |
|
$874 |
|
|
|
|
|
|
|
|
|
Kanowna |
|
39 |
|
37 |
|
$641 |
|
$674 |
|
226 |
|
231 |
|
$881 |
|
$958 |
Pierina |
|
17 |
|
19 |
|
1,419 |
|
2,277 |
|
97 |
|
94 |
|
1,085 |
|
1,349 |
Marigold (33%) |
|
11 |
|
15 |
|
1,001 |
|
1,197 |
|
54 |
|
49 |
|
908 |
|
1,563 |
Plutonic |
|
7 |
|
8 |
|
1,120 |
|
1,206 |
|
114 |
|
117 |
|
1,183 |
|
1,316 |
Yilgarn South |
|
- |
|
- |
|
- |
|
- |
|
339 |
|
354 |
|
749 |
|
1,014 |
Total Divested/Closed Sites |
|
74 |
|
79 |
|
$945 |
|
$1,213 |
|
830 |
|
845 |
|
$892 |
|
$1,110 |
Total
Gold2 |
|
6,249 |
|
6,284 |
|
$614 |
|
$832 |
|
7,166 |
|
7,174 |
|
$615 |
|
$914 |
Total Consolidated Barrick |
|
6,249 |
|
6,284 |
|
$598 |
|
$864 |
|
7,166 |
|
7,174 |
|
$566 |
|
$915 |
|
|
|
|
|
|
|
|
|
|
|
Copper Produced (lbs) |
|
Copper Sold (lbs) |
|
C1 Cash Costs ($/lb) |
|
C3 Cash Costs ($/lb) |
|
Copper Produced (lbs) |
|
Copper Sold (lbs) |
|
C1 Cash Costs ($/lb) |
|
C3 Cash Costs ($/lb) |
Zaldívar |
|
222 |
|
222 |
|
$1.79 |
|
$2.14 |
|
279 |
|
279 |
|
$1.65 |
|
$1.99 |
Lumwana |
|
214 |
|
213 |
|
2.08 |
|
2.76 |
|
260 |
|
240 |
|
2.29 |
|
2.97 |
Total Copper |
|
436 |
|
435 |
|
$1.92 |
|
$2.43 |
|
539 |
|
519 |
|
$1.92 |
|
$2.42 |
1 |
2013 production and sales ounces for Acacia include amounts relating to the Tulawaka mine. |
2 |
Total gold cash costs and all-in sustaining costs exclude the impact of hedges (2014: $16/oz gain; 2013: $41/oz gain) and/or corporate
general & administrative costs (2014: $48/oz; 2013: $42/oz). Total gold cash costs for 2013 also excludes the impact of the Barrick Energy gross margin ($8/oz), which was divested in third quarter 2013. |
|
|
|
|
|
BARRICK YEAR-END 2014 |
|
47 |
|
MANAGEMENTS DISCUSSION AND ANALYSIS |
Cortez, Nevada USA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Summary of Operating Data |
|
For the years ended December 31 |
|
|
|
2014 |
|
|
2013 |
|
|
% Change |
|
|
2012 |
|
Total tonnes mined (000s) |
|
|
152,146 |
|
|
|
134,007 |
|
|
|
14% |
|
|
|
109,046 |
|
Ore tonnes processed (000s) |
|
|
25,957 |
|
|
|
19,999 |
|
|
|
30% |
|
|
|
8,954 |
|
Average grade (grams/tonne) |
|
|
1.34 |
|
|
|
2.59 |
|
|
|
(48%) |
|
|
|
5.16 |
|
Gold produced (000s/oz) |
|
|
902 |
|
|
|
1,337 |
|
|
|
(33%) |
|
|
|
1,370 |
|
Gold sold (000s/oz) |
|
|
865 |
|
|
|
1,371 |
|
|
|
(37%) |
|
|
|
1,346 |
|
Cost of sales ($ millions) |
|
|
$ 687 |
|
|
|
$ 636 |
|
|
|
8% |
|
|
|
$ 603 |
|
Cash costs (per oz)1 |
|
|
$ 498 |
|
|
|
$ 229 |
|
|
|
117% |
|
|
|
$ 237 |
|
All-in sustaining costs (per oz)1 |
|
|
$ 706 |
|
|
|
$ 440 |
|
|
|
60% |
|
|
|
$ 612 |
|
All-in costs (per oz)1 |
|
|
$ 728 |
|
|
|
$ 536 |
|
|
|
36% |
|
|
|
$ 632 |
|
Summary of
Financial Data |
|
For
the years ended December 31 |
|
|
|
2014 |
|
|
2013 |
|
|
% Change |
|
|
2012 |
|
Segment EBIT ($ millions) |
|
|
$ 393 |
|
|
|
$ 1,289 |
|
|
|
(70%) |
|
|
|
$ 1,598 |
|
Segment EBITDA ($ millions)1 |
|
|
$ 648 |
|
|
|
$ 1,610 |
|
|
|
(60%) |
|
|
|
$ 1,887 |
|
Capital expenditures ($ millions)2 |
|
|
$ 189 |
|
|
|
$ 396 |
|
|
|
(52%) |
|
|
|
$ 502 |
|
Minesite sustaining |
|
|
$ 170 |
|
|
|
$ 264 |
|
|
|
(36%) |
|
|
|
$ 475 |
|
Minesite expansion |
|
|
$19 |
|
|
|
$ 132 |
|
|
|
(86%) |
|
|
|
$ 27 |
|
|
1 |
These are non-GAAP financial performance measures; for further information and a detailed reconciliation, please see pages 81 - 91 of this
MD&A. |
|
2 |
Amounts presented exclude capitalized interest. |
|
|
|
Financial Results
Segment EBIT for 2014 was 70% lower than the prior year, primarily due to a reduction in sales volumes combined with a lower realized gold
price. In 2014, gold production decreased 33% from the prior
year, primarily due to the anticipated processing of lower grade ore combined with the impact of a negative grade reconciliation in an area of the open pit in early 2014. Mining in that area of the pit ceased at the beginning of 2015 and
consequently a write-down of $46 million related to the attributable capitalized costs was recorded in fourth quarter 2014. This was partially offset by an increase in ore tonnes placed on the leach pads and an increase in tonnes mined from the open
pit resulting from the commissioning of new trucks at the end of 2013.
Cost of sales for 2014 was 8% higher than the prior year, primarily due to an increase in processing costs resulting from an increase in tonnes of
refractory ore processed, higher reagent costs as a result of increased tonnes on the leach pad and a reduction in capitalized stripping costs, partially offset by lower sales volumes. Cash costs were 117% higher than the prior year, primarily due
to the impact of lower sales volume on unit production costs. All-in sustaining costs for 2014 increased by $266 per ounce over the prior year due to higher cash costs, partially offset by a decrease in minesite sustaining capital
expenditures. |
|
|
|
|
|
|
|
BARRICK YEAR-END 2014 |
|
48 |
|
MANAGEMENTS DISCUSSION AND ANALYSIS |
|
|
|
|
|
Capital expenditures for 2014 decreased by $207 million, or 52%, from the prior year. The decrease was primarily due to a
reduction in capitalized stripping costs and in minesite expansion capital expenditures.
Outlook
At Cortez we expect 2015 gold production to be in the range of 825 to 900 thousand ounces, down slightly compared to 2014 production levels
mainly due to a decrease in open pit tonnage processed as a result of mine sequencing, and declining underground ore grade and tonnage due to a transition to lower grade underground ore zones as we advance deeper in the mine. Mining in 2015 will
include Cortez Hills and Crossroads pre-stripping, and as a result open pit tonnes processed will be down significantly. The impact of lower tonnes processed from the open pit will be partially offset by higher processed ore grades. |
|
|
|
|
In 2015, we expect cash costs to be in the range of $560 to $610 per ounce, higher than 2014, due to lower
capitalized stripping and higher processing costs. Processing costs are expected to rise as a higher proportion of production will be processed at the Goldstrike autoclaves. All-in sustaining costs are expected to be in the range of $760 to $835 per
ounce, higher than 2014, primarily due to the impact of lower sales volumes on unit production costs and higher sustaining capital expenditures.
|
|
|
|
|
Goldrush
The Goldrush project, located six kilometers from the Cortez mine, is one of the largest gold discoveries of the last decade. Measured and
indicated resources stood at 10.6 million ounces and inferred resources were 4.9 million ounces at the end of 2014. The prefeasibility study remains on schedule for completion in mid-2015. Infill drilling in 2014 continued to demonstrate
high grade continuity and led to resource upgrades, with nearly 70 percent of the overall resource now in the measured and indicated category. A permit application for twin exploration declines that will allow the company to better explore the
northern limits of the known deposit was submitted in the second quarter of 2014. |
|
|
|
|
|
Cortez Hills Lower Zone
A prefeasibility study for underground mining at Cortez below currently permitted levels will be completed in late 2015. Mineralization in this
zone is primarily oxide and higher grade compared to the current underground mine, which is sulfide in nature. The limits of the Lower Zone have not yet been defined, and drilling has indicated the potential for new targets at depth. The exploration
drift has been extended to the south, enabling additional step-out drilling, which is anticipated to begin in June. Drill results to date include 36.6 meters at 31.5 grams per tonne and 27.4 meters at 20.9 grams per tonne, both oxide in nature,
which compare favorably with the average grade of 13.8 grams per tonne in refractory ore above the 3,800 foot level 7.
Scientific and technical information relating to exploration at
the companys Cortez property contained in this MD&A has been reviewed and approved by Robert Krcmarov, Senior Vice President, Global Exploration of Barrick, who is a Qualified Person as defined in National Instrument 43-101
Standards of Disclosure for Mineral Projects. |
|
|
|
|
7 |
The drill results for the Cortez mine contained in this MD&A have been prepared in accordance with National Instrument 43-101 Standards of
Disclosure for Mineral Projects. For additional details regarding the Cortez exploration information included in this MD&A, please see Barricks most recent Form 40-F/Annual Information Form on file with the SEC and Canadian provincial
securities regulatory authorities. |
|
|
|
|
|
BARRICK YEAR-END 2014 |
|
49 |
|
MANAGEMENTS DISCUSSION AND ANALYSIS |
Goldstrike, Nevada USA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Summary of Operating Data |
|
For the years ended December 31 |
|
|
|
2014 |
|
|
2013 |
|
|
% Change |
|
|
2012 |
|
Total tonnes mined (000s) |
|
|
81,410 |
|
|
|
87,350 |
|
|
|
(7%) |
|
|
|
100,118 |
|
Ore tonnes processed (000s) |
|
|
5,307 |
|
|
|
6,829 |
|
|
|
(22%) |
|
|
|
7,487 |
|
Average grade (grams/tonne) |
|
|
6.28 |
|
|
|
5.01 |
|
|
|
25% |
|
|
|
5.89 |
|
Gold produced (000s/oz) |
|
|
902 |
|
|
|
892 |
|
|
|
1% |
|
|
|
1,174 |
|
Gold sold (000s/oz) |
|
|
908 |
|
|
|
887 |
|
|
|
2% |
|
|
|
1,175 |
|
Cost of sales ($ millions) |
|
|
$ 651 |
|
|
|
$ 662 |
|
|
|
(2%) |
|
|
|
$ 730 |
|
Cash costs (per oz) |
|
|
$ 571 |
|
|
|
$ 618 |
|
|
|
(8%) |
|
|
|
$ 527 |
|
All-in sustaining costs (per oz) |
|
|
$ 854 |
|
|
|
$ 913 |
|
|
|
(6%) |
|
|
|
$ 809 |
|
All-in costs (per oz) |
|
|
$ 1,170 |
|
|
|
$ 1,165 |
|
|
|
- |
|
|
|
$ 933 |
|
Summary of
Financial Data |
|
For the years ended December 31 |
|
|
|
2014 |
|
|
2013 |
|
|
% Change |
|
|
2012 |
|
Segment EBIT ($ millions) |
|
|
$ 496 |
|
|
|
$ 581 |
|
|
|
(15%) |
|
|
|
$ 1,227 |
|
Segment EBITDA ($ millions) |
|
|
$ 628 |
|
|
|
$ 693 |
|
|
|
(10%) |
|
|
|
$ 1,340 |
|
Capital expenditures ($ millions) |
|
|
$ 533 |
|
|
|
$ 474 |
|
|
|
12% |
|
|
|
$ 453 |
|
Minesite sustaining |
|
|
$ 246 |
|
|
|
$ 251 |
|
|
|
(2%) |
|
|
|
$ 308 |
|
Minesite expansion |
|
|
$ 287 |
|
|
|
$ 223 |
|
|
|
29% |
|
|
|
$ 145 |
|
|
|
|
Financial Results
Segment EBIT for 2014 was 15% lower than the prior year. The decrease was primarily due to a lower realized gold price and an increase in
underground mining costs and depreciation expense, partially offset by an increase in capitalized stripping costs.
In 2014, gold production of 902 thousand ounces increased by 1% over the prior year. The increase was primarily due to higher grades from the
open pit, combined with increased recoveries, partially offset by a decrease in ore tonnes processed.
Cost of sales for 2014 of $651 million was $11 million, or 2%, lower than the prior year. The decrease was primarily due to a decrease in
processing costs and an increase in capitalized stripping costs, partially offset by an increase in sales volume. Cash costs were $571 per ounce, down $47 per ounce, or 8%, compared to the prior year. The decrease was primarily due to the impact of
higher sales volume on unit production costs. All-in sustaining costs for 2014 decreased by $59 per ounce compared to the prior year primarily due to the lower cash costs combined with a decrease in minesite sustaining capital expenditures.
In 2014, capital expenditures increased by $59 million, or 12%,
compared to the prior year. The increase was primarily due to an increase in minesite expansion capital expenditure as a result of construction activity at the thiosulfate technology project. |
|
|
|
|
|
|
|
BARRICK YEAR-END 2014 |
|
50 |
|
MANAGEMENTS DISCUSSION AND ANALYSIS |
|
|
|
Goldstrike thiosulfate technology project
Goldstrike achieved first gold production through its autoclaves in fourth quarter 2014, after being successfully retrofitted with Barricks
innovative and proprietary thiosulfate technology. The new thiosulfate circuit allows for continued production from the autoclaves and accelerates the cash flow from about four million stockpiled ounces. The expected average annual contribution is
about 350 to 450 thousand ounces of production (including Cortez ore processed at Goldstrike) in the first full five years following implementation of this process. In 2015, Goldstrikes production is expected to exceed 1.0 million
ounces with contributions from the thiosulfate process. The project will finalize some adjustments to the system in first quarter 2015, with total project costs expected to remain at about $620 million. |
|
|
Outlook
At Goldstrike we expect 2015 production to be in the range of 1,000 to 1,150 thousand ounces, which is up from 2014 production levels, due
primarily to the commissioning of the thiosulfate circuit. As a result of the thiosulfate circuit, ounces produced at the autoclave will increase by approximately 250 thousand ounces in 2015. This will be partially offset by lower production
from the roaster due to lower grades from the open pit in 2015. Underground production is expected to be consistent with 2014.
Operating
costs are expected to be higher in 2015 due to higher process throughput at the autoclaves, but this will largely be offset by the impact of higher sales volumes on unit production costs. As a result, we expect cash costs to be in the range of $540
to $590 per ounce, which is consistent with 2014, and all-in sustaining costs to be $700 to $800 per ounce, which is down significantly compared to 2014 due to the impact of higher production levels.
Achieving these production and related cost guidance ranges is dependent on the thiosulfate circuit ramping up as planned. This process utilizes
new technology, and, as with any such new process, there are risks associated with the ramp-up to full capacity. If the ramp-up progresses slower than we currently anticipate, then our production guidance for both Goldstrike and Cortez would be at
risk.
|
|
|
|
|
BARRICK YEAR-END 2014 |
|
51 |
|
MANAGEMENTS DISCUSSION AND ANALYSIS |
Pueblo Viejo, Dominican Republic
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Summary of Operating Data |
|
For the years ended December 31 |
|
|
|
2014 |
|
|
2013 |
|
|
% Change |
|
|
2012 |
|
Total tonnes mined (000s) |
|
|
21,055 |
|
|
|
9,192 |
|
|
|
129% |
|
|
|
9,651 |
|
Ore tonnes processed (000s) |
|
|
4,027 |
|
|
|
2,658 |
|
|
|
52% |
|
|
|
445 |
|
Average grade (grams/tonne) |
|
|
5.53 |
|
|
|
6.14 |
|
|
|
(10%) |
|
|
|
5.23 |
|
Gold produced (000s/oz) |
|
|
665 |
|
|
|
488 |
|
|
|
36% |
|
|
|
67 |
|
Gold sold (000s/oz) |
|
|
667 |
|
|
|
444 |
|
|
|
50% |
|
|
|
- |
|
Cost of sales ($ millions) |
|
|
$ 885 |
|
|
|
$ 574 |
|
|
|
54% |
|
|
|
- |
|
Cash costs (per oz) |
|
|
$ 446 |
|
|
|
$ 561 |
|
|
|
(20%) |
|
|
|
- |
|
All-in sustaining costs (per oz) |
|
|
$ 588 |
|
|
|
$ 735 |
|
|
|
(20%) |
|
|
|
- |
|
All-in costs (per oz) |
|
|
$ 588 |
|
|
|
$ 800 |
|
|
|
(27%) |
|
|
|
- |
|
Summary of
Financial Data |
|
For the years ended December 31 |
|
|
|
2014 |
|
|
2013 |
|
|
% Change |
|
|
2012 |
|
Segment EBIT ($ millions) |
|
|
$ 669 |
|
|
|
$ 430 |
|
|
|
56% |
|
|
|
- |
|
Segment EBITDA ($ millions) |
|
|
$ 912 |
|
|
|
$ 569 |
|
|
|
60% |
|
|
|
- |
|
Capital expenditures ($ millions) |
|
|
$ 80 |
|
|
|
$ 101 |
|
|
|
(21%) |
|
|
|
$ 949 |
|
Minesite sustaining |
|
|
$ 80 |
|
|
|
$ 73 |
|
|
|
10% |
|
|
|
$ 95 |
|
Minesite expansion |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Project capex |
|
|
- |
|
|
|
$ 28 |
|
|
|
(100%) |
|
|
|
$ 854 |
|
|
|
|
Financial Results
Segment EBIT in 2014 was 56% higher than the prior year primarily due to increased sales volume as the minesite ramped up to full production,
partially offset by a lower realized gold price. In 2014,
gold production increased by 36% over the prior year, following the completion of major modifications to the autoclave facility in the second half of 2013 as the mine worked to achieve design capacity and all four autoclaves came online. In second
quarter 2014, the autoclaves achieved targeted and sustainable run rates, achieving full production. Modifications to the lime circuit are essentially complete and the mine is progressing toward design capacities on copper and silver.
Cost of sales for 2014 was 54% higher than the prior year,
primarily due to increased sales volume. Cash costs were 20% lower than the prior year primarily due to the impact of higher sales volume on unit production costs. All-in sustaining costs decreased by 20% from the prior year due to the lower cash
costs, partially offset by increased capitalized stripping costs.
In 2014, capital expenditures decreased by 21% from the prior year primarily due to a decrease in project capital expenditures resulting from the
completion of the 215 megawatt power plant that was commissioned in third quarter 2013, partially offset by an increase in capitalized stripping costs. |
|
|
Outlook
At Pueblo Viejo, we expect our equity share of 2015 gold production to be in the range of 625 to 675 thousand ounces, which is in line with
2014 production levels. In 2015, a decrease in processed grade will be offset by greater throughput, mainly as a result of greater plant availability following the completion of plant debottlenecking modifications to the autoclave facility resulting
in achievable targeted and sustainable run rates. Modifications to the lime circuit are essentially complete and the mine is progressing toward design capacities on silver and copper.
|
|
|
|
|
BARRICK YEAR-END 2014 |
|
52 |
|
MANAGEMENTS DISCUSSION AND ANALYSIS |
We expect cash costs to be in the range of $390 to $425 per ounce and all-in sustaining costs to be
$540 to $590 per ounce. Operating costs are expected to be lower primarily due to an improvement in higher silver and copper by-product credits as the mine works toward design capacities on silver and copper.
Barricks team of technical experts has identified multiple opportunities to optimize operations and increase cash flow at Pueblo Viejo. Over
the next 12 to 24 months, we will concentrate on decreasing costs and increasing production. This will involve:
|
|
|
Increasing plant processing throughput by optimizing blending and autoclave availability |
|
|
|
Decreasing overall power cost by switching from heavy fuel oil to lower-cost liquid natural gas |
|
|
|
Reducing costs by optimizing our maintenance spend and reducing G&A |
These initiatives and the transition from ramp-up to steady state operations create the opportunity to significantly decrease our all-in
sustaining costs over the next five years. In the longer term, Pueblo Viejo has significant reserves and resources as well as substantial exploration potential that will continue to extend the profitable life of the mine. We are actively exploring
opportunities to extend the life of the asset beyond 2050.
|
|
|
Pueblo Viejo is one of the worlds leading gold mines. It is expected to produce more than 1 million ounces of gold a year at all-in sustaining costs of
less than $700 per ounce over the next three years. The mine is now past commissioning, is fully up and running, and has a long operating life ahead of it with the potential for further additions to reserves and resources. |
|
|
On February 17, 2015, the Pueblo Viejo mine achieved certain operational and technical milestones as required
for the mines $1.035 billion loan facility to become non-recourse to Barrick and Goldcorp Inc. As a result, the sponsor guarantees previously provided by Barrick and Goldcorp Inc,. in proportion to their ownership interest in the mine, were
terminated as of February 17, 2015.
|
|
|
|
|
BARRICK YEAR-END 2014 |
|
53 |
|
MANAGEMENTS DISCUSSION AND ANALYSIS |
Lagunas Norte, Peru
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Summary of Operating Data |
|
For the years ended December 31 |
|
|
|
2014 |
|
|
2013 |
|
|
% Change |
|
|
2012 |
|
Total tonnes mined (000s) |
|
|
50,030 |
|
|
|
36,934 |
|
|
|
35% |
|
|
|
31,226 |
|
Ore tonnes processed (000s) |
|
|
22,110 |
|
|
|
21,089 |
|
|
|
5% |
|
|
|
20,533 |
|
Average grade (grams/tonne) |
|
|
0.99 |
|
|
|
1.06 |
|
|
|
(7%) |
|
|
|
1.26 |
|
Gold produced (000s/oz) |
|
|
582 |
|
|
|
606 |
|
|
|
(4%) |
|
|
|
754 |
|
Gold sold (000s/oz) |
|
|
604 |
|
|
|
591 |
|
|
|
2% |
|
|
|
734 |
|
Cost of sales ($ millions) |
|
|
$ 335 |
|
|
|
$ 281 |
|
|
|
19% |
|
|
|
$ 296 |
|
Cash costs (per oz) |
|
|
$ 379 |
|
|
|
$ 361 |
|
|
|
5% |
|
|
|
$ 318 |
|
All-in sustaining costs (per oz) |
|
|
$ 543 |
|
|
|
$ 627 |
|
|
|
(13%) |
|
|
|
$ 565 |
|
All-in costs (per oz) |
|
|
$ 543 |
|
|
|
$ 627 |
|
|
|
(13%) |
|
|
|
$ 565 |
|
Summary of Financial Data |
|
For the years ended December 31 |
|
|
|
2014 |
|
|
2013 |
|
|
% Change |
|
|
2012 |
|
Segment EBIT ($ millions) |
|
|
$ 439 |
|
|
|
$ 548 |
|
|
|
(20%) |
|
|
|
$ 929 |
|
Segment EBITDA ($ millions) |
|
|
$ 531 |
|
|
|
$ 602 |
|
|
|
(12%) |
|
|
|
$ 987 |
|
Capital expenditures ($ millions) |
|
|
$ 81 |
|
|
|
$ 139 |
|
|
|
(42%) |
|
|
|
$ 162 |
|
Minesite sustaining |
|
|
$ 81 |
|
|
|
$ 139 |
|
|
|
(42%) |
|
|
|
$ 162 |
|
Minesite expansion |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
Financial Results
Segment EBIT for 2014 decreased 20% from the prior year primarily due to a lower realized gold price combined with higher operating costs,
partially offset by an increased sales volume. In 2014, gold
production was 4% lower, compared to the prior year, primarily due to a decrease in average grade, partially offset by increased mine equipment availability resulting in increased tonnes placed on the leach pad combined with higher throughput due to
increased crusher availability. Cost of sales for 2014 was
19% higher than the prior year, primarily due to higher operating costs resulting from an increase in ore tonnes mined combined with higher depreciation expense. Cash costs were 5% higher than the prior year, primarily due to increased mining costs
resulting from an increase in ore tonnes mined. All-in sustaining costs decreased 13% from the prior year due to lower minesite sustaining capital expenditures, partially offset by the higher cash costs.
In 2014, capital expenditures decreased by 42% from the prior
year, primarily due to the significant construction progress made in 2013 on the new phase 5 leach pad, which is now operational, and the water treatment plants and tailings ponds, which are currently undergoing commissioning. |
|
|
|
|
|
|
|
BARRICK YEAR-END 2014 |
|
54 |
|
MANAGEMENTS DISCUSSION AND ANALYSIS |
Outlook
At Lagunas Norte we expect 2015 production to be in the range of 600 to 650 thousand ounces, which is higher than 2014 production levels as a
result of the availability of better recovery ore for the leach pad, increasing the tonnage placed on the leach pads and increasing the flow rate through the Merrill Crowe and CIC plants, which will allow us to convert leach pad inventory into
production.
In 2015, we expect cash costs to be in the range of $375 to $425 per ounce and all-in sustaining costs to be $675 to $725 per
ounce, which is higher than 2014 levels. The increase in all-in sustaining costs is mainly due to the construction of the Leach Pad Phase 6 Expansion and the engineering and construction of the East Waste dump expansion and ARD Treatment Plant.
|
|
|
Lagunas Norte Refractory Ore
We are currently evaluating options for mining and processing the refractory ore body below the current mine. If successful, this project has the
potential to extend the mine life by approximately eight years. The project would leverage existing on-site infrastructure, which improves the risk profile and expected return on investment from the project. If it proceeds, this project will have
the potential to unlock the value of other refractory ore deposits in the area. |
|
|
|
|
|
|
|
BARRICK YEAR-END 2014 |
|
55 |
|
MANAGEMENTS DISCUSSION AND ANALYSIS |
Veladero, Argentina
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Summary of Operating Data |
|
For the years ended December 31 |
|
|
|
2014 |
|
|
2013 |
|
|
% Change |
|
|
2012 |
|
Total tonnes mined (000s) |
|
|
67,686 |
|
|
|
78,592 |
|
|
|
(14%) |
|
|
|
83,892 |
|
Ore tonnes processed (000s) |
|
|
29,500 |
|
|
|
29,086 |
|
|
|
1% |
|
|
|
27,695 |
|
Average grade (grams/tonne) |
|
|
1.00 |
|
|
|
0.94 |
|
|
|
6% |
|
|
|
1.10 |
|
Gold produced (000s/oz) |
|
|
722 |
|
|
|
641 |
|
|
|
13% |
|
|
|
766 |
|
Gold sold (000s/oz) |
|
|
724 |
|
|
|
659 |
|
|
|
10% |
|
|
|
754 |
|
Cost of sales ($ millions) |
|
|
$ 554 |
|
|
|
$ 568 |
|
|
|
(2%) |
|
|
|
$ 586 |
|
Cash costs (per oz) |
|
|
$ 566 |
|
|
|
$ 501 |
|
|
|
13% |
|
|
|
$ 487 |
|
All-in sustaining costs (per oz) |
|
|
$ 815 |
|
|
|
$ 833 |
|
|
|
(2%) |
|
|
|
$ 761 |
|
All-in costs (per oz) |
|
|
$ 815 |
|
|
|
$ 833 |
|
|
|
(2%) |
|
|
|
$ 761 |
|
Summary of Financial Data |
|
For the years ended December 31 |
|
|
|
2014 |
|
|
2013 |
|
|
% Change |
|
|
2012 |
|
Segment EBIT ($ millions) |
|
|
$ 330 |
|
|
|
$ 354 |
|
|
|
(7%) |
|
|
|
$ 625 |
|
Segment EBITDA ($ millions) |
|
|
$ 446 |
|
|
|
$ 522 |
|
|
|
(15%) |
|
|
|
$ 819 |
|
Capital expenditures ($ millions) |
|
|
$ 173 |
|
|
|
$ 208 |
|
|
|
(17%) |
|
|
|
$ 196 |
|
Minesite sustaining |
|
|
$ 173 |
|
|
|
$ 208 |
|
|
|
(17%) |
|
|
|
$ 196 |
|
Minesite expansion |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
Financial Results
Segment EBIT for 2014 was 7% lower than the prior year, primarily due to an increase in sales volume, partially offset by the lower realized gold
price. In 2014, gold production was 13% higher compared to
the prior year, primarily due to a positive grade reconciliation from Phase 3 of the Federico pit, partially offset by lower tonnes mined due to decreased primary crusher availability resulting from increased maintenance downtime in first quarter
2014 and lower mine equipment availability. Cost of sales
for 2014 was slightly lower than the prior year, primarily due to lower depreciation expense as a result of impairment charges recorded in 2013 combined with lower operating costs due to the devaluation of the Argentine peso in 2014, partially
offset by the impact of higher sales volume. Cash costs were 13% higher than the prior year, primarily due the impact of lower silver by-product credits, partially offset by the impact of higher production levels on unit production costs. All-in
sustaining costs decreased slightly, compared to the prior year, primarily due to a reduction in capitalized stripping costs, partially offset by the higher cash costs.
In 2014, capital expenditures decreased 17% compared to the
prior year, primarily due to lower minesite sustaining capital expenditures as a result of a reduction in costs related to the leach pad expansion, as construction activities relating to both phases 4 and 5 were ongoing in the first half of 2013,
combined with lower capitalized stripping costs. This was partially offset by the commencement in third quarter 2014 of a project related to the recirculation of leach solution to achieve improved recoveries. |
|
|
|
|
|
|
|
BARRICK YEAR-END 2014 |
|
56 |
|
MANAGEMENTS DISCUSSION AND ANALYSIS |
|
|
|
Outlook
At Veladero, we expect 2015 production to be in the range of 575 to 625 thousand ounces, which is down compared to 2014 production levels as a
result of lower grade from the Federico pit. We expect cash
costs in 2015 to be in the range of $600 to $650 per ounce and all-in sustaining costs to be $990 to $1,075 per ounce, higher than 2014 levels mainly due to the decline in gold production and higher mining costs associated with lower grades and an
increase in waste material being mined in 2015. At Veladero, there are a number of initiatives under way to reduce operating costs mainly in the areas of supply chain and inventory management, maintenance practices, mining productivity and energy
costs. Operating costs at Veladero are highly sensitive to local inflation and the foreign exchange rate of the Argentine peso. We have assumed an average ARS:USD |
|
|
exchange rate of 10.2:1 for the purposes of preparing our cash cost and all-in sustaining cost guidance for 2015; however, we do expect further devaluation of the
Argentine peso over the next several years which will have a significant impact on our local labor costs and therefore our cash costs and all-in sustaining costs. |
Veladero continues to be subject to restrictions that affect the amount of leach solution. New government
regulations set a level limit for the leach solution pond, reducing storage capacity, impacting operational capacity to manage solution balance and reducing leaching kinetics, as ore has to be placed on upper levels of the leach pad to maintain pond
level. These restrictions are considered in our 2015 operating guidance.
|
|
|
|
|
BARRICK YEAR-END 2014 |
|
57 |
|
MANAGEMENTS DISCUSSION AND ANALYSIS |
Turquoise Ridge, Nevada USA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Summary of Operating Data |
|
For the years ended December 31 |
|
|
|
2014 |
|
|
2013 |
|
|
% Change |
|
|
2012 |
|
Total tonnes mined (000s) |
|
|
312 |
|
|
|
305 |
|
|
|
2% |
|
|
|
265 |
|
Ore tonnes processed (000s) |
|
|
335 |
|
|
|
340 |
|
|
|
(1%) |
|
|
|
293 |
|
Average grade (grams/tonne) |
|
|
19.62 |
|
|
|
16.29 |
|
|
|
20% |
|
|
|
16.60 |
|
Gold produced (000s/oz) |
|
|
195 |
|
|
|
167 |
|
|
|
17% |
|
|
|
144 |
|
Gold sold (000s/oz) |
|
|
200 |
|
|
|
162 |
|
|
|
23% |
|
|
|
145 |
|
Cost of sales ($ millions) |
|
|
$ 111 |
|
|
|
$ 109 |
|
|
|
2% |
|
|
|
$ 94 |
|
Cash costs (per oz) |
|
|
$ 473 |
|
|
|
$ 586 |
|
|
|
(19%) |
|
|
|
$ 547 |
|
All-in sustaining costs (per oz) |
|
|
$ 628 |
|
|
|
$ 928 |
|
|
|
(32%) |
|
|
|
$ 1,410 |
|
All-in costs (per oz) |
|
|
$ 628 |
|
|
|
$ 928 |
|
|
|
(32%) |
|
|
|
$ 1,410 |
|
Summary of Financial Data |
|
For the years ended December 31 |
|
|
|
2014 |
|
|
2013 |
|
|
% Change |
|
|
2012 |
|
Segment EBIT ($ millions) |
|
|
$ 139 |
|
|
|
$ 115 |
|
|
|
21% |
|
|
|
$ 147 |
|
Segment EBITDA ($ millions) |
|
|
$ 156 |
|
|
|
$ 129 |
|
|
|
21% |
|
|
|
$ 162 |
|
Capital expenditures ($ millions) |
|
|
$ 30 |
|
|
|
$ 55 |
|
|
|
(45%) |
|
|
|
$ 45 |
|
Minesite sustaining |
|
|
$ 30 |
|
|
|
$ 55 |
|
|
|
(45%) |
|
|
|
$ 45 |
|
Minesite expansion |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
Financial Results
Segment EBIT for 2014 increased 21% from the prior year, primarily due to an increase in sales volume, partially offset by a lower realized gold
price and higher depreciation expense. In 2014, gold
production of 195 thousand ounces was 17% higher, compared to the prior year. The increase was primarily due to increased throughput and improved ore grades.
Cost of sales for 2014 was consistent with the prior year. Cash costs were 19% lower than the prior year. The decrease was primarily due to the
impact of higher sales volume on unit production costs. All-in sustaining costs decreased by 32% compared to the prior year due to lower per ounce cash costs combined with lower minesite sustaining capital expenditures.
In 2014, capital expenditures decreased by 45% compared to the
prior year, primarily due to lower minesite sustaining capital expenditures. |
|
|
|
|
|
|
|
BARRICK YEAR-END 2014 |
|
58 |
|
MANAGEMENTS DISCUSSION AND ANALYSIS |
|
|
|
Outlook
At Turquoise Ridge we expect 2015 production to be in the range of 175 to 200 thousand ounces, which is in line with 2014 production levels.
In 2015, as we expand into the South Zone8, lower grades will be offset with higher tonnage mined and processed. We will see the benefit of this expansion into South Zone in 2016 and beyond
through increased production. We expect cash costs in 2015
to be in the range of $570 to $600 per ounce and all-in sustaining costs to be in the range of $875 to $925 per ounce. Cash costs are expected
to be higher due to the impact of higher operating costs as a result of higher tonnage mined and processed with expansion into South Zone. All-in
sustaining costs in 2015 are expected to be higher than 2014, due to higher spend on sustaining capital to support the ongoing infrastructure requirements in the North Zone as well as mobile equipment for the South Zone. |
|
|
Turquoise Ridge Second Shaft
The Turquoise Ridge mine contains 4.5 million ounces in reserves (75 percent basis) at an average grade of 16.9 grams per tonne the
highest reserve grade in the companys operating portfolio and among the highest in the entire gold industry. Turquoise Ridge has considerable untapped potential and could become a core operation for Barrick. The company is advancing a project
to develop an additional shaft, which could bring forward more than one million ounces of production, roughly doubling output to an average of 375 thousand ounces per year (75 percent basis) at all-in sustaining costs of about $625-675 per
ounce9. The prefeasibility study was completed in January 2015 and key permits are expected in the third quarter. Pending approval by the joint venture partners, construction could commence in the
fourth quarter of 2015, with initial production beginning in 2019. Preliminary estimates indicate capital expenditures of approximately $225-$245 million (75% basis) for additional underground development and shaft construction, and an attractive
payback period of roughly two and a half years using a gold price assumption of $1,300 per ounce.
Drilling at the northern extension of the
deposit confirms the ore body is larger than previously known, at higher grades. Due to the substantial thickness of the mineralization, our engineering team is also looking at the economics of introducing bulk underground mining in some parts of
the ore body. Advanced ground support technology and improved reinforcement techniques have also mitigated ground stability issues that challenged previous mining operations at the site.
8 |
Expansion into the South Zone is subject to approval by the joint venture partners. |
9 |
Annual average for the first full eight years. |
|
|
|
|
|
BARRICK YEAR-END 2014 |
|
59 |
|
MANAGEMENTS DISCUSSION AND ANALYSIS |
Porgera, Papua New Guinea
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Summary of Operating Data |
|
For the years ended December 31 |
|
|
|
2014 |
|
|
2013 |
|
|
% Change |
|
|
2012 |
|
Total tonnes mined (000s) |
|
|
15,719 |
|
|
|
18,628 |
|
|
|
(16%) |
|
|
|
21,935 |
|
Ore tonnes processed (000s) |
|
|
5,584 |
|
|
|
5,354 |
|
|
|
4% |
|
|
|
4,963 |
|
Average grade (grams/tonne) |
|
|
3.10 |
|
|
|
3.22 |
|
|
|
(4%) |
|
|
|
3.17 |
|
Gold produced (000s/oz) |
|
|
493 |
|
|
|
482 |
|
|
|
2% |
|
|
|
436 |
|
Gold sold (000s/oz) |
|
|
507 |
|
|
|
465 |
|
|
|
9% |
|
|
|
426 |
|
Cost of sales ($ millions) |
|
|
$ 545 |
|
|
|
$ 524 |
|
|
|
4% |
|
|
|
$ 484 |
|
Cash costs (per oz) |
|
|
$ 915 |
|
|
|
$ 965 |
|
|
|
(5%) |
|
|
|
$ 968 |
|
All-in sustaining costs (per oz) |
|
|
$ 996 |
|
|
|
$ 1,361 |
|
|
|
(27%) |
|
|
|
$ 1,452 |
|
All-in costs (per oz) |
|
|
$ 996 |
|
|
|
$ 1,361 |
|
|
|
(27%) |
|
|
|
$ 1,452 |
|
Summary of Financial Data |
|
For
the years ended December 31 |
|
|
|
2014 |
|
|
2013 |
|
|
% Change |
|
|
2012 |
|
Segment EBIT ($ millions) |
|
|
$ 84 |
|
|
|
$ 116 |
|
|
|
(28%) |
|
|
|
$ 223 |
|
Segment EBITDA ($ millions) |
|
|
$ 164 |
|
|
|
$ 190 |
|
|
|
(14%) |
|
|
|
$ 292 |
|
Capital expenditures ($ millions) |
|
|
$ 33 |
|
|
|
$ 171 |
|
|
|
(81%) |
|
|
|
$ 194 |
|
Minesite sustaining |
|
|
$ 33 |
|
|
|
$ 171 |
|
|
|
(81%) |
|
|
|
$ 194 |
|
Minesite expansion |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
Financial Results
Segment EBIT for 2014 was 28% lower than the prior year. The decrease was primarily due to the lower realized gold price, partially offset by an
increase in sales volume. In 2014, gold production of
493 thousand ounces was 2% higher compared to the prior year. The increase was primarily due to higher recoveries and throughput as a result of improved mill availability.
Cost of sales for 2014 of $545 million was 4% higher than the
prior year. The increase was primarily due to the increased sales volume combined with higher operating costs as a result of increased transport and maintenance costs as well as a decrease in capitalized stripping costs. Cash costs were $915 per
ounce, down $50 per ounce compared to the prior year. The decrease was primarily due to the impact of higher sales volume on unit production costs. All-in sustaining costs decreased by $365 per ounce, or 27%, compared to the prior year reflecting
the focus to significantly decrease minesite sustaining capital expenditures.
In 2014, capital expenditures decreased by $138 million, or 81%, compared to the prior year. The decrease was primarily due to a reduction in
capitalized stripping costs as a result of a change in the 2014 mine plan to reduce open pit mining activity.
In 2014, management resolved technical issues and developed an optimized mine plan to sequence the west wall cutback in an economical manner. As a
result, management was able to bring a significant portion of the ounces from the open pit back into the 2015 mine plan. The new plan resulted in an increase in the estimated mine life from 8 to 12 years, and an increase in the estimated fair value
less cost to dispose (FVLCD) of the mine, which has resulted in a partial reversal of a previous impairment loss of $160 million in fourth quarter 2014. |
|
|
|
|
|
|
|
BARRICK YEAR-END 2014 |
|
60 |
|
MANAGEMENTS DISCUSSION AND ANALYSIS |
Outlook
At Porgera we expect 2015 gold production to be in the range of 500 to 550 thousand ounces, which is slightly higher than 2014 production
levels. Porgera production is expected to be higher than 2014 mainly due to the change in the mine plan which focuses on the increasing underground mining rates and mining of higher grade open pit material. Processed tonnes are constrained due to
sulfur oxidation capacity. However the commencement of concentrate export will allow for stored concentrate to be reclaimed or optimal mill throughput to be achieved.
In 2015, we expect cash costs to be in the range of $775 to $825 per ounce which is lower than 2014 cash costs of $915, primarily due to an
increase in capitalized stripping in the open pit. All-in sustaining costs are expected to higher than 2014, mainly due to the increase in sustaining capital in line with the new mine plan.
Porgera is a well-established asset in a highly prospective region with extensive infrastructure, proven technology, and a team that is able to
operate successfully in a challenging environment. As part of Barricks global strategy we continue to focus on further decreasing Porgeras cost structure in the short term, with initiatives that could reduce our all-in sustaining costs
by approximately 50% over the next decade. In addition, we are advancing plans that could significantly increase the life of the mine. The large drivers of cost and mine life improvements we are exploring include:
|
|
|
Decreasing energy costs through a contracted build, own, operate, and
transfer model; Reducing the number of expatriate staff by training and developing local
talent; Implementing a cost optimization program focused on reducing external spending
through commercial negotiations, inventory optimization, and demand management;
Consistent positive reconciliation of actual versus mined tonnage, which adds process life
and associated underground mine life; and In the longer term, expansions from
high-potential targets in the area surrounding the mine. |
|
|
|
|
|
|
|
BARRICK YEAR-END 2014 |
|
61 |
|
MANAGEMENTS DISCUSSION AND ANALYSIS |
Kalgoorlie, Australia
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Summary of Operating Data |
|
|
|
|
|
|
|
|
|
|
For the years ended December 31 |
|
|
|
2014 |
|
|
2013 |
|
|
% Change |
|
|
2012 |
|
Total tonnes mined (000s) |
|
|
34,644 |
|
|
|
36,445 |
|
|
|
(5%) |
|
|
|
33,905 |
|
Ore tonnes processed (000s) |
|
|
5,809 |
|
|
|
5,924 |
|
|
|
(2%) |
|
|
|
5,871 |
|
Average grade (grams/tonne) |
|
|
2.01 |
|
|
|
1.97 |
|
|
|
2% |
|
|
|
2.05 |
|
Gold produced (000s/oz) |
|
|
326 |
|
|
|
315 |
|
|
|
3% |
|
|
|
327 |
|
Gold sold (000s/oz) |
|
|
330 |
|
|
|
330 |
|
|
|
- |
|
|
|
340 |
|
Cost of sales ($ millions) |
|
|
$ 309 |
|
|
|
$309 |
|
|
|
- |
|
|
|
$295 |
|
Cash costs (per oz) |
|
|
$ 817 |
|
|
|
$846 |
|
|
|
(3%) |
|
|
|
$803 |
|
All-in sustaining costs (per oz) |
|
|
$ 1,037 |
|
|
|
$1,070 |
|
|
|
(3%) |
|
|
|
$1,085 |
|
All-in costs (per oz) |
|
|
$ 1,037 |
|
|
|
$1,070 |
|
|
|
(3%) |
|
|
|
$1,085 |
|
|
|
|
|
Summary of Financial Data |
|
|
|
|
|
|
|
|
|
|
For the years ended December 31 |
|
|
|
|
2014 |
|
|
|
2013 |
|
|
|
% Change |
|
|
|
2012 |
|
Segment EBIT ($ millions) |
|
|
$ 106 |
|
|
|
$154 |
|
|
|
(31%) |
|
|
|
$266 |
|
Segment EBITDA ($ millions) |
|
|
$ 148 |
|
|
|
$182 |
|
|
|
(19%) |
|
|
|
$286 |
|
Capital expenditures ($ millions) |
|
|
$ 66 |
|
|
|
$66 |
|
|
|
- |
|
|
|
$87 |
|
Minesite sustaining |
|
|
$ 66 |
|
|
|
$66 |
|
|
|
- |
|
|
|
$87 |
|
Minesite expansion |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
Financial Results Segment EBIT
for 2014 was 31% lower than the prior year. The decrease was primarily due to lower realized gold prices and an increase in depreciation expense compared to the prior year.
In 2014, gold production was 3% higher compared to the prior
year primarily due to increased grades and improved recovery, partially offset by a decrease in ore tonnes processed.
Cost of sales for 2014 was in line with the prior year as lower operating costs, resulting from a decrease in ore tonnes mined were offset by an
increase in depreciation expense. Cash costs were 3% lower than the prior year primarily due to a decrease in mining costs resulting from a decrease in ore tonnes mined. All-in sustaining costs decreased by $33 per ounce compared to the prior year,
primarily due to the lower cash costs. In 2014, capital
expenditures were in line with the prior year as lower capitalized stripping costs at Golden Pike were offset by higher capital expenditures associated with the emissions reduction program. |
|
|
|
|
|
|
|
BARRICK YEAR-END 2014 |
|
62 |
|
MANAGEMENTS DISCUSSION AND ANALYSIS |
Outlook
At Kalgoorlie we expect 2015 production to be in the range of 315 to 330 thousand ounces, which is line with 2014 levels. Kalgoorlies
mine plan reflects a slightly lower mined grade from Golden Pike in the open pit and an associated lower feed grade and mill recovery. This is offset by higher processed tonnes due to an increase in throughput rates in the Fimiston circuit.
In 2015, we expect cash costs to be in the range of $775 to $800 per ounce and all-in sustaining
costs to be in the range of $915 to $940 per ounce, which are expected to be lower than 2014 levels mainly due to the decrease in the expected AUD/USD exchange rate and lower mining costs due to the fall in the diesel price. Mine scheduling in 2015
is expected to result in lower capitalized stripping due to lower waste movement at Golden Pike.
|
|
|
|
|
BARRICK YEAR-END 2014 |
|
63 |
|
MANAGEMENTS DISCUSSION AND ANALYSIS |
Acacia Mining plc1, Africa
100% basis
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Summary of Operating Data |
|
|
|
|
|
|
|
|
|
|
For the years ended December 31 |
|
|
|
2014 |
|
|
2013 |
|
|
% Change |
|
|
2012 |
|
Total tonnes mined (000s) |
|
|
44,847 |
|
|
|
54,100 |
|
|
|
(17%) |
|
|
|
48,303 |
|
Ore tonnes processed (000s) |
|
|
9,036 |
|
|
|
7,980 |
|
|
|
13% |
|
|
|
7,697 |
|
Average grade (grams/tonne) |
|
|
3.00 |
|
|
|
2.86 |
|
|
|
5% |
|
|
|
2.86 |
|
Gold produced (000s/oz) |
|
|
719 |
|
|
|
641 |
|
|
|
12% |
|
|
|
627 |
|
Gold sold (000s/oz) |
|
|
704 |
|
|
|
650 |
|
|
|
8% |
|
|
|
609 |
|
Cost of sales ($ millions) |
|
|
$693 |
|
|
|
$ 756 |
|
|
|
(8%) |
|
|
|
$ 794 |
|
Cash costs (per oz) |
|
|
$732 |
|
|
|
$ 812 |
|
|
|
(10%) |
|
|
|
$ 958 |
|
All-in sustaining costs (per oz) |
|
|
$ 1,105 |
|
|
|
$ 1,346 |
|
|
|
(18%) |
|
|
|
$ 1,585 |
|
All-in costs (per oz) |
|
|
$ 1,190 |
|
|
|
$ 1,519 |
|
|
|
(22%) |
|
|
|
$ 1,645 |
|
|
|
|
|
Summary of Financial Data |
|
|
|
|
|
|
|
|
|
|
For the years ended December 31 |
|
|
|
|
2014 |
|
|
|
2013 |
|
|
|
% Change |
|
|
|
2012 |
|
Segment EBIT ($ millions) |
|
|
$ 191 |
|
|
|
$ 115 |
|
|
|
66% |
|
|
|
$ 216 |
|
Segment EBITDA ($ millions) |
|
|
$ 320 |
|
|
|
$ 275 |
|
|
|
16% |
|
|
|
$ 378 |
|
Capital expenditures ($ millions) |
|
|
$ 251 |
|
|
|
$ 385 |
|
|
|
(35%) |
|
|
|
$ 323 |
|
Minesite sustaining |
|
|
$ 195 |
|
|
|
$ 272 |
|
|
|
(28%) |
|
|
|
$ 287 |
|
Minesite expansion |
|
|
$ 56 |
|
|
|
$ 113 |
|
|
|
(50%) |
|
|
|
$ 36 |
|
1 |
Formerly African Barrick Gold plc. |
Financial Results
Segment EBIT for 2014 was 66% higher than the prior year. The increase was primarily due to higher sales volumes and lower cost of sales, partially
offset by lower realized gold prices.
In 2014, gold production was 12% higher compared to the prior year. The increase was due to higher
production across all sites. In 2014, production at Buzwagi increased by 15% over the prior year, mainly due to higher ore grades as a result of mining in the main ore zone and increased recovery rates. Production at Bulyanhulu increased by 18% over
the prior year primarily due to an increase in ore grades combined with the contribution of ounces from the CIL plant that was commissioned during fourth quarter 2014. At North Mara, production increased by 7% over the prior year primarily due to
the processing of more ore tonnes as a result of improved mill efficiency.
Cost of sales for 2014 was 8% lower than the prior year. The
decrease was primarily due to lower labor cost as a result of headcount reductions and lower general and administrative costs, partially offset by increased maintenance costs due to higher mine equipment repairs. Cash costs were down 10% from the
prior year, primarily due to the reduction in costs of sales combined with the impact of higher production levels on unit production costs. All-in sustaining costs decreased by 18% over the prior year reflecting the lower per ounce cash costs, a
decrease in minesite sustaining capital expenditures across all sites and a reduction in capitalized stripping costs at North Mara and Buzwagi.
In 2014, capital expenditures
decreased by 35% from the prior year, primarily due to a reduction in minesite sustaining capital expenditures across all sites, partially offset by higher capitalized underground development costs at Bulyanhulu.
|
|
|
|
|
BARRICK YEAR-END 2014 |
|
64 |
|
MANAGEMENTS DISCUSSION AND ANALYSIS |
Outlook
We expect Acacias 2015 gold production to be in the range of 480 to 510 thousand ounces (Barricks share), which is higher than
2014 production levels. Acacias production is expected to be higher than 2014 mainly due to a significant increase at Bulyanhulu as a result of grade improvements combined with the processing of more ore tonnes and the contribution of ounces
from the CIL expansion. This will be partially offset by a decrease in production at North Mara due to the expected decline in grade as the Gokona pit transitions from an open pit to an underground operation, resulting in an increased proportion of
ore being sourced from the lower grade Nyabirama pit.
In 2015, we expect cash costs
to be in the range of $695 to $725 per ounce, which is lower than 2014 cash costs of $732 per ounce, primarily due to further cost reductions at Bulyanhulu. All-in sustaining costs are expected to be $1,050 to $1,100 per ounce, which is lower
compared to 2014 mainly due to a decrease in sustaining capital at Buzwagi.
|
|
|
|
|
BARRICK YEAR-END 2014 |
|
65 |
|
MANAGEMENTS DISCUSSION AND ANALYSIS |
Global Copper, Zambia and Chile
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Summary of Operating Data |
|
|
|
|
|
|
|
|
|
|
For the years ended December 31 |
|
|
|
2014 |
|
|
2013 |
|
|
% Change |
|
|
2012 |
|
Copper produced (millions of lbs) |
|
|
436 |
|
|
|
539 |
|
|
|
(19%) |
|
|
|
468 |
|
Copper sold (millions of lbs) |
|
|
435 |
|
|
|
519 |
|
|
|
(16%) |
|
|
|
472 |
|
Cost of sales ($ millions) |
|
|
$ 961 |
|
|
|
$ 1,114 |
|
|
|
(14%) |
|
|
|
$ 1,227 |
|
C1 cash costs (per lb) |
|
|
$ 1.92 |
|
|
|
$ 1.92 |
|
|
|
- |
|
|
|
$ 2.05 |
|
C3 fully allocated costs (per lb) |
|
|
$ 2.43 |
|
|
|
$ 2.42 |
|
|
|
- |
|
|
|
$ 2.85 |
|
|
|
|
|
Summary of Financial Data |
|
|
|
|
|
|
|
|
|
|
For the years ended December 31 |
|
|
|
|
2014 |
|
|
|
2013 |
|
|
|
% Change |
|
|
|
2012 |
|
Segment EBIT ($ millions) |
|
|
$ 233 |
|
|
|
$ 468 |
|
|
|
(50%) |
|
|
|
$ 394 |
|
Segment EBITDA ($ millions) |
|
|
$ 407 |
|
|
|
$ 656 |
|
|
|
(38%) |
|
|
|
$ 647 |
|
Capital expenditures ($ millions) |
|
|
$ 298 |
|
|
|
$ 405 |
|
|
|
(26%) |
|
|
|
$ 741 |
|
Minesite sustaining |
|
|
$ 292 |
|
|
|
$ 342 |
|
|
|
(15%) |
|
|
|
$ 555 |
|
Minesite expansion |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Project capex |
|
|
$ 6 |
|
|
|
$ 63 |
|
|
|
(90%) |
|
|
|
$ 186 |
|
Financial Results
Segment EBIT for 2014 was 50% lower than the prior year. The decrease was primarily due to a lower realized copper price combined with a decrease
in sales volume, due to a lower production in 2014.
In 2014, copper production of 436 million pounds was 19% lower compared to the prior
year. The decrease was primarily due to lower production at Zaldívar resulting from lower tonnes processed combined with a minor disruption in leaching irrigation due to piping and pump failures. The decrease in production at Lumwana was
primarily due to the shutdown of the mill and concentrate production for a significant portion of the second quarter 2014 due to the partial collapse of the terminal end of the main conveyor, combined with the adverse effect of an unusually long and
severe rainy season in Zambia during second quarter 2014. The partial collapse of the conveyor resulted in an impairment charge of $5 million and the incurring of $10 million in abnormal costs in second quarter 2014.
Cost of sales for 2014 was $961 million, a decrease of 14% compared to the prior year. The decrease was primarily due to lower sales volumes
compared to the prior year. C1 cash costs were $1.92 per pound, in line with the prior year. The impact of decreased production levels on unit production costs was more than offset by the benefit of lower direct mining costs. C3 fully allocated
costs per pound were $2.43 per pound, in line with the prior year. C3 fully allocated costs primarily reflect the effect of the above factors on C1 cash costs.
In 2014, capital expenditures
decreased by $107 million, or 26%, compared to the prior year. The decrease was primarily due to lower minesite sustaining capital expenditures at Zaldívar due to the deferral of expenditures, as well as lower project capital expenditures at
Jabal Sayid, which was put on care and maintenance in late 2013.
On December 18, 2014, the Zambian government passed changes to the
countrys mining tax regime that would replace the current corporate income tax and variable profit tax with a 20 percent royalty which took effect on January 1, 2015. The application of a 20 percent royalty rate compared to the 6 percent
royalty rate the company was paying has a significant negative impact on the expected future cash flows of our Lumwana mine and was considered an indicator of impairment. As a result, we conducted an impairment test and, as a result of the new
royalty rate, along with the decrease in our copper
|
|
|
|
|
BARRICK YEAR-END 2014 |
|
66 |
|
MANAGEMENTS DISCUSSION AND ANALYSIS |
price assumptions, recorded $930 million in impairment charges, including the full amount of
goodwill of $214 million allocated to Lumwana as a result of the change in segments (see note 19 to the consolidated financial statements).
Our Zaldívar mine experienced a significant decrease in the estimated FVLCD of the mine, primarily as a result of the decrease in fourth
quarter 2014 of our long-term copper price assumption and to a lesser extent, as a result of the final assessment of the tax rate increase in Chile. Accordingly, we recorded a goodwill impairment loss of $712 million on Zaldívar.
On April 2, 2014
Zambias energy regulator approved a 28.8% electricity price increase for mining companies. Subsequently, the bulk power supply agreement tariffs between state power company ZESCO and Copperbelt Energy Corporation were increased to 6.84 cents
per KWhr from 5.31 cents per KWhr. The Lumwana Mining Company has a long-term power supply contract with ZESCO and does not believe that the rates it pays thereunder should be affected by the announced rate increase. Lumwana and several other mining
companies in Zambia have been granted leave to challenge the rate increase in court. As noted above, we have announced our intention to suspend operations at the mine and therefore this electricity price increase will not have any immediate impact.
We will continue to progress the matter.
Outlook
Copper production is expected to be in the range of 310 to 340 million pounds, lower than 2014 production levels, due to the expected
suspension of operations at Lumwana in the first quarter of 2015, following the ratification of the new 20 percent royalty rate in Zambia. The production decrease at Lumwana is partially offset by the increased production at Zaldívar as a
result of improved stacker reliability and shovel availability as compared to 2014.
C1 cash costs are expected to be $1.75 to $2.00 per pound
compared to $1.92 per pound in 2014 and C3 fully allocated costs are expected to be in the range of $2.30 to $2.60 per pound. C1 cash costs are expected to be slightly lower in 2015 due to cost reductions and the impact of suspending Lumwana
operations.
|
|
|
|
|
BARRICK YEAR-END 2014 |
|
67 |
|
MANAGEMENTS DISCUSSION AND ANALYSIS |
FINANCIAL CONDITION REVIEW
Summary Balance Sheet and Key
Financial Ratios1
|
|
|
|
|
|
|
|
|
($ millions, except ratios and share amounts) |
|
As at December 31, 2014 |
|
|
As at December 31, 2013 |
|
Total cash and equivalents |
|
|
$2,699 |
|
|
|
$2,424 |
|
Current assets |
|
|
3,451 |
|
|
|
3,588 |
|
Non-current assets |
|
|
27,729 |
|
|
|
31,436 |
|
Total Assets |
|
|
$33,879 |
|
|
|
$37,448 |
|
Current liabilities excluding short-term debt |
|
|
$2,227 |
|
|
|
$2,626 |
|
Non-current liabilities excluding long-term debt |
|
|
5,709 |
|
|
|
5,741 |
|
Debt (current and long-term) |
|
|
13,081 |
|
|
|
13,080 |
|
Total Liabilities |
|
|
$21,017 |
|
|
|
$21,447 |
|
Total shareholders equity |
|
|
10,247 |
|
|
|
13,533 |
|
Non-controlling interests |
|
|
2,615 |
|
|
|
2,468 |
|
Total Equity |
|
|
$12,862 |
|
|
|
$16,001 |
|
Dividends |
|
|
$232 |
|
|
|
$508 |
|
Debt |
|
|
$13,081 |
|
|
|
$13,080 |
|
Total common shares outstanding (millions of
shares)2 |
|
|
1,165 |
|
|
|
1,165 |
|
|
|
|
Key Financial Ratios: |
|
|
|
|
|
|
|
|
Current ratio3 |
|
|
2.40:1 |
|
|
|
2.14:1 |
|
Debt-to-equity4 |
|
|
1.02:1 |
|
|
|
0.82:1 |
|
Debt-to-total
capitalization5 |
|
|
0.39:1 |
|
|
|
0.39:1 |
|
1 |
Figures include assets and liabilities classified as held-for-sale as at December 31, 2013. |
2 |
Total common shares outstanding do not include 5.1 million stock options.
|
3 |
Represents current assets divided by current liabilities (including short-term debt) as at
December 31, 2014 and December 31, 2013. |
4 |
Represents debt divided by total shareholders equity (including minority interest) as at December 31, 2014 and December 31, 2013.
|
5 |
Represents debt divided by capital stock and debt as at December 31, 2014 and December 31, 2013. |
Balance Sheet Review
Total assets were $33.9 billion at December 31, 2014, a decrease of $3.6 billion compared to total assets at December 31, 2013. The
decrease primarily reflects impairments against the carrying value of non-current assets of $2 billion post-tax (pre-tax $2.7 billion) and against goodwill of $1.4 billion. Our asset base is primarily comprised of non-current assets such as
property, plant and equipment and goodwill, reflecting the capital intensive nature of the mining business and our history of growing through acquisitions. Other significant assets include production inventories, indirect taxes and other government
receivables, and cash and equivalents. We typically do not carry a material accounts receivable balance, since only sales of concentrate and copper cathode have a settlement period.
Total liabilities at December 31, 2014 totaled $21 billion, consistent with total liabilities at December 31, 2013.
|
|
|
|
|
Shareholders Equity |
|
|
|
|
|
As at February 10, 2015 |
|
Number of shares |
|
Common shares |
|
|
1,164,669,708 |
|
Stock options |
|
|
5,145,638 |
|
Comprehensive Income
Comprehensive income consists of net income or loss, together with certain other economic gains and losses, which, collectively, are described as
other comprehensive income or OCI, and excluded from the income statement.
For 2014 other comprehensive income was a
loss of $149 million on an after-tax basis. The loss reflected losses of $41 million on hedge contracts designated for future periods, caused primarily by changes in currency exchange rates, copper prices, and fuel prices, reclassification
adjustments totaling $87 million for gains on hedge contracts designated for 2014 (or ineffective
|
|
|
|
|
BARRICK YEAR-END 2014 |
|
68 |
|
MANAGEMENTS DISCUSSION AND ANALYSIS |
amounts) that were transferred to earnings or PPE in conjunction with the recognition of the related hedge exposure, $18 million of gains recorded as a result in changes in the fair value of
investments held during the quarter and $42 million in losses for currency translation adjustments, partially offset by $18 million of losses transferred to earnings related to impaired investments, $29 million actuarial losses on pension liability
and $15 million gain due to tax recoveries on the overall decrease in OCI.
Included in accumulated other comprehensive income at
December 31, 2014 were unrealized pre-tax losses on currency, commodity and interest rate hedge contracts totaling $89 million. The balance primarily relates to currency hedge contracts that are designated against operating costs and capital
expenditures, primarily over the next two years, including $23 million remaining in crystallized hedge losses related to our Australian dollar contracts that were settled in the third quarter of 2012 or closed out in the second half of 2013 and $21
million in crystallized hedge gains related to our silver contracts. These hedge gains/losses are expected to be recorded in earnings at the same time the corresponding hedged operating costs/depreciation are recorded in earnings.
Financial Position and Liquidity
Our capital
structure comprises a mix of debt and shareholders equity. As at December 31, 2014, our total debt was $13.1 billion (debt net of cash and equivalents was $10.4 billion) and our debt-to-equity ratio and debt-to-total capitalization ratios
were 1.02:1 and 0.39:1, respectively. This compares to debt as at December 31, 2013 of $13.1 billion (debt net of cash and equivalents was $10.7 billion), and debt-to-equity and debt-to-total capitalization ratios of 0.82:1 and 0.39:1,
respectively. We have attributable debt of approximately $200 million maturing by the end of 2015 and less than $1 billion due by the end of 2017 (refer to note 24B to the consolidated financial statements). Our $4.0 billion revolving credit
facility (2012 Credit Facility) is fully undrawn and expires in January 2020.
1 |
Amounts exclude capital leases and include 60% of the Pueblo Viejo financing and 100% of the Acacia financing. |
Our top priority is restoring a strong balance sheet. While our level of debt needs to come down, strong liquidity means the company can tackle
its debt in a disciplined manner. Our primary source of liquidity is our operating cash flow, which is dependent on the ability of our operations to deliver projected future cash flows. Other options to enhance liquidity include drawing the $4.0
billion available under our 2012 Credit Facility (subject to compliance with covenants and the making of certain representations and warranties, this facility is available for drawdown as a source of financing), further non-core asset sales and
issuances of debt or equity securities in the public markets or to private investors, which could be undertaken for liquidity enhancement and/or in connection with establishing a strategic partnership. Many factors, including but not limited to,
general market conditions and then prevailing metals prices could impact our ability to issue securities on acceptable terms, as could our credit ratings. Moodys and S&P currently rate our long-term debt Baa2 and BBB, respectively. Changes
in our ratings could affect the trading prices of our securities and our cost of capital. If we were to borrow under our 2012 Credit Facility, the applicable interest rate on the amounts borrowed would be based, in part, on our credit ratings at the
time. The key financial covenant in the 2012 Credit Facility (undrawn as at February 18, 2015) requires Barrick to maintain a consolidated tangible net worth (CTNW) of at least $3.0 billion. Barricks CTNW was $5.7 billion as
at December 31, 2014.
|
|
|
|
|
BARRICK YEAR-END 2014 |
|
69 |
|
MANAGEMENTS DISCUSSION AND ANALYSIS |
Cash and equivalents and cash flow
Total cash and cash equivalents as at December 31, 2014 were $2.7 billion10. Our cash position consists of a mix of term deposits, treasury
bills and money market investments and is primarily denominated in US dollars.
Summary of Cash Inflow (Outflow)
|
|
|
|
|
|
|
|
|
($ millions) |
|
For the years ended
December 31 |
|
|
|
|
2014 |
|
|
|
2013 |
|
Operating inflows |
|
|
$ 2,296 |
|
|
|
$ 4,239 |
|
Investing activities |
|
|
|
|
|
|
|
|
Capital Expenditures1 |
|
|
$ (2,432) |
|
|
|
$ (5,501) |
|
Proceeds from Jabal Sayid JV agreement |
|
|
216 |
|
|
|
- |
|
Divestitures |
|
|
166 |
|
|
|
522 |
|
Other |
|
|
100 |
|
|
|
(258) |
|
Total investing outflows |
|
|
$ (1,950) |
|
|
|
$ (5,237) |
|
Financing activities |
|
|
|
|
|
|
|
|
Net change in debt |
|
|
$(47) |
|
|
|
$ (998) |
|
Dividends |
|
|
(232) |
|
|
|
(508) |
|
Proceeds from divestment of 10% of issued
ordinary share capital of Acacia |
|
|
186 |
|
|
|
- |
|
Net proceeds from equity offering |
|
|
- |
|
|
|
2,910 |
|
Other |
|
|
33 |
|
|
|
(62) |
|
Total financing (outflows) inflows |
|
|
$ (60) |
|
|
|
$ 1,342 |
|
Effect of exchange rate |
|
|
(11) |
|
|
|
(17) |
|
Increase/(decrease) in cash and equivalents |
|
|
275 |
|
|
|
327 |
|
1 |
The amounts include capitalized interest of $29 million for year ended December 31, 2014 (2013: $394 million). |
In 2014, we generated $2.3 billion in operating cash flow, compared to $4.2 billion of operating cash flow in the prior year. The decrease in
operating cash flow primarily reflects lower gross margin levels, primarily due to lower realized gold and copper prices and lower sales volumes, partially offset by a decrease in income tax payments of $594 million in 2014. The most significant
driver of the change in operating cash flow is market gold and copper prices. The ability of our operations to deliver projected future cash flows within the parameters of a reduced production profile, as well as future changes in gold and copper
market prices, either favorable or unfavorable, will continue to have a material impact on our cash flow and liquidity. The principal uses of operating cash flow are to fund our capital expenditures, interest and dividend payments.
10 |
Includes $670 million cash held at Acacia and Pueblo Viejo, which may not be readily deployed
outside of Acacia and/or Pueblo Viejo. |
Cash used in investing activities in 2014 amounted to $2 billion compared to $5.2 billion in the
prior year. The decrease of $3.3 billion from the prior year is primarily due to a decrease in capital expenditures, partially offset by the proceeds from divestitures, including $216 million in proceeds from the sale of 50% of Jabal Sayid that
occurred in 2014. In 2014, capital expenditures on a cash basis were $2.4 billion compared to $5.5 billion in the prior year. The decrease of $3.1 billion is primarily due to a decrease in project capital expenditures due to the decision made in
fourth quarter 2013 to temporarily suspend the Pascua-Lama project, and a decrease in minesite sustaining capital across most sites. The decrease in minesite expansion expenditures was primarily due to a reduction in costs at Cortez and Bulyanhulu
relating to the CIL plant which was commissioned in fourth quarter 2014.
Net financing cash outflows for 2014 amounted to $60 million,
compared to $1.3 billion of cash inflows in the prior year. The net financing cash outflows for 2014 primarily consist of $186 million in proceeds from the divestment of 10% of our share ownership in Acacia, partially offset by $232 million of
dividend payments and $188 million in debt repayments. The net financing cash inflows for 2013 primarily consist of $5.4 billion in debt proceeds and $2.9 billion from an equity offering, partially offset by debt repayments of $6.4 billion and $508
million in dividend payments.
|
|
|
|
|
BARRICK YEAR-END 2014 |
|
70 |
|
MANAGEMENTS DISCUSSION AND ANALYSIS |
Summary of Financial Instruments
As at December 31, 2014
|
|
|
|
|
|
|
|
|
|
|
Financial Instrument |
|
Principal/Notional Amount |
|
|
|
|
Associated Risks |
|
|
|
|
|
|
|
|
|
|
Interest rate |
Cash and equivalents |
|
|
|
|
$ 2,699 |
|
|
million |
|
Credit |
|
|
|
|
|
|
|
|
|
|
Credit |
Accounts receivable |
|
|
|
|
$ 418 |
|
|
million |
|
Market |
|
|
|
|
|
|
|
|
|
|
Market |
Available-for-sale securities |
|
|
|
|
$ 35 |
|
|
million |
|
Liquidity |
Accounts payable |
|
|
|
|
$ 1,653 |
|
|
million |
|
Liquidity |
Debt |
|
|
|
|
$ 13,187 |
|
|
million |
|
Interest rate |
Restricted share units |
|
|
|
|
$ 30 |
|
|
million |
|
Market |
Deferred share units |
|
|
|
|
$ 3 |
|
|
million |
|
Market |
|
|
CAD |
|
|
240 |
|
|
million |
|
Market/liquidity |
|
|
CLP |
|
|
102,000 |
|
|
million |
|
Credit |
|
|
AUD |
|
|
462 |
|
|
million |
|
Interest rate |
Derivative instruments - currency contracts |
|
ZAR |
|
|
421 |
|
|
million |
|
|
|
|
|
|
|
|
|
|
|
|
Market/liquidity |
|
|
|
|
|
|
|
|
|
|
Credit |
Derivative instruments - copper contracts |
|
|
|
|
4 |
|
|
million lbs |
|
Interest rate |
|
|
|
|
|
|
|
|
|
|
Market/liquidity |
|
|
|
|
|
|
|
|
|
|
Credit |
Derivative instruments - energy contracts |
|
Diesel |
|
|
9 |
|
|
million bbls |
|
Interest rate |
|
|
|
|
|
Derivative instruments - interest rate contracts |
|
Receive float interest rate swaps |
|
|
$ 142 |
|
|
million |
|
Market/liquidity |
Commitments and Contingencies
Litigation and Claims
We are currently subject to
various litigation proceedings as disclosed in note 35 to the consolidated financial statements, and we may be involved in disputes with other parties in the future that may result in litigation. If we are unable to resolve these disputes favorably,
it may have a material adverse impact on our financial condition, cash flow and results of operations
|
|
|
|
|
BARRICK YEAR-END 2014 |
|
71 |
|
MANAGEMENTS DISCUSSION AND ANALYSIS |
Contractual Obligations and Commitments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments due |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at December 31, 2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($ millions) |
|
|
2015 |
|
|
|
2016 |
|
|
|
2017 |
|
|
|
2018 |
|
|
|
2019 |
|
|
|
2020 and
thereafter |
|
|
|
Total |
|
Debt1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repayment of principal |
|
|
$ 262 |
|
|
|
$ 665 |
|
|
|
$ 127 |
|
|
|
$ 878 |
|
|
|
$ 877 |
|
|
|
$ 10,026 |
|
|
|
$ 12,835 |
|
Capital leases |
|
|
71 |
|
|
|
65 |
|
|
|
62 |
|
|
|
56 |
|
|
|
42 |
|
|
|
56 |
|
|
|
352 |
|
Interest |
|
|
663 |
|
|
|
654 |
|
|
|
633 |
|
|
|
624 |
|
|
|
551 |
|
|
|
6,449 |
|
|
|
9,574 |
|
Provisions for environmental rehabilitation2 |
|
|
119 |
|
|
|
118 |
|
|
|
76 |
|
|
|
80 |
|
|
|
129 |
|
|
|
2,071 |
|
|
|
2,593 |
|
Operating leases |
|
|
27 |
|
|
|
19 |
|
|
|
19 |
|
|
|
19 |
|
|
|
11 |
|
|
|
39 |
|
|
|
134 |
|
Restricted share units |
|
|
15 |
|
|
|
3 |
|
|
|
9 |
|
|
|
3 |
|
|
|
|
|
|
|
|
|
|
|
30 |
|
Pension benefits and other post-retirement benefits |
|
|
21 |
|
|
|
21 |
|
|
|
21 |
|
|
|
21 |
|
|
|
21 |
|
|
|
427 |
|
|
|
532 |
|
Derivative liabilities3 |
|
|
157 |
|
|
|
89 |
|
|
|
28 |
|
|
|
12 |
|
|
|
1 |
|
|
|
|
|
|
|
287 |
|
Purchase obligations for supplies and consumables4 |
|
|
492 |
|
|
|
271 |
|
|
|
124 |
|
|
|
74 |
|
|
|
54 |
|
|
|
139 |
|
|
|
1,154 |
|
Capital commitments5 |
|
|
133 |
|
|
|
5 |
|
|
|
5 |
|
|
|
5 |
|
|
|
4 |
|
|
|
7 |
|
|
|
159 |
|
Social development costs6 |
|
|
73 |
|
|
|
71 |
|
|
|
8 |
|
|
|
8 |
|
|
|
8 |
|
|
|
57 |
|
|
|
225 |
|
Total |
|
|
$ 2,033 |
|
|
|
$ 1,981 |
|
|
|
$ 1,112 |
|
|
|
$ 1,780 |
|
|
|
$ 1,698 |
|
|
|
$ 19,271 |
|
|
|
$ 27,875 |
|
|
1 |
Debt and Interest - Our debt obligations do not include any subjective acceleration clauses or other clauses that enable the holder of the debt to call
for early repayment, except in the event that we breach any of the terms and conditions of the debt or for other customary events of default. The debt and interest amounts include 100% of the Pueblo Viejo financing, even though our attributable
share is 60 per cent of this total, consistent with our ownership interest in the mine. We are not required to post any collateral under any debt obligations. Projected interest payments on variable rate debt were based on interest rates in
effect at December 31, 2014. Interest is calculated on our long-term debt obligations using both fixed and variable rates. |
|
2 |
Provisions for Environmental Rehabilitation - Amounts presented in the table represent the undiscounted uninflated future payments for the expected
cost of provisions for environmental rehabilitation. |
|
3 |
Derivative Liabilities - Amounts presented in the table relate to derivative contracts disclosed under note 24C to the consolidated financial
statements. Payments related to derivative contracts cannot be reasonably estimated given variable market conditions. |
|
4 |
Purchase Obligations for Supplies and Consumables - Includes commitments related to new purchase obligations to secure a supply of acid, tires and
cyanide for our production process. |
|
5 |
Capital Commitments - Purchase obligations for capital expenditures include only those items where binding commitments have been entered into.
|
|
6 |
Social Development Costs - Includes Pascua-Lamas commitment related to the potential funding of a power transmission line in Argentina of $120
million, expected to be paid over the period 2015-2016. |
INTERNAL CONTROL OVER FINANCIAL REPORTING AND
DISCLOSURE CONTROLS AND PROCEDURES
Management is responsible for establishing and maintaining adequate internal control over financial
reporting and disclosure controls and procedures. Internal control over financial reporting is a framework designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in
accordance with IFRS. The Companys internal control over financial reporting framework includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with IFRS, and that receipts and expenditures
of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Companys assets that could have a material effect on the Companys
consolidated financial statements.
Disclosure controls and procedures form a broader framework designed to ensure that other financial
information disclosed publicly fairly presents in all material respects the financial condition, results of operations and cash flows of the Company for the periods presented in this MD&A and Barricks Annual Report. The Companys
disclosure controls and procedures framework includes processes designed to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to management by others within those entities to allow
timely decisions regarding required disclosure.
|
|
|
|
|
BARRICK YEAR-END 2014 |
|
72 |
|
MANAGEMENTS DISCUSSION AND ANALYSIS |
Together, the internal control over financial reporting and disclosure controls and procedures
frameworks provide internal control over financial reporting and disclosure. Due to its inherent limitations, internal control over financial reporting and disclosure may not prevent or detect all misstatements. Further, the effectiveness of
internal control is subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with policies or procedures may change.
The management of Barrick, at the direction of our Co-Presidents and Chief Financial Officer, evaluated the effectiveness of the design and
operation of internal control over financial reporting as of the end of the period covered by this report based on the framework and criteria established in Internal Control Integrated Framework (2013) as issued by the Committee of
Sponsoring Organizations (COSO) of the Treadway Commission. Based on that evaluation, Management
concluded that the companys internal control over financial reporting was effective as of December 31, 2014.
As described on page 20 of this report, we announced a change to our organizational structure. Management will continue to monitor the
effectiveness of its internal control over financial reporting and disclosure controls and procedures under the new organizational structure and may make modifications from time to time as considered necessary.
Barricks annual management report on internal control over financial reporting and the integrated audit report of Barricks auditors
for the year ended December 31, 2014 will be included in Barricks 2014 Annual Report and its 2014 Form 40-F/Annual Information Form on file with the US Securities and Exchange Commission (SEC) and Canadian provincial
securities regulatory authorities.
|
|
|
|
|
BARRICK YEAR-END 2014 |
|
73 |
|
MANAGEMENTS DISCUSSION AND ANALYSIS |
REVIEW OF QUARTERLY RESULTS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarterly Information1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2014 |
|
|
2013 |
|
($ millions, except where indicated) |
|
Q4 |
|
|
Q3 |
|
|
Q2 |
|
|
Q1 |
|
|
Q4 |
|
|
Q3 |
|
|
Q2 |
|
|
Q1 |
|
Revenues |
|
|
$ 2,510 |
|
|
|
$ 2,598 |
|
|
|
$ 2,432 |
|
|
|
$ 2,632 |
|
|
|
$ 2,942 |
|
|
|
$ 2,985 |
|
|
|
$ 3,201 |
|
|
|
$ 3,399 |
|
Realized price per ounce gold2 |
|
|
1,204 |
|
|
|
1,285 |
|
|
|
1,289 |
|
|
|
1,285 |
|
|
|
1,272 |
|
|
|
1,323 |
|
|
|
1,411 |
|
|
|
1,629 |
|
Realized price per pound copper2 |
|
|
2.91 |
|
|
|
3.09 |
|
|
|
3.17 |
|
|
|
3.03 |
|
|
|
3.34 |
|
|
|
3.40 |
|
|
|
3.28 |
|
|
|
3.56 |
|
Cost of sales |
|
|
1,799 |
|
|
|
1,642 |
|
|
|
1,590 |
|
|
|
1,692 |
|
|
|
1,853 |
|
|
|
1,788 |
|
|
|
1,832 |
|
|
|
1,810 |
|
Net earnings (loss) |
|
|
(2,851) |
|
|
|
125 |
|
|
|
(269) |
|
|
|
88 |
|
|
|
(2,830) |
|
|
|
172 |
|
|
|
(8,555) |
|
|
|
847 |
|
Per share (dollars)2,3 |
|
|
(2.45) |
|
|
|
0.11 |
|
|
|
(0.23) |
|
|
|
0.08 |
|
|
|
(2.61) |
|
|
|
0.17 |
|
|
|
(8.55) |
|
|
|
0.85 |
|
Adjusted net earnings2 |
|
|
174 |
|
|
|
222 |
|
|
|
159 |
|
|
|
238 |
|
|
|
406 |
|
|
|
577 |
|
|
|
663 |
|
|
|
923 |
|
Per share (dollars)2,3 |
|
|
0.15 |
|
|
|
0.19 |
|
|
|
0.14 |
|
|
|
0.20 |
|
|
|
0.37 |
|
|
|
0.58 |
|
|
|
0.66 |
|
|
|
0.92 |
|
Operating cash flow |
|
|
371 |
|
|
|
852 |
|
|
|
488 |
|
|
|
585 |
|
|
|
1,016 |
|
|
|
1,231 |
|
|
|
907 |
|
|
|
1,085 |
|
Adjusted operating cash
flow2 |
|
|
$ 371 |
|
|
|
$ 852 |
|
|
|
$ 488 |
|
|
|
$ 585 |
|
|
|
$ 1,085 |
|
|
|
$ 1,300 |
|
|
|
$ 815 |
|
|
|
$ 1,158 |
|
1 |
Sum of all the quarters may not add up to the annual total due to rounding. |
2 |
Calculated using weighted average number of shares outstanding under the basic method of earnings per share. |
3 |
Realized price, adjusted net earnings, adjusted EPS and adjusted operating cash flow are non-GAAP financial performance measures with no standard
meaning under IFRS. For further information and a detailed reconciliation, please see pages 81 - 91 of this MD&A. |
Our recent financial results reflect a trend of declining spot gold prices, and as a result of an
emphasis on cost control and maximizing free cash flow, costs have also decreased. Our adjusted net earnings and adjusted operating cash flow levels have fluctuated with gold and copper realized prices and production levels each quarter. In fourth
quarter 2014, we recorded asset and goodwill impairments of $2.8 billion (net of tax effects and non-controlling interests), primarily at Lumwana, Zaldívar and Cerro Casale. The net loss in second quarter 2014 reflected asset and goodwill
impairment charges of $514 million relating to Jabal Sayid as a result of classifying the project as held for sale. In fourth quarter 2013, we recorded asset and goodwill impairment charges totaling $2.8 billion (net of tax effects and
non-controlling interests), primarily at Pascua-Lama, Porgera, Veladero and goodwill related to our Australia Pacific segment. The net loss in second quarter 2013 reflected asset and goodwill impairment charges totaling $8.7 billion (net of tax and
non-controlling interest effects), primarily at Pascua-Lama, Buzwagi, Jabal Sayid and goodwill related to our global copper, Australia Pacific and Capital Projects segments.
Fourth Quarter Results
In fourth quarter 2014,
we reported a net loss and adjusted net earnings of $2.9 billion and $174 million, respectively, compared to a net loss and adjusted net earnings of $2.8 billion and $406 million, respectively, in fourth quarter 2013. The net loss in fourth quarter
2014 reflects the recording of $2.8 billion (net of tax effects and non-controlling interests) in impairment charges similar to
impairment charges of $2.8 billion (net of tax effects and non-controlling interests) recorded in fourth quarter 2013.
The higher net loss and decrease in adjusted net earnings reflects the lower realized gold and copper prices as well as decreased gold sales
volume in fourth quarter 2014 compared to the same prior year period.
In fourth quarter 2014, gold and copper sales were 1.57 million
ounces and 139 million pounds, respectively, compared to 1.83 million ounces and 134 million pounds, respectively, in fourth quarter 2013. Revenues in fourth quarter 2014 were lower than the same prior year period reflecting lower
market prices for gold and copper and lower gold sales volumes. In fourth quarter 2014, cost of sales was $1.8 billion, a decrease of $54 million compared to the same prior year period, reflecting lower direct mining costs. Cash costs were $628 per
ounce, an increase of $55 per ounce, primarily due to lower production levels, partially offset by lower direct mining costs. C1 cash costs were $1.78 per pound for copper, a decrease of $0.03 per pound from the same prior year period due to lower
direct mining costs at Lumwana.
In fourth quarter 2013, operating cash flow was $371 million, down 63% from the same prior year period. The
decrease in operating cash flow primarily reflects lower realized gold and copper prices, partially offset by a decrease in income tax payments and a lower net loss.
|
|
|
|
|
BARRICK YEAR-END 2014 |
|
74 |
|
MANAGEMENTS DISCUSSION AND ANALYSIS |
IFRS
CRITICAL ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES
Management has discussed the development and selection of our critical accounting estimates with the
Audit Committee of the Board of Directors, and the Audit Committee has reviewed the disclosure relating to such estimates in conjunction with its review of this MD&A. The accounting policies and methods we utilize determine how we report our
financial condition and results of operations, and they may require management to make estimates or rely on assumptions about matters that are inherently uncertain. The consolidated financial statements have been prepared in accordance with
International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB) under the historical cost convention, as modified by revaluation of certain financial assets, derivative
contracts and post-retirement assets. Our significant accounting policies are disclosed in note 2 of the consolidated financial statements, including a summary of current and future changes in accounting policies.
Critical Accounting Estimates and Judgments
Certain accounting estimates have been identified as being critical to the presentation of our financial condition and results of
operations because they require us to make subjective and/or complex judgments about matters that are inherently uncertain; or there is a reasonable likelihood that materially different amounts could be reported under different conditions or using
different assumptions and estimates.
Life of mine (LOM) estimates used to measure depreciation of property, plant and equipment
We depreciate our assets over their useful life, or over the remaining life of the mine (if shorter). We use the units-of-production basis
(UOP) to depreciate the mining interest component of PP&E whereby the denominator is the expected mineral production based on our LOM plans. LOM plans are prepared based on estimates of ounces of gold/pounds of copper in proven and
probable reserves and the portion of resources considered probable of economic extraction. At the end of each fiscal year, as part of our business cycle, we update our LOM plans and prepare estimates of proven and probable gold and copper mineral
reserves as well as measured, indicated and inferred mineral resources for each mineral property. We prospectively revise calculations of depreciation based on these updated LOM plans. As at December 31, 2014, we have used a gold price of
$1,100 per ounce to calculate our gold reserves, consistent with the price used as at December 31, 2013.
Provisions for environmental rehabilitations
(PERs)
We have an obligation to reclaim our mining properties after the minerals have been mined from the site, and
have estimated the costs necessary to comply with existing reclamation standards. We recognize the fair value of a liability for a PER such as site closure and reclamation costs in the period in
which it is incurred if a reasonable estimate of fair value can be made. PER can include facility decommissioning and dismantling; removal or treatment of waste materials; site and land rehabilitation, including compliance with and monitoring of
environmental regulations; security and other site-related costs required to perform the rehabilitation work; and operation of equipment designed to reduce or eliminate environmental effects.
Provisions for the cost of each rehabilitation program are recognized at the time that an environmental disturbance occurs or a constructive
obligation is determined. When the extent of disturbance increases over the life of an operation, the provision is increased accordingly. We record a PER in our financial statements when it is incurred and capitalize this amount as an increase in
the carrying amount of the related asset. At operating mines, the increase in a PER is recorded as an adjustment to the corresponding asset carrying amount and results in a prospective increase in depreciation expense. At closed mines, any
adjustment to a PER is recognized as an expense in the consolidated statement of income.
PERs are measured at the expected value of the
future cash flows, discounted to their present value using a current, US dollar real risk-free pre-tax discount rate. The expected future cash flows exclude the effect of inflation. The unwinding of the discount, referred to as accretion expense, is
included in finance costs and results in an increase in the amount of the provision. Provisions are updated each reporting period for the effect of a change in the discount rate and foreign exchange rate when applicable, and the change in estimate
is added or deducted from the related asset and depreciated prospectively over the assets useful life. A 1% increase in the discount rate would result in a decrease of PER by $323 million and a 1% decrease in the discount rate would result in
an increase in PER by $295 million, while holding the other assumptions constant.
In the future, changes in regulations or laws or
enforcement could adversely affect our operations; and any instances of non-compliance with laws or regulations that result in fines or injunctions or delays in projects, or any unforeseen environmental contamination at, or related to, our mining
properties, could result in us suffering significant costs. We mitigate these risks through environmental and health and safety programs under which we monitor compliance with laws and
|
|
|
|
|
BARRICK YEAR-END 2014 |
|
75 |
|
MANAGEMENTS DISCUSSION AND ANALYSIS |
regulations and take steps to reduce the risk of environmental contamination occurring. We maintain insurance for some environmental risks; however, for some risks, coverage cannot be purchased
at a reasonable cost. Our coverage may not provide full recovery for all possible causes of loss. The principal factors that can cause expected cash flows to change are: the construction of new processing facilities; changes in the quantities of
material in reserves and a corresponding change in the life of mine plan; changing ore characteristics that ultimately impact the environment; changes in water quality that impact the extent of water treatment required; and changes in laws and
regulations governing the protection of the environment. In general, as the end of the mine life nears, the reliability of expected cash flows increases, but earlier in the mine life, the estimation of a PER is inherently more subjective.
Significant judgments and estimates are made when estimating the fair value of PERs. Expected cash flows relating to PERs could occur over periods of up to 40 years and the assessment of the extent of environmental remediation work is highly
subjective. Considering all of these factors that go into the determination of a PER, the fair value of PERs can materially change over time.
The amount of PERs recorded reflects the expected cost, taking into account the probability of particular scenarios. The difference between the
upper end of the range of these assumptions and the lower end of the range can be significant, and consequently changes in these assumptions could have a material effect on the fair value of PERs and future earnings in a period of change.
During the year ended December 31, 2014, our PER balance increased by $125 million primarily due to a decrease in the discount rate used to
calculate the PER ($185 million). The increase was partially offset by the divestiture of various sites that occurred in 2014 ($112 million). The offset was a corresponding increase in PP&E for our operations and a debit to other expense at our
closed sites.
|
|
|
|
|
|
|
|
|
PERs |
|
|
|
|
|
|
(in $ millions) |
|
|
|
|
|
|
As at December 31 |
|
2014 |
|
|
2013 |
|
Operating mines |
|
|
$ 1,629 |
|
|
|
$ 1,524 |
|
Closed mines and mines in closure |
|
|
734 |
|
|
|
731 |
|
Development projects |
|
|
121 |
|
|
|
104 |
|
Total |
|
|
$ 2,484 |
|
|
|
$ 2,359 |
|
Accounting for impairment of non-current assets
In accordance with our accounting policy, goodwill is tested for impairment at the beginning of the fourth quarter and also when there is an
indicator of impairment. Non-current assets are tested for impairment when events or changes in circumstances suggest that the carrying amount may not be recoverable. Refer to note 20 to the consolidated financial statements for further details
including key assumptions and sensitivities.
|
|
|
|
|
BARRICK YEAR-END 2014 |
|
76 |
|
MANAGEMENTS DISCUSSION AND ANALYSIS |
Summary of impairments
For the year ended December 31, 2014, we recorded post-tax impairment losses of $2 billion (2013: $8.7 billion) for non-current assets and
$1.4 billion (2013: $2.8 billion) for goodwill, as summarized in the table below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the years ended December 31 |
|
|
|
|
|
|
2014 |
|
|
2013 |
|
($ millions) |
|
Pre-tax (100%) |
|
|
Post-tax
(our share) |
|
|
Pre-tax (100%) |
|
|
Post-tax (our share) |
|
Goodwill |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Australia Pacific |
|
|
- |
|
|
|
- |
|
|
|
$1,200 |
|
|
|
$1,200 |
|
Copper |
|
|
- |
|
|
|
- |
|
|
|
1,033 |
|
|
|
1,033 |
|
Zaldívar |
|
|
$712 |
|
|
|
$712 |
|
|
|
- |
|
|
|
- |
|
Jabal Sayid |
|
|
316 |
|
|
|
316 |
|
|
|
- |
|
|
|
- |
|
Lumwana |
|
|
214 |
|
|
|
214 |
|
|
|
- |
|
|
|
- |
|
Bald Mountain |
|
|
131 |
|
|
|
131 |
|
|
|
- |
|
|
|
- |
|
Round Mountain |
|
|
36 |
|
|
|
36 |
|
|
|
- |
|
|
|
- |
|
Capital projects |
|
|
- |
|
|
|
- |
|
|
|
397 |
|
|
|
397 |
|
Acacia |
|
|
- |
|
|
|
- |
|
|
|
185 |
|
|
|
185 |
|
Total goodwil
limpairment charges |
|
|
$1,409 |
|
|
|
$1,409 |
|
|
|
$2,815 |
|
|
|
$2,815 |
|
Asset impairments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cerro Casale |
|
|
$1,476 |
|
|
|
$778 |
|
|
|
- |
|
|
|
- |
|
Lumwana |
|
|
720 |
|
|
|
720 |
|
|
|
- |
|
|
|
- |
|
Pascua-Lama |
|
|
382 |
|
|
|
382 |
|
|
|
$6,061 |
|
|
|
$6,007 |
|
Jabal Sayid |
|
|
198 |
|
|
|
198 |
|
|
|
860 |
|
|
|
704 |
|
Porgera |
|
|
(160) |
|
|
|
(160) |
|
|
|
746 |
|
|
|
595 |
|
Cortez |
|
|
46 |
|
|
|
29 |
|
|
|
- |
|
|
|
- |
|
Buzwagi |
|
|
- |
|
|
|
- |
|
|
|
721 |
|
|
|
439 |
|
Veladero |
|
|
- |
|
|
|
- |
|
|
|
464 |
|
|
|
300 |
|
North Mara |
|
|
- |
|
|
|
- |
|
|
|
286 |
|
|
|
125 |
|
Pierina |
|
|
- |
|
|
|
- |
|
|
|
140 |
|
|
|
98 |
|
Kalgoorlie |
|
|
9 |
|
|
|
9 |
|
|
|
- |
|
|
|
- |
|
Exploration sites |
|
|
7 |
|
|
|
7 |
|
|
|
112 |
|
|
|
94 |
|
Round Mountain |
|
|
- |
|
|
|
- |
|
|
|
78 |
|
|
|
51 |
|
Granny Smith |
|
|
- |
|
|
|
- |
|
|
|
73 |
|
|
|
73 |
|
Marigold |
|
|
- |
|
|
|
- |
|
|
|
60 |
|
|
|
39 |
|
Ruby Hill |
|
|
- |
|
|
|
- |
|
|
|
51 |
|
|
|
33 |
|
Kanowna |
|
|
- |
|
|
|
- |
|
|
|
41 |
|
|
|
41 |
|
Plutonic |
|
|
- |
|
|
|
- |
|
|
|
37 |
|
|
|
26 |
|
Darlot |
|
|
- |
|
|
|
- |
|
|
|
36 |
|
|
|
25 |
|
AFS investments |
|
|
18 |
|
|
|
18 |
|
|
|
26 |
|
|
|
23 |
|
Other1 |
|
|
1 |
|
|
|
4 |
|
|
|
80 |
|
|
|
57 |
|
Total asset
impairment charges |
|
|
$2,697 |
|
|
|
$1,985 |
|
|
|
$9,872 |
|
|
|
$8,730 |
|
Tax effects and NCI |
|
|
- |
|
|
|
712 |
|
|
|
- |
|
|
|
1,142 |
|
Total impairment
charges (100%) |
|
|
$4,106 |
|
|
|
$4,106 |
|
|
|
$12,687 |
|
|
|
$12,687 |
|
1 Includes the impairment
reversal relating to the Pueblo Viejo power assets.
Indicators of impairment
2014
In second quarter 2014, our Jabal Sayid
project in Saudi Arabia met the criteria as an asset held for sale. Accordingly, we were required to allocate goodwill from the Copper Operating Unit to Jabal Sayid and test the Jabal Sayid group of assets for impairment. We determined that the
carrying value exceeded the FVLCD, and consequently recorded $514 million in impairment charges, including the full amount of goodwill allocated on a relative fair value basis, of $316 million. In fourth quarter 2014, we closed a transaction to sell
a 50% interest of Jabal Sayid for cash proceeds of $216 million.
We reached an agreement to sell a power-related asset at our Pueblo Viejo
mine for proceeds that exceeded its carrying value. This asset had previously been impaired in fourth quarter 2012, and therefore we recognized a pre-tax impairment reversal of $9 million. This transaction closed on September 30, 2014.
In fourth quarter 2014, as described in note 19 to the consolidated financial statements, we reorganized our internal management reporting
structure. As a result, the goodwill attributable to our former North America Portfolio, Australia Pacific and Copper segments was allocated to the individual cash generating units (CGUs) within those operating segments on a relative
fair value basis. The allocation of goodwill to the carrying value of our Bald Mountain and Round Mountain CGUs resulted in their carrying values exceeding their FVLCD and, as a result, we recorded goodwill impairment losses of $131 million and $36
million, respectively.
On December 18, 2014, the Zambian government passed changes to the countrys mining tax regime that would
replace the current corporate income tax and variable profit tax with a 20 percent royalty which took effect on January 1, 2015. The application of a 20 percent royalty rate compared to the 6 percent royalty rate the company was paying has a
significant negative impact on the expected future cash flows of our Lumwana mine and was considered an indicator of impairment. As a result, we conducted an impairment test and, as a result of the new royalty rate along with the decrease in our
copper price assumptions, recorded $930 million in impairment charges, including the full amount of goodwill of $214 million allocated to Lumwana as a result of the change in segments (see note 19 to the consolidated financial statements).
Our Zaldívar mine experienced a significant decrease in the estimated FVLCD of the mine, primarily as a result of the decrease in fourth
quarter 2014 of our forecast of the long-term copper price and to a lesser extent, as a result of the final assessment of the tax rate increase in Chile.
|
|
|
|
|
BARRICK YEAR-END 2014 |
|
77 |
|
MANAGEMENTS DISCUSSION AND ANALYSIS |
Accordingly, we recorded a goodwill impairment loss of $712 million on this CGU.
In December 2014, the Chilean Supreme Court declined to consider Barricks appeal of the Environmental Court Decision on Pascua-Lama on
procedural grounds (see note 35). As a result, the Superintendencia del Medio Ambiente (SMA) will now re-evaluate the Resolution. Although we cannot reasonably predict the outcome of the resolution, this risk, in combination with the
decrease in our long-term silver price assumption in fourth quarter 2014 due to declining market prices, and the continued uncertainty about the timing, and cost and legal and permitting of the project, were deemed to be indicators of impairment. As
a result, we assessed the recoverable amount of the project and have recorded an impairment loss on Pascua-Lama of $382 million.
In November
2014, we completed a strategy optimization study for our Cerro Casale project with the goal of identifying a development model that would improve the project economics and risk by reducing the upfront capital requirements in order to generate a
higher return on our investment. The study was unable to identify an alternative that provided an overall rate of return above our hurdle rate for a project of this size and complexity. As a result, the budget for 2015 for the project has been
significantly reduced, with the 2015 budget focused on preserving the optionality of the project. We will continue activities to protect the asset and assess alternative ways to develop the project in a more economic manner; however,
managements expectation of achieving a suitable rate of return in the current metal price environment has been diminished. The foregoing developments were deemed to be indicators of impairment, and as a result, we assessed the recoverable
amount of the project and have recorded an impairment loss on the project of $778 million (Barricks share).
At our Porgera mine in
Papua New Guinea, we have revised our LOM plan to include a portion of the open pit resources that were removed from the plan in the prior year. In 2013, we did not have a feasible plan to access the open pit reserves due to technical and financial
issues with respect to the west wall of the open pit. In 2014, management resolved these technical issues and developed an optimized mine plan to sequence the west wall cutback in an economical manner. As a result, management was able to bring a
significant portion of the ounces from the open pit back into the LOM plan. The new plan resulted in an increase in the estimated mine life from 8 to 12 years, and an increase in the estimated FVLCD of the mine, which has resulted in a partial
reversal of a previous impairment loss of $160 million.
The annual update to the LOM plan at Cortez resulted in a cessation of mining in one of the open
pits at the mine. This was identified as an indicator of impairment, resulting in the impairment of assets specifically related to this pit of $29 million.
2013
The significant decrease in
our long-term gold, silver and copper price assumptions in second quarter 2013, due to declining market prices, as well as the regulatory challenges to Pascua-Lama in May 2013 and the resulting schedule delays and associated capital expenditure
increases, and a significant change to the mine plan at our Pierina mine, were all considered indicators of impairment, and, accordingly, we performed an impairment assessment for every mine site and significant advanced development project. As a
result of this assessment, we recorded non-current asset impairment losses of $6.4 billion after any related income tax effects, including a $5.1 billion impairment loss related to the carrying value of the PP&E at Pascua-Lama; $401 million
related to the Jabal Sayid project in our copper segment; $502 million related to Buzwagi and North Mara in Acacia; $219 million related to the Kanowna, Granny Smith, Plutonic and Darlot mines in our Australia Pacific Gold segment; and $98 million
related to our Pierina mine in South America.
After reflecting the above non-current asset impairment losses, we conducted goodwill
impairment tests and determined that the carrying value of our Copper, Australia Pacific Gold, Capital Projects and Acacia segments exceeded their FVLCD, and therefore we recorded a total goodwill impairment loss of $2.3 billion. The FVLCD of our
Copper segment was negatively impacted by the decrease in our long-term copper price assumption in second quarter 2013. The FVLCD of our Australia Pacific Gold segment was negatively impacted by the significant decrease in second quarter 2013 in our
long-term gold price assumption. The FVLCD of our Capital Projects segment was negatively impacted by the significant decrease in second quarter 2013 in our long-term gold and silver price assumptions, as well as the schedule delays and associated
capital expenditure increase at our Pascua-Lama project. The FVLCD of our Acacia segment was negatively impacted by significant changes in the LOM plans in second quarter 2013 for various assets in the segment, as well as the significant decrease in
our long-term gold price assumption.
In fourth quarter 2013, as described below, we identified indicators of impairment at certain of our
mines, resulting in non-current asset impairment losses totaling $2.3 billion after any related income tax effects. As a result of our fourth quarter 2013 decision to temporarily suspend construction of our Pascua-Lama Project, we
|
|
|
|
|
BARRICK YEAR-END 2014 |
|
78 |
|
MANAGEMENTS DISCUSSION AND ANALYSIS |
have recorded a further impairment loss on the project of $896 million, bringing the total
impairment loss for Pascua-Lama to $6.0 billion for the full year. At our Porgera mine in Papua New Guinea, we have changed our LOM plan to focus primarily on the higher grade underground mine. The new plan resulted in a decrease in the estimated
mine life from 13 to 9 years, and a decrease in the estimated FVLCD of the mine, which has resulted in an impairment loss of $595 million. At our Veladero mine in Argentina, the annual update to the LOM plan, which was completed in fourth quarter
2013, was significantly impacted by the lower gold price assumption as well as the effect of sustained local inflationary pressures on operating and capital costs. The new plan resulted in a reduction of reserves and LOM production as the next open
pit cutback is uneconomic at current gold prices. This resulted in a significant decrease in the estimated FVLCD of the mine, and accordingly, we recorded an impairment loss of $300 million (post-tax). The annual update to the LOM plan resulted in a
decrease in the net present value of our Jabal Sayid project, which is the basis for estimating the projects FVLCD, and was therefore considered an indicator of impairment. Jabal Sayids FVLCD was also negatively impacted by the delay in
achieving first production as a result of the High Commission For Industrial Security (HCIS) compliance requirements and ongoing discussions with the Deputy Ministry for Mineral Resources (DMMR) with respect to the transfer
of ownership of the project. As a result, we recorded an impairment loss of $303 million. The annual update to the LOM plan showed a decrease in the net present value at our Round Mountain mine, which was considered to be an indicator of impairment,
and we recorded an impairment loss of $51 million. At North Mara, several changes were made to the LOM plan, including a decision to defer Gokona Cut 3, while Acacia finalized a feasibility study into the alternative of mining out this reserve by
underground methods. This was considered an indicator of impairment for North Mara, resulting in an impairment loss of $58 million. A wall failure at our Ruby Hill mine in Nevada was also identified as an indicator of impairment, resulting in the
impairment of assets specifically related to the open pit of $33 million.
As at December 31, 2013, four of our mines, namely Plutonic,
Kanowna, Marigold and Tulawaka, met the criteria as assets held for sale. Accordingly, we were required to re-measure these CGUs to the lower of carrying value and FVLCD. Using these new re-measured values resulted in impairment losses of $12
million at Plutonic and $39 million at Marigold. Also, based on the estimated FVLCD of the expected proceeds related to the expected sale of Kanowna, we have reversed $66 million of the impairment loss recorded in second quarter 2013.
After reflecting the above non-current asset impairment losses, we conducted our annual goodwill
impairment test, prior to the reorganization of our operating segments, and determined that the carrying value of our Australia Pacific segment exceeded its FVLCD and therefore we recorded a goodwill impairment loss of $551 million bringing the
total impairment loss for Australia Pacific Gold goodwill to $1,200 million for the full year. After the reorganization of the operating segments, we did not identify any indicators of impairment.
Deferred Tax Assets and Liabilities
Measurement of
Temporary Differences
We are periodically required to estimate the tax basis of assets and liabilities. Where applicable tax laws and
regulations are either unclear or subject to varying interpretations, it is possible that changes in these estimates could occur that materially affect the amounts of deferred income tax assets and liabilities recorded in our consolidated financial
statements. Changes in deferred tax assets and liabilities generally have a direct impact on earnings in the period of changes.
Recognition of Deferred
Tax Assets
Each period, we evaluate the likelihood of whether some portion or all of each deferred tax asset will not be realized. This
evaluation is based on historic and future expected levels of taxable income, the pattern and timing of reversals of taxable temporary timing differences that give rise to deferred tax liabilities, and tax planning activities. Levels of future
taxable income are affected by, among other things, market gold prices, and production costs, quantities of proven and probable gold and copper reserves, interest rates and foreign currency exchange rates. If we determine that it is probable (a
likelihood of more than 50%) that all or some portion of a deferred tax asset will not be realized, we do not recognize it in our financial statements. Changes in recognition of deferred tax assets are recorded as a component of income tax expense
or recovery for each period. The most significant recent trend impacting expected levels of future taxable income and the amount of recognition of deferred tax assets, has been increased market gold prices. A decline in market gold prices could lead
to derecognition of deferred tax assets and a corresponding increase in income tax expense.
|
|
|
|
|
BARRICK YEAR-END 2014 |
|
79 |
|
MANAGEMENTS DISCUSSION AND ANALYSIS |
|
|
|
|
|
|
|
|
|
Deferred Tax Assets Not Recognized |
|
|
|
|
|
|
As at December 31, 2014 |
|
|
As at December 31, 2013 |
|
Australia and Papua |
|
|
|
|
|
|
|
|
New Guinea |
|
|
$ 367 |
|
|
|
$ 456 |
|
Canada |
|
|
371 |
|
|
|
139 |
|
US |
|
|
93 |
|
|
|
50 |
|
Chile |
|
|
776 |
|
|
|
471 |
|
Argentina |
|
|
823 |
|
|
|
928 |
|
Barbados |
|
|
68 |
|
|
|
71 |
|
Tanzania |
|
|
92 |
|
|
|
107 |
|
Zambia |
|
|
- |
|
|
|
43 |
|
Saudi Arabia |
|
|
67 |
|
|
|
17 |
|
|
|
|
$ 2,657 |
|
|
|
$ 2,282 |
|
Australia and Papua New Guinea: most of the unrecognized deferred tax assets relate to capital losses that can
only be utilized if capital gains are realized, as well as to tax assets in subsidiaries that do not have any present sources of gold production or taxable income. In the event that these subsidiaries have sources of taxable income in the future, we
may recognize some of the deferred tax assets.
Canada: most of the unrecognized deferred tax assets relate to tax pools which can only be
utilized by income from specific sources and to capital losses that can only be utilized if capital gains are realized in the future.
US: most of the
unrecognized deferred tax assets relate to AMT credits which are not probable to be utilized.
Chile and Argentina: most of the unrecognized
deferred tax assets relate to Pascua-Lama tax assets, that, considering the suspension of construction activities, do not have any present sources of gold production or taxable income. In the event that there will be sources of taxable income in the
future, we may recognize some or all of the deferred tax assets.
Barbados, Tanzania and Saudi Arabia: the unrecognized deferred tax assets relate to the full amount
of tax assets in subsidiaries that do not have any present, or sufficient, sources of gold production or taxable income. In the event that these subsidiaries have sources of taxable income in the future, we may recognize some or all of the deferred
tax assets.
Zambia: Legislation was enacted in December 2014 to reduce the tax rate on mining income to zero. Therefore, the gross deferred
tax asset in Zambia is recorded at Nil. There are significant tax pools available to offset future taxable income in Zambia, should the tax rate be increased in the future.
|
|
|
|
|
BARRICK YEAR-END 2014 |
|
80 |
|
MANAGEMENTS DISCUSSION AND ANALYSIS |
NON-GAAP FINANCIAL PERFORMANCE MEASURES
Adjusted Net Earnings and Adjusted Net Earnings per Share
Adjusted net earnings is a non-GAAP financial measure which excludes the following from net earnings:
|
|
Impairment charges (reversals) related to intangibles, goodwill, property, plant and equipment, and investments; |
|
|
Gains/losses and other one-time costs relating to acquisitions/dispositions; |
|
|
Foreign currency translation gains/losses; |
|
|
Significant tax adjustments not related to current period earnings; |
|
|
Costs related to restructuring/severance arrangements, care and maintenance and demobilization costs, and other expenses not related to current
operations; |
|
|
Unrealized gains/losses on non-hedge derivative instruments; and |
|
|
Change in the measurement of the PER at closed sites. |
Management uses this measure internally to evaluate our underlying operating performance for the reporting periods presented and to assist with
the planning and forecasting of future operating results. We believe that adjusted net earnings allows investors and analysts to better evaluate the results of our underlying business. Management believes that adjusted net earnings is a useful
measure of our performance because tax adjustments not related to the current period; impairment charges, gains/losses and other one-time costs relating to asset acquisitions/dispositions and business combinations; and project costs related to
restructuring/severance arrangements, project care and maintenance and demobilization costs, do not reflect the underlying operating performance of our core mining business and are not necessarily indicative of future operating results. We also
adjust for changes in PER discount rates relating to our closed sites as they are not related to our current operating sites and not
necessarily indicative of underlying results. Furthermore, foreign currency translation gains/losses and unrealized gains/losses from non-hedge derivatives are not necessarily reflective of the
underlying operating results for the reporting periods presented.
As noted, we use this measure for internal purposes. Managements
internal budgets and forecasts and public guidance do not reflect potential impairment charges, potential gains/losses on the acquisition/disposition of assets, foreign currency translation gains/losses, or unrealized gains/losses on non-hedge
derivatives. Consequently, the presentation of adjusted net earnings enables investors and analysts to better understand the underlying operating performance of our core mining business through the eyes of Management. Management periodically
evaluates the components of adjusted net earnings based on an internal assessment of performance measures that are useful for evaluating the operating performance of our business segments and a review of the non-GAAP measures used by mining industry
analysts and other mining companies.
Adjusted net earnings is intended to provide additional information only and does not have any
standardized definition under IFRS and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. The measures are not necessarily indicative of operating profit or cash flow from
operations as determined under IFRS. Other companies may calculate these measures differently. The following table reconciles these non-GAAP measures to the most directly comparable IFRS measure.
|
|
|
|
|
BARRICK YEAR-END 2014 |
|
81 |
|
MANAGEMENTS DISCUSSION AND ANALYSIS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of Net Earnings to Adjusted Net Earnings and Adjusted Net Earnings per Share1 |
|
($ millions, except per share amounts in dollars) |
|
For the years ended December 31 |
|
|
For the three months ended
December 31 |
|
|
|
2014 |
|
|
2013 |
|
|
2012 |
|
|
2014 |
|
|
2013 |
|
Net earnings (loss) attributable to equity holders of the Company |
|
|
$ (2,907) |
|
|
|
($ 10,366) |
|
|
|
($ 538) |
|
|
|
$ (2,851) |
|
|
|
($ 2,830) |
|
Impairment charges related to intangibles, goodwill, property, plant and equipment, and investments |
|
|
3,394 |
|
|
|
11,536 |
|
|
|
4,425 |
|
|
|
2,848 |
|
|
|
2,815 |
|
Acquisition/disposition (gains)/losses |
|
|
(48) |
|
|
|
442 |
|
|
|
(13) |
|
|
|
(13) |
|
|
|
(31) |
|
Foreign currency translation (gains)/losses |
|
|
169 |
|
|
|
233 |
|
|
|
125 |
|
|
|
(17) |
|
|
|
138 |
|
Tax adjustments |
|
|
(49) |
|
|
|
297 |
|
|
|
(83) |
|
|
|
63 |
|
|
|
17 |
|
Other expense adjustments2 |
|
|
97 |
|
|
|
483 |
|
|
|
75 |
|
|
|
6 |
|
|
|
296 |
|
Unrealized losses/(gains) on non-hedge derivative instruments |
|
|
137 |
|
|
|
(56) |
|
|
|
(37) |
|
|
|
138 |
|
|
|
1 |
|
Adjusted net earnings |
|
|
$ 793 |
|
|
|
$ 2,569 |
|
|
|
$ 3,954 |
|
|
|
$ 174 |
|
|
|
$ 406 |
|
Net earnings (loss) per share3 |
|
|
($2.50) |
|
|
|
($10.14) |
|
|
|
($0.54) |
|
|
|
($2.45) |
|
|
|
($2.61) |
|
Adjusted net earnings per share3 |
|
|
$0.68 |
|
|
|
$2.51 |
|
|
|
$3.95 |
|
|
|
$0.15 |
|
|
|
$0.37 |
|
1 |
Amounts presented in this table are after-tax and net of non-controlling interest. |
2 |
Other expense adjustments include $30 million of demobilization costs relating to Pascua-Lama for the year ended December 31, 2014 (2013:
$196 million). |
3 |
Calculated using weighted average number of shares outstanding under the basic method of earnings per share. |
Adjusted Operating Cash Flow and Free Cash Flow
Adjusted operating cash flow is a non-GAAP financial measure which excludes the effect of the settlement of currency contracts and the impact of
one-time costs. These costs are not reflective of the underlying capacity of our operations to generate operating cash flow and therefore this adjustment will result in a more meaningful operating cash flow measure for investors and analysts to
evaluate our performance in the period and assess our future operating cash flow-generating capability.
Management uses adjusted operating
cash flow as a measure internally to evaluate our underlying operating cash flow performance for the reporting periods presented, and to assist with the planning and forecasting of future operating cash flow.
We have adjusted our operating cash flow to remove the effect of the settlement of contingent consideration and non-recurring tax payments. This
settlement activity and non-recurring tax payments are not reflective of the underlying capacity of our operations to generate operating cash flow on a recurring basis, and therefore this adjustment will result in a more meaningful operating cash
flow measure for investors and analysts to evaluate our performance in the period and assess our future operating cash flow-generating capability.
Free cash flow is a measure which excludes our share of capital expenditures from adjusted operating
cash flow. Management believes this to be a useful indicator of our ability to operate without reliance on additional borrowing or usage of existing cash.
Adjusted operating cash flow and free cash flow are intended to provide additional information only and do not have any standardized definition
under IFRS and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. The measures are not necessarily indicative of operating profit or cash flow from operations as determined under
IFRS. Other companies may calculate these measures differently. The following table reconciles these non-GAAP measures to the most directly comparable IFRS measure.
|
|
|
|
|
BARRICK YEAR-END 2014 |
|
82 |
|
MANAGEMENTS DISCUSSION AND ANALYSIS |
Reconciliation of Operating Cash Flow to Adjusted Operating Cash Flow and Free Cash Flow
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($ millions) |
|
For the years ended December 31 |
|
|
For the three months ended
December 31 |
|
|
|
2014 |
|
|
2013 |
|
|
2012 |
|
|
2014 |
|
|
2013 |
|
Operating cash flow |
|
|
$ 2,296 |
|
|
|
$ 4,239 |
|
|
|
$ 5,983 |
|
|
|
$ 371 |
|
|
|
$ 1,016 |
|
Settlement of currency and commodity contracts |
|
|
- |
|
|
|
64 |
|
|
|
(385) |
|
|
|
- |
|
|
|
69 |
|
Settlement of contingent consideration |
|
|
- |
|
|
|
- |
|
|
|
50 |
|
|
|
- |
|
|
|
- |
|
Non-recurring tax payments |
|
|
- |
|
|
|
56 |
|
|
|
52 |
|
|
|
- |
|
|
|
- |
|
Adjusted operating cash flow |
|
|
$ 2,296 |
|
|
|
$ 4,359 |
|
|
|
$ 5,700 |
|
|
|
$ 371 |
|
|
|
$ 1,085 |
|
Capital expenditures |
|
|
(2,432) |
|
|
|
(5,501) |
|
|
|
(6,773) |
|
|
|
(547) |
|
|
|
(1,365) |
|
Free cash flow |
|
|
($ 136) |
|
|
|
($ 1,142) |
|
|
|
($ 1,073) |
|
|
|
($ 176) |
|
|
|
($ 280) |
|
Cash costs per ounce, All-in sustaining costs per ounce, All-in costs per ounce, C1 cash costs per pound and C3
fully allocated costs per pound
Beginning with our 2012 Annual Report, we adopted a non-GAAP all-in sustaining costs per
ounce measure. This was based on the expectation that the World Gold Council (WGC) (a market development organization for the gold industry comprised of and funded by 18 gold mining companies from around the world, including
Barrick) was developing a similar metric and that investors and industry analysts were interested in a measure that better represented the total recurring costs associated with producing gold. The WGC is not a regulatory organization. In June 2013,
the WGC published its definition of adjusted operating costs, all-in sustaining costs and also a definition of all-in costs. Barrick voluntarily adopted the definition of these metrics starting with our second
quarter 2013 MD&A. Starting in this MD&A, the non-GAAP adjusted operating costs was renamed cash costs. The manner in which this measure is calculated has not been changed.
The all-in sustaining costs measure is similar to our presentation in reports prior to second quarter 2013, with the exception of the
classification of sustaining capital. In our previous calculation, certain capital expenditures were presented as mine expansion projects, whereas they meet the definition of sustaining capital expenditures under the WGC definition, and therefore
these expenditures have been reclassified as sustaining capital expenditures.
Our all-in costs measure starts with all-in
sustaining costs and adds additional costs which reflect the varying costs of producing gold over the life-cycle of a mine, including: non-sustaining capital expenditures (capital expenditures at new projects and capital expenditures at
existing operations related to projects that significantly increase the net present value of the mine and are not related to current production) and other non-sustaining costs
(primarily exploration and evaluation (E&E) costs, community relations costs and general and administrative costs that are not associated with current operations). This definition
recognizes that there are different costs associated with the life-cycle of a mine, and that it is therefore appropriate to distinguish between sustaining and non-sustaining costs.
We believe that our use of all-in sustaining costs and all-in costs will assist analysts, investors and other stakeholders
of Barrick in understanding the costs associated with producing gold, understanding the economics of gold mining, assessing our operating performance and also our ability to generate free cash flow from current operations and to generate free cash
flow on an overall Company basis. Due to the capital intensive nature of the industry and the long useful lives over which these items are depreciated, there can be a significant timing difference between net earnings calculated in accordance with
IFRS and the amount of free cash flow that is being generated by a mine. In the current market environment for gold mining equities, many investors and analysts are more focused on the ability of gold mining companies to generate free cash flow from
current operations, and consequently we believe these measures are useful non-GAAP operating metrics and supplement our IFRS disclosures. These measures are not representative of all of our cash expenditures as they do not include income tax
payments, interest costs or dividend payments. These measures do not include depreciation or amortization. All-in sustaining costs and all-in costs are intended to provide additional information only and do not have
standardized definitions under IFRS and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. These measures are not
|
|
|
|
|
BARRICK YEAR-END 2014 |
|
83 |
|
MANAGEMENTS DISCUSSION AND ANALYSIS |
equivalent to net income or cash flow from operations as determined under IFRS. Although the WGC has published a standardized definition, other companies may calculate these measures differently.
In addition to presenting these metrics on a by-product basis, we have calculated these metrics on a co-product basis. Our co-product metrics
remove the impact of other metal sales that are produced as a by-product of our gold production from cost per ounce calculations, but does not reflect a reduction in costs for costs associated with other metal sales.
We believe that C1 cash costs per pound enables investors to better understand the performance of
our global copper segment in comparison to other copper producers who present results on a similar basis. C1 cash costs per pound excludes royalties and non-routine charges as they are not direct production costs. C3 fully allocated costs per pound
include C1 cash costs, depreciation, royalties, exploration and evaluation expense, administration expense and non-routine charges.
|
|
|
|
|
BARRICK YEAR-END 2014 |
|
84 |
|
MANAGEMENTS DISCUSSION AND ANALYSIS |
Reconciliation of Gold Cost of Sales to Cash costs per ounce, All-in sustaining costs per ounce
and All-in costs per ounce
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($ millions, except per ounce information in dollars) |
|
|
|
For the years ended December 31 |
|
|
For the three months ended December 31 |
|
|
|
Reference |
|
2014 |
|
|
2013 |
|
|
2012 |
|
|
2014 |
|
|
2013 |
|
Cost of sales |
|
A |
|
|
$ 5,662 |
|
|
|
$ 6,063 |
|
|
|
$ 6,078 |
|
|
|
$ 1,472 |
|
|
|
$ 1,445 |
|
Cost of sales applicable to non-controlling interests1 |
|
B |
|
|
(514) |
|
|
|
(383) |
|
|
|
(216) |
|
|
|
(132) |
|
|
|
(104) |
|
Cost of sales applicable to ore purchase arrangement |
|
C |
|
|
- |
|
|
|
(46) |
|
|
|
(161) |
|
|
|
- |
|
|
|
- |
|
Other metal sales |
|
D |
|
|
(183) |
|
|
|
(189) |
|
|
|
(141) |
|
|
|
(45) |
|
|
|
(43) |
|
Realized non-hedge gains/losses on fuel hedges |
|
E |
|
|
(8) |
|
|
|
(20) |
|
|
|
(8) |
|
|
|
4 |
|
|
|
(5) |
|
Community relations costs related to current operations |
|
F |
|
|
53 |
|
|
|
52 |
|
|
|
39 |
|
|
|
16 |
|
|
|
20 |
|
Treatment and refinement charges |
|
G |
|
|
11 |
|
|
|
6 |
|
|
|
6 |
|
|
|
3 |
|
|
|
2 |
|
Total production costs |
|
|
|
|
$ 5,021 |
|
|
|
$ 5,483 |
|
|
|
$ 5,597 |
|
|
|
$ 1,318 |
|
|
|
$ 1,315 |
|
Depreciation |
|
H |
|
|
($ 1,267) |
|
|
|
($ 1,363) |
|
|
|
($ 1,401) |
|
|
|
($ 332) |
|
|
|
($ 268) |
|
Impact of Barrick Energy |
|
I |
|
|
- |
|
|
|
(57) |
|
|
|
(90) |
|
|
|
- |
|
|
|
- |
|
Cash Costs |
|
|
|
|
$ 3,754 |
|
|
|
$ 4,063 |
|
|
|
$ 4,106 |
|
|
|
$ 986 |
|
|
|
$ 1,047 |
|
General & administrative costs |
|
J |
|
|
300 |
|
|
|
298 |
|
|
|
438 |
|
|
|
82 |
|
|
|
63 |
|
Rehabilitation - accretion and amortization (operating sites) |
|
K |
|
|
127 |
|
|
|
139 |
|
|
|
131 |
|
|
|
30 |
|
|
|
31 |
|
Mine on-site exploration and evaluation costs |
|
L |
|
|
20 |
|
|
|
61 |
|
|
|
115 |
|
|
|
6 |
|
|
|
16 |
|
Mine development expenditures2 |
|
M |
|
|
655 |
|
|
|
1,101 |
|
|
|
1,222 |
|
|
|
141 |
|
|
|
236 |
|
Sustaining capital expenditures2 |
|
M |
|
|
569 |
|
|
|
901 |
|
|
|
1,381 |
|
|
|
208 |
|
|
|
251 |
|
All-in sustaining costs |
|
|
|
|
$ 5,425 |
|
|
|
$ 6,563 |
|
|
|
$ 7,393 |
|
|
|
$ 1,453 |
|
|
|
$ 1,644 |
|
Community relations costs not related to current operations |
|
F |
|
|
35 |
|
|
|
23 |
|
|
|
26 |
|
|
|
19 |
|
|
|
12 |
|
Rehabilitation - accretion and amortization not related to current operations |
|
K |
|
|
12 |
|
|
|
10 |
|
|
|
10 |
|
|
|
3 |
|
|
|
2 |
|
Exploration and evaluation costs (non-sustaining) |
|
L |
|
|
153 |
|
|
|
117 |
|
|
|
193 |
|
|
|
45 |
|
|
|
30 |
|
Non-sustaining capital expenditures2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pascua-Lama |
|
M |
|
|
195 |
|
|
|
1,998 |
|
|
|
1,869 |
|
|
|
103 |
|
|
|
605 |
|
Pueblo Viejo |
|
M |
|
|
- |
|
|
|
29 |
|
|
|
512 |
|
|
|
- |
|
|
|
(4 |
) |
Cortez |
|
M |
|
|
19 |
|
|
|
132 |
|
|
|
27 |
|
|
|
5 |
|
|
|
9 |
|
Goldstrike thiosulfate project |
|
M |
|
|
287 |
|
|
|
223 |
|
|
|
145 |
|
|
|
65 |
|
|
|
71 |
|
Bulyanhulu CIL |
|
M |
|
|
29 |
|
|
|
83 |
|
|
|
27 |
|
|
|
4 |
|
|
|
30 |
|
Other |
|
M |
|
|
43 |
|
|
|
24 |
|
|
|
35 |
|
|
|
22 |
|
|
|
7 |
|
All-in costs |
|
|
|
|
$ 6,198 |
|
|
|
$ 9,202 |
|
|
|
$ 10,237 |
|
|
|
$ 1,719 |
|
|
|
$ 2,406 |
|
Ounces sold - consolidated basis (000s ounces) |
|
|
|
|
6,960 |
|
|
|
7,604 |
|
|
|
7,465 |
|
|
|
1,741 |
|
|
|
1,951 |
|
Ounces sold - non-controlling interest (000s ounces)1 |
|
|
|
|
(675) |
|
|
|
(430) |
|
|
|
(173) |
|
|
|
(168) |
|
|
|
(122) |
|
Ounces sold - equity basis (000s ounces) |
|
|
|
|
6,284 |
|
|
|
7,174 |
|
|
|
7,292 |
|
|
|
1,572 |
|
|
|
1,829 |
|
Total production costs per ounce3 |
|
|
|
|
$ 800 |
|
|
|
$ 764 |
|
|
|
$ 767 |
|
|
|
$ 839 |
|
|
|
$ 719 |
|
Cash costs per ounce3 |
|
|
|
|
$ 598 |
|
|
|
$ 566 |
|
|
|
$ 563 |
|
|
|
$ 628 |
|
|
|
$ 573 |
|
Cash costs per ounce (on a co-product
basis)3,4 |
|
|
|
|
$ 618 |
|
|
|
$ 589 |
|
|
|
$ 580 |
|
|
|
$ 648 |
|
|
|
$ 592 |
|
All-in sustaining costs per ounce3 |
|
|
|
|
$ 864 |
|
|
|
$ 915 |
|
|
|
$ 1,014 |
|
|
|
$ 925 |
|
|
|
$ 899 |
|
All-in sustaining costs per ounce (on a co-product basis)3,4 |
|
|
|
|
$ 884 |
|
|
|
$ 938 |
|
|
|
$ 1,031 |
|
|
|
$ 945 |
|
|
|
$ 918 |
|
All-in costs per ounce3 |
|
|
|
|
$ 986 |
|
|
|
$ 1,282 |
|
|
|
$ 1,404 |
|
|
|
$ 1,094 |
|
|
|
$ 1,317 |
|
All-in costs per ounce (on a co-product
basis)3,4 |
|
|
|
|
$ 1,006 |
|
|
|
$ 1,305 |
|
|
|
$ 1,421 |
|
|
|
$ 1,114 |
|
|
|
$ 1,336 |
|
1 |
Relates to interest in Pueblo Viejo and Acacia held by outside shareholders. |
2 |
Amounts represent our share of capital expenditures. |
3 |
Total production costs, cash costs, all-in sustaining costs, and all-in costs per ounce may not
calculate based on amounts presented in this table due to rounding. |
4 |
Amounts presented on a co-product basis remove the impact of other metal sales (net of non-controlling interest) from cost per ounce calculations that
are produced as a by-product of our gold production. |
|
|
|
|
|
BARRICK YEAR-END 2014 |
|
85 |
|
MANAGEMENTS DISCUSSION AND ANALYSIS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($ millions, except per ounce information in dollars) |
|
For the years ended December 31 |
|
|
For the three months ended December 31 |
|
|
|
|
|
|
2014 |
|
|
|
2013 |
|
|
|
2012 |
|
|
|
2014 |
|
|
|
2013 |
|
|
|
References |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A |
|
Cost of sales - gold |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales (statement of income) |
|
|
$ 6,830 |
|
|
|
$ 7,329 |
|
|
|
$ 7,332 |
|
|
|
$ 1,799 |
|
|
|
$ 1,853 |
|
|
|
Less: cost of sales - copper (Note 5) |
|
|
(954) |
|
|
|
(1,098) |
|
|
|
(1,245) |
|
|
|
(272) |
|
|
|
(265) |
|
|
|
Direct mining, royalties and community relations |
|
|
787 |
|
|
|
926 |
|
|
|
985 |
|
|
|
221 |
|
|
|
219 |
|
|
|
Depreciation |
|
|
174 |
|
|
|
188 |
|
|
|
253 |
|
|
|
53 |
|
|
|
50 |
|
|
|
Hedge gains |
|
|
(7) |
|
|
|
(16) |
|
|
|
(7) |
|
|
|
(2) |
|
|
|
(4) |
|
|
|
Add: Barrick Energy depreciation |
|
|
- |
|
|
|
43 |
|
|
|
102 |
|
|
|
- |
|
|
|
- |
|
|
|
Less: Community relations costs - gold & other non-operating |
|
|
(69) |
|
|
|
(62) |
|
|
|
64 |
|
|
|
(22) |
|
|
|
(24) |
|
|
|
Less: Cost of sales related to power sales |
|
|
(72) |
|
|
|
(15) |
|
|
|
- |
|
|
|
(17) |
|
|
|
(15) |
|
|
|
Less: Cost of sales - corporate 1 |
|
|
(73) |
|
|
|
(134) |
|
|
|
(175) |
|
|
|
(16) |
|
|
|
(104) |
|
|
|
Total Cost of Sales - Gold |
|
|
$ 5,662 |
|
|
|
6,063 |
|
|
|
$ 6,078 |
|
|
|
$ 1,472 |
|
|
|
1,445 |
|
1 2013 and 2012 figures include amounts related to Barrick
Energy that was sold in third quarter 2013.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
B |
|
Cost of sales applicable to non-controlling interests |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales applicable to Acacia (Note 5) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct mining, royalties and community relations |
|
|
$ 564 |
|
|
|
$ 596 |
|
|
|
$ 647 |
|
|
|
$ 165 |
|
|
|
$ 155 |
|
|
|
Depreciation |
|
|
129 |
|
|
|
160 |
|
|
|
162 |
|
|
|
35 |
|
|
|
29 |
|
|
|
Total related to Acacia |
|
|
$ 693 |
|
|
|
$ 756 |
|
|
|
$ 809 |
|
|
|
$ 200 |
|
|
|
$ 184 |
|
|
|
Portion attributable to non-controlling interest |
|
|
$ 222 |
|
|
|
$ 189 |
|
|
|
$ 216 |
|
|
|
$ 66 |
|
|
|
$ 42 |
|
|
|
Cost of sales applicable to Pueblo Viejo (Note 5) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct mining, royalties and community relations (excluding cost of sales related to power sales) |
|
|
$ 566 |
|
|
|
$ 420 |
|
|
|
$- |
|
|
|
$ 138 |
|
|
|
$ 143 |
|
|
|
Depreciation |
|
|
243 |
|
|
|
139 |
|
|
|
- |
|
|
|
56 |
|
|
|
44 |
|
|
|
Total related to Pueblo Viejo |
|
|
$ 809 |
|
|
|
$ 559 |
|
|
|
$- |
|
|
|
$ 194 |
|
|
|
$ 187 |
|
|
|
Portion attributable to non-controlling interest |
|
|
$ 292 |
|
|
|
$ 194 |
|
|
|
$- |
|
|
|
$ 66 |
|
|
|
$ 62 |
|
|
|
Cost of sales applicable to non-controlling interests |
|
|
$ 514 |
|
|
|
$ 383 |
|
|
|
$ 216 |
|
|
|
$ 132 |
|
|
|
$ 104 |
|
C |
Cost of sales applicable to ore purchase arrangement |
Equal to the cost of sales from ore purchase agreements that have economic characteristics similar to a toll milling arrangement,
as the cost of producing these ounces is not indicative of our normal production costs. These figures cannot be tied directly to the financial statements or notes.
By-product revenues from metals produced in conjunction with gold are deducted from the costs incurred to produce gold (note 6). By
product revenues from metals produced net of copper and non-controlling interest for the three months and year ended December 31, 2014 were $35 million and $139 million, respectively (2013: $37 million and $168 million, respectively, 2012: $130
million).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
E |
|
Realizednon-hedge gains/losses on fuel hedges |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fuel gains/(losses) (Note 24E) |
|
|
($ 181) |
|
|
|
$ 12 |
|
|
|
$ 6 |
|
|
|
($ 201) |
|
|
|
($ 6) |
|
|
|
Add/Less: Unrealized gains/(losses) |
|
|
173 |
|
|
|
(32) |
|
|
|
(14) |
|
|
|
205 |
|
|
|
1 |
|
|
|
Realized non-hedge gains/(losses) on fuel hedges |
|
|
($ 8) |
|
|
|
($ 20) |
|
|
|
($ 8) |
|
|
|
$ 4 |
|
|
|
($ 5) |
|
|
|
|
|
|
BARRICK YEAR-END 2014 |
|
86 |
|
MANAGEMENTS DISCUSSION AND ANALYSIS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($ millions, except per ounce information in dollars) |
|
For the years ended December 31 |
|
|
For the three months ended
December 31 |
|
|
|
|
|
2014 |
|
|
2013 |
|
|
2012 |
|
|
2014 |
|
|
2013 |
|
|
|
|
|
|
|
|
F |
|
Community relations costs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Community relations costs (Note 7) |
|
|
$ 76 |
|
|
|
$ 71 |
|
|
|
$ 75 |
|
|
|
$ 23 |
|
|
|
$ 28 |
|
|
|
Community relations costs relating to Pascua-Lama |
|
|
25 |
|
|
|
18 |
|
|
|
8 |
|
|
|
16 |
|
|
|
10 |
|
|
|
Less: NCI of Community relations costs |
|
|
(4) |
|
|
|
(5) |
|
|
|
(3) |
|
|
|
(2) |
|
|
|
(3) |
|
|
|
Less: Community relations costs - non-gold |
|
|
(9) |
|
|
|
(9) |
|
|
|
(15) |
|
|
|
(2) |
|
|
|
(3) |
|
|
|
Total Community relations costs - gold |
|
|
$ 88 |
|
|
|
$ 75 |
|
|
|
$ 65 |
|
|
|
$ 35 |
|
|
|
$ 32 |
|
|
|
Community relations costs related to current operations |
|
|
53 |
|
|
|
52 |
|
|
|
39 |
|
|
|
16 |
|
|
|
20 |
|
|
|
Community relations costs not related to current operations |
|
|
35 |
|
|
|
23 |
|
|
|
26 |
|
|
|
19 |
|
|
|
12 |
|
|
|
Total Community relations costs - gold |
|
|
$ 88 |
|
|
|
$ 75 |
|
|
|
$ 65 |
|
|
|
$ 35 |
|
|
|
$ 32 |
|
|
|
|
|
|
|
|
G |
|
Treatment and refinement charges |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Treatment and refinement charges, which are recorded against concentrate revenues, for the three months and year ended December 31, 2014 were $3 million and $11 million,
respectively (2013: $2 million and $6 million, respectively, 2012: $6 million). |
|
|
|
|
|
|
|
|
H |
|
Depreciation - gold |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation (Note 7) |
|
|
$ 1,648 |
|
|
|
$ 1,732 |
|
|
|
$ 1,651 |
|
|
|
$ 434 |
|
|
|
$ 442 |
|
|
|
Less: copper depreciation (Note 5) |
|
|
(174) |
|
|
|
(188) |
|
|
|
(253) |
|
|
|
(53) |
|
|
|
(50) |
|
|
|
Add: Barrick Energy depreciation |
|
|
- |
|
|
|
43 |
|
|
|
102 |
|
|
|
- |
|
|
|
- |
|
|
|
Less: NCI portion |
|
|
(135) |
|
|
|
(88) |
|
|
|
(46) |
|
|
|
(33) |
|
|
|
(17) |
|
|
|
Less: Depreciation - corporate assets |
|
|
(72) |
|
|
|
(136) |
|
|
|
(53) |
|
|
|
(16) |
|
|
|
(107) |
|
|
|
Total depreciation - gold |
|
|
$ 1,267 |
|
|
|
$ 1,363 |
|
|
|
$ 1,401 |
|
|
|
$ 332 |
|
|
|
$ 268 |
|
|
|
|
|
|
|
|
I |
|
Impact of Barrick Energy (Note 4) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue related to Barrick Energy |
|
|
$- |
|
|
|
$ 93 |
|
|
|
$ 153 |
|
|
|
$- |
|
|
|
$- |
|
|
|
Less: Cost of sales related to Barrick Energy |
|
|
- |
|
|
|
(79) |
|
|
|
(165) |
|
|
|
- |
|
|
|
- |
|
|
|
Add: Barrick Energy depreciation |
|
|
- |
|
|
|
43 |
|
|
|
102 |
|
|
|
- |
|
|
|
- |
|
|
|
Impact of Barrick Energy |
|
|
$- |
|
|
|
$ 57 |
|
|
|
$ 90 |
|
|
|
$- |
|
|
|
$- |
|
|
|
|
|
|
|
|
J |
|
General & administrative costs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total general & administrative costs (statement of income) |
|
|
$ 385 |
|
|
|
$ 390 |
|
|
|
$ 503 |
|
|
|
$ 102 |
|
|
|
$ 93 |
|
|
|
Less: non-gold and non-operating general & administrative costs |
|
|
(56) |
|
|
|
(58) |
|
|
|
(74) |
|
|
|
(15) |
|
|
|
(16) |
|
|
|
Less: NCI portion |
|
|
(15) |
|
|
|
(10) |
|
|
|
- |
|
|
|
(5) |
|
|
|
(2) |
|
|
|
Add: World Gold Council fees |
|
|
3 |
|
|
|
8 |
|
|
|
26 |
|
|
|
- |
|
|
|
2 |
|
|
|
Less: non-recurring items1 |
|
|
(17) |
|
|
|
(32) |
|
|
|
(17) |
|
|
|
- |
|
|
|
(14) |
|
|
|
Total general & administrative costs |
|
|
$ 300 |
|
|
|
$ 298 |
|
|
|
$ 438 |
|
|
|
$ 82 |
|
|
|
$ 63 |
|
1 2014 figures include amounts relating to severance costs.
K |
Rehabilitation - accretion and amortization |
Includes depreciation (note 7) on the assets related to rehabilitation provisions of our gold operations of $17million and $73
million for the three months and year ended December 31, 2014, respectively, (2013: $18 million and $88 million, respectively, 2012: $91 million) and accretion (note 13) on the rehabilitation provision of our gold operations of $16 million and
$66 million for the three months and year ended December 31, 2014, respectively (2013: $16 million and $61 million, respectively, 2012: $50 million).
|
|
|
|
|
BARRICK YEAR-END 2014 |
|
87 |
|
MANAGEMENTS DISCUSSION AND ANALYSIS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($ millions, except per ounce information in dollars) |
|
For the years ended December 31 |
|
|
For the three months ended
December 31 |
|
|
|
|
|
2014 |
|
|
2013 |
|
|
2012 |
|
|
2014 |
|
|
2013 |
|
|
|
|
|
|
|
|
L |
|
Exploration and evaluation costs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exploration and evaluation costs (note 8) |
|
|
$ 184 |
|
|
|
$ 208 |
|
|
|
$ 359 |
|
|
|
$ 54 |
|
|
|
$ 54 |
|
|
|
Less: exploration and evaluation costs - non-gold & NCI |
|
|
(11) |
|
|
|
(30) |
|
|
|
(51) |
|
|
|
(3) |
|
|
|
(8) |
|
|
|
Total exploration and evaluation costs - gold |
|
|
$ 173 |
|
|
|
$ 178 |
|
|
|
$ 308 |
|
|
|
$ 51 |
|
|
|
$ 46 |
|
|
|
Exploration & evaluation costs (sustaining) |
|
|
20 |
|
|
|
61 |
|
|
|
115 |
|
|
|
6 |
|
|
|
16 |
|
|
|
Exploration and evaluation costs (non-sustaining) |
|
|
153 |
|
|
|
117 |
|
|
|
193 |
|
|
|
45 |
|
|
|
30 |
|
|
|
Total exploration and evaluation costs - gold |
|
|
$ 173 |
|
|
|
$ 178 |
|
|
|
$ 308 |
|
|
|
$ 51 |
|
|
|
$ 46 |
|
|
|
|
|
|
|
|
M |
|
Capital expenditures |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gold segments (Note 5) |
|
|
$ 1,702 |
|
|
|
$ 2,558 |
|
|
|
$ 3,630 |
|
|
|
$ 443 |
|
|
|
$ 624 |
|
|
|
Pascua-Lama operating unit (Note 5) |
|
|
195 |
|
|
|
2,226 |
|
|
|
2,113 |
|
|
|
103 |
|
|
|
635 |
|
|
|
Other gold projects1 |
|
|
72 |
|
|
|
177 |
|
|
|
128 |
|
|
|
48 |
|
|
|
51 |
|
|
|
Capital expenditures - gold |
|
|
$ 1,969 |
|
|
|
$ 4,961 |
|
|
|
$ 5,871 |
|
|
|
$ 594 |
|
|
|
$ 1,310 |
|
|
|
Less: NCI portion |
|
|
(142) |
|
|
|
(173) |
|
|
|
(204) |
|
|
|
(38) |
|
|
|
(38) |
|
|
|
Less: capitalized interest (note 13) |
|
|
(30) |
|
|
|
(297) |
|
|
|
(567) |
|
|
|
(8) |
|
|
|
(67) |
|
|
|
Add: capitalized interest relating to copper |
|
|
- |
|
|
|
- |
|
|
|
118 |
|
|
|
- |
|
|
|
- |
|
|
|
Total capital expenditures - gold |
|
|
$ 1,797 |
|
|
|
$ 4,491 |
|
|
|
$ 5,218 |
|
|
|
$ 548 |
|
|
|
$ 1,205 |
|
|
|
Mine development expenditures |
|
|
655 |
|
|
|
1,101 |
|
|
|
1,222 |
|
|
|
141 |
|
|
|
236 |
|
|
|
Sustaining capital expenditures |
|
|
569 |
|
|
|
901 |
|
|
|
1,381 |
|
|
|
208 |
|
|
|
251 |
|
|
|
Non-sustaining capital expenditures |
|
|
573 |
|
|
|
2,489 |
|
|
|
2,615 |
|
|
|
199 |
|
|
|
718 |
|
|
|
Total capital expenditures - gold |
|
|
$ 1,797 |
|
|
|
$ 4,491 |
|
|
|
$ 5,218 |
|
|
|
$ 548 |
|
|
|
$ 1,205 |
|
1 |
2013 and 2012 figures include capital expenditures related to Barrick Energy that was sold in third quarter 2013. |
|
|
|
|
|
BARRICK YEAR-END 2014 |
|
88 |
|
MANAGEMENTS DISCUSSION AND ANALYSIS |
Reconciliation of Copper Cost of Sales to C1 cash costs per pound and C3 fully allocated costs per
pound
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($ millions, except per pound information in dollars) |
|
For the years ended December 31 |
|
|
For the three months ended
December 31 |
|
|
|
2014 |
|
|
2013 |
|
|
2012 |
|
|
2014 |
|
|
2013 |
|
Cost of sales |
|
|
$ 947 |
|
|
|
$ 1,091 |
|
|
|
$ 1,227 |
|
|
|
$ 270 |
|
|
|
$ 267 |
|
Depreciation/amortization |
|
|
(171) |
|
|
|
(184) |
|
|
|
(253) |
|
|
|
(52) |
|
|
|
(49) |
|
Treatment and refinement charges |
|
|
120 |
|
|
|
126 |
|
|
|
95 |
|
|
|
42 |
|
|
|
36 |
|
Community relations |
|
|
7 |
|
|
|
9 |
|
|
|
10 |
|
|
|
2 |
|
|
|
2 |
|
Less: royalties |
|
|
(39) |
|
|
|
(48) |
|
|
|
(34) |
|
|
|
(14) |
|
|
|
(12) |
|
Non-routine charges |
|
|
(1) |
|
|
|
5 |
|
|
|
(56) |
|
|
|
- |
|
|
|
1 |
|
Other metal sales |
|
|
(1) |
|
|
|
(1) |
|
|
|
(1) |
|
|
|
- |
|
|
|
- |
|
Other1 |
|
|
(26) |
|
|
|
- |
|
|
|
(22) |
|
|
|
- |
|
|
|
- |
|
C1 cash cost of sales |
|
|
$ 836 |
|
|
|
$ 998 |
|
|
|
$ 966 |
|
|
|
$ 248 |
|
|
|
$ 245 |
|
Depreciation/amortization |
|
|
171 |
|
|
|
184 |
|
|
|
253 |
|
|
|
52 |
|
|
|
49 |
|
Royalties |
|
|
39 |
|
|
|
48 |
|
|
|
34 |
|
|
|
14 |
|
|
|
12 |
|
Non-routine charges |
|
|
1 |
|
|
|
(5) |
|
|
|
56 |
|
|
|
- |
|
|
|
(1) |
|
Administration costs |
|
|
16 |
|
|
|
16 |
|
|
|
9 |
|
|
|
4 |
|
|
|
3 |
|
Other expense (income) |
|
|
(5) |
|
|
|
17 |
|
|
|
27 |
|
|
|
(2) |
|
|
|
3 |
|
C3 fully allocated cost of sales |
|
|
$ 1,058 |
|
|
|
$ 1,258 |
|
|
|
$ 1,345 |
|
|
|
$ 316 |
|
|
|
$ 311 |
|
Pounds sold - consolidated basis (millions pounds) |
|
|
435 |
|
|
|
519 |
|
|
|
472 |
|
|
|
139 |
|
|
|
134 |
|
C1 cash cost per pound2 |
|
|
$ 1.92 |
|
|
|
$ 1.92 |
|
|
|
$ 2.05 |
|
|
|
$ 1.78 |
|
|
|
$ 1.81 |
|
C3 fully allocated cost per
pound2 |
|
|
$ 2.43 |
|
|
|
$ 2.42 |
|
|
|
$ 2.85 |
|
|
|
$ 2.27 |
|
|
|
$ 2.33 |
|
1 |
Includes $17 million related to copper cathode purchases and $10 million of abnormal costs related to the conveyor collapse at Lumwana, as these costs
are not indicative of our normal production costs. |
2 |
C1 cash costs per pound and C3 fully allocated costs may not calculate based on amounts presented in this table due to rounding. |
|
|
|
|
|
BARRICK YEAR-END 2014 |
|
89 |
|
MANAGEMENTS DISCUSSION AND ANALYSIS |
EBITDA and Adjusted EBITDA
EBITDA is a non-GAAP financial measure, which excludes the following from net earnings:
Management
believes that EBITDA is a valuable indicator of our ability to generate liquidity by producing operating cash flow to: fund working capital needs, service debt obligations, and fund capital expenditures. Management uses EBITDA for this purpose.
EBITDA is also frequently used by investors and analysts for valuation purposes whereby EBITDA is multiplied by a factor or EBITDA multiple that is based on an observed or inferred relationship between EBITDA and market values to
determine the approximate total enterprise value of a company.
Adjusted EBITDA removes the effect of impairment charges. These
charges are not reflective of our ability to generate liquidity by producing operating cash flow
and therefore this adjustment will result in a more meaningful valuation measure for investors and analysts to evaluate our performance in the period and assess our future ability to generate
liquidity.
EBITDA and adjusted EBITDA are intended to provide additional information to investors and analysts and do not have any
standardized definition under IFRS and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. EBITDA and adjusted EBITDA exclude the impact of cash costs of financing activities and
taxes, and the effects of changes in operating working capital balances, and therefore is not necessarily indicative of operating profit or cash flow from operations as determined under IFRS. Other companies may calculate EBITDA and adjusted EBITDA
differently.
The following table provides a reconciliation of EBITDA and adjusted EBITDA to net earnings
EBITDA and Adjusted EBITDA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($ millions, except per share amounts in dollars) |
|
For the years ended December 31 |
|
|
For the three months ended December 31 |
|
|
|
2014 |
|
|
2013 |
|
|
2012 |
|
|
2014 |
|
|
2013 |
|
Net earnings (loss) |
|
|
$ (2,959) |
|
|
|
$ (10,603) |
|
|
|
$ (549) |
|
|
|
$ (3,040) |
|
|
|
$ (2,772) |
|
Income tax expense |
|
|
306 |
|
|
|
630 |
|
|
|
(164) |
|
|
|
(381) |
|
|
|
(338) |
|
Finance costs |
|
|
721 |
|
|
|
589 |
|
|
|
121 |
|
|
|
180 |
|
|
|
248 |
|
Finance income |
|
|
(11) |
|
|
|
(9) |
|
|
|
(11) |
|
|
|
(2) |
|
|
|
(2) |
|
Depreciation |
|
|
1,648 |
|
|
|
1,732 |
|
|
|
1,753 |
|
|
|
434 |
|
|
|
442 |
|
EBITDA |
|
|
($ 295) |
|
|
|
($ 7,661) |
|
|
|
$ 1,150 |
|
|
|
$ (2,809) |
|
|
|
($ 2,422) |
|
Impairment charges |
|
|
$ 4,106 |
|
|
|
$ 12,687 |
|
|
|
$ 6,502 |
|
|
|
$ 3,564 |
|
|
|
3,342 |
|
Adjusted EBITDA |
|
|
$ 3,811 |
|
|
|
$ 5,026 |
|
|
|
$ 7,652 |
|
|
|
$ 755 |
|
|
|
$ 920 |
|
Reported as: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cortez |
|
|
$ 648 |
|
|
|
$ 1,610 |
|
|
|
$ 1,887 |
|
|
|
$ 96 |
|
|
|
$ 290 |
|
Goldstrike |
|
|
628 |
|
|
|
693 |
|
|
|
1,340 |
|
|
|
114 |
|
|
|
198 |
|
Pueblo Viejo |
|
|
912 |
|
|
|
569 |
|
|
|
- |
|
|
|
197 |
|
|
|
166 |
|
Lagunas Norte |
|
|
531 |
|
|
|
602 |
|
|
|
987 |
|
|
|
152 |
|
|
|
151 |
|
Veladero |
|
|
446 |
|
|
|
522 |
|
|
|
819 |
|
|
|
121 |
|
|
|
92 |
|
Turquoise Ridge |
|
|
156 |
|
|
|
129 |
|
|
|
162 |
|
|
|
31 |
|
|
|
41 |
|
Porgera |
|
|
164 |
|
|
|
190 |
|
|
|
292 |
|
|
|
32 |
|
|
|
29 |
|
Kalgoorlie |
|
|
148 |
|
|
|
182 |
|
|
|
286 |
|
|
|
35 |
|
|
|
52 |
|
Acacia |
|
|
320 |
|
|
|
275 |
|
|
|
378 |
|
|
|
72 |
|
|
|
37 |
|
Copper |
|
|
407 |
|
|
|
656 |
|
|
|
647 |
|
|
|
139 |
|
|
|
180 |
|
Other |
|
|
(549) |
|
|
|
(402) |
|
|
|
854 |
|
|
|
(234) |
|
|
|
(316) |
|
Impairment charges |
|
|
(4,106) |
|
|
|
(12,687) |
|
|
|
(6,502) |
|
|
|
(3,564) |
|
|
|
(3,342) |
|
EBITDA |
|
|
($ 295) |
|
|
|
($ 7,661) |
|
|
|
$ 1,150 |
|
|
|
($ 2,809) |
|
|
|
($ 2,422) |
|
Impairment charges |
|
|
$ 4,106 |
|
|
|
$ 12,687 |
|
|
|
$ 6,502 |
|
|
|
$ 3,564 |
|
|
|
$ 3,342 |
|
Adjusted EBITDA |
|
|
$ 3,811 |
|
|
|
$ 5,026 |
|
|
|
$ 7,652 |
|
|
|
$ 755 |
|
|
|
$ 920 |
|
|
|
|
|
|
BARRICK YEAR-END 2014 |
|
90 |
|
MANAGEMENTS DISCUSSION AND ANALYSIS |
Realized Prices
Realized price is a non-GAAP financial measure which excludes from sales:
|
|
Unrealized gains and losses on non-hedge derivative contracts; |
|
|
Unrealized mark-to-market gains and losses on provisional pricing from copper and gold sales contracts; |
|
|
Sales attributable to ore purchase arrangements; and |
This
measure is intended to enable management to better understand the price realized in each reporting period for gold and copper sales because unrealized mark-to-market value of non-hedge gold and copper derivatives are subject to change each period
due to changes in market factors such as market and forward gold and copper prices so that prices ultimately realized may differ from those recorded. The exclusion of such unrealized mark-to-market gains and losses from the presentation of this
performance measure enables investors to understand performance based on the realized proceeds of selling gold and copper production.
The
gains and losses on non-hedge derivatives and receivable balances relate to instruments/balances that mature in future periods, at which time the gains and
losses will become realized. The amounts of these gains and losses reflect fair values based on market valuation assumptions at the end of each period and do not necessarily represent the amounts
that will become realized on maturity. We also exclude export duties that are paid upon sale and netted against revenues. We believe this provides investors and analysts with a more accurate measure with which to compare to market gold prices and to
assess our gold sales performance. For those reasons, management believes that this measure provides a more accurate reflection of our past performance and is a better indicator of its expected performance in future periods.
The realized price measure is intended to provide additional information, and does not have any standardized definition under IFRS and should not
be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. The measure is not necessarily indicative of sales as determined under IFRS. Other companies may calculate this measure differently. The
following table reconciles realized prices to the most directly comparable IFRS measure.
Reconciliation of Sales to
Realized Price per ounce/pound
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the years ended December 31 |
|
($ millions, except per ounce/pound information in dollars) |
|
Gold |
|
|
|
|
Copper |
|
|
|
2014 |
|
|
2013 |
|
|
2012 |
|
|
|
|
2014 |
|
|
2013 |
|
|
2012 |
|
Sales |
|
|
$ 8,744 |
|
|
|
$ 10,670 |
|
|
|
$ 12,564 |
|
|
|
|
|
$ 1,224 |
|
|
|
$ 1,651 |
|
|
|
$ 1,689 |
|
Sales applicable to non-controlling interests |
|
|
(851) |
|
|
|
(589) |
|
|
|
(288) |
|
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Sales attributable to ore purchase agreement |
|
|
- |
|
|
|
(46) |
|
|
|
(174) |
|
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Realized non-hedge gold/copper derivative (losses) gains |
|
|
1 |
|
|
|
1 |
|
|
|
- |
|
|
|
|
|
(11) |
|
|
|
(22) |
|
|
|
(76) |
|
Treatment and refinement charges |
|
|
11 |
|
|
|
6 |
|
|
|
6 |
|
|
|
|
|
120 |
|
|
|
126 |
|
|
|
95 |
|
Export duties |
|
|
48 |
|
|
|
51 |
|
|
|
65 |
|
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Other1 |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
- |
|
|
|
- |
|
|
|
(22) |
|
Revenues as adjusted |
|
|
$ 7,953 |
|
|
|
$ 10,093 |
|
|
|
$ 12,173 |
|
|
|
|
|
$ 1,333 |
|
|
|
$ 1,755 |
|
|
|
$ 1,686 |
|
Ounces/pounds sold (000s ounces/millions pounds) |
|
|
6,284 |
|
|
|
7,174 |
|
|
|
7,292 |
|
|
|
|
|
435 |
|
|
|
519 |
|
|
|
472 |
|
Realized gold/copper price per ounce/pound2 |
|
|
$ 1,265 |
|
|
|
$ 1,407 |
|
|
|
$ 1,669 |
|
|
|
|
|
$ 3.03 |
|
|
|
$ 3.39 |
|
|
|
$ 3.57 |
|
1 |
Revenue related to copper cathode purchases made in second quarter 2014. |
2 |
Realized price per ounce/pound may not calculate based on amounts presented in this table due to rounding. |
|
|
|
|
|
BARRICK YEAR-END 2014 |
|
91 |
|
MANAGEMENTS DISCUSSION AND ANALYSIS |
GLOSSARY OF TECHNICAL TERMS
AUTOCLAVE: Oxidation process in which high temperatures and pressures are applied to convert refractory sulfide mineralization into
amenable oxide ore.
BY-PRODUCT: A secondary metal or mineral product recovered in the milling process such as silver.
CONCENTRATE: A very fine, powder-like product containing the valuable ore mineral from which most of the waste mineral has been eliminated.
CONTAINED OUNCES: Represents ounces in the ground before reduction of ounces not able to be recovered by the applicable metallurgical
process.
DEVELOPMENT: Work carried out for the purpose of opening up a mineral deposit. In an underground mine this includes shaft
sinking, crosscutting, drifting and raising. In an open pit mine, development includes the removal of overburden.
DILUTION: The effect
of waste or low-grade ore which is unavoidably included in the mined ore, lowering the recovered grade.
DORÉ: Unrefined gold
and silver bullion bars usually consisting of approximately 90 percent precious metals that will be further refined to almost pure metal.
DRILLING:
Core: drilling
with a hollow bit with a diamond cutting rim to produce a cylindrical core that is used for geological study and assays. Used in mineral exploration.
In-fill: any method of drilling intervals between existing holes, used to provide greater geological detail and to help establish reserve
estimates.
EXPLORATION: Prospecting, sampling, mapping, diamond-drilling and other work involved in searching for ore.
GRADE: The amount of metal in each tonne of ore, expressed as troy ounces per ton or grams per tonne for precious metals and as a
percentage for most other metals.
Cut-off grade: the minimum metal grade at which an ore body can be economically mined (used in the
calculation of ore reserves).
Mill-head grade: metal content of mined ore going into a mill for processing.
Recovered grade: actual metal content of ore determined after processing.
Reserve grade: estimated metal content of an ore body, based on reserve calculations.
HEAP LEACHING: A process whereby gold/copper is extracted by heaping broken ore on sloping impermeable pads and continually
applying to the heaps a weak cyanide solution/sulfuric acid which dissolves the contained gold/copper. The gold/copper-laden solution is then collected for gold/copper recovery.
HEAP LEACH PAD: A
large impermeable foundation or pad used as a base for ore during heap leaching.
MILL: A processing facility where ore is finely
ground and thereafter undergoes physical or chemical treatment to extract the valuable metals.
MINERAL RESERVE: See pages 93 to 98
Summary Gold/ Copper Mineral Reserves and Mineral Resources.
MINERAL RESOURCE: See pages 93 to 98 Summary Gold/Copper
Mineral Reserves and Mineral Resources.
MINING RATE: Tonnes of ore mined per day or even specified time period.
OPEN PIT: A mine where the minerals are mined entirely from the surface.
ORE: Rock, generally containing metallic or nonmetallic minerals, which can be mined and processed at a profit.
ORE BODY: A sufficiently large amount of ore that can be mined economically.
OUNCES: Troy ounces of a fineness of 999.9 parts per 1,000 parts.
RECLAMATION: The process by which lands disturbed as a result of mining activity are modified to support beneficial land use. Reclamation
activity may include the removal of buildings, equipment, machinery and other physical remnants of mining, closure of tailings storage facilities, leach pads and other mine features, and contouring, covering and revegetation of waste rock and
other disturbed areas.
RECOVERY RATE: A term used in process metallurgy to indicate the proportion of valuable material physically
recovered in the processing of ore. It is generally stated as a percentage of the material recovered compared to the total material originally present.
REFINING: The final stage of metal production in which impurities are removed from the molten metal.
STRIPPING: Removal of overburden or waste rock overlying an ore body in preparation for mining by open pit methods. Expressed as the total
number of tonnes mined or to be mined for each ounce of gold or pound of copper.
TAILINGS: The material that remains after all
economically and technically recoverable precious metals have been removed from the ore during processing.
|
|
|
|
|
BARRICK YEAR-END 2014 |
|
92 |
|
MANAGEMENTS DISCUSSION AND ANALYSIS |
GOLD MINERAL RESERVES (1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at December 31, 2014 |
|
PROVEN |
|
|
PROBABLE |
|
|
TOTAL |
|
|
|
|
|
|
|
|
|
|
|
Based on attributable ounces |
|
Tonnes (000s) |
|
|
Grade (gm/t) |
|
|
Contained ozs
(000s) |
|
|
Tonnes
(000s) |
|
|
Grade
(gm/t) |
|
|
Contained ozs
(000s) |
|
|
Tonnes
(000s) |
|
|
Grade
(gm/t) |
|
|
Contained ozs
(000s) |
|
|
|
|
|
|
|
|
|
|
|
NORTH AMERICA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goldstrike Open Pit |
|
|
56,802 |
|
|
|
3.01 |
|
|
|
5,504 |
|
|
|
17,390 |
|
|
|
3.97 |
|
|
|
2,220 |
|
|
|
74,192 |
|
|
|
3.24 |
|
|
|
7,724 |
|
Goldstrike Underground |
|
|
4,156 |
|
|
|
9.85 |
|
|
|
1,316 |
|
|
|
2,505 |
|
|
|
7.13 |
|
|
|
574 |
|
|
|
6,661 |
|
|
|
8.83 |
|
|
|
1,890 |
|
Goldstrike Property Total |
|
|
60,958 |
|
|
|
3.48 |
|
|
|
6,820 |
|
|
|
19,895 |
|
|
|
4.37 |
|
|
|
2,794 |
|
|
|
80,853 |
|
|
|
3.70 |
|
|
|
9,614 |
|
Pueblo Viejo (60.00%) |
|
|
27,235 |
|
|
|
3.17 |
|
|
|
2,780 |
|
|
|
60,287 |
|
|
|
3.37 |
|
|
|
6,538 |
|
|
|
87,522 |
|
|
|
3.31 |
|
|
|
9,318 |
|
Cortez |
|
|
15,418 |
|
|
|
2.30 |
|
|
|
1,141 |
|
|
|
138,403 |
|
|
|
1.96 |
|
|
|
8,710 |
|
|
|
153,821 |
|
|
|
1.99 |
|
|
|
9,851 |
|
Bald Mountain |
|
|
16,421 |
|
|
|
0.96 |
|
|
|
509 |
|
|
|
44,056 |
|
|
|
0.60 |
|
|
|
852 |
|
|
|
60,477 |
|
|
|
0.70 |
|
|
|
1,361 |
|
Turquoise Ridge (75.00%) |
|
|
4,619 |
|
|
|
17.39 |
|
|
|
2,583 |
|
|
|
3,580 |
|
|
|
16.29 |
|
|
|
1,875 |
|
|
|
8,199 |
|
|
|
16.91 |
|
|
|
4,458 |
|
Round Mountain (50.00%) |
|
|
15,255 |
|
|
|
0.84 |
|
|
|
414 |
|
|
|
12,044 |
|
|
|
0.71 |
|
|
|
276 |
|
|
|
27,299 |
|
|
|
0.79 |
|
|
|
690 |
|
South Arturo (60.00%) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,711 |
|
|
|
4.40 |
|
|
|
242 |
|
|
|
1,711 |
|
|
|
4.40 |
|
|
|
242 |
|
Ruby Hill |
|
|
270 |
|
|
|
0.46 |
|
|
|
4 |
|
|
|
1,296 |
|
|
|
0.48 |
|
|
|
20 |
|
|
|
1,566 |
|
|
|
0.48 |
|
|
|
24 |
|
Hemlo |
|
|
1,103 |
|
|
|
2.26 |
|
|
|
80 |
|
|
|
11,164 |
|
|
|
2.06 |
|
|
|
740 |
|
|
|
12,267 |
|
|
|
2.08 |
|
|
|
820 |
|
Golden Sunlight |
|
|
846 |
|
|
|
1.43 |
|
|
|
39 |
|
|
|
1,435 |
|
|
|
1.91 |
|
|
|
88 |
|
|
|
2,281 |
|
|
|
1.73 |
|
|
|
127 |
|
SOUTH AMERICA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cerro Casale (75.00%) |
|
|
172,276 |
|
|
|
0.65 |
|
|
|
3,586 |
|
|
|
725,926 |
|
|
|
0.59 |
|
|
|
13,848 |
|
|
|
898,202 |
|
|
|
0.60 |
|
|
|
17,434 |
|
Pascua-Lama |
|
|
31,934 |
|
|
|
1.84 |
|
|
|
1,887 |
|
|
|
292,692 |
|
|
|
1.43 |
|
|
|
13,497 |
|
|
|
324,626 |
|
|
|
1.47 |
|
|
|
15,384 |
|
Veladero |
|
|
21,491 |
|
|
|
0.80 |
|
|
|
552 |
|
|
|
150,512 |
|
|
|
0.86 |
|
|
|
4,185 |
|
|
|
172,003 |
|
|
|
0.86 |
|
|
|
4,737 |
|
Lagunas Norte |
|
|
17,087 |
|
|
|
1.42 |
|
|
|
780 |
|
|
|
52,563 |
|
|
|
1.21 |
|
|
|
2,053 |
|
|
|
69,650 |
|
|
|
1.27 |
|
|
|
2,833 |
|
AUSTRALIA PACIFIC |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Porgera (95.00%) |
|
|
2,426 |
|
|
|
8.50 |
|
|
|
663 |
|
|
|
14,623 |
|
|
|
4.99 |
|
|
|
2,345 |
|
|
|
17,049 |
|
|
|
5.49 |
|
|
|
3,008 |
|
Kalgoorlie (50.00%) |
|
|
64,175 |
|
|
|
0.94 |
|
|
|
1,940 |
|
|
|
24,892 |
|
|
|
1.93 |
|
|
|
1,542 |
|
|
|
89,067 |
|
|
|
1.22 |
|
|
|
3,482 |
|
Cowal |
|
|
15,507 |
|
|
|
0.97 |
|
|
|
485 |
|
|
|
25,963 |
|
|
|
1.28 |
|
|
|
1,070 |
|
|
|
41,470 |
|
|
|
1.17 |
|
|
|
1,555 |
|
AFRICA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bulyanhulu (63.90%) |
|
|
941 |
|
|
|
11.73 |
|
|
|
355 |
|
|
|
23,828 |
|
|
|
7.49 |
|
|
|
5,735 |
|
|
|
24,769 |
|
|
|
7.65 |
|
|
|
6,090 |
|
North Mara (63.90%) |
|
|
2,466 |
|
|
|
2.12 |
|
|
|
168 |
|
|
|
12,648 |
|
|
|
2.80 |
|
|
|
1,140 |
|
|
|
15,114 |
|
|
|
2.69 |
|
|
|
1,308 |
|
Buzwagi (63.90%) |
|
|
4,244 |
|
|
|
1.01 |
|
|
|
138 |
|
|
|
9,023 |
|
|
|
1.50 |
|
|
|
436 |
|
|
|
13,267 |
|
|
|
1.35 |
|
|
|
574 |
|
OTHER |
|
|
224 |
|
|
|
0.28 |
|
|
|
2 |
|
|
|
12,198 |
|
|
|
0.27 |
|
|
|
105 |
|
|
|
12,422 |
|
|
|
0.27 |
|
|
|
107 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL |
|
|
474,896 |
|
|
|
1.63 |
|
|
|
24,926 |
|
|
|
1,638,739 |
|
|
|
1.29 |
|
|
|
68,091 |
|
|
|
2,113,635 |
|
|
|
1.37 |
|
|
|
93,017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COPPER MINERAL RESERVES (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at December 31, 2014 |
|
PROVEN |
|
|
PROBABLE |
|
|
TOTAL |
|
|
|
|
|
|
|
|
|
|
|
Based on attributable pounds |
|
Tonnes
(000s) |
|
|
Grade
(%) |
|
|
Contained lbs
(millions) |
|
|
Tonnes
(000s) |
|
|
Grade
(%) |
|
|
Contained lbs
(millions) |
|
|
Tonnes
(000s) |
|
|
Grade
(%) |
|
|
Contained lbs
(millions) |
|
|
|
|
|
|
|
|
|
|
|
Zaldivar |
|
|
360,824 |
|
|
|
0.556 |
|
|
|
4,419.3 |
|
|
|
100,620 |
|
|
|
0.513 |
|
|
|
1,138.7 |
|
|
|
461,444 |
|
|
|
0.546 |
|
|
|
5,558.0 |
|
Lumwana |
|
|
164,369 |
|
|
|
0.572 |
|
|
|
2,071.7 |
|
|
|
93,586 |
|
|
|
0.609 |
|
|
|
1,257.3 |
|
|
|
257,955 |
|
|
|
0.585 |
|
|
|
3,329.0 |
|
Jabal Sayid (50.00%) |
|
|
224 |
|
|
|
2.248 |
|
|
|
11.1 |
|
|
|
12,198 |
|
|
|
2.559 |
|
|
|
688.2 |
|
|
|
12,422 |
|
|
|
2.554 |
|
|
|
699.3 |
|
TOTAL |
|
|
525,417 |
|
|
|
0.561 |
|
|
|
6,502.1 |
|
|
|
206,404 |
|
|
|
0.678 |
|
|
|
3,084.2 |
|
|
|
731,821 |
|
|
|
0.594 |
|
|
|
9,586.3 |
|
|
|
|
|
|
|
|
|
|
|
(1) |
See accompanying footnote #1. |
93
GOLD MINERAL RESOURCES (1,2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at December 31, 2014 |
|
MEASURED (M) |
|
|
INDICATED (I) |
|
|
(M) + (I) |
|
|
INFERRED |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Based on attributable ounces |
|
Tonnes
(000s) |
|
|
Grade
(gm/t) |
|
|
Contained ozs
(000s) |
|
|
Tonnes
(000s) |
|
|
Grade
(gm/t) |
|
|
Contained ozs
(000s) |
|
|
Contained ozs
(000s) |
|
|
Tonnes
(000s) |
|
|
Grade
(gm/t) |
|
|
Contained ozs
(000s) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NORTH AMERICA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goldstrike Open Pit |
|
|
620 |
|
|
|
2.46 |
|
|
|
49 |
|
|
|
3,876 |
|
|
|
1.81 |
|
|
|
225 |
|
|
|
274 |
|
|
|
469 |
|
|
|
2.65 |
|
|
|
40 |
|
Goldstrike Underground |
|
|
1,161 |
|
|
|
12.86 |
|
|
|
480 |
|
|
|
2,579 |
|
|
|
11.04 |
|
|
|
915 |
|
|
|
1,395 |
|
|
|
1,657 |
|
|
|
10.32 |
|
|
|
550 |
|
Goldstrike Property Total |
|
|
1,781 |
|
|
|
9.24 |
|
|
|
529 |
|
|
|
6,455 |
|
|
|
5.49 |
|
|
|
1,140 |
|
|
|
1,669 |
|
|
|
2,126 |
|
|
|
8.63 |
|
|
|
590 |
|
Pueblo Viejo (60.00%) |
|
|
2,185 |
|
|
|
2.88 |
|
|
|
202 |
|
|
|
72,563 |
|
|
|
2.61 |
|
|
|
6,099 |
|
|
|
6,301 |
|
|
|
1,993 |
|
|
|
2.51 |
|
|
|
161 |
|
Cortez |
|
|
3,060 |
|
|
|
2.08 |
|
|
|
205 |
|
|
|
35,865 |
|
|
|
2.87 |
|
|
|
3,308 |
|
|
|
3,513 |
|
|
|
23,630 |
|
|
|
1.52 |
|
|
|
1,156 |
|
Goldrush |
|
|
3,106 |
|
|
|
5.09 |
|
|
|
508 |
|
|
|
65,016 |
|
|
|
4.82 |
|
|
|
10,066 |
|
|
|
10,574 |
|
|
|
27,920 |
|
|
|
5.42 |
|
|
|
4,868 |
|
Bald Mountain |
|
|
40,133 |
|
|
|
0.78 |
|
|
|
1,004 |
|
|
|
166,814 |
|
|
|
0.59 |
|
|
|
3,156 |
|
|
|
4,160 |
|
|
|
29,687 |
|
|
|
0.48 |
|
|
|
461 |
|
Turquoise Ridge (75.00%) |
|
|
14,206 |
|
|
|
6.12 |
|
|
|
2,793 |
|
|
|
67,000 |
|
|
|
4.33 |
|
|
|
9,318 |
|
|
|
12,111 |
|
|
|
29,373 |
|
|
|
5.50 |
|
|
|
5,198 |
|
Round Mountain (50.00%) |
|
|
10,413 |
|
|
|
0.61 |
|
|
|
204 |
|
|
|
13,353 |
|
|
|
0.55 |
|
|
|
236 |
|
|
|
440 |
|
|
|
7,861 |
|
|
|
0.51 |
|
|
|
130 |
|
South Arturo (60.00%) |
|
|
5 |
|
|
|
- |
|
|
|
- |
|
|
|
32,415 |
|
|
|
1.46 |
|
|
|
1,525 |
|
|
|
1,525 |
|
|
|
5,799 |
|
|
|
0.68 |
|
|
|
126 |
|
Ruby Hill |
|
|
2,898 |
|
|
|
0.87 |
|
|
|
81 |
|
|
|
185,447 |
|
|
|
0.64 |
|
|
|
3,842 |
|
|
|
3,923 |
|
|
|
22,627 |
|
|
|
1.39 |
|
|
|
1,010 |
|
Hemlo |
|
|
457 |
|
|
|
4.29 |
|
|
|
63 |
|
|
|
36,473 |
|
|
|
1.37 |
|
|
|
1,608 |
|
|
|
1,671 |
|
|
|
5,025 |
|
|
|
2.10 |
|
|
|
340 |
|
Spring Valley (70.00%) |
|
|
1,736 |
|
|
|
0.73 |
|
|
|
41 |
|
|
|
60,633 |
|
|
|
0.66 |
|
|
|
1,285 |
|
|
|
1,326 |
|
|
|
27,909 |
|
|
|
0.62 |
|
|
|
553 |
|
Golden Sunlight |
|
|
22 |
|
|
|
1.41 |
|
|
|
1 |
|
|
|
5,588 |
|
|
|
1.56 |
|
|
|
280 |
|
|
|
281 |
|
|
|
2,280 |
|
|
|
2.02 |
|
|
|
148 |
|
Donlin Gold (50.00%) |
|
|
3,865 |
|
|
|
2.52 |
|
|
|
313 |
|
|
|
266,803 |
|
|
|
2.24 |
|
|
|
19,190 |
|
|
|
19,503 |
|
|
|
46,108 |
|
|
|
2.02 |
|
|
|
2,997 |
|
SOUTH AMERICA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cerro Casale (75.00%) |
|
|
17,217 |
|
|
|
0.30 |
|
|
|
167 |
|
|
|
205,268 |
|
|
|
0.36 |
|
|
|
2,362 |
|
|
|
2,529 |
|
|
|
371,580 |
|
|
|
0.38 |
|
|
|
4,493 |
|
Pascua-Lama |
|
|
14,772 |
|
|
|
1.49 |
|
|
|
710 |
|
|
|
142,693 |
|
|
|
1.25 |
|
|
|
5,749 |
|
|
|
6,459 |
|
|
|
19,486 |
|
|
|
1.56 |
|
|
|
975 |
|
Veladero |
|
|
7,174 |
|
|
|
0.63 |
|
|
|
145 |
|
|
|
164,797 |
|
|
|
0.70 |
|
|
|
3,727 |
|
|
|
3,872 |
|
|
|
5,911 |
|
|
|
0.44 |
|
|
|
83 |
|
Lagunas Norte |
|
|
1,322 |
|
|
|
0.75 |
|
|
|
32 |
|
|
|
18,061 |
|
|
|
0.68 |
|
|
|
397 |
|
|
|
429 |
|
|
|
1,566 |
|
|
|
0.73 |
|
|
|
37 |
|
AUSTRALIA PACIFIC |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Porgera (95.00%) |
|
|
161 |
|
|
|
5.80 |
|
|
|
30 |
|
|
|
34,095 |
|
|
|
3.67 |
|
|
|
4,020 |
|
|
|
4,050 |
|
|
|
20,875 |
|
|
|
3.14 |
|
|
|
2,105 |
|
Kalgoorlie (50.00%) |
|
|
5,410 |
|
|
|
1.48 |
|
|
|
257 |
|
|
|
18,224 |
|
|
|
1.52 |
|
|
|
889 |
|
|
|
1,146 |
|
|
|
604 |
|
|
|
2.27 |
|
|
|
44 |
|
Cowal |
|
|
7,186 |
|
|
|
0.63 |
|
|
|
146 |
|
|
|
41,729 |
|
|
|
1.16 |
|
|
|
1,562 |
|
|
|
1,708 |
|
|
|
4,090 |
|
|
|
1.28 |
|
|
|
168 |
|
AFRICA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bulyanhulu (63.90%) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
7,923 |
|
|
|
8.49 |
|
|
|
2,163 |
|
|
|
2,163 |
|
|
|
8,770 |
|
|
|
9.90 |
|
|
|
2,791 |
|
North Mara (63.90%) |
|
|
1,821 |
|
|
|
2.70 |
|
|
|
158 |
|
|
|
9,656 |
|
|
|
2.91 |
|
|
|
902 |
|
|
|
1,060 |
|
|
|
6,437 |
|
|
|
3.24 |
|
|
|
670 |
|
Buzwagi (63.90%) |
|
|
134 |
|
|
|
1.62 |
|
|
|
7 |
|
|
|
30,751 |
|
|
|
1.30 |
|
|
|
1,282 |
|
|
|
1,289 |
|
|
|
2,954 |
|
|
|
1.24 |
|
|
|
118 |
|
Nyanzaga (63.90%) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
62,208 |
|
|
|
1.31 |
|
|
|
2,621 |
|
|
|
2,621 |
|
|
|
1,944 |
|
|
|
0.93 |
|
|
|
58 |
|
OTHER |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
239 |
|
|
|
0.13 |
|
|
|
1 |
|
|
|
1 |
|
|
|
246 |
|
|
|
0.25 |
|
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL |
|
|
139,064 |
|
|
|
1.70 |
|
|
|
7,596 |
|
|
|
1,750,069 |
|
|
|
1.54 |
|
|
|
86,728 |
|
|
|
94,324 |
|
|
|
676,801 |
|
|
|
1.35 |
|
|
|
29,282 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COPPER MINERAL RESOURCES (1,2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at December 31, 2014 |
|
MEASURED (M) |
|
|
INDICATED (I) |
|
|
(M) + (I) |
|
|
INFERRED |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Based on attributable pounds |
|
Tonnes (000s) |
|
|
Grade (%) |
|
|
Contained lbs (millions) |
|
|
Tonnes (000s) |
|
|
Grade (%) |
|
|
Contained lbs (millions) |
|
|
Contained lbs (millions) |
|
|
Tonnes (000s) |
|
|
Grade (%) |
|
|
Contained lbs (millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Zaldivar |
|
|
102,863 |
|
|
|
0.460 |
|
|
|
1,043.3 |
|
|
|
37,652 |
|
|
|
0.460 |
|
|
|
382.2 |
|
|
|
1,425.5 |
|
|
|
6,081 |
|
|
|
0.612 |
|
|
|
82.0 |
|
Lumwana |
|
|
52,727 |
|
|
|
0.510 |
|
|
|
592.7 |
|
|
|
216,623 |
|
|
|
0.549 |
|
|
|
2,621.5 |
|
|
|
3,214.2 |
|
|
|
38 |
|
|
|
0.477 |
|
|
|
0.4 |
|
Jabal Sayid (50.00%) |
|
|
- |
|
|
|
|
|
|
|
- |
|
|
|
239 |
|
|
|
1.442 |
|
|
|
7.6 |
|
|
|
7.6 |
|
|
|
246 |
|
|
|
2.747 |
|
|
|
14.9 |
|
TOTAL |
|
|
155,590 |
|
|
|
0.477 |
|
|
|
1,636.0 |
|
|
|
254,514 |
|
|
|
0.537 |
|
|
|
3,011.3 |
|
|
|
4,647.3 |
|
|
|
6,365 |
|
|
|
0.693 |
|
|
|
97.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Resources which are not reserves do not have demonstrated economic viability.
|
(2) |
See accompanying footnote #1. |
94
SUMMARY GOLD MINERAL RESERVES AND MINERAL RESOURCES
(1,2,3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the year ended December 31, 2014 |
|
|
|
2014 |
|
|
2013 |
|
Based on attributable ounces |
|
|
|
Tonnes
(000s) |
|
|
Grade
(gm/t) |
|
|
Ounces
(000s) |
|
|
Tonnes
(000s) |
|
|
Grade
(gm/t) |
|
|
Ounces
(000s) |
|
NORTH AMERICA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goldstrike Open Pit |
|
(proven and probable) |
|
|
74,192 |
|
|
|
3.24 |
|
|
|
7,724 |
|
|
|
76,436 |
|
|
|
3.31 |
|
|
|
8,122 |
|
|
|
(mineral resource) |
|
|
4,496 |
|
|
|
1.90 |
|
|
|
274 |
|
|
|
5,361 |
|
|
|
2.40 |
|
|
|
413 |
|
Goldstrike Underground |
|
(proven and probable) |
|
|
6,661 |
|
|
|
8.83 |
|
|
|
1,890 |
|
|
|
9,502 |
|
|
|
8.46 |
|
|
|
2,585 |
|
|
|
(mineral resource) |
|
|
3,740 |
|
|
|
11.60 |
|
|
|
1,395 |
|
|
|
5,430 |
|
|
|
10.37 |
|
|
|
1,810 |
|
Goldstrike Property Total |
|
(proven and probable) |
|
|
80,853 |
|
|
|
3.70 |
|
|
|
9,614 |
|
|
|
85,938 |
|
|
|
3.88 |
|
|
|
10,707 |
|
|
|
(mineral resource) |
|
|
8,236 |
|
|
|
6.30 |
|
|
|
1,669 |
|
|
|
10,791 |
|
|
|
6.41 |
|
|
|
2,223 |
|
Pueblo Viejo (60.00%) |
|
(proven and probable) |
|
|
87,522 |
|
|
|
3.31 |
|
|
|
9,318 |
|
|
|
92,844 |
|
|
|
3.25 |
|
|
|
9,694 |
|
|
|
(mineral resource) |
|
|
74,748 |
|
|
|
2.62 |
|
|
|
6,301 |
|
|
|
115,606 |
|
|
|
2.42 |
|
|
|
9,011 |
|
Cortez |
|
(proven and probable) |
|
|
153,821 |
|
|
|
1.99 |
|
|
|
9,851 |
|
|
|
188,434 |
|
|
|
1.82 |
|
|
|
11,024 |
|
|
|
(mineral resource) |
|
|
38,925 |
|
|
|
2.81 |
|
|
|
3,513 |
|
|
|
91,142 |
|
|
|
1.68 |
|
|
|
4,914 |
|
Goldrush |
|
(proven and probable) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(mineral resource) |
|
|
68,122 |
|
|
|
4.83 |
|
|
|
10,574 |
|
|
|
68,529 |
|
|
|
4.52 |
|
|
|
9,960 |
|
Bald Mountain |
|
(proven and probable) |
|
|
60,477 |
|
|
|
0.70 |
|
|
|
1,361 |
|
|
|
122,518 |
|
|
|
0.62 |
|
|
|
2,460 |
|
|
|
(mineral resource) |
|
|
206,947 |
|
|
|
0.63 |
|
|
|
4,160 |
|
|
|
187,278 |
|
|
|
0.59 |
|
|
|
3,579 |
|
Turquoise Ridge (75.00%) |
|
(proven and probable) |
|
|
8,199 |
|
|
|
16.91 |
|
|
|
4,458 |
|
|
|
8,893 |
|
|
|
17.73 |
|
|
|
5,070 |
|
|
|
(mineral resource) |
|
|
81,206 |
|
|
|
4.64 |
|
|
|
12,111 |
|
|
|
82,119 |
|
|
|
4.35 |
|
|
|
11,488 |
|
Round Mountain (50.00%) |
|
(proven and probable) |
|
|
27,299 |
|
|
|
0.79 |
|
|
|
690 |
|
|
|
42,146 |
|
|
|
0.68 |
|
|
|
919 |
|
|
|
(mineral resource) |
|
|
23,766 |
|
|
|
0.58 |
|
|
|
440 |
|
|
|
38,115 |
|
|
|
0.74 |
|
|
|
904 |
|
South Arturo (10.00%) |
|
(proven and probable) |
|
|
1,711 |
|
|
|
4.40 |
|
|
|
242 |
|
|
|
18,620 |
|
|
|
1.68 |
|
|
|
1,007 |
|
|
|
(mineral resource) |
|
|
32,420 |
|
|
|
1.46 |
|
|
|
1,525 |
|
|
|
29,598 |
|
|
|
1.51 |
|
|
|
1,440 |
|
Ruby Hill |
|
(proven and probable) |
|
|
1,566 |
|
|
|
0.48 |
|
|
|
24 |
|
|
|
4,502 |
|
|
|
0.97 |
|
|
|
140 |
|
|
|
(mineral resource) |
|
|
188,345 |
|
|
|
0.65 |
|
|
|
3,923 |
|
|
|
161,869 |
|
|
|
0.69 |
|
|
|
3,612 |
|
Hemlo |
|
(proven and probable) |
|
|
12,267 |
|
|
|
2.08 |
|
|
|
820 |
|
|
|
12,802 |
|
|
|
2.48 |
|
|
|
1,019 |
|
|
|
(mineral resource) |
|
|
36,930 |
|
|
|
1.41 |
|
|
|
1,671 |
|
|
|
52,847 |
|
|
|
1.12 |
|
|
|
1,903 |
|
Marigold Mine (0.00%)(4) |
|
(proven and probable) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
80,010 |
|
|
|
0.54 |
|
|
|
1,389 |
|
|
|
(mineral resource) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
11,188 |
|
|
|
0.44 |
|
|
|
158 |
|
Spring Valley (70.00%) |
|
(proven and probable) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(mineral resource) |
|
|
62,369 |
|
|
|
0.66 |
|
|
|
1,326 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Golden Sunlight |
|
(proven and probable) |
|
|
2,281 |
|
|
|
1.73 |
|
|
|
127 |
|
|
|
3,650 |
|
|
|
1.67 |
|
|
|
196 |
|
|
|
(mineral resource) |
|
|
5,610 |
|
|
|
1.56 |
|
|
|
281 |
|
|
|
4,279 |
|
|
|
1.24 |
|
|
|
170 |
|
Donlin Gold (50.00%) |
|
(proven and probable) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(mineral resource) |
|
|
270,668 |
|
|
|
2.24 |
|
|
|
19,503 |
|
|
|
270,668 |
|
|
|
2.24 |
|
|
|
19,503 |
|
SOUTH AMERICA |
|
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
|
|
Cerro Casale (75.00%) |
|
(proven and probable) |
|
|
898,202 |
|
|
|
0.60 |
|
|
|
17,434 |
|
|
|
898,202 |
|
|
|
0.60 |
|
|
|
17,434 |
|
|
|
(mineral resource) |
|
|
222,485 |
|
|
|
0.35 |
|
|
|
2,529 |
|
|
|
228,576 |
|
|
|
0.34 |
|
|
|
2,530 |
|
Pascua-Lama |
|
(proven and probable) |
|
|
324,626 |
|
|
|
1.47 |
|
|
|
15,384 |
|
|
|
324,626 |
|
|
|
1.47 |
|
|
|
15,384 |
|
|
|
(mineral resource) |
|
|
157,465 |
|
|
|
1.28 |
|
|
|
6,459 |
|
|
|
157,465 |
|
|
|
1.28 |
|
|
|
6,459 |
|
Veladero |
|
(proven and probable) |
|
|
172,003 |
|
|
|
0.86 |
|
|
|
4,737 |
|
|
|
186,626 |
|
|
|
0.85 |
|
|
|
5,117 |
|
|
|
(mineral resource) |
|
|
171,971 |
|
|
|
0.70 |
|
|
|
3,872 |
|
|
|
164,387 |
|
|
|
0.68 |
|
|
|
3,588 |
|
Lagunas Norte |
|
(proven and probable) |
|
|
69,650 |
|
|
|
1.27 |
|
|
|
2,833 |
|
|
|
90,800 |
|
|
|
1.28 |
|
|
|
3,751 |
|
|
|
(mineral resource) |
|
|
19,383 |
|
|
|
0.69 |
|
|
|
429 |
|
|
|
33,795 |
|
|
|
0.70 |
|
|
|
757 |
|
AUSTRALIA PACIFIC |
|
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
|
|
Porgera (95.00%) |
|
(proven and probable) |
|
|
17,049 |
|
|
|
5.49 |
|
|
|
3,008 |
|
|
|
23,134 |
|
|
|
4.10 |
|
|
|
3,051 |
|
|
|
(mineral resource) |
|
|
34,256 |
|
|
|
3.68 |
|
|
|
4,050 |
|
|
|
36,592 |
|
|
|
2.75 |
|
|
|
3,238 |
|
Kalgoorlie (50.00%) |
|
(proven and probable) |
|
|
89,067 |
|
|
|
1.22 |
|
|
|
3,482 |
|
|
|
91,793 |
|
|
|
1.26 |
|
|
|
3,718 |
|
|
|
(mineral resource) |
|
|
23,634 |
|
|
|
1.51 |
|
|
|
1,146 |
|
|
|
25,185 |
|
|
|
1.49 |
|
|
|
1,204 |
|
Cowal |
|
(proven and probable) |
|
|
41,470 |
|
|
|
1.17 |
|
|
|
1,555 |
|
|
|
47,875 |
|
|
|
1.18 |
|
|
|
1,816 |
|
|
|
(mineral resource) |
|
|
48,915 |
|
|
|
1.09 |
|
|
|
1,708 |
|
|
|
63,328 |
|
|
|
1.08 |
|
|
|
2,203 |
|
Plutonic (0.00%)(5) |
|
(proven and probable) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
442 |
|
|
|
9.22 |
|
|
|
131 |
|
|
|
(mineral resource) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
4,204 |
|
|
|
6.53 |
|
|
|
883 |
|
Kanowna Belle (0.00%)(6) |
|
(proven and probable) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
2,616 |
|
|
|
4.85 |
|
|
|
408 |
|
|
|
(mineral resource) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
3,392 |
|
|
|
4.70 |
|
|
|
513 |
|
AFRICA |
|
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
|
|
Bulyanhulu (63.90%)(7) |
|
(proven and probable) |
|
|
24,769 |
|
|
|
7.65 |
|
|
|
6,090 |
|
|
|
27,775 |
|
|
|
7.77 |
|
|
|
6,937 |
|
|
|
(mineral resource) |
|
|
7,923 |
|
|
|
8.49 |
|
|
|
2,163 |
|
|
|
7,556 |
|
|
|
10.65 |
|
|
|
2,588 |
|
North Mara (63.90%)(7) |
|
(proven and probable) |
|
|
15,114 |
|
|
|
2.69 |
|
|
|
1,308 |
|
|
|
16,043 |
|
|
|
3.17 |
|
|
|
1,634 |
|
|
|
(mineral resource) |
|
|
11,477 |
|
|
|
2.87 |
|
|
|
1,060 |
|
|
|
18,672 |
|
|
|
3.32 |
|
|
|
1,991 |
|
Buzwagi (63.90%)(7) |
|
(proven and probable) |
|
|
13,267 |
|
|
|
1.35 |
|
|
|
574 |
|
|
|
17,813 |
|
|
|
1.45 |
|
|
|
828 |
|
|
|
(mineral resource) |
|
|
30,885 |
|
|
|
1.30 |
|
|
|
1,289 |
|
|
|
36,291 |
|
|
|
1.29 |
|
|
|
1,506 |
|
Nyanzaga (63.90%)(7) |
|
(proven and probable) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(mineral resource) |
|
|
62,208 |
|
|
|
1.31 |
|
|
|
2,621 |
|
|
|
71,943 |
|
|
|
1.31 |
|
|
|
3,032 |
|
OTHER |
|
(proven and probable) |
|
|
12,422 |
|
|
|
0.27 |
|
|
|
107 |
|
|
|
25,338 |
|
|
|
0.27 |
|
|
|
217 |
|
|
|
(mineral resource) |
|
|
239 |
|
|
|
0.13 |
|
|
|
1 |
|
|
|
870 |
|
|
|
0.18 |
|
|
|
5 |
|
TOTAL |
|
(proven and probable) |
|
|
2,113,635 |
|
|
|
1.37 |
|
|
|
93,017 |
|
|
|
2,413,440 |
|
|
|
1.34 |
|
|
|
104,051 |
|
|
|
(mineral resource) |
|
|
1,889,133 |
|
|
|
1.55 |
|
|
|
94,324 |
|
|
|
1,976,285 |
|
|
|
1.56 |
|
|
|
99,362 |
|
(1) |
Resources which are not reserves do not have demonstrated economic viability. |
(2) |
See accompanying footnote #1. |
(3) |
Measured plus indicated resources |
(4) |
See accompanying footnote #2. |
(5) |
See accompanying footnote #3. |
(6) |
See accompanying footnote #4. |
(7) |
See accompanying footnote #5. |
95
CONTAINED SILVER WITHIN REPORTED GOLD RESERVES (1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the year ended Dec. 31, 2014 |
|
IN PROVEN GOLD RESERVES |
|
|
IN PROBABLE GOLD RESERVES |
|
|
|
|
|
TOTAL |
|
|
|
|
|
|
|
|
|
|
|
Based on attributable ounces |
|
Tonnes
(000s) |
|
|
Grade
(gm/t) |
|
|
Contained ozs
(000s) |
|
|
Tonnes (000s) |
|
|
Grade (gm/t) |
|
|
Contained ozs
(000s) |
|
|
Tonnes (000s) |
|
|
Grade (gm/t) |
|
|
Contained ozs
(000s) |
|
|
Process recovery
% |
|
|
|
|
|
|
|
|
|
|
|
NORTH AMERICA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pueblo Viejo (60.00%) |
|
|
27,235 |
|
|
|
22.928 |
|
|
|
20,076 |
|
|
|
60,287 |
|
|
|
19.74 |
|
|
|
38,255 |
|
|
|
87,522 |
|
|
|
20.73 |
|
|
|
58,331 |
|
|
|
87.0% |
|
SOUTH AMERICA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cerro Casale (75.00%) |
|
|
172,276 |
|
|
|
1.907 |
|
|
|
10,565 |
|
|
|
725,926 |
|
|
|
1.43 |
|
|
|
33,451 |
|
|
|
898,202 |
|
|
|
1.52 |
|
|
|
44,016 |
|
|
|
69.0% |
|
Pascua-Lama |
|
|
31,934 |
|
|
|
69.840 |
|
|
|
71,705 |
|
|
|
292,692 |
|
|
|
64.09 |
|
|
|
603,137 |
|
|
|
324,626 |
|
|
|
64.66 |
|
|
|
674,842 |
|
|
|
81.7% |
|
Lagunas Norte |
|
|
15,123 |
|
|
|
3.856 |
|
|
|
1,875 |
|
|
|
52,563 |
|
|
|
4.75 |
|
|
|
8,026 |
|
|
|
67,686 |
|
|
|
4.55 |
|
|
|
9,901 |
|
|
|
19.5% |
|
Veladero |
|
|
12,606 |
|
|
|
11.989 |
|
|
|
4,859 |
|
|
|
150,512 |
|
|
|
16.51 |
|
|
|
79,892 |
|
|
|
163,118 |
|
|
|
16.16 |
|
|
|
84,751 |
|
|
|
9.6% |
|
AFRICA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bulyanhulu (63.90%) |
|
|
941 |
|
|
|
8.83 |
|
|
|
267 |
|
|
|
23,828 |
|
|
|
7.22 |
|
|
|
5,530 |
|
|
|
24,769 |
|
|
|
7.28 |
|
|
|
5,797 |
|
|
|
64.9% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL |
|
|
260,115 |
|
|
|
13.08 |
|
|
|
109,347 |
|
|
|
1,305,808 |
|
|
|
18.30 |
|
|
|
768,291 |
|
|
|
1,565,923 |
|
|
|
17.43 |
|
|
|
877,638 |
|
|
|
73.6% |
|
|
|
|
|
|
|
|
|
|
|
(1) |
Silver is accounted for as a by-product credit against reported or projected gold production
costs. |
CONTAINED COPPER WITHIN REPORTED GOLD RESERVES (1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the year ended Dec. 31, 2014 |
|
IN PROVEN GOLD RESERVES |
|
|
IN PROBABLE GOLD RESERVES |
|
|
|
|
|
TOTAL |
|
|
|
|
|
|
|
|
|
|
|
Based on attributable pounds |
|
Tonnes (000s) |
|
|
Grade (%) |
|
|
Contained lbs (millions) |
|
|
Tonnes (000s) |
|
|
Grade (%) |
|
|
Contained lbs (millions) |
|
|
Tonnes (000s) |
|
|
Grade (%) |
|
|
Contained lbs (millions) |
|
|
Process recovery
% |
|
|
|
|
|
|
|
|
|
|
|
NORTH AMERICA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pueblo Viejo (60.00%) |
|
|
27,235 |
|
|
|
0.094 |
|
|
|
56.6 |
|
|
|
60,287 |
|
|
|
0.118 |
|
|
|
156.5 |
|
|
|
87,522 |
|
|
|
0.110 |
|
|
|
213.1 |
|
|
|
79.5% |
|
|
|
|
|
|
|
|
|
|
|
SOUTH AMERICA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cerro Casale (75.00%) |
|
|
172,276 |
|
|
|
0.190 |
|
|
|
721.3 |
|
|
|
725,926 |
|
|
|
0.226 |
|
|
|
3,613.3 |
|
|
|
898,202 |
|
|
|
0.219 |
|
|
|
4,334.6 |
|
|
|
87.4% |
|
Pascua-Lama |
|
|
31,934 |
|
|
|
0.094 |
|
|
|
66.1 |
|
|
|
292,692 |
|
|
|
0.069 |
|
|
|
447.8 |
|
|
|
324,626 |
|
|
|
0.072 |
|
|
|
513.9 |
|
|
|
38.5% |
|
|
|
|
|
|
|
|
|
|
|
AFRICA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bulyanhulu (63.90%) |
|
|
941 |
|
|
|
0.660 |
|
|
|
13.7 |
|
|
|
18,025 |
|
|
|
0.583 |
|
|
|
231.5 |
|
|
|
18,966 |
|
|
|
0.586 |
|
|
|
245.2 |
|
|
|
95.0% |
|
Buzwagi (63.90%) |
|
|
4,244 |
|
|
|
0.067 |
|
|
|
6.3 |
|
|
|
9,023 |
|
|
|
0.109 |
|
|
|
21.6 |
|
|
|
13,267 |
|
|
|
0.095 |
|
|
|
27.9 |
|
|
|
64.9% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL |
|
|
236,630 |
|
|
|
0.166 |
|
|
|
864.0 |
|
|
|
1,105,953 |
|
|
|
0.183 |
|
|
|
4,470.7 |
|
|
|
1,342,583 |
|
|
|
0.180 |
|
|
|
5,334.7 |
|
|
|
82.6% |
|
|
|
|
|
|
|
|
|
|
|
(1) |
Copper is accounted for as a by-product credit against reported or projected gold production
costs. |
96
CONTAINED SILVER WITHIN REPORTED GOLD RESOURCES (1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the year ended Dec. 31, 2014 |
|
MEASURED (M) |
|
|
INDICATED (I) |
|
|
(M) + (I) |
|
|
INFERRED |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Based on attributable ounces |
|
Tonnes (000s) |
|
|
Grade (gm/t) |
|
|
Contained ozs (000s) |
|
|
Tonnes
(000s) |
|
|
Grade
(gm/t) |
|
|
Contained ozs
(000s) |
|
|
Ounces
(000s) |
|
|
Tonnes (000s) |
|
|
Grade (gm/t) |
|
|
Contained ozs (000s) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NORTH AMERICA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pueblo Viejo (60.00%) |
|
|
2,185 |
|
|
|
18.18 |
|
|
|
1,277 |
|
|
|
72,563 |
|
|
|
15.17 |
|
|
|
35,394 |
|
|
|
36,671 |
|
|
|
1,993 |
|
|
|
21.22 |
|
|
|
1,360 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SOUTH AMERICA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cerro Casale (75.00%) |
|
|
17,217 |
|
|
|
1.19 |
|
|
|
661 |
|
|
|
205,268 |
|
|
|
1.06 |
|
|
|
6,985 |
|
|
|
7,646 |
|
|
|
371,580 |
|
|
|
1.04 |
|
|
|
12,379 |
|
Pascua-Lama |
|
|
14,772 |
|
|
|
26.37 |
|
|
|
12,525 |
|
|
|
142,658 |
|
|
|
22.28 |
|
|
|
102,178 |
|
|
|
114,703 |
|
|
|
19,476 |
|
|
|
20.13 |
|
|
|
12,607 |
|
Lagunas Norte |
|
|
1,322 |
|
|
|
2.26 |
|
|
|
96 |
|
|
|
18,061 |
|
|
|
2.10 |
|
|
|
1,221 |
|
|
|
1,317 |
|
|
|
1,566 |
|
|
|
2.48 |
|
|
|
125 |
|
Veladero |
|
|
7,174 |
|
|
|
0.68 |
|
|
|
157 |
|
|
|
164,797 |
|
|
|
0.52 |
|
|
|
2,772 |
|
|
|
2,929 |
|
|
|
5,911 |
|
|
|
0.31 |
|
|
|
59 |
|
AFRICA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bulyanhulu (63.90%) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
7,923 |
|
|
|
6.50 |
|
|
|
1,657 |
|
|
|
1,657 |
|
|
|
8,576 |
|
|
|
7.26 |
|
|
|
2,001 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL |
|
|
42,670 |
|
|
|
10.73 |
|
|
|
14,716 |
|
|
|
611,270 |
|
|
|
7.64 |
|
|
|
150,207 |
|
|
|
164,923 |
|
|
|
409,102 |
|
|
|
2.17 |
|
|
|
28,531 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Resources which are not reserves do not have demonstrated economic viability.
|
CONTAINED COPPER WITHIN REPORTED GOLD RESOURCES (1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the year ended Dec. 31, 2014 |
|
IN MEASURED (M) GOLD RESOURCES |
|
|
IN INDICATED (I) GOLD RESOURCES |
|
|
(M) + (I) |
|
|
INFERRED |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Based on attributable pounds |
|
Tonnes
(000s) |
|
|
Grade
(%) |
|
|
Contained lbs
(millions) |
|
|
Tonnes
(000s) |
|
|
Grade (%) |
|
|
Contained lbs (millions) |
|
|
Contained lbs
(millions) |
|
|
Tonnes
(000s) |
|
|
Grade
(%) |
|
|
Contained lbs (millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NORTH AMERICA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pueblo Viejo (60.00%) |
|
|
2,185 |
|
|
|
0.118 |
|
|
|
5.7 |
|
|
|
72,563 |
|
|
|
0.083 |
|
|
|
133.1 |
|
|
|
138.8 |
|
|
|
1,993 |
|
|
|
0.020 |
|
|
|
0.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SOUTH AMERICA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cerro Casale (75.00%) |
|
|
17,217 |
|
|
|
0.132 |
|
|
|
50.1 |
|
|
|
205,268 |
|
|
|
0.164 |
|
|
|
743.8 |
|
|
|
793.9 |
|
|
|
371,580 |
|
|
|
0.192 |
|
|
|
1,570.2 |
|
Pascua-Lama |
|
|
14,772 |
|
|
|
0.072 |
|
|
|
23.5 |
|
|
|
142,693 |
|
|
|
0.061 |
|
|
|
193.4 |
|
|
|
216.9 |
|
|
|
19,486 |
|
|
|
0.040 |
|
|
|
17.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AFRICA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Buzwagi (63.90%) |
|
|
134 |
|
|
|
0.102 |
|
|
|
0.3 |
|
|
|
30,751 |
|
|
|
0.110 |
|
|
|
74.3 |
|
|
|
74.6 |
|
|
|
2,954 |
|
|
|
0.109 |
|
|
|
7.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL |
|
|
34,308 |
|
|
|
0.105 |
|
|
|
79.6 |
|
|
|
451,275 |
|
|
|
0.115 |
|
|
|
1,144.6 |
|
|
|
1,224.2 |
|
|
|
396,013 |
|
|
|
0.183 |
|
|
|
1,595.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Resources which are not reserves do not have demonstrated economic viability.
|
NICKEL MINERAL RESOURCES (1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the year ended Dec. 31, 2014 |
|
MEASURED (M) |
|
|
INDICATED (I) |
|
|
(M) + (I) |
|
|
INFERRED |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Based on attributable pounds |
|
Tonnes (000s) |
|
|
Grade (%) |
|
|
Contained lbs (millions) |
|
|
Tonnes
(000s) |
|
|
Grade (%) |
|
|
Contained lbs (millions) |
|
|
Contained lbs
(millions) |
|
|
Tonnes (000s) |
|
|
Grade (%) |
|
|
Contained lbs (millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AFRICA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kabanga (50.00%) |
|
|
6,905 |
|
|
|
2.490 |
|
|
|
379.0 |
|
|
|
11,705 |
|
|
|
2.720 |
|
|
|
701.9 |
|
|
|
1,080.9 |
|
|
|
10,400 |
|
|
|
2.600 |
|
|
|
596.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Resources which are not reserves do not have demonstrated economic viability.
|
97
Mineral Reserves and Resources Notes
1. Mineral reserves (reserves) and mineral resources
(resources) have been calculated as at December 31, 2014 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 and Exchange Act of 1934), as interpreted by Staff of the SEC, applies different standards in order to classify mineralization as a reserve. In addition, while the terms measured, indicated and inferred
mineral resources are required pursuant to National Instrument 43-101, the U.S. Securities and Exchange Commission does not recognize such terms. Canadian standards differ significantly from the requirements of the U.S. Securities and Exchange
Commission, and mineral resource information contained herein is not comparable to similar information regarding mineral reserves disclosed in accordance with the requirements of the U.S. Securities and Exchange Commission. U.S. investors should
understand that inferred mineral resources have a great amount of uncertainty as to their existence and great uncertainty as to their economic and legal feasibility. In addition, U.S. investors are cautioned not to assume that any part
or all of Barricks mineral resources constitute or will be converted into reserves. Calculations have been prepared by employees of Barrick, its joint venture partners or its joint venture operating companies, as applicable, under the
supervision of Rick Sims, Senior Director, Resources and Reserves, of Barrick, Steven Haggarty, Senior Director, Metallurgy, of Barrick and Patrick Garretson, Director, LOM Planning, of Barrick. Except as noted below, reserves have been calculated
using an assumed long-term average gold price of USD $1,100 per ounce, a silver price of USD $17.00 per ounce, a copper price of US $3.00 per pound and exchange rates of 1.10 CAD/USD and 0.91 USD/AUD. Reserves at Round Mountain have been calculated
using an assumed long-term average gold price of USD $1,200. Reserves at Kalgoorlie assumed a gold price of AUD $1,350 and Bulyanhulu, North Mara and Buzwagi assumed a gold price of US $1,300. Reserve calculations incorporate current and/or expected
mine plans and cost levels at each property. Varying cut-off grades have been used depending on the mine and type of ore contained in the reserves. Barricks normal data verification procedures have been employed in connection with the
calculations. Resources as at December 31, 2014 have been estimated using varying cut-off grades, depending on both the type of mine or project, its maturity and ore types at each property. For a breakdown of reserves and resources by category
and for a more detailed description of the key assumptions, parameters and methods used in calculating Barricks reserves and resources, see Barricks most recent Annual Information Form/Form 40-F on file with Canadian provincial
securities regulatory authorities and the U.S. Securities and Exchange Commission.
2. On April 4, 2014, the Company divested its interest in the Marigold
mine. For additional information regarding this matter, see page 29 of Barricks Year-End Report 2014.
3. On January 31, 2014, the Company divested the Plutonic mine. For
additional information regarding this matter, see page 30 of Barricks Year-End Report 2014.
4. On March 1, 2014, the Company divested the Kanowna Bell mine. For
additional information regarding this matter, see page 30 of Barricks Year-End Report 2014.
5. On March 11, 2014, the Company divested 41 million shares in
Acacia Gold, reducing the Companys interest in Acacia Gold to 63.90%. For additional information regarding this matter, see page 29 of Barricks Year-End Report 2014.
6. On December 3, 2014, the Company divested 50% of its interest in the
Jabal Sayid project. For additional information regarding this matter, see page 29 of Barricks Year-End Report 2014.
98
MANAGEMENTS RESPONSIBILITY
Managements Responsibility for Financial Statements
The accompanying consolidated financial statements have been prepared by and are the responsibility of the Board of Directors and Management of
the Company.
The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards as
issued by the International Accounting Standards Board and reflect Managements best estimates and judgments based on currently available information. The Company has developed and maintains a system of internal controls in order to ensure, on
a reasonable and cost effective basis, the reliability of its financial information.
The consolidated financial statements have been audited
by PricewaterhouseCoopers LLP, Chartered Accountants. Their report outlines the scope of their examination and opinion on the consolidated financial statements.
Ammar Al-Joundi
Executive Vice
President
and Chief Financial Officer
Toronto, Canada
February 18, 2015
|
|
|
|
|
BARRICK YEAR END 2014 |
|
99 |
|
MANAGEMENTS RESPONSIBILITY |
MANAGEMENTS REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Barricks management is responsible for establishing and maintaining internal control over financial reporting.
Barricks management assessed the effectiveness of the Companys internal control over financial reporting as at December 31, 2014.
Barricks Management used the Internal Control Integrated Framework (2013) as issued by the Committee of Sponsoring Organizations (COSO) of the Treadway Commission to evaluate the effectiveness of Barricks internal control
over financial reporting. Based on managements assessment, Barricks internal control over financial reporting is effective as at December 31, 2014.
The effectiveness of the Companys internal control over financial reporting as at December 31, 2014 has been audited by
PricewaterhouseCoopers LLP, Chartered Accountants, as stated in their report which is located on pages 101 - 103 of Barricks 2014 Annual Financial Statements.
|
|
|
|
|
BARRICK YEAR END 2014 |
|
100 |
|
MANAGEMENTS REPORT ON INTERNAL
CONTROL OVER FINANCIAL REPORTING |
February 18, 2015
Independent Auditors Report
To the
Shareholders of
Barrick Gold Corporation
We
have completed integrated audits of Barrick Gold Corporations (the company) 2014 and 2013 consolidated financial statements and its internal control over financial reporting as at December 31, 2014. Our opinions, based on our audits, are
presented below.
Report on the consolidated financial statements
We have audited the accompanying consolidated financial statements of Barrick Gold Corporation, which comprise the consolidated balance sheets as at
December 31, 2014 and December 31, 2013 and the consolidated statements of income, comprehensive income, cash flow and changes in equity for the years then ended, and the related notes.
Managements responsibility for the consolidated financial statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial
Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB) and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from
material misstatement, whether due to fraud or error.
Auditors responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with Canadian
generally accepted auditing standards and the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated
financial statements are free from material misstatement. Canadian generally accepted auditing standards also require that we comply with ethical requirements.
An audit involves performing procedures to obtain audit evidence, on a test basis, about the amounts and disclosures in the consolidated financial statements.
The procedures selected depend on the auditors judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor
considers internal control relevant to the companys preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances.
PricewaterhouseCoopers LLP
PwC Tower, 18 York Street, Suite 2600, Toronto, Ontario, Canada M5J oB2
T: +1 416 863 1133, F: +1 416 365 8215, www.pwc.com/ca
PwC refers to PricewaterhouseCoopers LLP, an Ontario limited liability partnership.
An audit also includes evaluating the appropriateness of accounting principles and policies used and the reasonableness of
accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.
We believe that the
audit evidence we have obtained in our audits is sufficient and appropriate to provide a basis for our audit opinion on the consolidated financial statements.
Opinion
In our opinion, the consolidated financial
statements present fairly, in all material respects, the financial position of Barrick Gold Corporation as at December 31, 2014 and December 31, 2013 and its financial performance and its cash flows for the years then ended in accordance
with IFRS as issued by the IASB.
Report on internal control over financial reporting
We have also audited Barrick Gold Corporations internal control over financial reporting as at December 31, 2014, based on criteria established in
Internal Control Integrated Framework (2013), issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
Managements responsibility for internal control over financial reporting
Management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control
over financial reporting included in the accompanying Managements Report on Internal Control over Financial Reporting.
Auditors
responsibility
Our responsibility is to express an opinion on the companys internal control over financial reporting based on our audit. We
conducted our audit of internal control over financial reporting in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether effective internal control over financial reporting was maintained in all material respects.
An audit of internal control over
financial reporting includes obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control, based on the
assessed risk, and performing such other procedures as we consider necessary in the circumstances.
We believe that our audit provides a reasonable basis
for our audit opinion on the companys internal control over financial reporting.
Definition of internal control over financial reporting
A companys internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A companys internal control over financial reporting includes those policies and procedures
that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors
of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the companys assets that could have a material effect on the financial statements.
Inherent limitations
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.
Opinion
In our opinion, Barrick Gold Corporation
maintained, in all material respects, effective internal control over financial reporting as at December 31, 2014, based on criteria established in Internal Control Integrated Framework (2013) issued by COSO.
(Signed) PricewaterhouseCoopers LLP
Chartered Professional Accountants, Licenced Public Accountants
Consolidated Statements of Income
|
|
|
|
|
|
|
|
|
Barrick Gold Corporation
For the years ended December 31 (in millions of United States dollars, except per share data) |
|
|
2014 |
|
|
|
2013 |
|
Revenue (notes 5 and 6) |
|
$ |
10,239 |
|
|
$ |
12,527 |
|
Costs and expenses |
|
|
|
|
|
|
|
|
Cost of sales (notes 5 and 7) |
|
|
6,830 |
|
|
|
7,329 |
|
General and administrative expenses (note 10) |
|
|
385 |
|
|
|
390 |
|
Exploration, evaluation and project expenses (notes 5 and 8) |
|
|
392 |
|
|
|
680 |
|
Impairment charges (note 9b) |
|
|
4,106 |
|
|
|
12,687 |
|
Loss on currency translation |
|
|
132 |
|
|
|
180 |
|
Closed mine rehabilitation |
|
|
83 |
|
|
|
100 |
|
Loss (gain) on non-hedge derivatives (note 24e) |
|
|
193 |
|
|
|
(76 |
) |
Other expense (income) (note
9a) |
|
|
(14 |
) |
|
|
56 |
|
Loss before finance items and income taxes |
|
|
(1,868 |
) |
|
|
(8,819 |
) |
Finance items |
|
|
|
|
|
|
|
|
Finance income |
|
|
11 |
|
|
|
9 |
|
Finance costs (note 13) |
|
|
(796 |
) |
|
|
(657 |
) |
Loss before income taxes |
|
|
(2,653 |
) |
|
|
(9,467 |
) |
Income tax expense (note
11) |
|
|
(306 |
) |
|
|
(630 |
) |
Loss from continuing operations |
|
|
(2,959 |
) |
|
|
(10,097 |
) |
Loss from discontinued operations (note
4e) |
|
|
- |
|
|
|
(506 |
) |
Net loss |
|
$ |
(2,959 |
) |
|
$ |
(10,603 |
) |
Attributable to: |
|
|
|
|
|
|
|
|
Equity holders of Barrick Gold Corporation |
|
$ |
(2,907 |
) |
|
$ |
(10,366 |
) |
Non-controlling interests (note
31) |
|
$ |
(52 |
) |
|
$ |
(237 |
) |
|
|
|
Earnings per share data attributable to the equity holders of Barrick Gold Corporation (note 12) |
|
|
|
|
|
|
|
|
Loss from continuing operations |
|
|
|
|
|
|
|
|
Basic |
|
$ |
(2.50 |
) |
|
$ |
(9.65 |
) |
Diluted |
|
$ |
(2.50 |
) |
|
$ |
(9.65 |
) |
Loss from discontinued operations |
|
|
|
|
|
|
|
|
Basic |
|
$ |
- |
|
|
$ |
(0.49 |
) |
Diluted |
|
$ |
- |
|
|
$ |
(0.49 |
) |
Net loss |
|
|
|
|
|
|
|
|
Basic |
|
$ |
(2.50 |
) |
|
$ |
(10.14 |
) |
Diluted |
|
$ |
(2.50 |
) |
|
$ |
(10.14 |
) |
The accompanying notes are an integral part of these consolidated financial statements.
|
|
|
|
|
BARRICK YEAR END 2014 |
|
104 |
|
FINANCIAL STATEMENTS |
Consolidated Statements of Comprehensive Income
|
|
|
|
|
|
|
|
|
Barrick Gold Corporation
For the years ended December 31 (in millions of United States dollars) |
|
|
2014 |
|
|
|
2013 |
|
Net loss |
|
$ |
(2,959) |
|
|
$ |
(10,603) |
|
Other comprehensive income (loss), net of taxes |
|
|
|
|
|
|
|
|
Items that may be reclassified subsequently to profit or loss: |
|
|
|
|
|
|
|
|
Unrealized gains (losses) on available-for-sale (AFS) financial securities, net of tax $nil, $6 |
|
|
18 |
|
|
|
(68 |
) |
Realized (gains) losses and impairments on AFS financial securities, net of tax $nil, ($3) |
|
|
18 |
|
|
|
17 |
|
Unrealized gains (losses) on derivative investments designated as cash flow hedges, net of tax $6, ($7) |
|
|
(35 |
) |
|
|
(63 |
) |
Realized (gains) losses on derivative investments designated as cash flow hedges, net of tax ($1), $73 |
|
|
(88 |
) |
|
|
(325 |
) |
Currency translation adjustments gain (loss), net of tax $nil, $nil |
|
|
(43 |
) |
|
|
(93 |
) |
Items that will not be reclassified to profit or loss: |
|
|
|
|
|
|
|
|
Remeasurement gains (losses) of post-employment benefit obligations, net of tax $10,
($13) |
|
|
(19 |
) |
|
|
24 |
|
Total other comprehensive loss |
|
|
(149 |
) |
|
|
(508 |
) |
Total comprehensive loss |
|
$ |
(3,108 |
) |
|
$ |
(11,111 |
) |
Attributable to: |
|
|
|
|
|
|
|
|
Equity holders of Barrick Gold Corporation |
|
|
|
|
|
|
|
|
Continuing operations |
|
$ |
(3,056 |
) |
|
$ |
(10,337 |
) |
Discontinued operations |
|
$ |
- |
|
|
$ |
(537 |
) |
Non-controlling interests |
|
$ |
(52 |
) |
|
$ |
(237 |
) |
The accompanying notes are an integral part of these consolidated financial statements.
|
|
|
|
|
BARRICK YEAR END 2014 |
|
105 |
|
FINANCIAL STATEMENTS |
Consolidated Statements of Cash Flow
|
|
|
|
|
|
|
|
|
Barrick Gold Corporation
For the years ended December 31 (in millions of United States dollars) |
|
|
2014 |
|
|
|
2013 |
|
OPERATING ACTIVITIES |
|
|
|
|
|
|
|
|
Net loss from continuing operations |
|
$ |
(2,959 |
) |
|
$ |
(10,097 |
) |
Adjustments for the following items: |
|
|
|
|
|
|
|
|
Depreciation |
|
|
1,648 |
|
|
|
1,732 |
|
Finance costs (note 13) |
|
|
796 |
|
|
|
657 |
|
Impairment charges (note 9b) |
|
|
4,106 |
|
|
|
12,687 |
|
Income tax expense (note 11) |
|
|
306 |
|
|
|
630 |
|
Increase in inventory |
|
|
(78 |
) |
|
|
(352 |
) |
Proceeds from settlement of hedge contracts |
|
|
- |
|
|
|
219 |
|
Loss (gain) on non-hedge derivatives (note 24e) |
|
|
193 |
|
|
|
(76 |
) |
Gain on sale of long-lived assets/investments |
|
|
(52 |
) |
|
|
(41 |
) |
Other operating activities (note
14a) |
|
|
(442 |
) |
|
|
601 |
|
Operating cash flows before interest and income taxes |
|
|
3,518 |
|
|
|
5,960 |
|
Interest paid |
|
|
(707 |
) |
|
|
(662 |
) |
Income taxes paid |
|
|
(515 |
) |
|
|
(1,109 |
) |
Net cash provided by operating activities from continuing operations |
|
|
2,296 |
|
|
|
4,189 |
|
Net cash provided by operating activities from discontinued operations |
|
|
- |
|
|
|
50 |
|
Net cash provided by operating activities |
|
|
2,296 |
|
|
|
4,239 |
|
INVESTING ACTIVITIES |
|
|
|
|
|
|
|
|
Property, plant and equipment |
|
|
|
|
|
|
|
|
Capital expenditures (note 5) |
|
|
(2,432 |
) |
|
|
(5,501 |
) |
Sales proceeds |
|
|
72 |
|
|
|
50 |
|
Proceeds from joint venture agreement of Jabal Sayid |
|
|
216 |
|
|
|
- |
|
Divestitures (note 4) |
|
|
166 |
|
|
|
522 |
|
Investment sales |
|
|
120 |
|
|
|
18 |
|
Other investing activities (note
14b) |
|
|
(92 |
) |
|
|
(262 |
) |
Net cash used in investing activities from continuing operations |
|
|
(1,950 |
) |
|
|
(5,173 |
) |
Net cash used in investing activities from discontinued operations |
|
|
- |
|
|
|
(64 |
) |
Net cash used in investing activities |
|
|
(1,950 |
) |
|
|
(5,237 |
) |
FINANCING ACTIVITIES |
|
|
|
|
|
|
|
|
Capital stock |
|
|
|
|
|
|
|
|
Proceeds on exercise of stock options |
|
|
- |
|
|
|
1 |
|
Proceeds on common share offering (note 30) |
|
|
- |
|
|
|
2,910 |
|
Proceeds from divestment of 10% of issued ordinary share capital of Acacia (note
4c) |
|
|
186 |
|
|
|
- |
|
Debt (note 24b) |
|
|
|
|
|
|
|
|
Proceeds |
|
|
141 |
|
|
|
5,414 |
|
Repayments |
|
|
(188 |
) |
|
|
(6,412 |
) |
Dividends (note 30) |
|
|
(232 |
) |
|
|
(508 |
) |
Funding from non-controlling interests (note 31) |
|
|
24 |
|
|
|
55 |
|
Other financing activities (note
14c) |
|
|
9 |
|
|
|
(118 |
) |
Net cash provided by (used in) financing activities from continuing operations |
|
|
(60 |
) |
|
|
1,342 |
|
Net cash provided by financing activities from discontinued operations |
|
|
- |
|
|
|
- |
|
Net cash provided by (used in) financing activities |
|
|
(60 |
) |
|
|
1,342 |
|
Effect of exchange rate changes on cash and equivalents |
|
|
(11 |
) |
|
|
(17 |
) |
Net increase in cash and equivalents |
|
|
275 |
|
|
|
327 |
|
Cash and equivalents at beginning of year (note 24a) |
|
|
2,404 |
|
|
|
2,097 |
|
Add: cash and equivalents of assets classified as held for sale at the beginning of year |
|
|
20 |
|
|
|
- |
|
Cash and equivalents at the end of year
(note 24a) |
|
$ |
2,699 |
|
|
$ |
2,424 |
|
Less: cash and equivalents of assets classified as held for sale at the end of year |
|
|
- |
|
|
|
20 |
|
Cash and equivalents excluding assets classified as held for sale at the end of
year |
|
$ |
2,699 |
|
|
$ |
2,404 |
|
The accompanying notes are an integral part of these consolidated financial statements.
|
|
|
|
|
BARRICK YEAR END 2014 |
|
106 |
|
FINANCIAL STATEMENTS |
Consolidated Balance Sheets
|
|
|
|
|
|
|
|
|
Barrick Gold Corporation |
|
As at December 31, |
|
|
As at December 31, |
|
(in millions of United States dollars) |
|
|
2014 |
|
|
|
2013 |
|
ASSETS |
|
|
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
|
|
Cash and equivalents (note 24a) |
|
$ |
2,699 |
|
|
$ |
2,404 |
|
Accounts receivable (note 17) |
|
|
418 |
|
|
|
385 |
|
Inventories (note 16) |
|
|
2,722 |
|
|
|
2,679 |
|
Other current assets (note
17) |
|
|
311 |
|
|
|
421 |
|
Total current assets (excluding assets classified as held for sale) |
|
|
6,150 |
|
|
|
5,889 |
|
Assets classified as held for sale |
|
|
- |
|
|
|
323 |
|
Total current assets |
|
|
6,150 |
|
|
|
6,212 |
|
|
|
|
Non-current assets |
|
|
|
|
|
|
|
|
Equity in investees (note 15a) |
|
|
206 |
|
|
|
27 |
|
Other investments (note 15b) |
|
|
35 |
|
|
|
120 |
|
Property, plant and equipment (note 18) |
|
|
19,193 |
|
|
|
21,688 |
|
Goodwill (note 19a) |
|
|
4,426 |
|
|
|
5,835 |
|
Intangible assets (note 19b) |
|
|
308 |
|
|
|
320 |
|
Deferred income tax assets (note 29) |
|
|
674 |
|
|
|
501 |
|
Non-current portion of inventory (note 16) |
|
|
1,684 |
|
|
|
1,679 |
|
Other assets (note 21) |
|
|
1,203 |
|
|
|
1,066 |
|
Total assets |
|
$ |
33,879 |
|
|
$ |
37,448 |
|
LIABILITIES AND EQUITY |
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
|
Accounts payable (note 22) |
|
$ |
1,653 |
|
|
$ |
2,165 |
|
Debt (note 24b) |
|
|
333 |
|
|
|
179 |
|
Current income tax liabilities |
|
|
84 |
|
|
|
75 |
|
Other current liabilities (note
23) |
|
|
490 |
|
|
|
303 |
|
Total current liabilities (excluding liabilities classified as held for sale) |
|
|
2,560 |
|
|
|
2,722 |
|
Liabilities classified as held for sale |
|
|
- |
|
|
|
162 |
|
Total current liabilities |
|
|
2,560 |
|
|
|
2,884 |
|
|
|
|
Non-current liabilities |
|
|
|
|
|
|
|
|
Debt (note 24b) |
|
|
12,748 |
|
|
|
12,901 |
|
Provisions (note 26) |
|
|
2,561 |
|
|
|
2,428 |
|
Deferred income tax liabilities (note 29) |
|
|
2,036 |
|
|
|
2,258 |
|
Other liabilities (note
28) |
|
|
1,112 |
|
|
|
976 |
|
Total liabilities |
|
|
21,017 |
|
|
|
21,447 |
|
Equity |
|
|
|
|
|
|
|
|
Capital stock (note 30) |
|
|
20,864 |
|
|
|
20,869 |
|
Deficit |
|
|
(10,739 |
) |
|
|
(7,581 |
) |
Accumulated other comprehensive income (loss) |
|
|
(199 |
) |
|
|
(69 |
) |
Other |
|
|
321 |
|
|
|
314 |
|
Total equity attributable to Barrick Gold Corporation shareholders |
|
|
10,247 |
|
|
|
13,533 |
|
Non-controlling interests (note
31) |
|
|
2,615 |
|
|
|
2,468 |
|
Total equity |
|
|
12,862 |
|
|
|
16,001 |
|
Contingencies and commitments (notes 2,
16, 18 and 35) |
|
|
|
|
|
|
|
|
Total liabilities and equity |
|
$ |
33,879 |
|
|
$ |
37,448 |
|
The accompanying notes are an integral part of these consolidated financial statements.
|
|
|
|
|
Signed on behalf of the Board, |
|
|
|
|
|
|
|
|
|
John L. Thornton, Chairman |
|
Steven J. Shapiro, Director |
|
|
|
|
|
|
|
BARRICK YEAR END 2014 |
|
107 |
|
FINANCIAL STATEMENTS |
Consolidated Statements of Changes in Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Barrick Gold Corporation |
|
|
|
|
Attributable to equity holders of the company |
|
|
|
|
|
|
|
(in millions of United States dollars) |
|
|
Common Shares (in thousands) |
|
|
|
Capital stock |
|
|
|
Retained earnings (deficit) |
|
|
|
Accumulated other comprehensive income (loss)1 |
|
|
|
Other2 |
|
|
|
Total equity attributable to shareholders |
|
|
|
Non- controlling interests |
|
|
|
Total equity |
|
At January 1, 2014 |
|
|
1,164,652 |
|
|
$ |
20,869 |
|
|
$ |
(7,581 |
) |
|
$ |
(69 |
) |
|
$ |
314 |
|
|
$ |
13,533 |
|
|
$ |
2,468 |
|
|
$ |
16,001 |
|
Net loss |
|
|
- |
|
|
|
- |
|
|
|
(2,907 |
) |
|
|
- |
|
|
|
- |
|
|
|
(2,907 |
) |
|
|
(52 |
) |
|
|
(2,959 |
) |
Total other comprehensive loss |
|
|
- |
|
|
|
- |
|
|
|
(19 |
) |
|
|
(130 |
) |
|
|
- |
|
|
|
(149 |
) |
|
|
- |
|
|
|
(149 |
) |
Total comprehensive loss |
|
|
- |
|
|
$ |
- |
|
|
$ |
(2,926 |
) |
|
$ |
(130 |
) |
|
$ |
- |
|
|
$ |
(3,056 |
) |
|
$ |
(52 |
) |
|
$ |
(3,108 |
) |
Transactions with owners |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends |
|
|
- |
|
|
|
- |
|
|
|
(232 |
) |
|
|
- |
|
|
|
- |
|
|
|
(232 |
) |
|
|
- |
|
|
|
(232 |
) |
Issued on exercise of stock options |
|
|
18 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Derecognition of stock option expense |
|
|
- |
|
|
|
(5 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(5 |
) |
|
|
- |
|
|
|
(5 |
) |
Recognized on divestment of 10% of Acacia Mining plc |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
7 |
|
|
|
7 |
|
|
|
174 |
|
|
|
181 |
|
Funding from non-controlling interests |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
29 |
|
|
|
29 |
|
Other decrease in non-controlling interests |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(4 |
) |
|
|
(4 |
) |
Total transactions with owners |
|
|
18 |
|
|
$ |
(5 |
) |
|
$ |
(232 |
) |
|
$ |
- |
|
|
$ |
7 |
|
|
$ |
(230 |
) |
|
$ |
199 |
|
|
$ |
(31 |
) |
At December 31, 2014 |
|
|
1,164,670 |
|
|
$ |
20,864 |
|
|
$ |
(10,739 |
) |
|
$ |
(199 |
) |
|
$ |
321 |
|
|
$ |
10,247 |
|
|
$ |
2,615 |
|
|
$ |
12,862 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At January 1, 2013 |
|
|
1,001,108 |
|
|
$ |
17,926 |
|
|
$ |
3,269 |
|
|
$ |
463 |
|
|
$ |
314 |
|
|
$ |
21,972 |
|
|
$ |
2,664 |
|
|
$ |
24,636 |
|
Net loss |
|
|
- |
|
|
|
- |
|
|
|
(10,366 |
) |
|
|
- |
|
|
|
- |
|
|
|
(10,366 |
) |
|
|
(237 |
) |
|
|
(10,603 |
) |
Total other comprehensive income (loss) |
|
|
- |
|
|
|
- |
|
|
|
24 |
|
|
|
(532 |
) |
|
|
- |
|
|
|
(508 |
) |
|
|
- |
|
|
|
(508 |
) |
Total comprehensive loss |
|
|
- |
|
|
$ |
- |
|
|
$ |
(10,342 |
) |
|
$ |
(532 |
) |
|
$ |
- |
|
|
$ |
(10,874 |
) |
|
$ |
(237 |
) |
|
$ |
(11,111 |
) |
Transactions with owners |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends |
|
|
- |
|
|
|
- |
|
|
|
(508 |
) |
|
|
- |
|
|
|
- |
|
|
|
(508 |
) |
|
|
- |
|
|
|
(508 |
) |
Issued on public equity offering |
|
|
163,500 |
|
|
|
2,934 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
2,934 |
|
|
|
- |
|
|
|
2,934 |
|
Issued on exercise of stock options |
|
|
44 |
|
|
|
1 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1 |
|
|
|
- |
|
|
|
1 |
|
Recognition of stock option expense |
|
|
- |
|
|
|
8 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
8 |
|
|
|
- |
|
|
|
8 |
|
Funding from non-controlling interests |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
55 |
|
|
|
55 |
|
Other decrease in non-controlling interests |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(14 |
) |
|
|
(14 |
) |
Total transactions with owners |
|
|
163,544 |
|
|
$ |
2,943 |
|
|
$ |
(508 |
) |
|
$ |
- |
|
|
$ |
- |
|
|
$ |
2,435 |
|
|
$ |
41 |
|
|
$ |
2,476 |
|
At December 31, 2013 |
|
|
1,164,652 |
|
|
$ |
20,869 |
|
|
$ |
(7,581 |
) |
|
$ |
(69 |
) |
|
$ |
314 |
|
|
$ |
13,533 |
|
|
$ |
2,468 |
|
|
$ |
16,001 |
|
1 |
Includes cumulative translation adjustments as at December 31, 2014: $122 million loss (2013: $80 million). |
2 Includes additional paid-in capital as at December 31, 2014: $283 million (December 31,
2013: $276 million) and convertible borrowings - equity component as at December 31, 2014: $38 million (December 31, 2013: $38 million).
The accompanying
notes are an integral part of these consolidated financial statements.
|
|
|
|
|
BARRICK YEAR END 2014 |
|
108 |
|
FINANCIAL STATEMENTS |
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
Barrick Gold Corporation. Tabular dollar amounts in millions of United States dollars,
unless otherwise shown. References to A$, ARS, C$, CLP, DOP, EUR, GBP, JPY, PGK, TZS, ZAR, and ZMW are to Australian dollars, Argentine pesos, Canadian dollars, Chilean pesos, Dominican pesos, Euros, British pound sterling, Japanese yen, Papua New
Guinea kina, Tanzanian shillings, South African rand, and Zambian kwacha, respectively.
1 > CORPORATE INFORMATION
Barrick Gold Corporation (Barrick or the Company) is a corporation governed by the Business Corporations Act (Ontario). The
Companys head and registered office is located at Brookfield Place, TD Canada Trust Tower, 161 Bay Street, Suite 3700, Toronto, Ontario, M5J 2S1. We are principally engaged in the production and sale of gold and copper, as well as related
activities such as exploration and mine development. Our producing gold mines are located in Canada, the United States, Peru, Argentina, Australia, Dominican Republic and Papua New Guinea. We also hold a 63.9% equity interest in Acacia Mining plc
(Acacia), formerly African Barrick Gold plc, a company listed on the London Stock Exchange that owns gold mines and exploration properties in Africa. Our Copper business contains producing copper mines located in Chile and Zambia and a
mine under construction in Saudi Arabia. We also have projects located in South America and North America. We sell our gold and copper production into the world market.
2 > SIGNIFICANT ACCOUNTING POLICIES
A) |
Statement of Compliance |
These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as
issued by the International Accounting Standards Board (IASB) under the historical cost convention, as modified by revaluation of derivative contracts and certain financial assets. Accounting policies are consistently applied to all
years presented, unless otherwise stated. Certain items within the statement of income have been reclassified in the current year. The prior periods have been restated to reflect the change in presentation. The most significant changes relate to: i)
reclassifying closed mine rehabilitation costs and loss (gain) on currency translation from other expense (income) into separate line items on the consolidated statement of income; ii) corporate social responsibility costs have been reclassified
from other expenses (income) into community
relations costs within cost of sales and within exploration, evaluation and project expenses; and iii) reclassifying energy sales and related cost of sales from other expense (income) into
revenue and cost of sales, respectively. These consolidated financial statements were approved for issuance by the Board of Directors on February 18, 2015.
Subsidiaries
These consolidated financial
statements include the accounts of Barrick and its subsidiaries. All intercompany balances, transactions, income and expenses, and profits or losses have been eliminated on consolidation. We consolidate subsidiaries where we have the ability to
exercise control. Control of an investee is defined to exist when we are exposed to variable returns from our involvement with the investee and have the ability to affect those returns through our power over the investee. Specifically, we control an
investee if, and only if, we have all of the following: power over the investee (i.e., existing rights that give us the current ability to direct the relevant activities of the investee); exposure, or rights, to variable returns from our involvement
with the investee; and the ability to use our power over the investee to affect its returns. For non wholly-owned, controlled subsidiaries, the net assets attributable to outside equity shareholders are presented as
non-controlling interests in the equity section of the consolidated balance sheet. Profit for the period that is attributable to non-controlling interests is calculated based on the ownership of
the minority shareholders in the subsidiary.
Joint Arrangements
A joint arrangement is defined as one over which two or more parties have joint control, which is the contractually agreed sharing of control over
an arrangement. This exists only when the decisions about the relevant activities (being those that significantly affect the returns of the arrangement) require the unanimous consent of the parties sharing control. There are two types of joint
arrangements, joint operations (JO) and joint ventures (JV).
A JO is a joint arrangement whereby the parties that
have joint control of the arrangement have rights to the assets and obligations for the liabilities, relating to the arrangement. In relation to our interests in joint operations, we recognize our share of any assets, liabilities, revenues and
expenses of the JO.
|
|
|
|
|
BARRICK YEAR END 2014 |
|
109 |
|
NOTES TO FINANCIAL STATEMENTS |
A JV is a joint arrangement whereby the parties that have joint control of the arrangement have
rights to the net assets of the joint venture. Our investment in the JV is accounted for using the equity method.
On acquisition, an equity
method investment is initially recognized at cost. The carrying amount of equity method investments includes goodwill identified on acquisition, net of any accumulated impairment losses. The carrying amount is adjusted by our share of
post-acquisition net income or loss, depreciation, amortization or impairment of the fair value adjustments made at the date of acquisition, dividends, cash contributions and our share of post-acquisition movements in Other Comprehensive Income
(OCI).
Associates
An associate is an entity over which the investor has significant influence but not control and that is neither a subsidiary nor an interest in a
joint arrangement. Significant influence is presumed to exist where the Company has between 20% and 50% of the voting rights, but can also arise where the Company has less than 20% if we have the power to be actively involved and influential in
policy decisions affecting the entity. Our share of the net assets and net income or loss is accounted for in the consolidated financial statements using the equity method of accounting.
Outlined below is information
related to our joint arrangements and entities other than 100% owned Barrick subsidiaries at December 31, 2014:
|
|
|
|
|
|
|
|
|
|
|
Place of business |
|
Entity type |
|
Economic interest1 |
|
Method2 |
Round Mountain Mine |
|
United States |
|
JO |
|
50% |
|
Our share |
Turquoise Ridge Mine3 |
|
United States |
|
JO |
|
75% |
|
Our share |
Kalgoorlie Mine |
|
Australia |
|
JO |
|
50% |
|
Our share |
Porgera Mine |
|
Papua New Guinea |
|
JO |
|
95% |
|
Our share |
Acacia Mining plc4 |
|
Tanzania |
|
Subsidiary, publicly traded |
|
63.9% |
|
Consolidation |
Pueblo Viejo4 |
|
Dominican Republic |
|
Subsidiary |
|
60% |
|
Consolidation |
Cerro Casale Project4 |
|
Chile |
|
Subsidiary |
|
75% |
|
Consolidation |
Donlin Gold Project |
|
United States |
|
JO |
|
50% |
|
Our share |
Jabal Sayid5 |
|
Saudi Arabia |
|
JV |
|
50% |
|
Equity Method |
Kabanga Project5,6 |
|
Tanzania |
|
JV |
|
50% |
|
Equity Method |
1 |
Unless otherwise noted, all of our joint arrangements are funded by contributions made by their partners in proportion to their economic interest.
|
2 |
For our JOs, we recognize our share of any assets, liabilities, revenues and expenses of the JO. |
3 |
We have joint control given that decisions about relevant activities require unanimous consent of the parties to the joint operation.
|
4 |
We consolidate our interests in Pueblo Viejo, Cerro Casale and Acacia and record a non-controlling interest for the 40%, 25% and 36.1%, respectively,
that we do not own. |
5 |
Barrick has commitments of $29 million relating to its interest in the joint ventures in 2014. |
6 |
Our JV is an early stage exploration project and, as such, does not have any significant assets, liabilities, income, contractual commitments or
contingencies. Expenses are recognized through our equity pick-up (loss). Refer to note 15 for further details. |
On the acquisition of a business, the acquisition method of accounting is used, whereby the purchase consideration is allocated to the identifiable
assets and liabilities on the basis of fair value at the date of acquisition. Provisional fair values allocated at a reporting date are finalized as soon as the relevant information is available, within a period not to exceed twelve months from the
acquisition date with retroactive restatement of the impact of adjustments to those provisional fair values effective as at the acquisition date. Incremental costs related to acquisitions are expensed as incurred.
When the amount of purchase consideration is contingent on future events, the initial cost of the
acquisition recorded includes an estimate of the fair value of the contingent amounts expected to be payable in the future. When the fair value of contingent consideration as at the date of acquisition is finalized before the purchase price
allocation is finalized, the adjustment is allocated to the identifiable assets and liabilities acquired. Subsequent changes to the estimated fair value of contingent consideration are recorded in the consolidated statement of income.
When the cost of the acquisition exceeds the fair values of the identifiable net assets acquired, the difference is
|
|
|
|
|
BARRICK YEAR END 2014 |
|
110 |
|
NOTES TO FINANCIAL STATEMENTS |
recorded as goodwill. If the fair value attributable to Barricks share of the identifiable net assets exceeds the cost of acquisition, the difference is recognized as a gain in the
consolidated statement of income.
Non-controlling interests represent the fair value of net assets in subsidiaries, as at the date of
acquisition, that are not held by Barrick and are presented in the equity section of the consolidated balance sheet.
When control of a
subsidiary is acquired in stages, its carrying value prior to the acquisition of control is compared with the fair value of the identifiable net assets at that date. If fair value is greater than/less than carrying value, gain/loss is recorded in
the consolidated statement of income.
D) |
Non-current assets and disposal groups held for sale and Discontinued Operations |
Non-current assets and disposal groups are classified as assets held for sale (HFS) if it is highly probable that the value of these
assets will be recovered primarily through sale rather than through continuing use. They are recorded at the lower of carrying amount and fair value less cost of disposal. Impairment losses on initial classification as HFS and subsequent gains and
losses on remeasurement are recognized in the income statement. Once classified as held-for sale, property, plant and equipment are no longer amortized. The assets and liabilities are presented as held for sale in the consolidated balance sheet when
the sale is highly probable, the asset or disposal group is available for immediate sale in its present condition and management is committed to the sale, which should be expected to be completed within one year from the date of classification.
A discontinued operation is a component of the Company that can be clearly distinguished from the rest of the Company, both operationally and for
financial reporting purposes, and the value of this component is expected to be recovered primarily through sale rather than continuing use.
Results of operations and any gain or loss from disposal are excluded from income before finance items and income taxes and are reported
separately as income/loss from discontinued operations.
E) |
Foreign Currency Translation |
The functional currency of the Company, for each subsidiary of the Company, and for joint arrangements and associates, is the currency of the
primary economic environment in which it operates. The functional currency of all of our operations is the US dollar. We translate
non-US dollar balances for these operations into US dollars as follows:
|
|
Property, plant and equipment (PP&E), intangible assets and equity method investments using the rates at the time of acquisition;
|
|
|
Available-for-sale securities using the closing exchange rate as at the balance sheet date with translation gains and losses recorded in OCI;
|
|
|
Deferred tax assets and liabilities using the closing exchange rate as at the balance sheet date with translation gains and losses recorded in income
tax expense; |
|
|
Other assets and liabilities using the closing exchange rate as at the balance sheet date with translation gains and losses recorded in other
income/expense; and |
|
|
Income and expenses using the average exchange rate for the period, except for expenses that relate to non-monetary assets and liabilities measured at
historical rates, which are translated using the same historical rate as the associated non-monetary assets and liabilities. |
We record revenue when evidence exists that all of the following criteria are met:
|
|
The significant risks and rewards of ownership of the product have been transferred to the buyer; |
|
|
Neither continuing managerial involvement to the degree usually associated with ownership, nor effective control over the goods sold, has been
retained; |
|
|
The amount of revenue can be reliably measured; |
|
|
It is probable that the economic benefits associated with the sale will flow to us; and |
|
|
The costs incurred or to be incurred in respect of the sale can be reliably measured. |
These conditions are generally satisfied when title passes to the customer.
Gold Bullion Sales
Gold bullion
is sold primarily in the London spot market. The sales price is fixed at the delivery date based on the gold spot price. Generally, we record revenue from gold bullion sales at the time of physical delivery, which is also the date that title to the
gold passes.
Concentrate Sales
Under the terms of concentrate sales contracts with independent smelting companies, gold and copper sales prices are provisionally set on a
specified future date after shipment based on market prices. We record revenues under these contracts at the time of shipment, which is also when the risk and rewards of ownership pass to the smelting companies, using forward market gold and copper
prices on the expected date that final sales prices will be
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BARRICK YEAR END 2014 |
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111 |
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NOTES TO FINANCIAL STATEMENTS |
determined. Variations between the price recorded at the shipment date and the actual final price set under the smelting contracts are caused by changes in market gold and copper prices, which
result in the existence of an embedded derivative in accounts receivable. The embedded derivative is recorded at fair value each period until final settlement occurs, with changes in fair value classified as provisional price adjustments and
included in revenue in the consolidated statement of income.
Copper Cathode Sales
Under the terms of copper cathode sales contracts, copper sales prices are provisionally set on a specified future date based upon market commodity
prices plus certain price adjustments. Revenue is recognized at the time of shipment, which is also when the risks and rewards of ownership pass to the customer. Revenue is provisionally measured using forward market prices on the expected date that
final selling prices will be determined. Variations occur between the price recorded on the date of revenue recognition and the actual final price under the terms of the contracts due to changes in market copper prices, which result in the existence
of an embedded derivative in accounts receivable. This embedded derivative is recorded at fair value each period until final settlement occurs, with changes in fair value classified as provisional price adjustments and included in revenue in the
consolidated statement of income.
G) |
Exploration and Evaluation (E&E) |
Exploration expenditures are the costs incurred in the initial search for mineral deposits with economic potential or in the process of obtaining
more information about existing mineral deposits. Exploration expenditures typically include costs associated with prospecting, sampling, mapping, diamond drilling and other work involved in searching for ore.
Evaluation expenditures are the costs incurred to establish the technical and commercial viability of developing mineral deposits identified
through exploration activities or by acquisition. Evaluation expenditures include the cost of (i) establishing the volume and grade of deposits through drilling of core samples, trenching and sampling activities in an ore body that is
classified as either a mineral resource or a proven and probable reserve; (ii) determining the optimal methods of extraction and metallurgical and treatment processes; (iii) studies related to surveying, transportation and infrastructure
requirements; (iv) permitting activities; and (v) economic evaluations to determine whether development of the mineralized material is commercially justified, including scoping, prefeasibility and final feasibility studies.
Exploration and evaluation expenditures are expensed as incurred unless management determines that
probable future economic benefits will be generated as a result of the expenditures. Once the technical feasibility and commercial viability of a program or project has been demonstrated with a prefeasibility study, and we have recognized reserves
in accordance with National Instrument 43-101, we account for future expenditures incurred in the development of that program or project in accordance with our policy for Property, Plant & Equipment, as described in note 2(m).
Earnings per share is computed by dividing net income available to common shareholders by the weighted average number of common shares outstanding
for the period. Diluted earnings per share reflect the potential dilution that could occur if additional common shares are assumed to be issued under securities that entitle their holders to obtain common shares in the future. For stock options, the
number of additional shares for inclusion in diluted earnings per share calculations is determined using the treasury stock method. Under this method, stock options, whose exercise price is less than the average market price of our common shares,
are assumed to be exercised and the proceeds are used to repurchase common shares at the average market price for the period. The incremental number of common shares issued under stock options and repurchased from proceeds is included in the
calculation of diluted earnings per share.
Current
tax for each taxable entity is based on the local taxable income at the local statutory tax rate enacted or substantively enacted at the balance sheet date and includes adjustments to tax payable or recoverable in respect of previous periods.
Deferred tax is recognized using the balance sheet method in respect of all temporary differences between the tax bases of assets and liabilities,
and their carrying amounts for financial reporting purposes, except as indicated below.
Deferred income tax liabilities are recognized for all taxable
temporary differences, except:
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Where the deferred income tax liability arises from the initial recognition of goodwill, or the initial recognition of an asset or liability in an
acquisition that is not a business combination and, at the time of the acquisition, affects neither the accounting profit nor taxable profit or loss; and |
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In respect of taxable temporary differences associated with investments in subsidiaries and interests in joint
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BARRICK YEAR END 2014 |
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112 |
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NOTES TO FINANCIAL STATEMENTS |
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ventures, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.
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Deferred income tax assets are recognized for all deductible temporary differences and the carry-forward of unused tax
assets and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences and the carry-forward of unused tax assets and unused tax losses can be utilized, except:
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Where the deferred income tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in an
acquisition that is not a business combination and, at the time of the acquisition, affects neither the accounting profit nor taxable profit or loss; and |
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In respect of deductible temporary differences associated with investments in subsidiaries and interests in joint ventures, deferred tax assets are
recognized only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilized. |
The carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable
that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilized. To the extent that an asset not previously recognized fulfills the criteria for recognition, a deferred income tax asset is
recorded.
Deferred tax is measured on an undiscounted basis at the tax rates that are expected to apply in the periods in which the asset is
realized or the liability is settled, based on tax rates and tax laws enacted or substantively enacted at the balance sheet date.
Current and
deferred tax relating to items recognized directly in equity are recognized in equity and not in the income statement.
Royalties and Special Mining Taxes
Income tax expense includes the cost of royalty and special mining taxes payable to governments that are calculated based on a percentage
of taxable profit whereby taxable profit represents net income adjusted for certain items defined in the applicable legislation.
Indirect Taxes
Indirect tax recoverable is recorded at its undiscounted amount, and is disclosed as non-current if not expected to be recovered within twelve
months.
Investments in publicly quoted equity securities that are neither subsidiaries nor associates are categorized as available-for-sale.
Available-for-sale equity investments are recorded at fair value with unrealized gains and losses recorded in OCI. Realized gains and losses are recorded in earnings when investments are sold and are calculated using the average carrying amount of
securities sold.
If the fair value of an investment declines below the carrying amount, we undertake qualitative and quantitative assessments
of whether the impairment is either significant or prolonged. If an unrealized loss on an available-for-sale investment has been recognized in OCI and it is deemed to be either significant or prolonged, any cumulative loss that had been recognized
in OCI is reclassified as an impairment loss in the consolidated statement of income. The reclassification adjustment is calculated as the difference between the acquisition cost and current fair value, less any impairment loss on that financial
asset previously recognized. If the value of a previously impaired available-for-sale equity investment subsequently recovers, additional unrealized gains are recorded in OCI and the previously recorded impairment losses are not reversed through the
consolidated statement of income.
Material
extracted from our mines is classified as either ore or waste. Ore represents material that, at the time of extraction, we expect to process into a saleable form and sell at a profit. Raw materials are comprised of both ore in stockpiles and ore on
leach pads as processing is required to extract benefit from the ore. Ore is accumulated in stockpiles that are subsequently processed into gold/copper in a saleable form. The recovery of gold and copper from certain oxide ores is achieved through
the heap leaching process. Work in process represents gold/copper in the processing circuit that has not completed the production process, and is not yet in a saleable form. Finished goods inventory represents gold/copper in saleable form. Mine
operating supplies represent commodity consumables and other raw materials used in the production process, as well as spare parts and other maintenance supplies that are not classified as capital items.
Inventories are valued at the lower of cost and net realizable value. Cost is determined on a weighted average
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BARRICK YEAR END 2014 |
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NOTES TO FINANCIAL STATEMENTS |
basis and includes all costs incurred, based on a normal production capacity, in bringing each product to its present location and condition. Cost of inventories comprises direct labor, materials
and contractor expenses, including non-capitalized stripping costs; depreciation on PP&E including capitalized stripping costs; and an allocation of mine site overhead costs. As ore is removed for processing, costs are removed based on the
average cost per ounce/pound in the stockpile.
We record provisions to reduce inventory to net realizable value to reflect changes in
economic factors that impact inventory value and to reflect present intentions for the use of slow moving and obsolete supplies inventory. Net realizable value is determined with reference to relevant market prices less applicable variable selling
expenses. Provisions recorded also reflect an estimate of the remaining costs of completion to bring the inventory into its saleable form. Provisions are also recorded to reduce mine operating supplies to net realizable value, which is generally
calculated by reference to its salvage or scrap value, when it is determined that the supplies are obsolete. Provisions are reversed to reflect subsequent recoveries in net realizable value where the inventory is still on hand.
A
mine that is under construction is determined to enter the production stage when the project is in the location and condition necessary for it to be capable of operating in the manner intended by management. We use the following factors to assess
whether these criteria have been met: (1) the level of capital expenditures compared to construction cost estimates; (2) the completion of a reasonable period of testing of mine plant and equipment; (3) the ability to produce minerals
in saleable form (within specifications); and (4) the ability to sustain ongoing production of minerals.
When a mine construction
project moves into the production stage, the capitalization of certain mine construction costs ceases and costs are either capitalized to inventory or expensed, except for capitalizable costs related to property, plant and equipment additions or
improvements, open pit stripping activities that provide a future benefit, underground mine development or expenditures that meet the criteria for capitalization in accordance with IAS 16 Property Plant and Equipment.
Pre-production stripping costs are capitalized until an other than de minimis level of mineral is extracted, after which time such
costs are either capitalized to inventory or, if it qualifies as an open pit stripping activity that provides a future benefit, to PP&E. We consider various relevant
criteria to assess when an other than de minimis level of mineral is produced. Some of the criteria considered would include, but are not limited to, the following: (1) the
amount of minerals mined versus total ounces in life of mine (LOM) ore; (2) the amount of ore tons mined versus total LOM expected ore tons mined; (3) the current stripping ratio versus the LOM strip ratio; and (4) the ore
grade versus the LOM grade.
M) |
Property, Plant and Equipment |
Buildings, Plant and Equipment
At acquisition, we
record buildings, plant and equipment at cost, including all expenditures incurred to prepare an asset for its intended use. These expenditures consist of: the purchase price; brokers commissions; and installation costs including
architectural, design and engineering fees, legal fees, survey costs, site preparation costs, freight charges, transportation insurance costs, duties, testing and preparation charges.
We capitalize costs that meet the asset recognition criteria. Costs incurred that do not extend the productive capacity or useful economic life of
an asset are considered repairs and maintenance expense and are accounted for as a cost of the inventory produced in the period.
Buildings,
plant and equipment are depreciated on a straight-line basis over their expected useful life, which commences when the assets are considered available for use. Once buildings, plant and equipment are considered available for use they are measured at
cost less accumulated depreciation and applicable impairment losses.
Depreciation on equipment utilized in the development of assets,
including open pit and underground mine development, is recapitalized as development costs attributable to the related asset.
Estimated useful lives of
Major Asset Categories
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Buildings, plant and equipment |
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5 - 29 years |
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Underground mobile equipment |
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5 - 7 years |
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Light vehicles and other mobile equipment |
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2 - 3 years |
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Furniture, computer and office equipment |
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2 - 3 years |
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BARRICK YEAR END 2014 |
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NOTES TO FINANCIAL STATEMENTS |
Leasing Arrangements
The determination of whether an arrangement is, or contains, a lease is based on the substance of the arrangement at inception date, including
whether the fulfillment of the arrangement is dependent on the use of a specific asset or assets or whether the arrangement conveys a right to use the asset.
Leasing arrangements that transfer substantially all the risks and rewards of ownership of the asset to Barrick are classified as finance leases.
Finance leases are recorded as an asset with a corresponding liability at an amount equal to the lower of the fair value of the leased property and the present value of the minimum lease payments. Each lease payment is allocated between the
liability and finance costs using the effective interest method, whereby a constant rate of interest expense is recognized on the balance of the liability outstanding. The interest element of the lease is charged to the consolidated statement of
income as a finance cost.
PP&E assets acquired under finance leases are depreciated, over the shorter of the useful life of the asset and
the lease term.
All other leases are classified as operating leases. Operating lease payments are recognized as an operating cost in the
consolidated statements of income on a straight-line basis over the lease term.
Mineral Properties
Mineral properties consist of: the fair value attributable to mineral reserves and resources acquired in a business combination or asset
acquisition; underground mine development costs; open pit mine development costs; capitalized exploration and evaluation costs; and capitalized interest. In addition, we incur project costs which are generally capitalized when the expenditures
result in a future benefit.
i) Acquired Mining Properties
On acquisition of a mining property we prepare an estimate of the fair value attributable to the proven and probable mineral reserves, mineral
resources and exploration potential attributable to the property. The estimated fair value attributable to the mineral reserves and the portion of mineral resources considered to be probable of economic extraction at the time of the acquisition is
depreciated on a units of production (UOP) basis whereby the denominator is the proven and probable reserves and the portion of mineral resources considered to be probable of economic extraction. The estimated fair value attributable to
mineral resources that are not considered to
be probable of economic extraction at the time of the acquisition is not subject to depreciation, until the resources become probable of economic extraction in the future. The estimated fair
value attributable to exploration licenses is recorded as an intangible asset and is not subject to depreciation until the property enters production.
ii)
Underground Mine Development Costs
At our underground mines, we incur development costs to build new shafts, drifts and ramps that will
enable us to physically access ore underground. The time over which we will continue to incur these costs depends on the mine life. These underground development costs are capitalized as incurred.
Capitalized underground development costs incurred to enable access to specific ore blocks or areas of the underground mine, and which only
provide an economic benefit over the period of mining that ore block or area, are depreciated on a UOP basis, whereby the denominator is estimated ounces/pounds of gold/copper in proven and probable reserves and the portion of resources within that
ore block or area that is considered probable of economic extraction.
If capitalized underground development costs provide an economic
benefit over the entire mine life, the costs are depreciated on a UOP basis, whereby the denominator is the estimated ounces/pounds of gold/copper in total accessible proven and probable reserves and the portion of resources that is considered
probable of economic extraction.
iii) Open Pit Mining Costs
In open pit mining operations, it is necessary to remove overburden and other waste materials to access ore from which minerals can be extracted
economically. The process of mining overburden and waste materials is referred to as stripping. Stripping costs incurred in order to provide initial access to the ore body (referred to as pre-production stripping) are capitalized as open pit mine
development costs.
Stripping costs incurred during the production stage of a pit are accounted for as costs of the inventory produced during
the period that the stripping costs are incurred, unless these costs are expected to provide a future economic benefit to an identifiable component of the ore body. Components of the ore body are based on the distinct development phases identified
by the mine planning engineers when determining the optimal development plan for the open pit. Production phase stripping costs generate
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BARRICK YEAR END 2014 |
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NOTES TO FINANCIAL STATEMENTS |
a future economic benefit when the related stripping activity: (i) improves access to a component of the ore body to be mined in the future; (ii) increases the fair value of the mine
(or pit) as access to future mineral reserves becomes less costly; and (iii) increases the productive capacity or extends the productive life of the mine (or pit). Production phase stripping costs that are expected to generate a future economic
benefit are capitalized as open pit mine development costs.
Capitalized open pit mine development costs are depreciated on a UOP basis
whereby the denominator is the estimated ounces/pounds of gold/copper in proven and probable reserves and the portion of resources considered probable of economic extraction based on the current LOM plan in the current component of the ore body that
has been made more accessible through the stripping activity and all future components in the current plan that benefit from the particular stripping activity. Capitalized open pit mine development costs are depreciated once the open pit has entered
production and the future economic benefit is being derived.
Construction-in-Progress
Assets under construction at operating mines are capitalized as construction-in-progress. The cost of construction-in-progress comprises its
purchase price and any costs directly attributable to bringing it into working condition for its intended use. Construction-in-progress amounts related to development projects are included in the carrying amount of the development project.
Construction-in-progress amounts incurred at operating mines are presented as a separate asset within PP&E. Construction-in-progress also includes deposits on long lead items. Construction-in-progress is not depreciated. Depreciation commences
once the asset is complete and available for use.
Capitalized Interest
We capitalize interest costs for qualifying assets. Qualifying assets are assets that require a significant amount of time to prepare for their
intended use, including projects that are in the exploration and evaluation, development or construction stages. Qualifying assets also include significant expansion projects at our operating mines. Capitalized interest costs are considered an
element of the cost of the qualifying asset which is determined based on gross expenditures incurred on an asset. Capitalization ceases when the asset is substantially complete or if active development is suspended or ceases. Where the funds used to
finance a qualifying asset form part of general borrowings, the amount capitalized is calculated using a weighted average of rates applicable to
the relevant borrowings during the period. Where funds borrowed are directly attributable to a qualifying asset, the amount capitalized represents the borrowing costs specific to those
borrowings. Where surplus funds available out of money borrowed specifically to finance a project are temporarily invested, the total capitalized interest is reduced by income generated from short-term investments of such funds.
Insurance
We record losses relating to insurable
events as they occur. Proceeds receivable from insurance coverage are recorded at such time as receipt is receivable or virtually certain and the amount receivable is fixed or determinable. For business interruption the amount is only recognized
when it is virtually certain or receivable as supported by receipt of notification of a minimum or proposed settlement amount from the insurance adjuster.
Under the
acquisition method of accounting, the costs of business combinations are allocated to the assets acquired and liabilities assumed based on the estimated fair value at the date of acquisition. The excess of the fair value of consideration paid over
the fair value of the identifiable net assets acquired is recorded as goodwill. Goodwill is not amortized; instead it is tested annually for impairment at the start of the fourth quarter for all of our segments. In addition, at each reporting period
we assess whether there is an indication that goodwill is impaired and, if there is such an indication, we would test for goodwill impairment at that time. At the date of acquisition, goodwill is assigned to the cash generating unit
(CGU) or group of CGUs that is expected to benefit from the synergies of the business combination. For the purposes of impairment testing, goodwill is allocated to the Companys operating segments, which corresponds to the level at
which goodwill is internally monitored by the Chief Operating Decision Maker (CODM), the Co-Presidents.
The recoverable amount of
an operating segment is the higher of Value in Use (VIU) and Fair Value Less Costs of Disposal (FVLCD). A goodwill impairment is recognized for any excess of the carrying amount of the operating segment over its recoverable
amount. Goodwill impairment charges are not reversible.
Intangible assets acquired by way of an asset acquisition or business combination are recognized if the asset is separable or arises from
contractual or legal rights and the fair value can be measured reliably on initial recognition.
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BARRICK YEAR END 2014 |
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NOTES TO FINANCIAL STATEMENTS |
On acquisition of a mineral property in the exploration stage, we prepare an estimate of the fair
value attributable to the exploration licenses acquired, including the fair value attributable to mineral resources, if any, of that property. The fair value of the exploration license is recorded as an intangible asset (acquired exploration
potential) as at the date of acquisition. When an exploration stage property moves into development, the acquired exploration potential attributable to that property is transferred to mining interests within PP&E.
P) |
Impairment of Non-Current Assets |
We review and test the carrying amounts of PP&E and intangible assets with definite lives when an indicator of impairment is considered to
exist. Impairment assessments on PP&E and intangible assets are conducted at the level of CGU, which is the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and includes any liabilities
specific to the CGU. For operating mines and projects, the individual mine/project represents a CGU for impairment testing.
The recoverable
amount of a CGU is the higher of VIU and FVLCD. An impairment loss is recognized for any excess of the carrying amount of a CGU over its recoverable amount where both the recoverable amount and carrying value include the associated other assets and
liabilities including taxes where applicable, of the CGU. Where it is not appropriate to allocate the loss to a separate asset, an impairment loss related to a CGU is allocated to the carrying amount of the assets of the CGU on a pro rata basis
based on the carrying amount of its non-monetary assets.
Impairment Reversal
Impairment losses for PP&E and intangible assets are reversed if there has been a change in the estimates used to determine the assets
recoverable amount since the last impairment loss was recognized, and it has been determined that the asset is no longer impaired or that impairment has decreased. This reversal is recognized in the consolidated statements of income and is limited
to the carrying value that would have been determined, net of any depreciation where applicable, had no impairment charge been recognized in prior years. When an impairment reversal is undertaken, the recoverable amount is assessed by reference to
the higher of VIU and FVLCD.
Debt is
recognized initially at fair value, net of financing costs incurred, and subsequently measured at amortized cost. Any difference between the amounts originally received and the redemption value of the debt is recognized in the consolidated statement
of income over the period to maturity using the effective interest method.
R) |
Derivative Instruments and Hedge Accounting |
Derivative Instruments
Derivative instruments
are recorded at fair value on the consolidated balance sheet, classified based on contractual maturity. Derivative instruments are classified as either hedges of the fair value of recognized assets or liabilities or of firm commitments (fair
value hedges), hedges of highly probable forecast transactions (cash flow hedges) or non-hedge derivatives. Derivatives designated as either a fair value or cash flow hedge that are expected to be highly effective in achieving
offsetting changes in fair value or cash flows are assessed on an ongoing basis to determine that they actually have been highly effective throughout the financial reporting periods for which they were designated. Derivative assets and derivative
liabilities are shown separately in the balance sheet unless there is a legal right to offset and intent to settle on a net basis.
Fair Value Hedges
Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in the consolidated statement
of income, together with any changes in the fair value of the hedged asset or liability or firm commitment that is attributable to the hedged risk.
Cash
Flow Hedges
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is
recognized in equity. The gain or loss relating to the ineffective portion is recognized in the consolidated statements of income. Amounts accumulated in equity are transferred to the consolidated statements of income in the period when the
forecasted transaction impacts earnings. When the forecasted transaction that is hedged results in the recognition of a non-financial asset or a non-financial liability, the gains and losses previously deferred in equity are transferred from equity
and included in the measurement of the initial carrying amount of the asset or liability.
When a derivative designated as a cash flow hedge
expires or is sold and the forecasted transaction is still expected to occur, any cumulative gain or loss relating to the derivative that is recorded in equity at that time remains in equity and is recognized in the consolidated statements of income
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BARRICK YEAR END 2014 |
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NOTES TO FINANCIAL STATEMENTS |
when the forecasted transaction occurs. When a forecasted transaction is no longer expected to occur, the cumulative gain or loss that was recorded in equity is immediately transferred to the
consolidated statements of income.
Non-Hedge Derivatives
Derivative instruments that do not qualify as either fair value or cash flow hedges are recorded at their fair value at the balance sheet date,
with changes in fair value recognized in the consolidated statements of income.
Derivatives embedded in other financial instruments or executory contracts are accounted for as separate derivatives when their risks and
characteristics are not closely related to their host financial instrument or contract. In some cases, the embedded derivatives may be designated as hedges and are accounted for as described above.
T) |
Fair Value Measurement |
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date. The fair value hierarchy establishes three levels to classify the inputs to valuation techniques used to measure fair value. Refer to note 25 for further information.
U) |
Environmental Rehabilitation Provision |
Mining, extraction and processing activities normally give rise to obligations for environmental rehabilitation. Rehabilitation work can include
facility decommissioning and dismantling; removal or treatment of waste materials; site and land rehabilitation, including compliance with and monitoring of environmental regulations; security and other site-related costs required to perform the
rehabilitation work; and operation of equipment designed to reduce or eliminate environmental effects. The extent of work required and the associated costs are dependent on the requirements of relevant authorities and our environmental policies.
Routine operating costs that may impact the ultimate closure and rehabilitation activities, such as waste material handling conducted as an integral part of a mining or production process, are not included in the provision. Costs arising from
unforeseen circumstances, such as the contamination caused by unplanned discharges, are recognized as an expense and liability when the event that gives rise to an obligation occurs and reliable estimates of the required rehabilitation costs can be
made.
Provisions for the cost of each rehabilitation program are normally recognized at the time that an
environmental disturbance occurs or a constructive obligation is determined. When the extent of disturbance increases over the life of an operation, the provision is increased accordingly. The major parts of the carrying amount of provisions relate
to tailings pond closure/rehabilitation; demolition of buildings/mine facilities; ongoing water treatment; and ongoing care and maintenance and security of closed mines. Costs included in the provision encompass all closure and rehabilitation
activity expected to occur progressively over the life of the operation at the time of closure and post-closure in connection with disturbances as at the reporting date. Estimated costs included in the determination of the provision reflect the
risks and probabilities of alternative estimates of cash flows required to settle the obligation at each particular operation. The expected rehabilitation costs are estimated based on the cost of external contractors performing the work or the cost
of performing the work internally depending on managements intention.
The timing of the actual rehabilitation expenditure is dependent
upon a number of factors such as the life and nature of the asset, the operating license conditions and the environment in which the mine operates. Expenditures may occur before and after closure and can continue for an extended period of time
depending on rehabilitation requirements. Rehabilitation provisions are measured at the expected value of future cash flows, which exclude the effect of inflation, discounted to their present value using a current US dollar real risk-free pre-tax
discount rate. The unwinding of the discount, referred to as accretion expense, is included in finance costs and results in an increase in the amount of the provision. Provisions are updated each reporting period for changes to expected cash flows
and for the effect of changes in the discount rate, and the change in estimate is added or deducted from the related asset and depreciated over the expected economic life of the operation to which it relates.
Significant judgments and estimates are involved in forming expectations of future activities and the amount and timing of the associated cash
flows. Those expectations are formed based on existing environmental and regulatory requirements or, if more stringent, our environmental policies which give rise to a constructive obligation.
When provisions for closure and rehabilitation are initially recognized, the corresponding cost is capitalized as an asset, representing part of
the cost of acquiring the future economic benefits of the operation. The capitalized cost of closure and rehabilitation activities is recognized in PP&E
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BARRICK YEAR END 2014 |
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NOTES TO FINANCIAL STATEMENTS |
and depreciated over the expected economic life of the operation to which it relates.
Adjustments to the estimated amount and timing of future closure and rehabilitation cash flows are a normal occurrence in light of the significant
judgments and estimates involved. The principal factors that can cause expected cash flows to change are: the construction of new processing facilities; changes in the quantities of material in reserves and resources with a corresponding change in
the life of mine plan; changing ore characteristics that impact required environmental protection measures and related costs; changes in water quality that impact the extent of water treatment required; changes in discount rates; changes in foreign
exchange rates and changes in laws and regulations governing the protection of the environment.
Rehabilitation provisions are adjusted as a
result of changes in estimates and assumptions. Those adjustments are accounted for as a change in the corresponding cost of the related assets, including the related mineral property, except where a reduction in the provision is greater than the
remaining net book value of the related assets, in which case the value is reduced to nil and the remaining adjustment is recognized in the consolidated statement of income. In the case of closed sites, changes in estimates and assumptions are
recognized immediately in the consolidated statement of income. For an operating mine, the adjusted carrying amount of the related asset is depreciated prospectively. Adjustments also result in changes to future finance costs.
V) |
Litigation and Other Provisions |
Provisions are recognized when a present obligation exists (legal or constructive), as a result of a past event, for which it is probable that an
outflow of resources will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. Provisions are discounted to their present value using a current US dollar real risk-free pre-tax discount rate and
the accretion expense is included in finance costs.
Certain conditions may exist as of the date the 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. In assessing loss contingencies related to legal proceedings that are pending against us or unasserted claims that may result
in such proceedings, the Company with assistance from 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 a loss is probable, and the amount can be reliably
estimated, then a loss is recorded. When a contingent loss is not probable but is reasonably possible, or is probable but the amount of loss cannot be reliably estimated, then details of the contingent loss are disclosed. Loss contingencies
considered remote are generally not disclosed unless they involve guarantees, in which case we disclose the nature of the guarantee. Legal fees incurred in connection with pending legal proceedings are expensed as incurred. Contingent gains are only
recognized when the inflow of economic benefits is virtually certain.
W) |
Stock-Based Compensation |
Barrick offers equity-settled (Employee Stock Option Plan (ESOP), Employee Share Purchase Plan (ESPP)), cash-settled
(Restricted Share Units (RSU), Deferred Share Units (DSU), Performance Restricted Share Units (PRSU)) and Performance Granted Share Units (PGSU) awards to certain employees, officers and directors of
the Company.
Equity-settled awards are measured at fair value using the Lattice model with market related inputs as of the date of the grant.
The cost is recorded over the vesting period of the award to the same expense category as the award recipients payroll costs (i.e. cost of sales, operating segment administration, corporate administration) and the corresponding entry is
recorded in equity. Equity-settled awards are not remeasured subsequent to the initial grant date.
Cash-settled awards are measured at fair
value initially using the market value of the underlying shares on the day preceding the date of the grant of the award and are required to be remeasured to fair value at each reporting date until settlement. The cost is then recorded over the
vesting period of the award. This expense, and any changes in the fair value of the award, is recorded to the same expense category as the award recipients payroll costs. The cost of a cash-settled award is recorded within liabilities until
settled.
We use the accelerated method (also referred to as graded vesting) for attributing stock option expense over the vesting
period. Stock option expense incorporates an expected forfeiture rate. The expected forfeiture rate is estimated based on historical forfeiture rates and expectations of future forfeiture rates. We make adjustments if the actual forfeiture rate
differs from the expected rate.
|
|
|
|
|
BARRICK YEAR END 2014 |
|
119 |
|
NOTES TO FINANCIAL STATEMENTS |
Employee Stock Option Plan (ESOP)
Under Barricks ESOP, certain officers and key employees of the Corporation may purchase common shares at an exercise price that is equal to
the closing share price on the day before the grant of the option. The grant date is the date when the details of the award, including the number of options granted to the individual and the exercise price, are approved. Stock options vest equally
over four years, beginning in the year after granting. The ESOP arrangement has graded vesting terms, and therefore, multiple vesting periods must be valued and accounted for separately over their respective vesting periods. The compensation expense
of the instruments issued for each grant under the ESOP is calculated using the Lattice model. The compensation expense is adjusted by the estimated forfeiture rate which is estimated based on historical forfeiture rates and expectations of future
forfeiture rates. We make adjustments if the actual forfeiture rate differs from the expected rate.
Restricted Share Units (RSU)
Under our RSU plan, selected employees are granted RSUs where each RSU has a value equal to one Barrick common share. RSUs generally vest from
two-and-a-half to three years and are settled in cash upon vesting. Additional RSUs are credited to reflect dividends paid on Barrick common shares over the vesting period.
A liability for RSUs is measured at fair value on the grant date and is subsequently adjusted for changes in fair value. The liability is
recognized on a straight-line basis over the vesting period, with a corresponding charge to compensation expense, as a component of corporate administration and operating segment administration. Compensation expenses for RSUs incorporate an estimate
for expected forfeiture rates based on which the fair value is adjusted.
Deferred Share Units (DSU)
Under our DSU plan, Directors must receive a specified portion of their basic annual retainer in the form of DSUs, with the option to elect to
receive 100% of such retainer in DSUs. Each DSU has the same value as one Barrick common share. DSUs must be retained until the Director leaves the Board, at which time the cash value of the DSUs is paid out. Additional DSUs are credited to reflect
dividends paid on Barrick common shares. The initial fair value of the liability is calculated as of the grant date and is recognized immediately. Subsequently, at each reporting date and on settlement, the liability is remeasured, with any change
in fair value recorded as compensation expense in the period. Officers may also elect to receive a portion or all of their incentive compensation in the form of DSUs.
Performance Restricted Share Units (PRSU)
Under our PRSU plan, selected employees are granted PRSUs, where each PRSU has a value equal to one Barrick common share. PRSUs vest at the end of
a three-year period and are settled in cash on the third anniversary of the grant date. Additional PRSUs are credited to reflect dividends paid on Barrick common shares over the vesting period. Vesting, and therefore the liability, is based on the
achievement of performance goals and the target settlement ranges from 0% to 200% of the original grant of units.
The value of a PRSU
reflects the value of a Barrick common share and the number of shares issued is adjusted for its relative performance against certain competitors and other internal financial performance measures. Therefore, the fair value of the PRSUs is determined
with reference to the closing stock price at each remeasurement date.
The initial fair value of the liability is calculated as of the grant
date and is recognized within compensation expense using the straight-line method over the vesting period. Subsequently, at each reporting date and on settlement, the liability is remeasured, with any changes in fair value recorded as compensation
expense. The fair value is adjusted for the revised estimated forfeiture rate.
Performance Granted Share Units (PGSU)
Under our PGSU plan, selected employees are granted PGSUs, where each PGSU has a value equal to one Barrick common share. Annual PGSU awards are
determined based on a multiple ranging from one to six times base salary (depending on position and level of responsibility) multiplied by a performance factor. The number of PGSUs granted to a plan participant is determined by dividing the dollar
value of the award by the closing price of Barrick common shares on the day prior to the grant. Upon vesting, PGSUs are converted into common shares and these shares cannot be sold until the employee retires or leaves Barrick. PGSUs vest at the end
of the third year from the date of the grant.
The initial fair value of the liability is calculated as of the grant date and is recognized
within compensation expense using the straight-line method over the vesting period. Subsequently, at each reporting date and on settlement, the liability is remeasured, with any changes in fair value recorded as compensation expense. The fair value
is adjusted for the revised estimated forfeiture rate.
|
|
|
|
|
BARRICK YEAR END 2014 |
|
120 |
|
NOTES TO FINANCIAL STATEMENTS |
Employee Share Purchase Plan
Under our ESPP plan, Barrick employees can purchase Company shares through payroll deduction. Each year, employees may contribute 1%-6% of their
combined base salary and annual short-term incentive, and Barrick will match 50% of the contribution, up to a maximum of $5,000 per year.
Both Barrick and the employee make the contributions on a bi-monthly basis with the funds being transferred to a custodian who purchases Barrick
Common Shares in the open market. Shares purchased with employee contributions have no vesting requirement; however, shares purchased with Barricks contributions vest approximately one year from contribution date. All dividend income is used
to purchase additional Barrick shares.
Barrick records an expense equal to its bi-monthly cash contribution. No forfeiture rate is applied to
the amounts accrued. Where an employee leaves prior to vesting, any accrual for contributions by Barrick during the year related to that employee is reversed.
X) Post-Retirement Benefits
Defined Contribution Pension Plans
Certain
employees take part in defined contribution employee benefit plans whereby we contribute up to 6% of the employees annual salary. We also have a retirement plan for certain officers of Barrick under which we contribute 15% of the
officers annual salary and annual short-term incentive. The contributions are recognized as compensation expense as incurred. The Company has no further payment obligations once the contributions have been paid.
Defined Benefit Pension Plans
We have qualified
defined benefit pension plans that cover certain former United States and Canadian employees and provide benefits based on employees years of service. Our policy is to fund the amounts necessary on an actuarial basis to provide enough assets
to meet the benefits payable to plan members. Independent trustees administer assets of the plans, which are invested mainly in fixed income and equity securities.
As well as the qualified plans, we have non-qualified defined benefit pension plans covering certain employees and former directors of Barrick. No
funding is done on these plans and contributions for future years are required to be equal to benefit payments.
Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions
are charged or credited to equity in other comprehensive income in the period in which they arise.
Our valuations are carried out using the
projected unit credit method. We record the difference between the fair value of the plan assets and the present value of the plan obligations as an asset or liability on the consolidated balance sheets.
Pension Plan Assets and Liabilities
Pension
plan assets, which consist primarily of fixed-income and equity securities, are valued using current market quotations. Plan obligations and the annual pension expense are determined on an actuarial basis and are affected by numerous assumptions and
estimates including the market value of plan assets, estimates of the expected return on plan assets, discount rates, future wage increases and other assumptions.
The discount rate and life expectancy are the assumption that generally have the most significant impact on our pension cost and obligation.
Other Post-Retirement Benefits
We provide
post-retirement medical, dental, and life insurance benefits to certain employees. Actuarial gains and losses resulting from variances between actual results and economic estimates or actuarial assumptions are recorded in OCI.
Y) |
New Accounting Standards Adopted during the Year |
The Company has adopted IFRIC 21 Levies effective January 1, 2014.
IFRIC 21 Levies
In May 2013, the IASB issued
IFRIC 21 Levies, which sets out the accounting for an obligation to pay a levy that is not income tax. The interpretation addresses what the obligating event is that gives rise to the recognition of a liability to pay a levy. We performed an
assessment of the impact of IFRIC 21 and concluded it did not have a significant impact on our consolidated financial statements.
Z) |
New Accounting Standards Issued But Not Yet Effective |
IFRS 9 Financial Instruments
In July 2014, the
IASB issued the final version of IFRS 9 Financial Instruments bringing together the classification and measurement, impairment and hedge accounting phases of the IASBs project to replace IAS 39 Financial Instruments: Recognition and
Measurement. IFRS 9 retains
|
|
|
|
|
BARRICK YEAR END 2014 |
|
121 |
|
NOTES TO FINANCIAL STATEMENTS |
but simplifies the mixed measurement model and establishes two primary measurement categories for financial assets: amortized cost and fair value. IFRS 9 also amends some of the requirements of
IFRS 7 Financial Instruments: Disclosures, including added disclosures about investments in equity instruments measured at fair value in OCI, and guidance on financial liabilities and derecognition of financial instruments.
The mandatory effective date of IFRS 9 would be annual periods beginning on or after January 1, 2018, with early adoption permitted. IFRS 9
will be applied starting January 1, 2015 and consequently, we will amend our accounting policy for derivative instruments and hedge accounting reflecting the early adoption. We expect to have reduced volatility in our income statements and an
increase in the amount of unrealized gains and losses being reported in OCI as a result of adopting IFRS 9.
IFRS 15 Revenue from Contracts with Customers
In May 2014, the IASB issued IFRS 15 Revenue from Contracts with Customers, which covers principles that an entity shall apply to report
useful information to users of financial statements about the nature, amount, timing, and uncertainty of revenue and cash flows arising from a contract with a customer. Application of the standard is mandatory for annual reporting periods beginning
on or after January 1, 2017, with earlier application permitted. We are currently assessing the impact on our consolidated financial statements along with timing of our adoption of IFRS 15.
3 > CRITICAL JUDGMENTS, ESTIMATES, ASSUMPTIONS AND RISKS
Many of the amounts included in the consolidated balance sheet require management to make judgments and/or estimates. These judgments and estimates
are continuously evaluated and are based on managements experience and knowledge of the relevant facts and circumstances. Actual results may differ from the estimates. Information about such judgments and estimates is contained in the
description of our accounting policies and/or other notes to the financial statements. The key areas where judgments, estimates and assumptions have been made are summarized below.
Reserves and Resources
Estimates of the
quantities of proven and probable mineral reserves and mineral resources, form the basis for our LOM plans, which are used for a number of important business and accounting purposes, including: the calculation of depreciation expense; the
capitalization of production phase stripping costs; and forecasting the timing of the
payments related to the environmental rehabilitation provision. In addition, the underlying LOM plans are used in the impairment tests for goodwill and non-current assets. We estimate our ore
reserves and mineral resources based on information compiled by qualified persons as defined in accordance with the Canadian Securities Administrators National Instrument 43-101 Standards of Disclosure for Mineral Projects requirements. Refer
to notes 18 and 20.
Impairment and reversal of impairment for non-current assets and impairment of Goodwill
Goodwill and non-current assets are tested for impairment if there is an indicator of impairment, and in the case of goodwill, annually at the
start of the fourth quarter for all of our operating segments. Calculating the estimated fair values of CGUs for non-current asset impairment tests and CGUs or groups of CGUs for goodwill impairment tests requires management to make estimates and
assumptions with respect to future production levels, operating and capital costs in our LOM plans, future metal prices, foreign exchange rates, Net Asset Value (NAV) multiples, value of reserves outside LOM plans in relation to the
assumptions related to comparable entities and the market values per ounce and per pound and discount rates. Changes in any of the assumptions or estimates used in determining the fair values could impact the impairment analysis. Refer to note 2n,
note 2p and note 20 for further information. Other than what is disclosed in note 20, we have not identified any impairment triggers or any indicators that prior impairments are required to be tested for reversal for the year ended December 31,
2014.
Provisions for Environmental Rehabilitation
Management assesses its provision for environmental rehabilitation on an annual basis or when new information becomes available. This assessment
includes the estimation of the future rehabilitation costs, the timing of these expenditures, and the impact of changes in discount rates and foreign exchange rates. The actual future expenditures may differ from the amounts currently provided if
the estimates made are significantly different than actual results or if there are significant changes in environmental and/or regulatory requirements in the future. Refer to notes 2u and 26 for further information.
Taxes
Management is required to make
estimations regarding the tax basis of assets and liabilities and related deferred income tax assets and liabilities, amounts recorded for uncertain tax positions, the measurement of income tax expense and indirect taxes, and estimates of the timing
of repatriation of earnings, which would impact the recognition of withholding taxes and taxes related to the
|
|
|
|
|
BARRICK YEAR END 2014 |
|
122 |
|
NOTES TO FINANCIAL STATEMENTS |
outside basis on subsidiaries/associates. A number of these estimates require management to make estimates of future taxable profit, and the recoverability of indirect taxes, and if actual
results are significantly different than our estimates, the ability to realize the deferred tax assets and indirect tax receivables recorded on our balance sheet could be impacted. Refer to note 2i, note 11 and note 29 for further information.
Contingencies
Contingencies can be either
possible assets or possible liabilities arising from past events which, by their nature, will only be resolved when one or more future events not wholly within our control occur or fail to occur. The assessment of such contingencies inherently
involves the exercise of significant judgment and estimates of the outcome of future events. In assessing loss contingencies related to legal proceedings that are pending against us or unasserted claims, that may result in such proceedings or
regulatory or government actions that may negatively impact our business or operations, the Company with assistance from its legal counsel evaluates the perceived merits of any legal proceedings or unasserted claims or actions as well as the
perceived merits of the nature and amount of relief sought or expected to be sought, when determining the amount, if any, to recognize as a contingent liability or assessing the impact on the carrying value of assets. Contingent assets are not
recognized in the consolidated financial statements. Refer to note 35 for more information.
Pascua-Lama
As a result of our decision to suspend the construction of our Pascua-Lama project, significant judgment and estimation has been used in
determining our accrued liabilities, including: demobilization, contract claims, severance and VAT refunds previously received in Chile. For contractors, it is necessary to estimate accruals for work completed but not yet invoiced based on
subjective assessments of the stage of completion of their work in relation to invoices rendered; and for costs arising from existing contracts for legal or constructive obligations arising from our demobilization actions. In addition, we have
received VAT refunds in Chile related to Pascua-Lama of $543 million that will require repayment should the project not come into production by 2017, which has not been accrued as the suspension is considered temporary. We expect to be able to
extend the date of the commencement of production with the Chilean authorities to avoid repaying these amounts, although if unsuccessful, would be required to repay them. We also recorded VAT recoverable in Argentina of $461 million at
December 31, 2014 (December 31, 2013 $519 million), which may not be
recoverable should the project not advance to production and is subject to devaluation risk as the amounts are recoverable in Argentine pesos.
Refer to note 27 for a summary of our key financial risks.
Other
Notes to the Financial Statements
|
|
|
|
|
|
|
Note |
|
Divestitures |
|
|
4 |
|
Segment information |
|
|
5 |
|
Revenue |
|
|
6 |
|
Cost of sales |
|
|
7 |
|
Exploration, evaluation and project expenses |
|
|
8 |
|
Other expense (income) |
|
|
9 |
|
General and administrative expenses |
|
|
10 |
|
Income tax expense |
|
|
11 |
|
Loss per share |
|
|
12 |
|
Finance costs |
|
|
13 |
|
Cash flow other items |
|
|
14 |
|
Investments |
|
|
15 |
|
Inventories |
|
|
16 |
|
Accounts receivable and other current assets |
|
|
17 |
|
Property, plant and equipment |
|
|
18 |
|
Goodwill and other intangible assets |
|
|
19 |
|
Impairment of goodwill and non-current assets |
|
|
20 |
|
Other assets |
|
|
21 |
|
Accounts payable |
|
|
22 |
|
Other current liabilities |
|
|
23 |
|
Financial instruments |
|
|
24 |
|
Fair value measurements |
|
|
25 |
|
Provisions |
|
|
26 |
|
Financial risk management |
|
|
27 |
|
Other non-current liabilities |
|
|
28 |
|
Deferred income taxes |
|
|
29 |
|
Capital stock |
|
|
30 |
|
Non-controlling interests |
|
|
31 |
|
Remuneration of key management personnel |
|
|
32 |
|
Stock-based compensation |
|
|
33 |
|
Post-retirement benefits |
|
|
34 |
|
Contingencies |
|
|
35 |
|
|
|
|
|
|
BARRICK YEAR END 2014 |
|
123 |
|
NOTES TO FINANCIAL STATEMENTS |
4 > DIVESTITURES
A) Divestment |
of 50 percent interest in Jabal Sayid |
On July 13, 2014, Barrick entered into an agreement to form a joint venture with Maaden to operate the Jabal Sayid copper project.
Maaden, which is 50 percent owned by the Saudi Arabian government, acquired its 50 percent interest in the new joint venture company for cash consideration of $216 million. The transaction closed on December 3, 2014. Since the transaction
resulted in a loss of control, the assets and liabilities were written down to their fair value less costs of disposal, which resulted in an impairment loss of $514 million, including $316 million of goodwill, for the year ended December 31,
2014. Refer to note 20 for further details of the impairment loss.
Jabal Sayid is a joint arrangement which is structured through a separate
entity of which Barrick is a 50 percent shareholder. The terms of the contractual arrangement provide that we have rights to 50 percent of the net earnings of the entity, and therefore we concluded that it was a joint venture and, as such, we
recorded it as an equity method investment.
B) Disposition |
of Australian assets |
On January 31, 2014, we closed the sale of our Plutonic mine for total cash consideration of $22 million. In addition, on March 1, 2014,
we completed the sale of our Kanowna mine for total cash consideration of $67 million. The transactions resulted in a loss of $5 million for the year ended December 31, 2014.
On September 30, 2013, we recorded the sale of Yilgarn South assets, which comprised of Granny Smith, Lawlers and Darlot mines from Australia
for total proceeds of $266 million, consisting of $135 million in cash and $131 million in Gold Fields Limited shares (GFL). We measured GFL shares using the quoted market price at September 30, 2013 and there were no restrictions
on when we would be able to divest these shares. As a result of this sale, we recognized a gain of $11 million for the year ended December 31, 2013.
C) Disposition |
of 10 percent interest in Acacia |
On March 11, 2014, we completed the divestment of 41 million ordinary shares in Acacia, representing 10 percent of the issued ordinary
share capital of Acacia for net cash proceeds of $186 million. Subsequent to the divestment, we continue to retain a controlling interest in Acacia and continue to consolidate Acacia. We have accounted for the divestment as an equity transaction
and, accordingly, recorded the difference between the proceeds received and the carrying value of $179 million as $7 million of additional paid-in capital in shareholders equity.
D) Disposition |
of Marigold mine |
On
April 4, 2014, we completed the divestiture of our minority interest in the Marigold mine, for total cash consideration of $86 million. The transaction resulted in a gain of $21 million for the year ended December 31, 2014.
E) Disposition |
of Barrick Energy |
On July 31, 2013, we closed the sale of Barrick Energy for total proceeds of $435 million, consisting of $387 million in cash and a future
royalty valued at $48 million. As a result of the sale, we recognized a loss of $519 million for the year ended December 31, 2013 representing the difference between the net proceeds and our carrying value.
The condensed statement of income for Barrick Energy for the year ended December 31, 2013, which has been disclosed as a discontinued
operation in the consolidated statements of income, is as follows:
|
|
|
|
|
For the year ended December 31 |
|
2013 |
|
Revenue |
|
|
$ 93 |
|
Cost of sales1 |
|
|
79 |
|
Loss on remeasurement/impairment |
|
|
519 |
|
Other expense |
|
|
13 |
|
Loss before finance items and income taxes |
|
|
(518) |
|
Finance items |
|
|
(1) |
|
Loss before income taxes |
|
|
(519) |
|
Income tax recovery |
|
|
13 |
|
Net loss |
|
|
$ (506) |
|
1 Includes depreciation of $43 million for the year ended December 31,
2013.
|
|
|
|
|
BARRICK YEAR END 2014 |
|
124 |
|
NOTES TO FINANCIAL STATEMENTS |
5 > SEGMENT INFORMATION
As a result of the organizational changes that were implemented in third quarter 2014, we have determined that our Co-Presidents, acting together,
are Barricks Chief Operating Decision Maker (CODM). Beginning in fourth quarter 2014, CODM reviews the operating results, assesses performance and makes capital allocation decisions at the mine site or project level, with the
exception of Acacia which is reviewed and assessed as a separate business. Therefore, each individual mine site and Acacia are operating segments for financial reporting purposes. As a result, our former North America Portfolio, Australia Pacific
and Copper operating segments have been eliminated and each individual mine within those segments is now an operating segment. For segment reporting purposes, we present our reportable operating segments as follows: eight individual gold mines,
Acacia and our Pascua-Lama project. The remaining operating segments have been grouped into two other categories: (a) our remaining gold mines and (b) our two copper mines.
Segment performance is evaluated based on a number of measures including operating income before tax, production levels and unit production costs.
Income tax, operating segment administration, finance income and costs, impairment charges and reversals, investment write-downs and gains/losses on hedge and non-hedge derivatives are managed on a consolidated basis and are therefore not reflected
in segment income.
Consolidated Statements of Income Information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of Sales |
|
|
|
|
|
|
|
|
|
|
|
|
|
For the year ended December 31, 2014 |
|
Revenue |
|
|
Direct Mining, Royalties and Community Relations |
|
|
Depreciation |
|
|
Exploration, Evaluation and Project Expenses |
|
|
Other Expenses (Income)1 |
|
|
Segment Income (Loss) |
|
Goldstrike |
|
|
$1,154 |
|
|
|
$519 |
|
|
|
$132 |
|
|
|
$1 |
|
|
|
$6 |
|
|
|
$496 |
|
Cortez |
|
|
1,093 |
|
|
|
432 |
|
|
|
255 |
|
|
|
1 |
|
|
|
12 |
|
|
|
393 |
|
Pueblo Viejo |
|
|
1,552 |
|
|
|
642 |
|
|
|
243 |
|
|
|
- |
|
|
|
(2) |
|
|
|
669 |
|
Lagunas Norte |
|
|
775 |
|
|
|
243 |
|
|
|
92 |
|
|
|
2 |
|
|
|
(1) |
|
|
|
439 |
|
Veladero |
|
|
894 |
|
|
|
438 |
|
|
|
116 |
|
|
|
3 |
|
|
|
7 |
|
|
|
330 |
|
Turquoise Ridge |
|
|
252 |
|
|
|
94 |
|
|
|
17 |
|
|
|
1 |
|
|
|
1 |
|
|
|
139 |
|
Porgera |
|
|
644 |
|
|
|
465 |
|
|
|
80 |
|
|
|
2 |
|
|
|
13 |
|
|
|
84 |
|
Kalgoorlie |
|
|
417 |
|
|
|
267 |
|
|
|
42 |
|
|
|
1 |
|
|
|
1 |
|
|
|
106 |
|
Acacia |
|
|
923 |
|
|
|
564 |
|
|
|
129 |
|
|
|
18 |
|
|
|
21 |
|
|
|
191 |
|
Pascua-Lama |
|
|
- |
|
|
|
- |
|
|
|
14 |
|
|
|
113 |
|
|
|
(12) |
|
|
|
(115) |
|
Other Mines - Gold |
|
|
1,282 |
|
|
|
785 |
|
|
|
301 |
|
|
|
13 |
|
|
|
(4) |
|
|
|
187 |
|
Other Mines - Copper2 |
|
|
1,226 |
|
|
|
787 |
|
|
|
174 |
|
|
|
42 |
|
|
|
(10) |
|
|
|
233 |
|
|
|
|
$ 10,212 |
|
|
|
$ 5,236 |
|
|
|
$ 1,595 |
|
|
|
$ 197 |
|
|
|
$ 32 |
|
|
|
$ 3,152 |
|
|
|
|
|
|
BARRICK YEAR END 2014 |
|
125 |
|
NOTES TO FINANCIAL STATEMENTS |
Consolidated Statements of Income Information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of Sales |
|
|
|
|
|
|
|
|
|
|
For the year ended December 31, 2013 |
|
Revenue |
|
|
Direct Mining, Royalties and Community Relations |
|
|
Depreciation |
|
|
Exploration, Evaluation and Project Expenses |
|
|
Other Expenses (Income)1 |
|
|
Segment Income (Loss) |
|
Goldstrike |
|
|
$1,252 |
|
|
|
$550 |
|
|
|
$112 |
|
|
|
$ - |
|
|
|
$9 |
|
|
|
$581 |
|
Cortez |
|
|
1,938 |
|
|
|
315 |
|
|
|
321 |
|
|
|
3 |
|
|
|
10 |
|
|
|
1,289 |
|
Pueblo Viejo |
|
|
995 |
|
|
|
435 |
|
|
|
139 |
|
|
|
- |
|
|
|
(9) |
|
|
|
430 |
|
Lagunas Norte |
|
|
839 |
|
|
|
227 |
|
|
|
54 |
|
|
|
3 |
|
|
|
7 |
|
|
|
548 |
|
Veladero |
|
|
941 |
|
|
|
400 |
|
|
|
168 |
|
|
|
6 |
|
|
|
13 |
|
|
|
354 |
|
Turquoise Ridge |
|
|
225 |
|
|
|
95 |
|
|
|
14 |
|
|
|
- |
|
|
|
1 |
|
|
|
115 |
|
Porgera |
|
|
659 |
|
|
|
450 |
|
|
|
74 |
|
|
|
7 |
|
|
|
12 |
|
|
|
116 |
|
Kalgoorlie |
|
|
468 |
|
|
|
281 |
|
|
|
28 |
|
|
|
1 |
|
|
|
4 |
|
|
|
154 |
|
Acacia |
|
|
937 |
|
|
|
596 |
|
|
|
160 |
|
|
|
17 |
|
|
|
49 |
|
|
|
115 |
|
Pascua-Lama |
|
|
- |
|
|
|
- |
|
|
|
3 |
|
|
|
388 |
|
|
|
- |
|
|
|
(391) |
|
Other Mines - Gold |
|
|
2,474 |
|
|
|
1,485 |
|
|
|
409 |
|
|
|
30 |
|
|
|
25 |
|
|
|
525 |
|
Other Mines - Copper2 |
|
|
1,653 |
|
|
|
926 |
|
|
|
188 |
|
|
|
57 |
|
|
|
14 |
|
|
|
468 |
|
|
|
|
$ 12,381 |
|
|
|
$ 5,760 |
|
|
|
$ 1,670 |
|
|
|
$ 512 |
|
|
|
$ 135 |
|
|
|
$ 4,304 |
|
1 |
Other expenses include accretion expense, which is included with finance costs in the consolidated statements of income. For the year ended
December 31, 2014, accretion expense was $51 million (2013: $51 million). Refer to note 9a for details of other expenses (income). |
2 |
Includes exploration and evaluation expense and losses from equity investees that hold copper projects. |
|
|
|
|
|
|
|
|
|
Reconciliation of Segment Income to Loss from Continuing Operations Before Income Taxes |
|
|
|
|
|
|
For the years ended December 31 |
|
|
2014 |
|
|
|
2013 |
|
Segment income |
|
$ |
3,152 |
|
|
$ |
4,304 |
|
Other revenue1 |
|
|
27 |
|
|
|
146 |
|
Other cost of sales/amortization1,2 |
|
|
1 |
|
|
|
101 |
|
Exploration, evaluation and project expenses not attributable to segments |
|
|
(195 |
) |
|
|
(168 |
) |
General and administrative expenses |
|
|
(385 |
) |
|
|
(390 |
) |
Other (expense) income not attributable to segments |
|
|
(5 |
) |
|
|
28 |
|
Impairment charges |
|
|
(4,106 |
) |
|
|
(12,687 |
) |
Loss on currency translation |
|
|
(132 |
) |
|
|
(180 |
) |
Closed mine rehabilitation |
|
|
(83 |
) |
|
|
(100 |
) |
Finance income |
|
|
11 |
|
|
|
9 |
|
Finance costs (includes non segment accretion) |
|
|
(745 |
) |
|
|
(606 |
) |
(Loss) gain on non-hedge derivatives |
|
|
(193 |
) |
|
|
76 |
|
Loss before income taxes |
|
$ |
(2,653 |
) |
|
$ |
(9,467 |
) |
1 Includes revenue and costs from Pierina, which is not part of any of our
operating segments. Pierina entered closure in 2013.
2 Includes all realized hedge gains/losses.
|
|
|
|
|
BARRICK YEAR END 2014 |
|
126 |
|
NOTES TO FINANCIAL STATEMENTS |
Geographic Information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-current assets1 |
|
|
Revenue2 |
|
|
|
|
As at Dec. 31, 2014 |
|
|
|
As at Dec. 31, 2013 |
|
|
|
2014 |
|
|
|
2013 |
|
United States |
|
|
$ 9,455 |
|
|
|
$ 7,014 |
|
|
|
$ 3,095 |
|
|
|
$ 4,117 |
|
Zambia |
|
|
395 |
|
|
|
1,036 |
|
|
|
515 |
|
|
|
666 |
|
Chile |
|
|
3,711 |
|
|
|
3,998 |
|
|
|
711 |
|
|
|
987 |
|
Dominican Republic |
|
|
5,208 |
|
|
|
4,836 |
|
|
|
1,552 |
|
|
|
995 |
|
Argentina |
|
|
2,517 |
|
|
|
2,425 |
|
|
|
894 |
|
|
|
941 |
|
Tanzania |
|
|
1,717 |
|
|
|
1,549 |
|
|
|
923 |
|
|
|
937 |
|
Canada |
|
|
495 |
|
|
|
448 |
|
|
|
283 |
|
|
|
278 |
|
Saudi Arabia |
|
|
343 |
|
|
|
741 |
|
|
|
- |
|
|
|
- |
|
Australia |
|
|
1,155 |
|
|
|
997 |
|
|
|
821 |
|
|
|
1,962 |
|
Papua New Guinea |
|
|
668 |
|
|
|
672 |
|
|
|
644 |
|
|
|
659 |
|
Peru |
|
|
1,045 |
|
|
|
734 |
|
|
|
801 |
|
|
|
985 |
|
Unallocated1 |
|
|
1,020 |
|
|
|
6,786 |
|
|
|
- |
|
|
|
- |
|
Total |
|
|
$ 27,729 |
|
|
|
$ 31,236 |
|
|
|
$ 10,239 |
|
|
|
$ 12,527 |
|
1 |
As a result of the reorganization of our operating segments in the fourth quarter of 2014, the presentation of the 2014 non-current asset information differs from the 2013 information, which reflects the presentation
under the previous operating segment grouping. The primary difference relates to the presentation of goodwill in our former operating units in 2013 while being presented with the individual mine site for 2014. We have determined that it is not
practical to restate prior year comparative information into current year segment presentation, nor is it practical to disclose 2014 information into the previous segment grouping, as the goodwill impairments recorded in each of 2013 and 2014 would
have been determined at the operating segment level which is different in each year. As a result, the 2014 non-current asset information is presented under the updated segment presentation and the comparative 2013 information is disclosed under the
previous segment grouping. |
2 |
Presented based on the location from which the product originated. |
Capital Expenditures Information
|
|
|
|
|
|
|
|
|
|
|
Segment Capital Expenditures1 |
|
|
|
|
For the year ended Dec. 31, 2014 |
|
|
|
For the year ended Dec. 31, 2013 |
|
Goldstrike |
|
|
$ 558 |
|
|
|
$ 474 |
|
Cortez |
|
|
189 |
|
|
|
396 |
|
Pueblo Viejo |
|
|
134 |
|
|
|
169 |
|
Lagunas Norte |
|
|
82 |
|
|
|
145 |
|
Veladero |
|
|
173 |
|
|
|
208 |
|
Turquoise Ridge |
|
|
30 |
|
|
|
55 |
|
Porgera |
|
|
33 |
|
|
|
171 |
|
Kalgoorlie |
|
|
66 |
|
|
|
66 |
|
Acacia |
|
|
254 |
|
|
|
387 |
|
Pascua-Lama |
|
|
195 |
|
|
|
2,226 |
|
Other Mines - Gold |
|
|
183 |
|
|
|
487 |
|
Other Mines - Copper |
|
|
298 |
|
|
|
405 |
|
Segment total |
|
|
$ 2,195 |
|
|
|
$ 5,189 |
|
Other items not allocated to segments |
|
|
69 |
|
|
|
120 |
|
Total |
|
|
$ 2,264 |
|
|
|
$ 5,309 |
|
1 |
Segment capital expenditures are presented for internal management reporting purposes on an accrual basis. Capital expenditures in the Consolidated Statements of Cash Flow are presented on a cash basis. In 2014, cash
expenditures were $2,432 million (2013: $5,501 million) and the decrease in accrued expenditures was $168 million (2013: $192 million decrease). |
|
|
|
|
|
BARRICK YEAR END 2014 |
|
127 |
|
NOTES TO FINANCIAL STATEMENTS |
6 > REVENUE
|
|
|
|
|
|
|
|
|
For the years ended December 31 |
|
|
2014 |
|
|
|
2013 |
|
Gold bullion sales1 |
|
|
|
|
|
|
|
|
Spot market sales |
|
|
$ 8,471 |
|
|
|
$ 10,427 |
|
Concentrate sales |
|
|
273 |
|
|
|
243 |
|
|
|
|
$ 8,744 |
|
|
|
$ 10,670 |
|
Copper sales1 |
|
|
|
|
|
|
|
|
Copper cathode sales |
|
|
$ 710 |
|
|
|
$ 987 |
|
Concentrate sales |
|
|
514 |
|
|
|
664 |
|
|
|
|
$ 1,224 |
|
|
|
$ 1,651 |
|
Other sales2 |
|
|
$ 271 |
|
|
|
$ 206 |
|
Total |
|
|
$ 10,239 |
|
|
|
$ 12,527 |
|
1 |
Revenues include amounts transferred from OCI to earnings for commodity cash flow hedges (see note 24d). |
2 |
Revenues include the sale of by-products for our gold and copper mines and energy sales from Monte Rio. |
Principal Products
All of our gold mining
operations produce gold in doré form, except Acacias gold mines of Bulyanhulu and Buzwagi which produce both gold doré and gold concentrate. Gold doré is unrefined gold bullion bars usually consisting of 90% gold that is
refined to pure gold bullion prior to sale to our customers. Concentrate is a processing product containing the valuable ore mineral from which most of the waste mineral has been eliminated. Our Lumwana mine produces a concentrate that primarily
contains copper. At our Zaldívar mine we produce copper cathode, which consists of 99.9% copper.
Revenue
Revenue is presented net of direct sales taxes of $48 million (2013: $51 million). Incidental revenues from the sale of by-products, primarily
copper, silver and energy at our gold mines, are classified within other sales.
Provisional Copper and Gold Sales
We have provisionally priced sales for which price finalization, referenced to the relevant copper and gold index, is outstanding at the balance
sheet date. Our exposure at December 31, 2014 to the impact of movements in market commodity prices for provisionally priced sales is set out in the following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Volumes subject to final pricing |
|
|
Impact on net
income before
taxation of 10%
movement in
market price $M |
|
As at December 31 |
|
|
2014 |
|
|
|
2013 |
|
|
|
2014 |
|
|
|
2013 |
|
Copper pounds (millions) |
|
|
82 |
|
|
|
63 |
|
|
$ |
24 |
|
|
$ |
21 |
|
Gold ounces (000s) |
|
|
28 |
|
|
|
19 |
|
|
|
3 |
|
|
|
3 |
|
For the year ended December 31, 2014, our provisionally priced copper sales included provisional pricing
losses of $38 million (2013: $9 million loss) and our provisionally priced gold sales included provisional pricing losses of $1 million (2013: $10 million loss).
At December 31, 2014, our provisionally priced copper and gold sales subject to final settlement were recorded at average prices of $2.88/lb
(2013: $3.34/lb) and $1,201/oz (2013: $1,349/oz), respectively. The sensitivities in the above tables have been determined as the impact of a 10% change in commodity prices at each reporting date, while holding all other variables, including foreign
currency exchange rates, constant.
7 > COST OF SALES
|
|
|
|
|
|
|
|
|
For the years ended December 31 |
|
2014 |
|
|
2013 |
|
Direct mining cost 1,2,3 |
|
$ |
4,803 |
|
|
$ |
5,205 |
|
Depreciation |
|
|
1,648 |
|
|
|
1,732 |
|
Royalty expense |
|
|
303 |
|
|
|
321 |
|
Community relations |
|
|
76 |
|
|
|
71 |
|
Total |
|
$ |
6,830 |
|
|
$ |
7,329 |
|
1 |
Direct mining cost includes charges to reduce the cost of inventory to net realizable value of $121 million (2013: $46 million). |
2 |
Direct mining cost includes the costs of extracting by-products. |
3 |
Includes employee costs of $1,381 million (2013: $1,737 million).
|
|
|
|
|
|
BARRICK YEAR END 2014 |
|
128 |
|
NOTES TO FINANCIAL STATEMENTS |
Cost of Sales
Cost of sales consists of direct mining costs (which include personnel costs, certain general and administrative costs, energy costs (principally
diesel fuel and electricity), maintenance and repair costs, operating supplies, external services, third-party smelting and transport fees), depreciation related to sales, royalty expenses, and community relations expense at our operating sites.
Cost of sales also includes costs associated with power sales from Monte Rio in the Dominican Republic. Cost of sales is based on the weighted average cost of contained or recoverable ounces sold and royalty expense for the period. Costs also
include any impairment to reduce inventory to its net realizable value.
Royalties
Certain of our properties are subject to royalty arrangements based on mineral production at the properties. The primary type of royalty is a net
smelter return (NSR) royalty. Under this type of royalty we pay the holder an amount calculated as the royalty percentage multiplied by the value of gold production at market gold prices less third-party smelting, refining and transportation costs.
Other types of royalties include:
Ø Net profits interest (NPI) royalty
to other than a government,
Ø Modified net smelter return (NSR)
royalty,
Ø Net smelter return
sliding scale (NSRSS) royalty,
Ø Gross proceeds sliding scale (GPSS)
royalty,
Ø Gross smelter return
(GSR) royalty,
Ø Net value (NV)
royalty,
Ø Land tenement (LT)
royalty, and a
Ø Gold revenue
royalty.
Royalty expense is recorded on completion of the production or sales process.
|
|
|
Producing mines and projects
|
|
Type of royalty
|
Goldstrike |
|
0%-5% NSR, 0%-6% NPI |
Cortez |
|
1.5% GSR |
Cortez - Pipeline/South |
|
|
Pipeline deposit |
|
0.4%-9% GSR |
Cortez - portion of Pipeline/ |
|
|
South Pipeline deposit |
|
5% NV |
Pueblo Viejo |
|
3.2% NSR (for gold & silver) |
Lagunas Norte |
|
2.51% NSR |
Veladero |
|
3.75% gross proceeds |
Porgera |
|
2% NSR, 0.25% other |
Kalgoorlie |
|
2.5% of gold revenue |
Acacia |
|
|
Bulyanhulu |
|
4% NSR |
North Mara - Nyabirama and |
|
|
Nyabigena pit |
|
4% NSR, 1% LT |
North Mara - Gokona pit |
|
4% NSR, 1.1% LT |
Buzwagi |
|
4% NSR, 30% NPI1 |
Pascua-Lama Project - |
|
|
Chile gold production |
|
1.4%-9.6% GPSS |
Pascua-Lama Project - |
|
|
Chile copper production |
|
1.9% NSR |
Pascua-Lama Project - |
|
|
Argentina production |
|
3% modified NSR |
Other Mines - Gold |
|
|
Williams |
|
1.5% NSR, 0.75%-1% NV |
David Bell |
|
3%-3.5% NSR |
Hemlo Interlake property |
|
50% NPI, 3% NSR |
Round Mountain |
|
3.53%-6.35% NSRSS |
Bald Mountain |
|
3.5%-7% NSRSS, 2.9%-4% NSR, 10% NPI |
Ruby Hill |
|
3% modified NSR |
Western Australia production |
|
2.5% of gold revenue |
Cowal |
|
4% of net gold revenue |
Other Mines - Copper |
|
|
Lumwana |
|
6% GSR2 |
Kabanga |
|
4% NSR |
Other |
|
|
Cerro Casale |
|
3% NSR (capped at $3 million cumulative) |
Donlin Gold Project |
|
1.5% NSR (first 5 years), |
|
|
4.5% NSR (thereafter), |
|
|
8.0% NPI3 |
1 |
The NPI is calculated as a percentage of profits realized from the Buzwagi mine after all capital, exploration, and development costs and interest
incurred in relation to the Buzwagi mine have been recouped and all operating costs relating to the Buzwagi mine have been paid. No amount is currently payable. |
2 |
This has been replaced by a royalty of 20% on revenue effective January 1, 2015. |
3 |
The NPI is calculated as a percentage of profits realized from the mine until all funds invested to date with interest at an agreed upon rate are
recovered. No amount is currently payable. |
|
|
|
|
|
BARRICK YEAR END 2014 |
|
129 |
|
NOTES TO FINANCIAL STATEMENTS |
8 > EXPLORATION, EVALUATION AND PROJECT
EXPENSES
|
|
|
|
|
|
|
|
|
For the years ended December 31 |
|
2014 |
|
|
2013 |
|
Exploration: |
|
|
|
|
|
|
|
|
Minesite exploration |
|
|
$ 32 |
|
|
|
$ 51 |
|
Global programs |
|
|
131 |
|
|
|
128 |
|
|
|
|
$ 163 |
|
|
|
$ 179 |
|
Evaluation costs |
|
|
21 |
|
|
|
29 |
|
Exploration and evaluation expense |
|
|
$ 184 |
|
|
|
$ 208 |
|
|
|
|
Advanced project costs: |
|
|
|
|
|
|
|
|
Pascua-Lama |
|
|
88 |
|
|
|
370 |
|
Jabal Sayid |
|
|
30 |
|
|
|
52 |
|
|
|
|
Other project related costs: |
|
|
|
|
|
|
|
|
Cerro Casale |
|
|
14 |
|
|
|
4 |
|
Kainantu |
|
|
4 |
|
|
|
6 |
|
Reko Diq |
|
|
12 |
|
|
|
5 |
|
Corporate Development |
|
|
35 |
|
|
|
17 |
|
|
|
|
Community relations related to projects |
|
|
25 |
|
|
|
18 |
|
Exploration, evaluation and project
expenses1 |
|
|
$ 392 |
|
|
|
$ 680 |
|
1 Approximates the impact on operating cash flow.
9 > OTHER EXPENSE (INCOME)
A Other Expense (Income)
|
|
|
|
|
|
|
|
|
For the years ended December 31 |
|
2014 |
|
|
2013 |
|
Other Expense: |
|
|
|
|
|
|
|
|
Consulting fees |
|
|
$ 28 |
|
|
|
$ 35 |
|
Bank charges |
|
|
16 |
|
|
|
22 |
|
Lease termination charges |
|
|
15 |
|
|
|
- |
|
Mine site severance and non-operational costs |
|
|
12 |
|
|
|
47 |
|
World Gold Council fees |
|
|
3 |
|
|
|
7 |
|
Pension and other post-retirement benefit |
|
|
3 |
|
|
|
3 |
|
Total other expense |
|
|
$ 77 |
|
|
|
$ 114 |
|
|
|
|
Other Income: |
|
|
|
|
|
|
|
|
Gain on sale of long-lived assets/investments |
|
|
$ (52) |
|
|
|
$ (41) |
|
Incidental interest income |
|
|
(14) |
|
|
|
(5) |
|
Insurance (recovery) expense |
|
|
(7) |
|
|
|
3 |
|
Management fee income |
|
|
(5) |
|
|
|
(3) |
|
Royalty income |
|
|
(4) |
|
|
|
(6) |
|
Toll milling |
|
|
- |
|
|
|
(5) |
|
Incidental income |
|
|
(9) |
|
|
|
(1) |
|
Total other income |
|
|
$ (91) |
|
|
|
$ (58) |
|
Net other expense (income) |
|
|
$ (14) |
|
|
|
$ 56 |
|
B Impairment Charges
|
|
|
|
|
|
|
|
|
For the years ended December 31 |
|
2014 |
|
|
2013 |
|
Impairment of long-lived assets1 |
|
|
$ 2,672 |
|
|
|
$ 9,734 |
|
Impairment of other intangibles1 |
|
|
7 |
|
|
|
112 |
|
|
|
|
$ 2,679 |
|
|
|
$ 9,846 |
|
Impairment of goodwill1 |
|
|
1,409 |
|
|
|
2,815 |
|
Impairment of available-for-sale investments |
|
|
18 |
|
|
|
26 |
|
Total |
|
|
$ 4,106 |
|
|
|
$ 12,687 |
|
1 Refer to note 20 for further details.
10> GENERAL AND ADMINISTRATIVE EXPENSES
|
|
|
|
|
|
|
|
|
For the years ended December 31 |
|
2014 |
|
|
2013 |
|
Corporate administration2 |
|
|
$ 217 |
|
|
|
$ 192 |
|
Operating segment administration |
|
|
168 |
|
|
|
198 |
|
Total1 |
|
|
$ 385 |
|
|
|
$ 390 |
|
1 |
Includes employee costs of $231 million (2013: $241 million). |
2 |
Includes $24 million (2013: $12 million) related to one time severance payments.
|
|
|
|
|
|
BARRICK YEAR END 2014 |
|
130 |
|
NOTES TO FINANCIAL STATEMENTS |
|
|
|
|
|
|
|
|
|
For the years ended December 31 |
|
2014 |
|
|
2013 |
|
Tax on profit |
|
|
|
|
|
|
|
|
Current tax |
|
|
|
|
|
|
|
|
Charge for the year |
|
|
$ 750 |
|
|
|
$ 1,106 |
|
Adjustment in respect of prior years |
|
|
(64) |
|
|
|
(5) |
|
|
|
|
$ 686 |
|
|
|
$ 1,101 |
|
Deferred tax |
|
|
|
|
|
|
|
|
Origination and reversal of temporary differences in the current year |
|
|
$ (436) |
|
|
|
$ (517) |
|
Adjustment in respect of prior years |
|
|
56 |
|
|
|
46 |
|
|
|
|
$ (380) |
|
|
|
$ (471) |
|
Income tax expense (recovery) |
|
|
$ 306 |
|
|
|
$ 630 |
|
Tax expense related to continuing operations |
|
|
|
|
|
|
|
|
Current |
|
|
|
|
|
|
|
|
Canada |
|
|
$ - |
|
|
|
$ (6) |
|
International |
|
|
686 |
|
|
|
1,107 |
|
|
|
|
$ 686 |
|
|
|
$ 1,101 |
|
Deferred |
|
|
|
|
|
|
|
|
Canada |
|
|
$ (181) |
|
|
|
$ (11) |
|
International |
|
|
(199) |
|
|
|
(460) |
|
|
|
|
$ (380) |
|
|
|
$ (471) |
|
Income tax expense |
|
|
$ 306 |
|
|
|
$ 630 |
|
Currency Translation
Deferred tax balances are subject to remeasurement for changes in currency exchange rates each period. The most significant balances are
Argentinean deferred tax liabilities. In 2014 and 2013, tax expense of $46 million and $49 million respectively primarily arose from translation losses due to the weakening of the Argentinean peso against the US dollar. These losses and gains are
included within deferred tax expense/recovery.
Restructure of Internal Debt to Equity
In second quarter 2014, a deferred tax recovery of $112 million arose from a restructure of internal debt to equity in subsidiary corporations,
which resulted in the release of a deferred tax liability and a net increase in deferred tax assets.
|
|
|
|
|
|
|
|
|
Reconciliation to Canadian Statutory Rate |
|
|
|
|
|
|
|
|
For the years ended December 31 |
|
2014 |
|
|
2013 |
|
At 26.5% statutory rate |
|
|
$ (703) |
|
|
|
$ (2,509) |
|
Increase (decrease) due to: |
|
|
|
|
|
|
|
|
Allowances and special tax deductions1 |
|
|
(93) |
|
|
|
(181) |
|
Impact of foreign tax rates2 |
|
|
18 |
|
|
|
(169) |
|
Expenses not tax deductible |
|
|
96 |
|
|
|
111 |
|
Goodwill impairment charges not tax deductible |
|
|
373 |
|
|
|
837 |
|
Impairment charges not recognized in deferred tax assets |
|
|
334 |
|
|
|
1,699 |
|
Net currency translation losses on deferred tax balances |
|
|
46 |
|
|
|
49 |
|
Current year tax losses not recognized in deferred tax assets |
|
|
20 |
|
|
|
183 |
|
Restructure of internal debt to equity |
|
|
(112) |
|
|
|
- |
|
Pueblo Viejo SLA amendment |
|
|
- |
|
|
|
384 |
|
Non-recognition of US AMT credits |
|
|
43 |
|
|
|
48 |
|
Adjustments in respect of prior years |
|
|
(8) |
|
|
|
5 |
|
Impact of tax rate changes |
|
|
20 |
|
|
|
- |
|
Other withholding taxes |
|
|
40 |
|
|
|
64 |
|
Mining taxes |
|
|
227 |
|
|
|
134 |
|
Other items |
|
|
5 |
|
|
|
(25) |
|
Income tax expense |
|
|
$ 306 |
|
|
|
$ 630 |
|
1 |
We are able to claim certain allowances and tax deductions unique to extractive industries that result in a lower effective tax rate.
|
2 |
We operate in multiple foreign tax jurisdictions that have tax rates different than the Canadian statutory rate. |
Non Recognition of US Alternative Minimum Tax (AMT) Credits
In fourth quarter 2014 and 2013, we recorded a deferred tax expense of $43 million and $48 million, respectively related to US AMT credits which
are not probable to be realized based on our current life of mine plans.
Tax Rate Changes
In third quarter 2014, a tax rate change was enacted in Chile, resulting in current tax expense of $2 million.
In fourth quarter 2014, a tax rate change was enacted in Peru, reducing corporate income tax rates. This resulted in a deferred tax expense of $18
million due to recording the deferred tax asset in Peru at the lower rates.
|
|
|
|
|
BARRICK YEAR END 2014 |
|
131 |
|
NOTES TO FINANCIAL STATEMENTS |
Pueblo Viejo Special Lease Agreement (SLA) Amendment
In third quarter 2013, the Pueblo Viejo Special Lease Agreement (SLA) Amendment was substantively enacted. The amendment included the following
items: Elimination of a 10 percent return embedded in the initial capital investment for purposes of the net profits tax (NPI); an extension of the period over which Pueblo Viejo will recover its capital investment; a delay of application of NPI
deductions; a reduction of the depreciation rates; and the establishment of a graduated minimum tax.
The tax impact of the amendment is a charge of $384 million, comprised of current tax and deferred
tax expense, including $36 million of graduated minimum tax related to 2012 sales proceeds.
12 > LOSS PER SHARE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the years ended December 31 ($ millions, except shares in millions and per share amounts |
|
2014 |
|
|
2013 |
|
in dollars) |
|
Basic |
|
|
Diluted |
|
|
Basic |
|
|
Diluted |
|
Loss from continuing operations |
|
|
$ (2,959) |
|
|
|
$ (2,959) |
|
|
|
$ (10,097) |
|
|
|
$ (10,097) |
|
Loss from discontinued operations |
|
|
- |
|
|
|
- |
|
|
|
(506) |
|
|
|
(506) |
|
Loss attributable to non-controlling interests |
|
|
52 |
|
|
|
52 |
|
|
|
237 |
|
|
|
237 |
|
Net loss attributable to equity holders of Barrick Gold
Corporation |
|
|
$ (2,907) |
|
|
|
$ (2,907) |
|
|
|
$ (10,366) |
|
|
|
$ (10,366) |
|
Weighted average shares outstanding |
|
|
1,165 |
|
|
|
1,165 |
|
|
|
1,022 |
|
|
|
1,022 |
|
Stock options |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
1,165 |
|
|
|
1,165 |
|
|
|
1,022 |
|
|
|
1,022 |
|
Loss per share data attributable to the equity holders of Barrick
Gold Corporation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations |
|
|
$ (2.50) |
|
|
|
$ (2.50) |
|
|
|
$ (9.65) |
|
|
|
$ (9.65) |
|
Loss from discontinued operations |
|
|
$ - |
|
|
|
$ - |
|
|
|
$ (0.49) |
|
|
|
$ (0.49) |
|
Net loss |
|
|
$ (2.50) |
|
|
|
$ (2.50) |
|
|
|
$ (10.14) |
|
|
|
$ (10.14) |
|
|
|
|
|
|
|
|
|
|
For the years ended December 31 |
|
2014 |
|
|
2013 |
|
Interest |
|
|
$ 733 |
|
|
|
$ 775 |
|
Amortization of debt issue costs |
|
|
21 |
|
|
|
22 |
|
Amortization of premium |
|
|
(1) |
|
|
|
- |
|
Gain on interest rate hedges |
|
|
(2) |
|
|
|
(1) |
|
Interest capitalized1 |
|
|
(30) |
|
|
|
(297) |
|
Accretion |
|
|
75 |
|
|
|
68 |
|
Debt extinguishment fees |
|
|
- |
|
|
|
90 |
|
Total |
|
|
$ 796 |
|
|
|
$ 657 |
|
1 |
For the year ended December 31, 2014, the general capitalization rate was 5.40% (2013: 5.00%)
|
|
|
|
|
|
BARRICK YEAR END 2014 |
|
132 |
|
NOTES TO FINANCIAL STATEMENTS |
14 |
> CASH FLOW OTHER ITEMS |
A Operating Cash Flows - Other Items
|
|
|
|
|
|
|
|
|
For the years ended December 31 |
|
2014 |
|
|
2013 |
|
Adjustments for non-cash income statement items: |
|
|
|
|
|
|
|
|
Loss on currency translation |
|
|
$ 132 |
|
|
|
$ 180 |
|
RSU expense (recovery) |
|
|
8 |
|
|
|
(1) |
|
Stock option expense (recovery) |
|
|
(5) |
|
|
|
8 |
|
Change in estimate of rehabilitation costs at closed mines |
|
|
83 |
|
|
|
100 |
|
Net inventory impairment charges (note 16) |
|
|
121 |
|
|
|
46 |
|
Cash flow arising from changes in: |
|
|
|
|
|
|
|
|
Accounts receivable |
|
|
(24) |
|
|
|
28 |
|
Other current assets |
|
|
(177) |
|
|
|
(31) |
|
Accounts payable |
|
|
(329) |
|
|
|
429 |
|
Other current liabilities |
|
|
141 |
|
|
|
17 |
|
Other assets and liabilities |
|
|
(284) |
|
|
|
(119) |
|
Settlement of rehabilitation obligations |
|
|
(108) |
|
|
|
(56) |
|
Other net operating activities |
|
|
$ (442) |
|
|
|
$ 601 |
|
|
|
|
B Investing Cash Flows Other Items |
|
|
|
|
|
|
|
|
For the years ended December 31 |
|
|
2014 |
|
|
|
2013 |
|
Value added tax recoverable on project capital expenditures |
|
|
$ (66) |
|
|
|
$ (237) |
|
Derivative settlements |
|
|
- |
|
|
|
20 |
|
Other |
|
|
(26) |
|
|
|
(45) |
|
Other net investing activities |
|
|
$ (92) |
|
|
|
$ (262) |
|
Investing cash flow includes payments for: |
|
|
|
|
|
|
|
|
Capitalized interest (note 24) |
|
|
$ 29 |
|
|
|
$ 394 |
|
|
|
|
C Financing Cash Flows Other Items |
|
|
|
|
|
|
|
|
For the years ended December 31 |
|
|
2014 |
|
|
|
2013 |
|
Financing fees on long-term debt |
|
|
$ - |
|
|
|
$ (32) |
|
Debt extinguishment fees |
|
|
- |
|
|
|
(90) |
|
Derivative settlements |
|
|
9 |
|
|
|
4 |
|
Other net financing activities |
|
|
$ 9 |
|
|
|
$ (118) |
|
|
|
|
|
|
BARRICK YEAR END 2014 |
|
133 |
|
NOTES TO FINANCIAL STATEMENTS |
A Equity
Accounting Method Investment Continuity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kabanga |
|
|
Jabal Sayid |
|
|
Total |
|
At January 1, 2013 |
|
|
$ 20 |
|
|
|
$ - |
|
|
|
$20 |
|
Funds invested |
|
|
7 |
|
|
|
- |
|
|
|
7 |
|
At December 31, 2013 |
|
|
$ 27 |
|
|
|
$ - |
|
|
|
$27 |
|
Funds invested |
|
|
1 |
|
|
|
178 |
|
|
|
179 |
|
At December 31, 2014 |
|
|
$28 |
|
|
|
$ 178 |
|
|
|
$206 |
|
Publicly traded |
|
|
No |
|
|
|
No |
|
|
|
|
|
Summarized Equity Investee Financial Information
|
|
|
|
|
|
|
|
|
Jabal Sayid |
|
For the year ended December 31 |
|
|
|
|
2014 |
|
Summarized Balance Sheet |
|
|
|
|
|
|
Cash and equivalents |
|
|
|
|
$ 10 |
|
Other current assets |
|
|
|
|
21 |
|
Total current assets |
|
|
|
|
$ 31 |
|
Non-current assets |
|
|
|
|
429 |
|
Total assets |
|
|
|
|
$ 460 |
|
|
|
|
Current financial liabilities (excluding trade, other payables & provisions) |
|
|
|
|
3 |
|
Other current liabilities |
|
|
|
|
1 |
|
Total current liabilities |
|
|
|
|
$ 4 |
|
|
|
|
Non-current financial liabilities (excluding trade, other payables & provisions) |
|
|
|
|
2 |
|
Other non-current liabilities |
|
|
|
|
343 |
|
Total non-current liabilities |
|
|
|
|
$ 345 |
|
Total liabilities |
|
|
|
|
$ 349 |
|
|
|
|
Net assets |
|
|
|
|
$ 111 |
|
The information above reflects the amounts presented in the financial information of the joint venture adjusted
for differences between IFRS and Saudi GAAP.
Reconciliation of Summarized Financial Information to Carrying Value
|
|
|
|
|
Opening net assets, January 1 |
|
$ |
111 |
|
Profit/(loss) for the period |
|
|
- |
|
Closing net assets, December 31 |
|
$ |
111 |
|
Barricks share of net assets (50%) |
|
|
55 |
|
Goodwill recognition |
|
|
123 |
|
Carrying value |
|
$ |
178 |
|
B Other Investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at Dec. 31, 2014 |
|
|
|
|
|
As at Dec. 31, 2013 |
|
|
|
|
|
|
|
Fair Value |
1 |
|
|
Cumulative Gains in AOCI |
|
|
|
Fair Value |
1 |
|
|
Cumulative Losses in AOCI |
|
Available-for-sale securities |
|
|
$ 35 |
|
|
|
$ 4 |
|
|
|
$ 120 |
|
|
|
$ (32) |
|
1 Refer to note 25 for further information on
the measurement of fair value.
|
|
|
|
|
BARRICK YEAR END 2014 |
|
134 |
|
NOTES TO FINANCIAL STATEMENTS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gains on Investments Recorded in Earnings |
|
|
|
|
|
|
|
|
|
|
|
|
For the years ended December 31 |
|
|
|
|
|
|
|
|
|
|
2014 |
|
|
|
2013 |
|
Gains realized on sales |
|
|
|
|
|
|
|
|
|
|
$ - |
|
|
|
$ 6 |
|
Cash proceeds from sales1 |
|
|
|
|
|
|
|
|
|
|
120 |
|
|
|
18 |
|
1 Primarily relates to sale of Goldfields investments |
|
|
|
|
|
|
16 > INVENTORIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gold |
|
|
Copper |
|
|
|
As at Dec. 31, 2014 |
|
|
As at Dec. 31, 2013 |
|
|
As at Dec. 31, 2014 |
|
|
As at Dec. 31, 2013 |
|
Raw materials |
|
|
|
|
|
|
|
|
Ore in stockpiles |
|
|
$ 2,036 |
|
|
|
$ 1,835 |
|
|
|
$ 182 |
|
|
|
$ 236 |
|
Ore on leach pads |
|
|
357 |
|
|
|
334 |
|
|
|
392 |
|
|
|
320 |
|
Mine operating supplies |
|
|
875 |
|
|
|
1,027 |
|
|
|
132 |
|
|
|
151 |
|
Work in process |
|
|
245 |
|
|
|
209 |
|
|
|
7 |
|
|
|
6 |
|
Finished products |
|
|
|
|
|
|
|
|
Gold doré |
|
|
129 |
|
|
|
177 |
|
|
|
- |
|
|
|
- |
|
Copper cathode |
|
|
- |
|
|
|
- |
|
|
|
12 |
|
|
|
12 |
|
Copper concentrate |
|
|
- |
|
|
|
- |
|
|
|
28 |
|
|
|
47 |
|
Gold concentrate |
|
|
11 |
|
|
|
4 |
|
|
|
- |
|
|
|
- |
|
|
|
|
$ 3,653 |
|
|
|
$ 3,586 |
|
|
|
$ 753 |
|
|
|
$ 772 |
|
Non-current ore in stockpiles1 |
|
|
(1,584) |
|
|
|
(1,477) |
|
|
|
(100) |
|
|
|
(202) |
|
|
|
|
$ 2,069 |
|
|
|
$ 2,109 |
|
|
|
$ 653 |
|
|
|
$ 570 |
|
1 Ore that we do not expect to process in the next 12 months is
classified within other long-term assets |
|
|
|
|
|
|
For the years ended December 31 |
|
|
|
|
|
|
|
|
|
|
2014 |
|
|
|
2013 |
|
Inventory impairment charges |
|
|
|
|
|
|
|
|
|
|
$ 121 |
|
|
|
$ 53 |
|
Inventory impairment charges reversed |
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
(7) |
|
Ore on leach pads
The recovery of gold and copper from certain oxide ores is achieved through the heap leaching process. Our Pierina, Lagunas Norte, Veladero,
Cortez, Bald Mountain, Round Mountain and Ruby Hill mines all use a heap leaching process for gold and our Zaldívar mine uses a heap leaching process for copper. Under this method, ore is placed on leach pads where it is treated with a
chemical solution, which dissolves the gold or copper contained in the ore. The resulting pregnant solution is further processed in a plant where the gold or copper is recovered. For accounting purposes, costs are added to ore on leach
pads based on current mining and leaching costs, including applicable depreciation, depletion and amortization relating to mining operations. Costs are removed from ore on leach pads as ounces or pounds are recovered based on the average cost per
recoverable ounce of gold or pound of copper on the leach pad.
Estimates of recoverable gold or copper on the leach pads are calculated from
the quantities of ore placed on the leach pads (measured tons added to the leach pads), the grade of ore placed on the leach pads (based on assay data) and a recovery percentage (based on ore type).
Although the quantities of recoverable gold or copper placed on the leach pads are reconciled by
comparing the grades of ore placed on pads to the quantities of gold or copper actually recovered (metallurgical balancing), the nature of the leaching process inherently limits the ability to precisely monitor inventory levels. As a result, the
metallurgical balancing process is regularly monitored and estimates are refined based on actual results over time. Historically, our operating results have not been materially impacted by variations between the estimated and actual recoverable
quantities of gold or copper on our leach pads. At December 31, 2014, the weighted average cost per recoverable ounce of gold and recoverable pound of copper on leach pads was $687 per ounce and $1.24 per pound, respectively (2013: $753 per
ounce of gold and $1.28 per pound of copper). Variations between actual and estimated quantities resulting from changes in assumptions and estimates that do not result in write-downs to net realizable value are accounted for on a prospective basis.
|
|
|
|
|
BARRICK YEAR END 2014 |
|
135 |
|
NOTES TO FINANCIAL STATEMENTS |
The ultimate recovery of gold or copper from a leach pad will not be known until the leaching
process is concluded. Based on current mine plans, we expect to place the last ton of ore on our current leach pads at dates for gold ranging from 2015 to 2023 and for copper in 2028. Including the estimated time required for residual leaching,
rinsing and reclamation activities, we expect that our leaching operations will terminate within a period of up to six years following the date that the last ton of ore is placed on the leach pad.
The current portion of ore inventory on leach pads is determined based on estimates of the quantities of gold or copper at each balance sheet date
that we expect to recover during the next 12 months.
|
|
|
|
|
|
|
|
|
Ore in Stockpiles |
|
|
|
|
|
|
|
|
|
|
As at Dec. 31, 2014 |
|
|
As at Dec. 31, 2013 |
|
Gold |
|
|
|
|
|
|
|
|
Goldstrike |
|
|
$ 760 |
|
|
|
$ 656 |
|
Pueblo Viejo |
|
|
340 |
|
|
|
271 |
|
Porgera |
|
|
257 |
|
|
|
259 |
|
Cortez |
|
|
159 |
|
|
|
203 |
|
Cowal |
|
|
176 |
|
|
|
129 |
|
Kalgoorlie |
|
|
103 |
|
|
|
104 |
|
Buzwagi |
|
|
69 |
|
|
|
43 |
|
North Mara |
|
|
43 |
|
|
|
42 |
|
Lagunas Norte |
|
|
54 |
|
|
|
37 |
|
Veladero |
|
|
32 |
|
|
|
35 |
|
Turquoise Ridge |
|
|
18 |
|
|
|
17 |
|
Other |
|
|
25 |
|
|
|
39 |
|
Copper |
|
|
|
|
|
|
|
|
Zaldívar |
|
|
108 |
|
|
|
140 |
|
Jabal Sayid |
|
|
- |
|
|
|
54 |
|
Lumwana |
|
|
74 |
|
|
|
42 |
|
|
|
|
$ 2,218 |
|
|
|
$ 2,071 |
|
|
|
|
|
|
|
|
|
|
Ore on Leachpads |
|
|
|
|
|
|
|
|
|
|
As at Dec. 31, 2014 |
|
|
As at Dec. 31, 2013 |
|
Gold |
|
|
|
|
|
|
|
|
Veladero |
|
|
$ 149 |
|
|
|
$ 178 |
|
Cortez |
|
|
40 |
|
|
|
56 |
|
Bald Mountain |
|
|
108 |
|
|
|
38 |
|
Round Mountain |
|
|
21 |
|
|
|
29 |
|
Lagunas Norte |
|
|
37 |
|
|
|
18 |
|
Ruby Hill |
|
|
- |
|
|
|
9 |
|
Pierina |
|
|
2 |
|
|
|
6 |
|
Copper |
|
|
|
|
|
|
|
|
Zaldívar |
|
|
392 |
|
|
|
320 |
|
|
|
|
$ 749 |
|
|
|
$ 654 |
|
|
Purchase Commitments |
|
At December 31, 2014, we had purchase obligations for supplies and consumables of approximately $1,154 million (2013: $1,221 million). |
|
|
17 > ACCOUNTS RECEIVABLE AND OTHER CURRENT ASSETS |
|
|
|
|
|
|
As at Dec. 31, 2014 |
|
|
As at Dec. 31, 2013 |
|
Accounts receivable |
|
|
|
|
|
|
|
|
Amounts due from concentrate sales |
|
|
$ 98 |
|
|
|
$ 144 |
|
Amounts due from copper cathode sales |
|
|
86 |
|
|
|
84 |
|
Receivable from Dominican Republic government2 |
|
|
109 |
|
|
|
39 |
|
Other receivables |
|
|
125 |
|
|
|
118 |
|
|
|
|
$ 418 |
|
|
|
$ 385 |
|
Other current assets |
|
|
|
|
|
|
|
|
Derivative assets (note 24f) |
|
|
$ 7 |
|
|
|
$ 37 |
|
Goods and services taxes recoverable1 |
|
|
208 |
|
|
|
262 |
|
Prepaid expenses |
|
|
62 |
|
|
|
81 |
|
Other |
|
|
34 |
|
|
|
41 |
|
|
|
|
$ 311 |
|
|
|
$ 421 |
|
1 |
Primarily includes VAT and fuel tax receivables of $84 million in Argentina, $44 million in Tanzania, $33 million in Dominican Republic, $24 million in
Chile, and $8 million in Peru (Dec. 31, 2013: $86 million, $91 million, $31 million, $24 million and $15 million, respectively). |
2 |
Amounts receivable from the Dominican Republic government relate to sales of energy from Pueblo Viejos power plant and balances due under the
Special Lease Agreement for payments made by Pueblo Viejo on behalf of the government. |
|
|
|
|
|
BARRICK YEAR END 2014 |
|
136 |
|
NOTES TO FINANCIAL STATEMENTS |
18 |
> PROPERTY, PLANT AND EQUIPMENT |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Buildings, plant and equipment |
|
|
Mining property costs subject
to depreciation1,3 |
|
|
Mining property costs not subject to
depreciation1,2 |
|
|
Oil and gas properties4 |
|
|
Total |
|
At January 1, 2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net of accumulated depreciation |
|
|
$ 6,210 |
|
|
|
$ 8,551 |
|
|
|
$ 6,927 |
|
|
|
$ - |
|
|
|
$ 21,688 |
|
Additions |
|
|
190 |
|
|
|
301 |
|
|
|
2,048 |
|
|
|
- |
|
|
|
2,539 |
|
Capitalized interest |
|
|
- |
|
|
|
2 |
|
|
|
28 |
|
|
|
- |
|
|
|
30 |
|
Disposals |
|
|
(36) |
|
|
|
(15) |
|
|
|
(523) |
|
|
|
- |
|
|
|
(574) |
|
Depreciation |
|
|
(933) |
|
|
|
(891) |
|
|
|
- |
|
|
|
- |
|
|
|
(1,824) |
|
Impairment charges |
|
|
(105) |
|
|
|
(422) |
|
|
|
(2,139) |
|
|
|
- |
|
|
|
(2,666) |
|
Transfers5 |
|
|
1,400 |
|
|
|
738 |
|
|
|
(2,138) |
|
|
|
- |
|
|
|
- |
|
At December 31, 2014 |
|
|
$ 6,726 |
|
|
|
$ 8,264 |
|
|
|
$4,203 |
|
|
|
$ - |
|
|
|
$ 19,193 |
|
|
|
|
|
|
|
At December 31, 2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost |
|
|
$ 15,316 |
|
|
|
$ 21,803 |
|
|
|
$ 16,017 |
|
|
|
$ - |
|
|
|
$ 53,136 |
|
Accumulated depreciation and impairments |
|
|
(8,590) |
|
|
|
(13,539) |
|
|
|
(11,814) |
|
|
|
- |
|
|
|
(33,943) |
|
Net carrying amount December 31, 2014 |
|
|
$ 6,726 |
|
|
|
$ 8,264 |
|
|
|
$ 4,203 |
|
|
|
$ - |
|
|
|
$ 19,193 |
|
|
|
|
|
|
|
|
|
Buildings, plant and equipment |
|
|
Mining property costs subject
to depreciation1,3 |
|
|
Mining property costs not subject to
depreciation1,2 |
|
|
Oil and gas properties4 |
|
|
Total |
|
At January 1, 2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost |
|
|
$ 10,371 |
|
|
|
$ 19,373 |
|
|
|
$ 18,460 |
|
|
|
$ 1,416 |
|
|
|
$ 49,620 |
|
Accumulated depreciation and impairments |
|
|
(6,542) |
|
|
|
(10,651) |
|
|
|
(2,597) |
|
|
|
(553) |
|
|
|
(20,343) |
|
Net carrying amount January 1, 2013 |
|
|
$ 3,829 |
|
|
|
$ 8,722 |
|
|
|
$ 15,863 |
|
|
|
$ 863 |
|
|
|
$ 29,277 |
|
Adjustment on currency translation |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(28) |
|
|
|
(28) |
|
Additions |
|
|
151 |
|
|
|
630 |
|
|
|
4,420 |
|
|
|
7 |
|
|
|
5,208 |
|
Capitalized interest |
|
|
- |
|
|
|
- |
|
|
|
295 |
|
|
|
- |
|
|
|
295 |
|
Disposals |
|
|
(531) |
|
|
|
4 |
|
|
|
(5) |
|
|
|
(799) |
|
|
|
(1,331) |
|
Depreciation |
|
|
(848) |
|
|
|
(1,052) |
|
|
|
- |
|
|
|
(43) |
|
|
|
(1,943) |
|
Impairment charges |
|
|
(1,046) |
|
|
|
(1,524) |
|
|
|
(7,078) |
|
|
|
- |
|
|
|
(9,648) |
|
Transfers5 |
|
|
4,691 |
|
|
|
1,867 |
|
|
|
(6,539) |
|
|
|
- |
|
|
|
19 |
|
Assets held for sale |
|
|
(36) |
|
|
|
(96) |
|
|
|
(29) |
|
|
|
- |
|
|
|
(161) |
|
At December 31, 2013 |
|
|
$ 6,210 |
|
|
|
$ 8,551 |
|
|
|
$ 6,927 |
|
|
|
$ - |
|
|
|
$ 21,688 |
|
|
|
|
|
|
|
At December 31, 2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost |
|
|
$ 13,817 |
|
|
|
$ 20,769 |
|
|
|
$ 16,602 |
|
|
|
$ - |
|
|
|
$ 51,188 |
|
Accumulated depreciation and impairments |
|
|
(7,607) |
|
|
|
(12,218) |
|
|
|
(9,675) |
|
|
|
- |
|
|
|
(29,500) |
|
Net carrying amount December 31, 2013 |
|
|
$ 6,210 |
|
|
|
$ 8,551 |
|
|
|
$ 6,927 |
|
|
|
$ - |
|
|
|
$ 21,688 |
|
1 |
Includes capitalized reserve acquisition costs, capitalized development costs and capitalized exploration and evaluation costs other than exploration
license costs included in intangible assets. |
2 |
Assets not subject to depreciation includes construction-in-progress, projects and acquired mineral resources and exploration potential at operating
mine sites and development projects. |
3 |
Assets subject to depreciation include the following items for production stage properties: acquired mineral reserves and resources, capitalized mine
development costs, capitalized stripping and capitalized exploration and evaluation costs. |
4 |
Represents Barrick Energy which was divested in July 2013 (refer to note 4e). |
5 |
Primarily relates to long-lived assets that are transferred to PP&E once they are placed into service. |
|
|
|
|
|
BARRICK YEAR END 2014 |
|
137 |
|
NOTES TO FINANCIAL STATEMENTS |
A Mineral Property Costs Not Subject to Depreciation
|
|
|
|
|
|
|
|
|
|
|
Carrying amount at Dec. 31, 2014 |
|
|
Carrying amount at Dec. 31, 2013 |
|
Construction-in-progress1 |
|
|
$ 1,490 |
|
|
|
$ 1,870 |
|
Acquired mineral resources and exploration potential |
|
|
264 |
|
|
|
272 |
|
Projects |
|
|
|
|
|
|
|
|
Pascua-Lama |
|
|
1,867 |
|
|
|
2,053 |
|
Cerro Casale2 |
|
|
444 |
|
|
|
1,920 |
|
Jabal Sayid3 |
|
|
- |
|
|
|
687 |
|
Donlin Gold |
|
|
138 |
|
|
|
125 |
|
|
|
|
$ 4,203 |
|
|
|
$ 6,927 |
|
|
1 |
Represents assets under construction at our operating mine sites. |
|
2 |
Amounts are presented on a 100% basis and include our partners non-controlling interest. |
|
3 |
Refer to note 4a for further details. |
B Changes in Gold and Copper Mineral Life of Mine Plan
At the end of each fiscal year, as part of our annual business cycle, we prepare updated estimates of proven and probable gold and copper mineral
reserves and the
portion of resources considered probable of economic extraction for each mineral property. This forms the basis for our LOM plans. We prospectively revise calculations of amortization expense for
property, plant and equipment amortized using the UOP method, where the denominator is our LOM ounces. The effect of changes in our LOM on amortization expense for 2014 was a $201 million increase (2013: $45 million decrease).
C Capital Commitments and Operating Leases
In
addition to entering into various operational commitments in the normal course of business, we had commitments of approximately $159 million at December 31, 2014 (2013: $249 million) for construction activities at our sites and projects.
Operating leases are recognized as an operating cost in the consolidated statement of income on a straight-line basis over the lease term. At
December 31, 2014, we have operating lease commitments totaling $134 million, of which $27 million is expected to be paid within a year, $68 million is expected to be paid within two to five years and the remaining amount to be paid beyond five
years.
19 > GOODWILL AND OTHER
INTANGIBLE ASSETS
A Goodwill
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gold |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North America |
|
|
Australia |
|
|
South America |
|
|
Acacia |
|
|
Capital Projects |
|
|
Copper |
|
|
Barrick Energy |
|
|
Total |
|
Opening balance January 1, 2013 |
|
|
$ 2,376 |
|
|
|
$ 1,480 |
|
|
|
$ 441 |
|
|
|
$ 185 |
|
|
|
$ 809 |
|
|
|
$ 3,451 |
|
|
|
$ 95 |
|
|
|
$ 8,837 |
|
Additions |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Other1 |
|
|
(18) |
|
|
|
(74) |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(92) |
|
Impairments2 |
|
|
- |
|
|
|
(1,200) |
|
|
|
- |
|
|
|
(185) |
|
|
|
(397) |
|
|
|
(1,033) |
|
|
|
(95) |
|
|
|
(2,910) |
|
Transfers3 |
|
|
412 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(412) |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Net carrying amount December 31, 2013 |
|
|
$ 2,770 |
|
|
|
$ 206 |
|
|
|
$ 441 |
|
|
|
$ - |
|
|
|
$ - |
|
|
|
$ 2,418 |
|
|
|
$ - |
|
|
|
$ 5,835 |
|
1 Represents the allocation of goodwill to assets held for sale as well as the
disposition of YSS assets.
2 Refer to note 20.
3 In the first quarter 2013 we transferred $412 million of goodwill from the Capital Projects segment to the
North American segment as a result of Pueblo Viejo entering production.
|
|
|
|
|
BARRICK YEAR END 2014 |
|
138 |
|
NOTES TO FINANCIAL STATEMENTS |
As a result of the reorganization of our operating segments in fourth quarter 2013, we reallocated
goodwill, which had previously been recorded in our Regional Business Units (our former operating segments), to the new Operating Units on a relative fair value basis except for Pueblo Viejo, which had specifically identified goodwill from the
earlier allocation in 2013. The reorganization of the Operating Units did not result in any indicators of impairment (see note 20). In 2014, we also reorganized our segments and reallocated goodwill, which had previously been recorded in our North
America Portfolio, Australia Pacific and Copper Operating units on a relative fair value basis. This reorganized operating segments were then tested for impairment (see note 20).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Closing balance December 31, 2013 |
|
|
Additions |
|
|
Impairments
(Q2 2014)2 |
|
|
Reallocation1 |
|
|
Impairments (Q4 2014) |
|
|
Closing balance December 31, 2014 |
|
Goldstrike |
|
|
$ 730 |
|
|
|
$ - |
|
|
|
$ - |
|
|
|
$ - |
|
|
|
$ - |
|
|
|
$ 730 |
|
Cortez |
|
|
869 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
869 |
|
Pueblo Viejo |
|
|
412 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
412 |
|
Lagunas Norte |
|
|
247 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
247 |
|
Veladero |
|
|
195 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
195 |
|
North America Portfolio |
|
|
758 |
|
|
|
- |
|
|
|
- |
|
|
|
(758) |
|
|
|
- |
|
|
|
- |
|
Turquoise Ridge |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
528 |
|
|
|
- |
|
|
|
528 |
|
Hemlo |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
63 |
|
|
|
- |
|
|
|
63 |
|
Bald Mountain |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
131 |
|
|
|
(131) |
|
|
|
- |
|
Round Mountain |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
36 |
|
|
|
(36) |
|
|
|
- |
|
Australia Pacific |
|
|
206 |
|
|
|
- |
|
|
|
- |
|
|
|
(206) |
|
|
|
- |
|
|
|
- |
|
Kalgoorlie |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
71 |
|
|
|
- |
|
|
|
71 |
|
Cowal |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
64 |
|
|
|
- |
|
|
|
64 |
|
Porgera |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
71 |
|
|
|
- |
|
|
|
71 |
|
Copper |
|
|
2,418 |
|
|
|
- |
|
|
|
(316) |
|
|
|
(2,102) |
|
|
|
- |
|
|
|
- |
|
Zaldívar |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,888 |
|
|
|
(712) |
|
|
|
1,176 |
|
Lumwana |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
214 |
|
|
|
(214) |
|
|
|
- |
|
Total |
|
|
$ 5,835 |
|
|
|
$
- |
|
|
|
$
(316) |
|
|
|
$
- |
|
|
|
$ (1,093) |
|
|
|
$
4,426 |
|
1 As a result of the reorganization of our operating segments in November
2014, we reallocated goodwill, which had previously been recorded in our North America Portfolio, Australia Pacific and Copper Operating Units on a relative fair value basis. The reorganized operating segments were then tested for impairment (see
note 20).
2 In Q2 we reclassified Jabal Sayid to Held for Sale pending the sale of 50% to our Joint
Venture partner. As a result, we recorded an impairment of goodwill of $316 million.
On a total basis, the gross amount and accumulated impairment losses
are as follows:
|
|
|
|
|
Cost |
|
|
$ 9,635 |
|
Accumulated impairment losses and other January 1, 2013 |
|
|
(798) |
|
Impairment losses and other 2013 |
|
|
(3,002) |
|
Impairment losses 2014 |
|
|
(1,409) |
|
Accumulated impairment losses and other December 31,
2014 |
|
|
(5,209) |
|
Net carrying amount December 31, 2014 |
|
|
$ 4,426
|
|
|
|
|
|
|
BARRICK YEAR END 2014 |
|
139 |
|
NOTES TO FINANCIAL STATEMENTS |
B Intangible Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Water rights1 |
|
|
Technology2 |
|
|
Supply contracts3 |
|
|
Exploration potential4 |
|
|
Total |
|
|
|
|
|
|
|
Opening balance January 1, 2013 |
|
|
$ 116 |
|
|
|
$ 17 |
|
|
|
$ 22 |
|
|
|
$ 298 |
|
|
|
$ 453 |
|
Additions |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
Amortization and impairment losses |
|
|
- |
|
|
|
(1) |
|
|
|
(2) |
|
|
|
(130) |
|
|
|
(133) |
|
Closing balance December 31, 2013 |
|
|
$ 116 |
|
|
|
$ 16 |
|
|
|
$ 20 |
|
|
|
$ 168 |
|
|
|
$ 320 |
|
Additions |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
Amortization and impairment losses |
|
|
- |
|
|
|
(2) |
|
|
|
(3) |
|
|
|
(7) |
|
|
|
(12) |
|
Closing balance December 31, 2014 |
|
|
$ 116 |
|
|
|
$ 14 |
|
|
|
$ 17 |
|
|
|
$ 161 |
|
|
|
$ 308 |
|
Cost |
|
|
$ 116 |
|
|
|
$ 17 |
|
|
|
$ 39 |
|
|
|
$ 467 |
|
|
|
$ 639 |
|
|
|
|
|
|
|
Accumulated amortization and impairment losses |
|
|
- |
|
|
|
(3) |
|
|
|
(22) |
|
|
|
(306) |
|
|
|
(331) |
|
|
|
|
|
|
|
Net carrying amount December 31, 2014 |
|
|
$ 116 |
|
|
|
$ 14 |
|
|
|
$ 17 |
|
|
|
$ 161 |
|
|
|
$ 308 |
|
1 |
Relates to water rights in South America which are subject to annual impairment testing and will be amortized through cost of sales when we begin using
these in the future. |
2 |
The amount will be amortized through cost of sales using the UOP method over LOM ounces of the Pueblo Viejo mine, with no assumed residual value.
|
3 |
Relates to a supply agreement with Michelin North America Inc. to secure a supply of tires and is amortized over the effective term of the contract
through cost of sales. |
4 |
Exploration potential consists of the estimated fair value attributable to exploration licenses acquired as a result of a business combination or asset
acquisition. The carrying value of the licenses will be transferred to PP&E when the development of attributable mineral resources commences (note 2m(i)). See note 20 for details of impairment charges recorded against exploration assets.
|
|
|
|
|
|
BARRICK YEAR END 2014 |
|
140 |
|
NOTES TO FINANCIAL STATEMENTS |
20 > IMPAIRMENT OF GOODWILL AND NON-CURRENT ASSETS
In accordance with our accounting policy, goodwill is tested for impairment at the beginning of the fourth quarter and also when there is an
indicator of impairment. Non-current assets are tested for impairment when events or changes in circumstances suggest that the carrying amount may not be recoverable.
When there is an indicator of impairment of non-current assets within an operating segment consisting of a CGU or group of CGUs that contains
goodwill, we test the non-current assets for impairment first and recognize any impairment loss on the non-current assets before testing the operating segment for any potential goodwill impairment. When there is an indicator of impairment of
non-current assets within an operating segment consisting of a single CGU that contains goodwill, we test the non-current assets for impairment first and recognize any impairment loss on goodwill first and then any remaining impairment loss is
applied against the non-current assets. As at December 31, 2014, we no longer have any groups of CGUs that contain goodwill as a result of the management reorganization, and therefore each CGU is tested for impairment independently.
An impairment loss is recognized when the carrying amount exceeds the recoverable amount. The recoverable amount of each operating segment for
goodwill testing purposes has been determined based on its estimated FVLCD, which has been determined to be greater than the VIU amounts. The recoverable amount for non-current asset testing is calculated using the same approach as for goodwill;
however, the assessment is done at the CGU level, which is the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets. A CGU is generally an individual operating mine or development project.
A |
Summary of impairments (reversals) |
For the year ended December 31, 2014, we recorded impairment losses of $2.7 billion (2013: $9.9 billion) for non-current assets and $1.4
billion (2013: $2.8 billion) for goodwill, as summarized in the following table:
|
|
|
|
|
|
|
|
|
For the year ended December 31 |
|
|
2014 |
|
|
|
2013 |
|
Cerro Casale |
|
|
$ 1,476 |
|
|
|
$ - |
|
Lumwana |
|
|
720 |
|
|
|
- |
|
Pascua-Lama |
|
|
382 |
|
|
|
6,061 |
|
Jabal Sayid |
|
|
198 |
|
|
|
860 |
|
Cortez |
|
|
46 |
|
|
|
- |
|
AFS Investments |
|
|
18 |
|
|
|
26 |
|
Exploration (Tusker, Kainantu, Saudi Licenses) |
|
|
7 |
|
|
|
112 |
|
Porgera |
|
|
(160) |
|
|
|
746 |
|
Buzwagi |
|
|
- |
|
|
|
721 |
|
Veladero |
|
|
- |
|
|
|
464 |
|
North Mara |
|
|
- |
|
|
|
286 |
|
Pierina |
|
|
- |
|
|
|
140 |
|
Round Mountain |
|
|
- |
|
|
|
78 |
|
Granny Smith |
|
|
- |
|
|
|
73 |
|
Ruby Hill |
|
|
- |
|
|
|
66 |
|
Marigold Mine |
|
|
- |
|
|
|
60 |
|
Kanowna |
|
|
- |
|
|
|
41 |
|
Plutonic |
|
|
- |
|
|
|
37 |
|
Darlot |
|
|
- |
|
|
|
36 |
|
Bald Mountain |
|
|
- |
|
|
|
16 |
|
Tulawaka |
|
|
- |
|
|
|
16 |
|
Other |
|
|
10 |
|
|
|
33 |
|
Total non-current asset impairment losses |
|
|
$ 2,697 |
|
|
|
$ 9,872 |
|
Zaldívar |
|
|
712 |
|
|
|
- |
|
Jabal Sayid |
|
|
316 |
|
|
|
- |
|
Lumwana |
|
|
214 |
|
|
|
- |
|
Bald Mountain |
|
|
131 |
|
|
|
- |
|
Round Mountain |
|
|
36 |
|
|
|
- |
|
Copper |
|
|
- |
|
|
|
1,033 |
|
Australia Pacific |
|
|
- |
|
|
|
1,200 |
|
Capital Project |
|
|
- |
|
|
|
397 |
|
Acacia |
|
|
- |
|
|
|
185 |
|
Total goodwill impairment losses |
|
|
$ 1,409 |
|
|
|
$ 2,815 |
|
Total impairment losses |
|
|
$ 4,106 |
|
|
|
$ 12,687 |
|
|
|
|
|
|
BARRICK YEAR END 2014 |
|
141 |
|
NOTES TO FINANCIAL STATEMENTS |
2014 Indicators of Impairment
In second quarter 2014, our Jabal Sayid project in Saudi Arabia met the criteria as an asset held for sale. Accordingly, we were required to
allocate goodwill from the Copper Operating Unit to Jabal Sayid and test the Jabal Sayid group of assets for impairment. We determined that the carrying value exceeded the FVLCD, and consequently recorded $514 million in impairment charges,
including the full amount of goodwill allocated on a relative fair value basis, of $316 million. The recoverable amount after the impairment, based on FVLCD, was $560 million. In fourth quarter 2014, we closed a transaction to sell a 50 percent
interest of Jabal Sayid for cash proceeds of $216 million.
We reached an agreement to sell a power-related asset at our Pueblo Viejo mine for
proceeds that exceeded its carrying value. This asset had previously been impaired in fourth quarter 2012, and therefore we recognized an impairment reversal of $9 million. This transaction closed on September 30, 2014.
In fourth quarter 2014, as described in note 19, we reorganized our internal management reporting structure. As a result, the goodwill
attributable to our former North America Portfolio, Australia Pacific and Copper segments was allocated to the individual CGUs within those operating segments on a relative fair value basis. The allocation of goodwill to the carrying value of our
Bald Mountain and Round Mountain CGUs, resulted in their carrying values exceeding their FVLCD and, as a result, we recorded goodwill impairment losses of $131 million and $36 million, respectively. The recoverable amounts after the impairment of
Bald Mountain and Round Mountain, based on FVLCD, were $482 million and $131 million, respectively.
On December 18, 2014, the Zambian
government passed changes to the countrys mining tax regime that would replace the current corporate income tax and variable profit tax with a 20 percent royalty which took effect on January 1, 2015. The application of a 20 percent
royalty rate compared to the 6 percent royalty rate the company was paying has a significant negative impact on the expected future cash flows of our Lumwana mine and was considered an indicator of impairment. As a result, we conducted an impairment
test and as a result of the new royalty rate along with the decrease in our copper price assumptions, recorded $930 million in impairment charges, including the full amount of goodwill of $214 million allocated to Lumwana as a result of the change
in segments (see note 19). The
recoverable amount after the impairment, based on FVLCD, was $300 million.
Our
Zaldívar mine experienced a significant decrease in the estimated FVLCD of the mine, primarily as a result of the decrease in fourth quarter of 2014 of our forecast of the long-term copper price and, to a lesser extent, as a result of the
final assessment of the tax rate increase in Chile. Accordingly, we recorded a goodwill impairment loss of $712 million on this CGU. The recoverable amount after the impairment, based on FVLCD, was $2,411 million.
In November 2014, we completed a strategy optimization study for our Cerro Casale project with the goal of identifying a development model that
would improve the project economics and risk by reducing the upfront capital requirements in order to generate a higher return on our investment. The study was unable to identify an alternative that provided an overall rate of return above our
hurdle rate for a project of this size and complexity. As a result, the budget for 2015 for the project has been significantly reduced, with the 2015 budget focused on preserving the optionality of the project. We will continue activities to protect
the asset and assess alternative ways to develop the project in a more economic manner; however managements expectation of achieving a suitable rate of return in the current metal price environment has been diminished. The foregoing
developments were deemed to be indicators of impairment, and as a result, we assessed the recoverable amount of the project and have recorded an impairment loss on the project of $1,467 million. The recoverable amount after the impairment, based on
the projects estimated FVLCD, was $500 million (100% basis).
In December 2014, the Chilean Supreme Court declined to consider
Barricks appeal of the Environmental Court Decision on Pascua-Lama on procedural grounds (see note 35). As a result, the Superintendencia del Medio Ambiente (SMA) will now re-evaluate the Resolution. Although we cannot reasonably
predict the outcome of the resolution, this risk, in combination with the decrease in our long-term silver price assumption in fourth quarter 2014 due to declining market prices, and the continued uncertainty about the timing, cost and permitting of
the project, were deemed to be indicators of impairment. As a result, we assessed the recoverable amount of the project and have recorded an impairment loss on Pascua-Lama of $382 million. The recoverable amount after the impairment, based on the
projects estimated FVLCD, was $1,200 million, which is equal to the projects carrying value at the start of the year.
|
|
|
|
|
BARRICK YEAR END 2014 |
|
142 |
|
NOTES TO FINANCIAL STATEMENTS |
At our Porgera mine in Papua New Guinea, we have revised our LOM plan to include a portion of the
open pit resources that were removed from the plan in the prior year. In 2013, we did not have a feasible plan to access the open pit reserves due to technical and financial issues with respect to the west wall of the open pit. In 2014, management
resolved these technical issues and developed an optimized mine plan to sequence the west wall cutback in an economical manner. As a result, management was able to bring a significant portion of the ounces from the open pit back into the LOM plan.
The new plan resulted in an increase in the estimated mine life from 8 to 12 years, and an increase in the estimated FVLCD of the mine, which has resulted in a partial reversal of a previous impairment loss of $160 million. The recoverable amount
after the impairment reversal, based on FVLCD, was $600 million.
The annual update to the LOM plan at Cortez resulted in a cessation of
mining in one of the open pits at the mine. This was identified as an indicator of impairment, resulting in the impairment of assets specifically related to this pit of $46 million.
2013 Indicators of Impairment
The significant
decrease in our long-term gold, silver and copper price assumptions in second quarter 2013, due to declining market prices, as well as the regulatory challenges to Pascua-Lama in May 2013 and the resulting schedule delays and associated capital
expenditure increases; and a significant change to the mine plan at our Pierina mine, were all considered indicators of impairment, and, accordingly, we performed an impairment assessment for every mine site and significant advanced development
project. As a result of this assessment, we recorded non-current asset impairment losses of $7.1 billion, including a $5.2 billion impairment loss related to the carrying value of the PP&E at Pascua-Lama; $501 million related to the Jabal Sayid
project in our copper segment; $874 million related to Buzwagi and North Mara in Acacia; $236 million related to the Kanowna, Granny Smith, Plutonic and Darlot mines in our Australia Pacific Gold segment; and $140 million related to our Pierina mine
in South America. The recoverable amounts after the impairments, based on FVLCD, were: Pascua-Lama: $1,420 million; Jabal Sayid: $1,022 million; Buzwagi: $354 million; North Mara: $502 million; Kanowna: $42 million; Granny Smith: $146 million;
Plutonic: $38 million; Darlot: $45 million; and Pierina: $nil.
After reflecting the above non-current asset impairment losses, we conducted goodwill impairment
tests and determined that the carrying value of our Copper, Australia Pacific Gold, Capital Projects and Acacia segments exceeded their FVLCD, and therefore we recorded a total goodwill impairment loss of $2.3 billion. The FVLCD of our copper
segment was negatively impacted by the decrease in our long-term copper price assumption in second quarter 2013. The FVLCD of our Australia Pacific Gold segment was negatively impacted by the significant decrease in second quarter 2013 in our
long-term gold price assumption. The FVLCD of our Capital Projects segment was negatively impacted by the significant decrease in second quarter 2013 in our long-term gold and silver price assumptions, as well as the schedule delays and associated
capital expenditure increase at our Pascua-Lama project. The FVLCD of our Acacia segment was negatively impacted by significant changes in the LOM plans in second quarter 2013 for various assets in the segment, as well as the significant decrease in
our long-term gold price assumption.
In fourth quarter 2013, as described below, we identified indicators of impairment at certain of our
mines, resulting in non-current asset impairment losses totaling $2.8 billion. As a result of our fourth quarter 2013 decision to temporarily suspend construction of our Pascua-Lama Project, we have recorded a further impairment loss on the project
of $896 million, bringing the total impairment loss for Pascua-Lama to $6.1 billion for the full year. The recoverable amount after the impairment, based on FVLCD, was $1,2 billion. At our Porgera mine in Papua New Guinea, we have changed our LOM
plan to focus primarily on the higher grade underground mine. The new plan resulted in a decrease in the estimated mine life from 13 to 9 years, and a decrease in the estimated FVLCD of the mine, which has resulted in an impairment loss of $746
million. The recoverable amount after the impairment, based on FVLCD, was $447 million. At our Veladero mine in Argentina, the annual update to the LOM plan, which was completed in fourth quarter 2013, was significantly impacted by the lower gold
price assumption as well as the effect of sustained local inflationary pressures on operating and capital costs. The new plan resulted in a reduction of reserves and LOM production as the next open pit cutback is uneconomic at current gold prices.
This resulted in a significant decrease in the estimated FVLCD of the mine, and accordingly, we recorded an impairment loss of $462 million. The recoverable amount after the impairment, based on FVLCD, was $808 million. The annual update to the LOM
plan resulted in a decrease in the net present value of our Jabal Sayid project, which is the basis for estimating the
|
|
|
|
|
BARRICK YEAR END 2014 |
|
143 |
|
NOTES TO FINANCIAL STATEMENTS |
projects FVLCD, and was therefore considered an indicator of impairment. Jabal Sayids FVLCD was also negatively impacted by the delay in achieving first production as a result of the
High Commission For Industrial Security (HCIS) compliance requirements and ongoing discussions with the Deputy Ministry for Mineral Resources (DMMR) with respect to the transfer of ownership of the project. As a result, we
recorded an impairment loss of $359 million. The recoverable amount after the impairment, based on FVLCD, was $700 million. The annual update to the LOM plan showed a decrease in the net present value at our Round Mountain mine, which was considered
to be an indicator of impairment, and we recorded an impairment loss of $78 million. The recoverable amount after the impairment, based on FVLCD, was $133 million. At North Mara, several changes were made to the LOM plan, including a decision to
defer Gokona Cut 3, while Acacia finalized a feasibility study into the alternative of mining out this reserve by underground methods. This was considered an indicator of impairment for North Mara, resulting in an impairment loss of $133 million.
The recoverable amount after the impairment, based on FVLCD, was $407 million. A wall failure at our Ruby Hill mine in Nevada was also identified as an indicator of impairment, resulting in the impairment of assets specifically related to the open
pit of $51 million.
As at December 31, 2013, four of our mines, namely Plutonic, Kanowna, Marigold and Tulawaka, met the criteria as
assets held for sale. Accordingly, we were required to remeasure these CGUs to the lower of carrying value and FVLCD. Using these new remeasured values, resulted in impairment losses of $17 million at Plutonic and $60 million at Marigold. Also,
based on the estimated FVLCD of the expected proceeds related to the expected sale of Kanowna, we have reversed $66 million of the impairment loss recorded in second quarter 2013.
After reflecting the above non-current asset impairment losses, we conducted our annual goodwill impairment test, prior to the reorganization of
our operating segments, and determined that the carrying value of our Australia Pacific segment exceeded its FVLCD and therefore we recorded a goodwill impairment loss of $551 million bringing the total impairment loss for Australia Pacific Gold
goodwill to $1,200 million for the full year. After the reorganization of the operating segments, we did not identify any indicators of impairment.
Key assumptions
The key assumptions and estimates used in determining the FVLCD are related to commodity prices, discount rates, NAV multiples for gold assets,
operating costs, exchange rates, capital expenditures, the LOM production profile, continued license to operate, and for our projects the expected start of production. In addition, assumptions related to observable market evaluation metrics,
including identification of comparable entities, and associated market values per ounce and per pound of reserves and/or resources, as well as the valuation of resources beyond what is included in LOM plans.
Gold
For the gold segments, excluding
Pascua-Lama and Cerro Casale, FVLCD for each of the CGUs was determined by calculating the net present value (NPV) of the future cash flows expected to be generated by the mines and projects within the segments (level 3 of the fair value
hierarchy). The estimates of future cash flows were derived from the most recent LOM plans and, where the LOM plans excludes a material portion of total reserves and resources, we assign value to reserves and resources not considered in these base
models. These values are then aggregated to the segment level, if applicable, the level at which goodwill was tested in 2013. In 2014, each of our mines/projects is its own segment, therefore it is not aggregated. Based on observable market or
publicly available data, including spot and forward prices and equity sell-side analyst forecasts, we make an assumption of future gold and silver prices to estimate future revenues. The future cash flows for each gold mine are discounted using a
real weighted average cost of capital (WACC), which reflects specific market risk factors for each mine. Some gold companies trade at a market capitalization greater than the NPV of their expected cash flows. Market participants describe
this as a NAV multiple, which represents the multiple applied to the NPV to arrive at the trading price. The NAV multiple is generally understood to take account of a variety of additional value factors such as the exploration potential
of the mineral property, namely the ability to find and produce more metal than what is currently included in the LOM plan or reserve and resource estimates, and the benefit of gold price optionality. As a result, we applied a specific NAV multiple
to the NPV of each CGU within each gold segment based on the NAV multiples observed in the market in recent periods and that we judged to be appropriate to the CGU.
Cerro Casale
The FVLCD for Cerro Casale was
determined by considering both the NPV, determined consistent with our gold and copper CGUs, as well as observable market values for comparable assets expressed as dollar per ounce and dollar
|
|
|
|
|
BARRICK YEAR END 2014 |
|
144 |
|
NOTES TO FINANCIAL STATEMENTS |
per pound of proven and probable reserves (both level 3 of the fair value hierarchy). Both these approaches were used, with the market approach being the primary method, to reflect the risk and
uncertainty of the current LOM and to reflect the significant option value inherent in a large project with significant reserves and resources. The observable market values were adjusted, where appropriate, for country risk if the comparable asset
was in a different country, for any change in metal prices since the valuation date of the comparable asset and the fact that this project has high initial capital, which depresses the value in comparison to other assets with lower initial capital.
Pascua-Lama
The FVLCD for Pascua-Lama was
determined by considering observable market values for comparable assets expressed as dollar per ounce of proven and probable reserves (level 3 of the fair value hierarchy). The market approach being the primary method as the LOM for Pascua-Lama has
significant uncertainty with respect to the estimated timeline for the project and the estimated remaining construction costs. The observable market values were adjusted, where appropriate, for country risk if the comparable asset was in a different
country and any change in metal prices since the valuation date of the comparable asset.
Copper
For our Copper segment, the FVLCD for each of the CGUs was determined based on the NPV of future cash flows expected to be generated using the most
recent LOM plans aggregated to the segment level in 2013 (level 3 of the fair value hierarchy). In 2014, each of the mines is its own segment, therefore it is not aggregated. Based on observable market or publicly available data including spot and
forward prices and equity sell-side analyst consensus, we make an assumption of future copper prices to estimate future revenues. The future cash flows for each copper mine were discounted using a WACC depending on the location and market risk
factors for each mine. FVLCD for Lumwana was also estimated by considering market multiples expressed as dollar per pound based primarily on the observed valuation metrics for comparable assets (level 3 of the fair value hierarchy). Both these
approaches were used with the market approach being the primary method, as the LOM for Lumwana does not meet our investment criteria once the new tax regime has been implemented and we wanted to reflect the value of the minerals on the property. The
observable market multiples were adjusted where appropriate for country risk if the comparable asset was in a different country and any change in metal prices since the valuation date of the comparable asset.
The key assumptions used in our impairment testing are summarized in the table below:
|
|
|
|
|
|
|
|
|
|
|
2014 |
|
|
2013 |
|
Gold price per oz (long-term) |
|
|
$1,300 |
|
|
|
$1,300 |
|
Silver price per oz (long-term) |
|
|
$21 |
|
|
|
$23 |
|
Copper price per lb (long-term) |
|
|
$3.00 |
|
|
|
$3.25 |
|
WACC - gold (range) |
|
|
3% - 8% |
|
|
|
2% - 7% |
|
WACC - gold (avg) |
|
|
5% |
|
|
|
5% |
|
WACC - copper (range) |
|
|
7% - 9% |
|
|
|
7% - 9% |
|
WACC - copper (avg) |
|
|
7% |
|
|
|
7% |
|
NAV multiple - gold (avg) |
|
|
1.1 |
|
|
|
1.1 |
|
LOM years - gold (range) |
|
|
3 23 |
|
|
|
3 - 29 |
|
LOM years - gold (avg) |
|
|
12 |
|
|
|
13 |
|
Value per ounce of gold 1 |
|
|
$45 - $80 |
|
|
|
$60 - $70 |
|
Value per pound of copper 1 |
|
|
$0.05 - $0.06 |
|
|
|
n/a |
|
1 |
The value per ounce/pound used is dependent on the characteristics of the property being valued |
Sensitivities
We performed a sensitivity
analysis on commodity price, which is the key assumption that impacts the impairment calculations. We assumed a negative 10% change for the assumption, taking sales price from $1,300 per ounce down to $1,170 per ounce for gold, $3.00 per pound down
to $2.70 per pound for copper and $21 per ounce to $18.90 per ounce for silver, while holding all other assumptions constant. We note that this sensitivity identifies the key assets where the decrease in the sales price, in isolation, could cause
the carrying value of our operating segments to exceed its recoverable amount for the purposes of the goodwill impairment test or the carrying value of any of our CGUs to exceed its recoverable amount for the purposes of the non-current asset
impairment test where an indicator of impairment for the non-current asset was identified.
Should there be a significant decline in commodity
prices, we would take actions to assess the implications on our life of mine plans, including the determination of reserves and resources, and the appropriate cost structure for the operating segments. The recoverable amount of the CGUs would also
be impacted by other market factors such as changes in net asset value multiples and the value per ounce/pound of comparable market entities. We performed this sensitivity based on the results of our last impairment test performed in fourth quarter
2014 and noted that the goodwill at most CGUs would be fully impaired, with only Goldstrike, Lagunas Norte, Turquoise Ridge and Zaldívar having material balances remaining. The decreases in fair value with a 10% decrease in sales prices for
these sites are as follows: Goldstrike ($1,105), Lagunas Norte ($269), Turquoise Ridge ($459) and Zaldívar ($449). In addition to the goodwill impairments, the following sites would have material non-current asset impairments as well:
|
|
|
|
|
BARRICK YEAR END 2014 |
|
145 |
|
NOTES TO FINANCIAL STATEMENTS |
|
|
|
|
|
|
|
|
|
As at December 31, 2014 |
|
Carrying value1 |
|
|
Decrease in fair value with a 10% decrease in sales |
|
|
|
|
|
|
prices |
|
Cortez1 |
|
|
$3,894 |
|
|
|
$1,371 |
|
|
|
|
Pueblo Viejo1 |
|
|
5,291 |
|
|
|
2,185 |
|
|
|
|
Veladero1 |
|
|
804 |
|
|
|
474 |
|
|
|
|
Bald Mountain2 |
|
|
538 |
|
|
|
237 |
|
|
|
|
Porgera2 |
|
|
528 |
|
|
|
418 |
|
|
|
|
Round
Mountain2 |
|
|
140 |
|
|
|
114 |
|
1 |
Includes goodwill (refer to note 19). |
2 |
These CGUs have been impaired or had a reversal in 2014 and therefore their fair value approximates carrying value |
In addition, for our Cerro Casale and Pascua-Lama projects and Lumwana mine, we have determined our valuation primarily based on a market
approach. The key assumption that impacts the impairment calculations, should there be an indication of impairment for these CGUs, is the value per ounce of gold and per pound of copper based on an analysis of comparable companies. We assumed a
negative 10% change for the assumption of gold, silver and copper value per unit, while holding all other assumptions constant and, based on the results of the impairment testing performed in fourth quarter 2014 for Cerro Casale, Pascua-Lama and
Lumwana, the fair value of the CGUs would have been reduced from $500 million to $450 million; $1,200 million to $1,080 million; and, $300 million to $270 million respectively. We note that this sensitivity identifies the decrease in the value that,
in isolation, would cause the carrying value of the CGU to exceed its recoverable amount. For Cerro Casale, Pascua-Lama and Lumwana, this value decrease is linear to the decrease in value per ounce/pound.
21 > OTHER ASSETS
|
|
|
|
|
|
|
|
|
|
|
As at Dec. 31, 2014 |
|
|
As at Dec. 31, 2013 |
|
Derivative assets (note 24f) |
|
|
$ 2 |
|
|
|
$ 10 |
|
Goods and services taxes recoverable1 |
|
|
565 |
|
|
|
618 |
|
Notes receivable |
|
|
112 |
|
|
|
112 |
|
Due from joint venture2 |
|
|
164 |
|
|
|
- |
|
Other3 |
|
|
360 |
|
|
|
326 |
|
|
|
|
$ 1,203 |
|
|
|
$ 1,066 |
|
1 |
Includes VAT and fuel tax receivables of $461 million in Argentina, $62 million in Tanzania and $42 million in Chile (Dec. 31, 2013: $519 million, $54
million and $45 million, respectively). The VAT in Argentina is recoverable once Pascua-Lama has entered production. |
2 |
Represents the non-interest bearing shareholder loan due from the Jabal Sayid JV as a result of the divestment of 50 percent interest in Jabal Sayid.
|
3 |
Includes a cash balance at Pueblo Viejo of $59 million (2013: $nil) that is contractually restricted to the disbursements for environmental
rehabilitation that are expected to occur near the end of Pueblo Viejos mine life. |
22 > ACCOUNTS PAYABLE
|
|
|
|
|
|
|
|
|
|
|
As at Dec. 31, 2014 |
|
|
As at Dec. 31, 2013 |
|
Accounts payable |
|
|
$ 974 |
|
|
|
$ 1,058 |
|
Accruals |
|
|
679 |
|
|
|
1,107 |
|
|
|
|
$ 1,653 |
|
|
|
$ 2,165 |
|
23 > OTHER CURRENT LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
As at Dec. 31, 2014 |
|
|
As at Dec. 31, 2013 |
|
Provision for environmental rehabilitation (note 26) |
|
|
$ 109 |
|
|
|
$ 105 |
|
Derivative liabilities (note 24f) |
|
|
158 |
|
|
|
31 |
|
Restricted stock units (note 33b) |
|
|
15 |
|
|
|
19 |
|
Other |
|
|
208 |
|
|
|
148 |
|
|
|
|
$ 490 |
|
|
|
$ 303 |
|
24 > FINANCIAL INSTRUMENTS
Financial instruments include cash; evidence of ownership in an entity; or a contract that imposes an obligation on one party and conveys a right
to a second entity to deliver/receive cash or another financial instrument. Information on certain types of financial instruments is included elsewhere in these consolidated financial statements as follows: accounts receivable (note 17); investments
(note 15); restricted share units (note 33b).
A Cash and Equivalents
Cash and equivalents include cash, term deposits, treasury bills and money market investments with original maturities of less than 90 days.
|
|
|
|
|
|
|
|
|
|
|
As at Dec. 31, 2014 |
|
|
As at Dec. 31, 2013 |
|
Cash deposits |
|
|
$ 967 |
|
|
|
$ 648 |
|
Term deposits |
|
|
630 |
|
|
|
235 |
|
Money market investments |
|
|
1,102 |
|
|
|
1,521 |
|
|
|
|
$ 2,699 |
|
|
|
$ 2,404 |
|
|
|
|
|
|
BARRICK YEAR END 2014 |
|
146 |
|
NOTES TO FINANCIAL STATEMENTS |
Of total cash and cash equivalents as of December 31, 2014, $614 million (2013: $305 million)
was held in subsidiaries which have regulatory regulations, contractual restrictions or operate in countries where exchange controls and other legal restrictions apply and are therefore not available for general use by the Company. In addition, $242
million (2013: $936 million) of cash and equivalents is held in subsidiaries where we have determined the cash is reinvested for the foreseeable future for the calculation of deferred income tax. This cash can be repatriated, however there would be
a tax cost of doing so.
B Long-Term Debt1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2014 |
|
|
|
|
At Dec. 31 |
|
|
|
Proceeds |
|
|
|
Repayments |
|
|
|
Amortization and Other |
2 |
|
|
At Jan. 1 |
|
2.9%/4.4%/5.7% notes3 |
|
|
$ 2,409 |
|
|
|
$ - |
|
|
|
$ - |
|
|
|
$ 3 |
|
|
|
$ 2,406 |
|
3.85%/5.25% notes |
|
|
1,983 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,983 |
|
5.80% notes |
|
|
395 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
395 |
|
5.75%/6.35% notes |
|
|
855 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
855 |
|
Other fixed rate notes4 |
|
|
2,720 |
|
|
|
- |
|
|
|
- |
|
|
|
8 |
|
|
|
2,712 |
|
Project financing |
|
|
850 |
|
|
|
- |
|
|
|
102 |
|
|
|
11 |
|
|
|
941 |
|
Capital leases5 |
|
|
354 |
|
|
|
133 |
|
|
|
46 |
|
|
|
27 |
|
|
|
240 |
|
Other debt obligations |
|
|
794 |
|
|
|
8 |
|
|
|
40 |
|
|
|
(3) |
|
|
|
829 |
|
2.5%/4.10%/5.75% notes6 |
|
|
2,579 |
|
|
|
- |
|
|
|
- |
|
|
|
2 |
|
|
|
2,577 |
|
Acacia Credit facility7 |
|
|
142 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
142 |
|
|
|
|
$ 13,081 |
|
|
|
$ 141 |
|
|
|
$ 188 |
|
|
|
$ 48 |
|
|
|
$ 13,080 |
|
Less: current portion8 |
|
|
(333) |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(179) |
|
|
|
|
$ 12,748 |
|
|
|
$ 141 |
|
|
|
$ 188 |
|
|
|
$ 48 |
|
|
|
$ 12,901 |
|
|
|
|
|
2013 |
|
|
|
|
At Dec. 31 |
|
|
|
Proceeds |
|
|
|
Repayments |
|
|
|
Amortization and Other |
2 |
|
|
At Jan.1 |
|
1.75%/2.9%/4.4%/5.7% notes3 |
|
|
$ 2,406 |
|
|
|
$ - |
|
|
|
$ 1,571 |
|
|
|
$ 6 |
|
|
|
$ 3,971 |
|
3.85%/5.25% notes |
|
|
1,983 |
|
|
|
- |
|
|
|
- |
|
|
|
2 |
|
|
|
1,981 |
|
4.875%/5.80% notes |
|
|
395 |
|
|
|
- |
|
|
|
350 |
|
|
|
1 |
|
|
|
744 |
|
5.75%/6.35% notes |
|
|
855 |
|
|
|
- |
|
|
|
136 |
|
|
|
1 |
|
|
|
990 |
|
Other fixed rate notes4 |
|
|
2,712 |
|
|
|
- |
|
|
|
500 |
|
|
|
4 |
|
|
|
3,208 |
|
Project financing |
|
|
941 |
|
|
|
94 |
|
|
|
45 |
|
|
|
2 |
|
|
|
890 |
|
Capital leases5 |
|
|
240 |
|
|
|
- |
|
|
|
93 |
|
|
|
148 |
|
|
|
185 |
|
Other debt obligations |
|
|
829 |
|
|
|
178 |
|
|
|
119 |
|
|
|
(4) |
|
|
|
774 |
|
Credit facility |
|
|
- |
|
|
|
- |
|
|
|
1,200 |
|
|
|
- |
|
|
|
1,200 |
|
2012 Credit facility |
|
|
- |
|
|
|
2,000 |
|
|
|
2,000 |
|
|
|
- |
|
|
|
- |
|
2.5%/4.10%/5.75% notes6 |
|
|
2,577 |
|
|
|
3,000 |
|
|
|
398 |
|
|
|
(25) |
|
|
|
- |
|
Acacia Credit facility7 |
|
|
142 |
|
|
|
142 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
$ 13,080 |
|
|
|
$ 5,414 |
|
|
|
$ 6,412 |
|
|
|
$ 135 |
|
|
|
$ 13,943 |
|
Less: current portion8 |
|
|
(179) |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(1,848) |
|
|
|
|
$12,901 |
|
|
|
$ 5,414 |
|
|
|
$ 6,412 |
|
|
|
$ 135 |
|
|
|
$ 12,095 |
|
1 |
The agreements that govern our long-term debt each contain various provisions which are not
summarized herein. These provisions allow Barrick to, at its option, redeem indebtedness prior to maturity at specified prices and also may permit redemption of debt by Barrick upon the occurrence of certain specified changes in tax legislation.
|
2 |
Amortization of debt premium/discount and increases in capital leases. |
3 |
Consists of $2.4 billion in conjunction with our wholly-owned subsidiary Barrick North America Finance LLC (BNAF). This consists of $229
million of BGC notes due 2016, $1.35 billion of BNAF notes due 2021 and $850 million of BNAF notes due 2041. We provide an unconditional and irrevocable guarantee on all BNAF Notes and generally provide such guarantees on all BNAF notes issued,
which will rank equally with our other unsecured and unsubordinated obligations. |
4 |
Consists of $2.8 billion in conjunction with our wholly-owned subsidiary Barrick North America Finance LLC (BNAF) and our wholly-owned
subsidiary Barrick (PD) Australia Finance Pty Ltd. (BPDAF). This consists of $500 million of BNAF notes due 2018, $750 million of BGC notes due 2019, $400 million of BPDAF notes due 2020, $250 million of BNAF notes due 2038 and $850
million of BPDAF notes due 2039. We provide an unconditional and irrevocable guarantee on all BNAF and BPDAF notes and generally provide such guarantees on all BNAF and BPDAF notes issued, which will rank equally with our other unsecured and
unsubordinated obligations. |
5 |
Consists primarily of capital leases at Pascua-Lama $199 million and Lagunas Norte, $123 million (2013: $71 million and $150 million, respectively).
|
6 |
Consists of $2.6 billion in conjunction with our wholly-owned subsidiary Barrick North America Finance LLC (BNAF). This consists of $252
million of BGC notes due 2018, $1.5 billion of BGC notes due 2023 and $850 million of BNAF notes due 2043. We provide an unconditional and irrevocable guarantee on all BNAF Notes and generally provide such guarantees on all BNAF notes issued, which
will rank equally with our other unsecured and unsubordinated obligations. |
7 |
Consists of an export credit backed term loan facility. |
8 |
The current portion of long-term debt consists of project financing ($98 million; 2013: $102 million), other debt obligations ($150 million, 2013: $39
million), and capital leases ($71 million, 2013: $38 million) and Acacia credit facility ($14 million, 2013: nil). |
|
|
|
|
|
BARRICK YEAR END 2014 |
|
147 |
|
NOTES TO FINANCIAL STATEMENTS |
1.75%/2.9%/4.4%/5.7% notes
In June 2011, Barrick, and our wholly-owned subsidiary Barrick North America Finance LLC (BNAF), issued an aggregate of $4.0 billion in
debt securities comprised of: $700 million of 1.75% notes that had an original maturity date in 2014 and $1.1 billion of 2.90% notes that had an original maturity date mature in 2016 issued by Barrick (collectively, the Barrick Notes) as
well as $1.35 billion of 4.40% notes that mature in 2021 and $850 million of 5.70% notes that mature in 2041 issued by BNAF (collectively, the BNAF Notes). Barrick provides an unconditional and irrevocable guarantee of the BNAF Notes.
The Barrick Notes and the guarantee in respect of the BNAF Notes will rank equally with Barricks other unsecured and unsubordinated obligations.
During 2013, the entire balance ($700 million) of the 1.75% notes was repaid along with $871 million out of the $1.1 billion of 2.9% notes.
3.85% and 5.25% Notes
On April 3, 2012, we
issued an aggregate of $2 billion in debt securities comprised of $1.25 billion of 3.85% notes that mature in 2022 and $750 million of 5.25% notes that mature in 2042. $1.0 billion of the net proceeds from this offering were used to repay the
existing indebtedness under the 2012 Credit Facility.
Other Fixed Rate Notes
On October 16, 2009, we issued two tranches of debentures totaling $1.25 billion through our wholly-owned indirect subsidiary Barrick (PD)
Australia Finance Pty Ltd. (BPDAF) consisting of $850 million of 30-year notes with a coupon rate of 5.95%, and $400 million of 10-year notes with a coupon rate of 4.95% (collectively, the Notes). We also provide an
unconditional and irrevocable guarantee of these payments, which rank equally with our other unsecured and unsubordinated obligations.
On March 19, 2009, we issued an aggregate of $750 million of 10-year notes with a coupon rate
of 6.95% for general corporate purposes. The notes are unsecured, unsubordinated obligations and will rank equally with our other unsecured, unsubordinated obligations.
In September 2008, we issued an aggregate of $1.25 billion of notes through our wholly-owned indirect subsidiaries Barrick North America Finance
LLC and Barrick Gold Financeco LLC (collectively, the LLCs) consisting of $500 million of 5-year notes with a coupon rate of 6.125%, $500 million of 10-year notes with a coupon rate of 6.8%, and $250 million of 30-year notes with a
coupon rate of 7.5% (collectively, the Notes). We also provide an unconditional and irrevocable guarantee of these payments, which rank equally with our other unsecured and unsubordinated obligations.
During 2013, the entire balance ($500 million) of the 5-year notes with a coupon rate of 6.125% that was due in September 2013 was repaid.
Pueblo Viejo Project Financing Agreement
In
April 2010, Barrick and Goldcorp finalized terms for $1.035 billion (100% basis) in project financing for Pueblo Viejo. The project financing is non-recourse subject to guarantees provided by Barrick and Goldcorp for their proportionate share which
will terminate upon Pueblo Viejo meeting certain operating completion tests and are subject to an exclusion for certain political risk events. On February 17, 2015, we received notification that the completion tests have been met, resulting in
termination of the guarantees. The lending syndicate is comprised of international financial institutions including export development agencies and commercial banks. The amount is divided into three tranches of $400 million, $375 million and $260
million with tenors of 15, 15 and 12 years, respectively. The $400 million tranche bears a coupon of LIBOR+3.25% pre-completion and scales gradually to LIBOR+5.10% (inclusive of political risk insurance premium) for years 13-15. The $375 million
tranche bears a fixed coupon of 3.86% for the entire 15 years. The $260 million tranche bears a coupon of LIBOR+3.25% pre-completion and scales gradually to LIBOR+4.85% (inclusive of political risk insurance premium) for years 11-12.
We have drawn the entire $1.035 billion to date. During the year, $102 million of loans was repaid. The remaining principal balance under the
Pueblo Viejo Financing Agreement is $888 million.
|
|
|
|
|
BARRICK YEAR END 2014 |
|
148 |
|
NOTES TO FINANCIAL STATEMENTS |
Credit Facility
We had a credit and guarantee agreement (the Credit Facility) with certain Lenders which required such lenders to make available to us
a credit facility of up to $1.45 billion ($1.5 billion prior to second quarter 2012) or the equivalent amount in Canadian dollars. We drew $1.5 billion on the Credit Facility in 2011 to finance a portion of the Equinox acquisition, including the
payment of related fees and expenses. The Credit Facility, which was unsecured, had an interest rate of LIBOR plus 0.25% to 0.35% on drawn down amounts, and a commitment rate of 0.07% to 0.08% on undrawn amounts. $50 million matured in the second
quarter of 2012 and an additional $250 million was repaid during the second quarter of 2012. The remaining $1.2 billion was repaid in 2013. Subsequent to the repayment, we terminated the Credit Facility.
Refinancing of the Credit Facility
In January
2012, we finalized a credit and guarantee agreement (the 2012 Credit Facility) with certain Lenders, which requires such Lenders to make available to us a credit facility of $4.0 billion or the equivalent amount in Canadian dollars. The
2012 Credit Facility, which is unsecured, currently has an interest rate of LIBOR plus 1.50% on drawn amounts, and a commitment rate of 0.25% on undrawn amounts. The $4.0 billion facility currently matures in 2020. In first quarter 2013, we drew
$2.0 billion on our $4.0 billion revolving credit facility (2012 Credit Facility), using the proceeds to repay $1.2 billion on our $1.45 billion credit facility, which expired in April 2013. In second quarter 2013, we issued $3.0 billion
of debt, using $2.0 billion of the net proceeds to repay the outstanding balance on the 2012 Credit Facility. The 2012 Credit Facility is undrawn as at December 31, 2014.
2.50%/4.10%/5.75% notes
On May 2, 2013, we
issued an aggregate of $3 billion in notes through our wholly-owned indirect subsidiary Barrick North America Finance LLC consisting of $650 million of 2.50% notes that mature in 2018, $1.5 billion of 4.10% notes that mature in 2023 and $850 million
of 5.75% notes that mature in 2043. $2.0 billion of the net proceeds from this offering were used to repay existing indebtedness under our $4 billion revolving credit facility which matures in 2020. We provided an unconditional and irrevocable
guarantee of these payments, which will rank equally with our other unsecured and unsubordinated obligations.
During 2013, $398 million of
the $650 million 2.50% notes were repaid.
Acacia Credit Facility
In January 2013, Acacia concluded negotiations with a group of commercial banks for the provision of an export credit backed term loan facility
(the Facility) for the amount of US$142 million. The Facility has been put in place to fund a substantial portion of the construction costs of the new CIL circuit at the process plant at the Bulyanhulu Project (Project). The
Facility is collateralized by the Project, has a term of seven years and, when drawn, the spread over LIBOR will be 250 basis points. The Facility is repayable in equal installments over the term of the Facility, after a two-year repayment holiday
period. The interest rate has been fixed at an effective rate of 3.6% through the use of an interest rate swap. At December 31, 2014, the full value of the Facility has been drawn.
Debt Issue Costs
In 2013, a total of $30 million
of debt issue costs arose from debt issued during the year.
|
|
|
|
|
BARRICK YEAR END 2014 |
|
149 |
|
NOTES TO FINANCIAL STATEMENTS |
Interest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2014 |
|
|
|
|
2013 |
|
For the years ended December 31 |
|
|
Interest cost |
|
|
|
Effective rate |
1 |
|
|
|
|
Interest cost |
|
|
|
Effective rate |
1 |
1.75%/2.9%/4.4%/5.7% notes |
|
|
$ 118 |
|
|
|
4.84% |
|
|
|
|
|
$ 153 |
|
|
|
3.97% |
|
3.85%/5.2% notes |
|
|
89 |
|
|
|
4.44% |
|
|
|
|
|
87 |
|
|
|
4.34% |
|
5.80% notes |
|
|
23 |
|
|
|
5.87% |
|
|
|
|
|
40 |
|
|
|
5.58% |
|
5.75%/6.35% notes |
|
|
54 |
|
|
|
6.25% |
|
|
|
|
|
60 |
|
|
|
6.11% |
|
Other fixed rate notes |
|
|
179 |
|
|
|
6.50% |
|
|
|
|
|
202 |
|
|
|
6.53% |
|
Project financing |
|
|
47 |
|
|
|
5.09% |
|
|
|
|
|
46 |
|
|
|
4.77% |
|
Capital leases |
|
|
13 |
|
|
|
3.51% |
|
|
|
|
|
6 |
|
|
|
3.20% |
|
Other debt obligations |
|
|
46 |
|
|
|
5.97% |
|
|
|
|
|
42 |
|
|
|
5.12% |
|
Credit facility |
|
|
- |
|
|
|
- |
|
|
|
|
|
2 |
|
|
|
0.88% |
|
2012 Credit Facility |
|
|
- |
|
|
|
- |
|
|
|
|
|
5 |
|
|
|
1.47% |
|
2.5%/4.10%/5.75% notes |
|
|
120 |
|
|
|
4.59% |
|
|
|
|
|
85 |
|
|
|
4.30% |
|
Acacia credit facility |
|
|
4 |
|
|
|
2.80% |
|
|
|
|
|
2 |
|
|
|
2.80% |
|
Deposits on silver contracts (note 28) |
|
|
57 |
|
|
|
8.32% |
|
|
|
|
|
55 |
|
|
|
8.59% |
|
Accretion |
|
|
75 |
|
|
|
|
|
|
|
|
|
68 |
|
|
|
|
|
Other interest |
|
|
1 |
|
|
|
|
|
|
|
|
|
11 |
|
|
|
|
|
Debt extinguishment fees |
|
|
- |
|
|
|
|
|
|
|
|
|
90 |
|
|
|
|
|
|
|
|
$ 826 |
|
|
|
|
|
|
|
|
|
$ 954 |
|
|
|
|
|
Less: interest capitalized |
|
|
(30) |
|
|
|
|
|
|
|
|
|
(297) |
|
|
|
|
|
|
|
|
$ 796 |
|
|
|
|
|
|
|
|
|
$ 657 |
|
|
|
|
|
|
|
|
|
|
|
Cash interest paid |
|
|
$ 736 |
|
|
|
|
|
|
|
|
|
$ 1,056 |
|
|
|
|
|
Amortization of debt issue costs |
|
|
21 |
|
|
|
|
|
|
|
|
|
22 |
|
|
|
|
|
Gain on interest rate hedges |
|
|
(2) |
|
|
|
|
|
|
|
|
|
(1) |
|
|
|
|
|
(Decrease) Increase in interest accruals |
|
|
(4) |
|
|
|
|
|
|
|
|
|
(281) |
|
|
|
|
|
Accretion |
|
|
75 |
|
|
|
|
|
|
|
|
|
68 |
|
|
|
|
|
Debt extinguishment fees |
|
|
- |
|
|
|
|
|
|
|
|
|
90 |
|
|
|
|
|
Interest cost |
|
|
$ 826 |
|
|
|
|
|
|
|
|
|
$ 954 |
|
|
|
|
|
1 |
The effective rate includes the stated interest rate under the debt agreement, amortization of debt issue costs and debt discount/premium and the
impact of interest rate contracts designated in a hedging relationship with debt. |
Scheduled Debt Repayments1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2015 |
|
|
2016 |
|
|
2017 |
|
|
2018 |
|
|
2019 |
|
|
2020 and thereafter |
|
|
Total |
|
2.9%/4.4%/5.7% notes |
|
|
$ - |
|
|
|
$ 229 |
|
|
|
$ - |
|
|
|
$ - |
|
|
|
$ - |
|
|
|
$ 2,200 |
|
|
|
$ 2,429 |
|
3.85%/5.2% notes |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
2,000 |
|
|
|
2,000 |
|
5.80% notes |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
400 |
|
|
|
400 |
|
5.75%/6.35% notes |
|
|
- |
|
|
|
264 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
600 |
|
|
|
864 |
|
Other fixed rate notes |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
500 |
|
|
|
750 |
|
|
|
1,500 |
|
|
|
2,750 |
|
Project financing |
|
|
98 |
|
|
|
98 |
|
|
|
98 |
|
|
|
98 |
|
|
|
98 |
|
|
|
398 |
|
|
|
888 |
|
Other debt obligations |
|
|
150 |
|
|
|
46 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
564 |
|
|
|
760 |
|
2.5%/4.10%/5.75% notes |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
252 |
|
|
|
- |
|
|
|
2,350 |
|
|
|
2,602 |
|
Acacia credit facility |
|
|
14 |
|
|
|
28 |
|
|
|
29 |
|
|
|
28 |
|
|
|
29 |
|
|
|
14 |
|
|
|
142 |
|
|
|
|
$ 262 |
|
|
|
$ 665 |
|
|
|
$ 127 |
|
|
|
$ 878 |
|
|
|
$ 877 |
|
|
|
$ 10,026 |
|
|
|
$ 12,835 |
|
Minimum annual payments under capital leases |
|
|
$ 71 |
|
|
|
$ 65 |
|
|
|
$ 62 |
|
|
|
$ 56 |
|
|
|
$ 42 |
|
|
|
$ 56 |
|
|
|
$ 352 |
|
1 |
This table illustrates the contractual undiscounted cash flows, and may not agree with the amounts
disclosed in the consolidated balance sheet. |
|
|
|
|
|
BARRICK YEAR END 2014 |
|
150 |
|
NOTES TO FINANCIAL STATEMENTS |
C |
Derivative Instruments (Derivatives) |
In the normal course of business, our assets, liabilities and forecasted transactions, as reported in US dollars, are impacted by various market
risks including, but not limited to:
|
|
|
Item |
|
Impacted by |
Sales |
|
Prices of gold, silver and copper |
|
|
¡ By-product credits |
|
¡
Prices of silver, copper and gold |
|
|
Cost of sales |
|
|
|
|
¡ Consumption of diesel fuel, propane, natural gas,
and electricity |
|
¡
Prices of diesel fuel, propane, natural gas, and electricity |
|
|
¡ Non-US dollar expenditures |
|
¡
Currency exchange rates US dollar versus A$, ARS, C$, CLP, EUR, JPY, PGK, TZS, ZAR, and ZMW |
|
|
Corporate and operating segment administration, exploration and evaluation costs |
|
Currency exchange rates US dollar versus A$, ARS, C$, CLP, GBP, JPY, PGK, TZS, ZAR and ZMW |
|
|
Capital expenditures |
|
|
|
|
¡ Non-US dollar capital expenditures |
|
¡
Currency exchange rates US dollar versus A$, ARS, C$, CLP, EUR, GBP, PGK and ZAR |
|
|
¡ Consumption of steel |
|
¡
Price of steel |
|
|
Interest earned on cash and equivalents |
|
US
dollar interest rates |
|
|
Interest paid on fixed-rate borrowings |
|
US
dollar interest rates |
The time frame and manner in which we manage those risks varies for each item based upon our
assessment of the risk and available alternatives for mitigating risk. For these particular risks, we believe that derivatives are an appropriate way of managing the risk.
We use derivatives as part of our risk management program to mitigate variability associated with changing market values related to the hedged
item. Many of the derivatives we use meet the hedge effectiveness criteria and are designated in a hedge accounting relationship.
Certain
derivatives are designated as either hedges of the fair value of recognized assets or liabilities or of firm commitments (fair value hedges) or hedges of highly probable forecasted transactions (cash flow hedges),
collectively known as accounting hedges. Hedges that are expected to be highly effective in achieving offsetting changes in fair value or cash flows are assessed on an ongoing basis to determine that they actually have been highly
effective throughout the financial reporting periods for which they were designated. Some of the derivative instruments we use are effective in achieving our risk management objectives, but they do not meet the strict hedge accounting criteria.
These derivatives are considered to be non-hedge derivatives. We also enter into derivative instruments with the objective of realizing trading gains to increase our reported net income. These derivatives are also considered to be
non-hedge derivatives.
|
|
|
|
|
BARRICK YEAR END 2014 |
|
151 |
|
NOTES TO FINANCIAL STATEMENTS |
D Summary of Derivatives at December 31, 2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notional Amount by Term to Maturity |
|
|
Accounting Classification by Notional
Amount |
|
|
|
Within 1 year |
|
|
2 to 3 years |
|
|
4 to 5 years |
|
|
Total |
|
|
Cash flow hedge |
|
|
Non-Hedge |
|
|
Fair value (USD) |
|
US dollar interest rate contracts (US$ millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total receive - float swap positions |
|
|
$ 14 |
|
|
|
$ 57 |
|
|
|
$ 71 |
|
|
|
$ 142 |
|
|
|
$ 142 |
|
|
|
$ - |
|
|
|
$ 1 |
|
Currency contracts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A$:US$ contracts (A$ millions) |
|
|
377 |
|
|
|
85 |
|
|
|
- |
|
|
|
462 |
|
|
|
429 |
|
|
|
33 |
|
|
|
(83) |
|
C$:US$ contracts (C$ millions) |
|
|
240 |
|
|
|
- |
|
|
|
- |
|
|
|
240 |
|
|
|
240 |
|
|
|
- |
|
|
|
(6) |
|
CLP:US$ contracts (CLP millions) |
|
|
102,000 |
|
|
|
- |
|
|
|
- |
|
|
|
102,000 |
|
|
|
83,474 |
|
|
|
18,526 |
|
|
|
(7) |
|
PGK:US$ contracts (PGK millions) |
|
|
15 |
|
|
|
- |
|
|
|
- |
|
|
|
15 |
|
|
|
- |
|
|
|
15 |
|
|
|
- |
|
ZAR:US$ contracts (ZAR millions) |
|
|
421 |
|
|
|
- |
|
|
|
- |
|
|
|
421 |
|
|
|
171 |
|
|
|
250 |
|
|
|
(1) |
|
Commodity contracts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Copper collar sell contracts (millions of pounds) |
|
|
4 |
|
|
|
- |
|
|
|
- |
|
|
|
4 |
|
|
|
- |
|
|
|
4 |
|
|
|
3 |
|
Diesel contracts (thousands of
barrels)1 |
|
|
2,855 |
|
|
|
4,731 |
|
|
|
1,080 |
|
|
|
8,666 |
|
|
|
- |
|
|
|
8,666 |
|
|
|
(185) |
|
1 |
Diesel commodity contracts represent a combination of WTI and BRENT. These derivatives hedge physical supply contracts based on the price of ULSD, WTB,
MOPS and JET, respectively, plus a spread. WTI represents West Texas Intermediate, BRENT represents Brent Crude Oil, and MOPS represents Mean of Platts Singapore. |
Fair Values of Derivative Instruments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset Derivatives |
|
|
Liability Derivatives |
|
|
|
Balance Sheet Classification |
|
|
Fair Value as at Dec. 31, 2014 |
|
|
Fair Value as at Dec. 31, 2013 |
|
|
Balance Sheet Classification |
|
|
Fair Value as at Dec. 31, 2014 |
|
|
Fair Value as at Dec. 31, 2013 |
|
Derivatives designated as hedging instruments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
US dollar interest rate contracts |
|
|
Other assets |
|
|
|
$ 2 |
|
|
|
$ 6 |
|
|
|
Other liabilities |
|
|
|
$ 1 |
|
|
|
$ 1 |
|
Currency contracts |
|
|
Other assets |
|
|
|
- |
|
|
|
- |
|
|
|
Other liabilities |
|
|
|
71 |
|
|
|
55 |
|
Commodity contracts |
|
|
Other assets |
|
|
|
- |
|
|
|
7 |
|
|
|
Other liabilities |
|
|
|
- |
|
|
|
- |
|
Total derivatives classified as hedging instruments |
|
|
|
|
|
|
$ 2 |
|
|
|
$ 13 |
|
|
|
|
|
|
|
$ 72 |
|
|
|
$ 56 |
|
Derivatives not designated as hedging instruments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
US dollar interest rate contracts |
|
|
Other assets |
|
|
|
$ - |
|
|
|
$ 2 |
|
|
|
Other liabilities |
|
|
|
$ - |
|
|
|
$ - |
|
Currency contracts |
|
|
Other assets |
|
|
|
4 |
|
|
|
12 |
|
|
|
Other liabilities |
|
|
|
30 |
|
|
|
39 |
|
Commodity contracts |
|
|
Other assets |
|
|
|
3 |
|
|
|
20 |
|
|
|
Other liabilities |
|
|
|
185 |
|
|
|
11 |
|
Total derivatives not designated as hedging instruments |
|
|
|
|
|
|
$ 7 |
|
|
|
$ 34 |
|
|
|
|
|
|
|
$ 215 |
|
|
|
$ 50 |
|
Total derivatives |
|
|
|
|
|
|
$ 9 |
|
|
|
$ 47 |
|
|
|
|
|
|
|
$ 287 |
|
|
|
$ 106 |
|
|
|
|
|
|
BARRICK YEAR END 2014 |
|
152 |
|
NOTES TO FINANCIAL STATEMENTS |
As of December 31, 2014, we had 24 counterparties to our derivative positions. We proactively
manage our exposure to individual counterparties in order to mitigate both credit and liquidity risks. For those counterparties with which we hold a net asset position (total balance attributable to the counterparties is $1 million), two hold
greater than 10% of our mark-to-market asset position, with the largest counterparty holding 74%. We have 22 counterparties with which we are in a net liability position, for a total net liability of $279 million. On an ongoing basis, we monitor our
exposures and ensure that none of the counterparties with which we hold outstanding contracts has declared insolvency.
US Dollar Interest
Rate Contracts
Fair value hedges
During the year, we closed out $400 million of pay-variable receive-fixed swap positions which were used to hedge the fair value of a portion of
our long-term fixed-rate debt.
Cash flow hedges
At December 31, 2014, Acacia has $142 million of pay-fixed receive-float interest rate swaps to hedge the floating rate debt associated with
the Bulyanhulu plant expansion. These contracts, designated as cash flow hedges, convert the floating rate debt as it is drawn against the Financing agreement.
Currency Contracts
Cash Flow
Hedges
During the year, currency contracts totaling C$170 million and CLP 21 billion have been designated against forecasted non-US dollar
denominated expenditures, some of which are hedges which matured within the year. In total, we have A$429 million, C$240 million, CLP 83 billion and ZAR 171 million designated as cash flow hedges of our anticipated operating, administrative and
sustaining capital spend. The outstanding contracts hedge the variability of the US dollar amount of those expenditures caused by changes in currency exchange rates over the next two years. The effective portion of changes in fair value of the
currency contracts is recorded in OCI until the forecasted expenditure impacts earnings. Gains and losses from hedge ineffectiveness are recognized in current earnings classified in the consolidated statement of income as gains (losses) on non-hedge
derivatives.
During the year, we sold back and effectively closed out approximately C$149 million of our Canadian
dollar option contracts as a loss mitigation strategy. We crystallized losses of approximately $1 million, which were recognized in the consolidated statement of income based on the original hedge contract maturity dates. At December 31, 2014,
none of these losses remain crystallized in OCI.
During 2013, we sold back and effectively closed out approximately A$990 million of our
Australian dollar forward contracts as a loss mitigation strategy. No cash settlement occurred and payments will net at maturity (2014-2016). Including Australian dollar contracts closed out in 2012, $23 million of losses remain crystalized in OCI
at December 31, 2014.
During 2013, we also unwound approximately CLP 500 billion of our Chilean peso hedges. We realized net cash
proceeds of approximately $50 million with $18 million being crystallized in OCI. Any unrealized change and realized gain/losses on ineffective amounts or time value have been recognized in the consolidated statement of income as gains on non-hedge
derivatives. At December 31, 2014, none of the gains remain crystallized in OCI.
Non-hedge Derivatives
We concluded that CLP 19 billion of derivatives contracts do not meet the strict hedge effectiveness criteria. These contracts represent an
economic hedge of operating and administrative expenses at various South American locations, including operating mines and projects. Also, ZAR 250 million represents an economic hedge of Acacias anticipated operating, capital and
administrative spending at various locations in Africa. Although not qualifying as accounting hedges, the contracts provide protection against the variability of CLP and ZAR to the US dollar. The remaining non-hedge currency contracts are used to
mitigate the variability of the US dollar amount of non-US dollar denominated exposures that do not meet the strict hedge effectiveness criteria. Changes in the fair value of the non-hedge currency contracts are recorded in the consolidated
statement of income as gains (losses) on non-hedge derivatives.
During the year, we did not write any currency options. As a result, there
are no outstanding notional amounts to report at December 31, 2014.
|
|
|
|
|
BARRICK YEAR END 2014 |
|
153 |
|
NOTES TO FINANCIAL STATEMENTS |
Commodity Contracts
Diesel/Propane/Electricity/Natural Gas
Non-hedge Derivatives
During the
year, we entered into 1,680 thousand barrels of WTI and 563 thousand barrels of Brent to economically hedge our exposure to forecasted fuel purchases for expected consumption at our mines. In total, on a combined basis we have
8,566 thousand barrels of WTI and Brent swaps outstanding that economically hedge our exposure to forecasted fuel purchases at our mines. During the year, we wrote 100 thousand barrels of WTI put options with an outstanding notional of
100 thousand barrels at December 31, 2014.
Metals Contracts
Cash Flow Hedges
During 2013, we
purchased 148 million pounds of copper collar contracts to designate as hedges against copper cathode sales at our Zaldívar mine for 2013. These contracts contained purchased put and sold call options with weighted average strike prices
of $3.50/lb and $4.25/lb, respectively. During 2013, we also purchased 251 million pounds of copper collars for 2014 which matured evenly throughout 2014. These contracts contained purchased put and sold call options with weighted average
strike prices of $3.00/lb and $3.75/lb respectively. At December 31, 2014 there are no remaining positions classified as cash flow hedges or economic hedges of our Zaldívar mine. Previously, these contracts were designated as cash flow
hedges, with the effective portion of the hedge recognized in OCI and the ineffective portion, together with the changes in time value, recognized in non-hedge derivative gains (losses). Provided that the spot copper
price remains within the collar band, any unrealized gain (loss) on the collar will be attributable to time value.
During the year, we recorded unrealized losses on our copper collars of $6 million to changes in time value. This was included in current period
earnings as losses on non-hedge derivative activities. Gains and losses from hedge ineffectiveness and time value of options, which are generally excluded, are recognized in the consolidated statement of income as gains on non-hedge derivatives.
During 2013, we early terminated 65 million ounces of silver hedges. We realized net cash proceeds of approximately $190 million with
$21 million remaining crystallized in OCI to be recognized in revenue as the exposure occurs. Any unrealized changes and realized gains/losses on ineffective amounts or time value have been recognized in the consolidated statements of income as
gains on non-hedge derivatives.
Non-Hedge Derivatives
We enter into purchased and written contracts with the primary objective of increasing the realized price on some of our gold sales. During the
year, we wrote gold put and call options with an average outstanding notional of 34 thousand ounces. As a result of these activities, we recorded approximately $1 million in the consolidated statement of income as gains on non-hedge
derivatives. There are no outstanding gold positions at December 31, 2014.
|
|
|
|
|
BARRICK YEAR END 2014 |
|
154 |
|
NOTES TO FINANCIAL STATEMENTS |
Cash Flow Hedge Gains (Losses) in Accumulated Other Comprehensive Income
(AOCI)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity price hedges |
|
|
Currency hedges |
|
|
Interest rate hedges |
|
|
|
|
|
|
Gold/Silver1 |
|
|
Copper |
|
|
Fuel |
|
|
Operating costs |
|
|
General and administrative costs |
|
|
Capital expenditures |
|
|
Long- term debt |
|
|
Total |
|
At January 1, 2013 |
|
|
$ 10 |
|
|
|
$ - |
|
|
|
$ 7 |
|
|
|
$ 456 |
|
|
|
$ 25 |
|
|
|
$ 26 |
|
|
|
$ (31) |
|
|
|
$ 493 |
|
Effective portion of change in fair value of hedging instruments |
|
|
55 |
|
|
|
57 |
|
|
|
(2) |
|
|
|
(140) |
|
|
|
(16) |
|
|
|
(12) |
|
|
|
2 |
|
|
|
(56) |
|
|
|
|
|
|
|
|
|
|
Transfers to earnings: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
On recording hedged items in earnings/PP&E1 |
|
|
(1) |
|
|
|
(57) |
|
|
|
(9) |
|
|
|
(268) |
|
|
|
(11) |
|
|
|
(14) |
|
|
|
3 |
|
|
|
(357) |
|
Hedge ineffectiveness due to changes in original forecasted transaction |
|
|
(46) |
|
|
|
- |
|
|
|
- |
|
|
|
5 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(41) |
|
|
|
|
|
|
|
|
|
|
At December 31, 2013 |
|
|
$ 18 |
|
|
|
$- |
|
|
|
$ (4) |
|
|
|
$ 53 |
|
|
|
$ (2) |
|
|
|
$ - |
|
|
|
$ (26) |
|
|
|
$ 39 |
|
Effective portion of change in fair value of hedging instruments |
|
|
- |
|
|
|
2 |
|
|
|
- |
|
|
|
(44) |
|
|
|
3 |
|
|
|
- |
|
|
|
(2) |
|
|
|
(41) |
|
|
|
|
|
|
|
|
|
|
Transfers to earnings: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
On recording hedged items in earnings/PP&E1 |
|
|
- |
|
|
|
(2) |
|
|
|
4 |
|
|
|
(93) |
|
|
|
(4) |
|
|
|
- |
|
|
|
3 |
|
|
|
(92) |
|
Hedge ineffectiveness due to changes in original forecasted transaction |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
5 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
5 |
|
At December 31, 2014 |
|
|
$ 18 |
|
|
|
$- |
|
|
|
$- |
|
|
|
$ (79) |
|
|
|
$ (3) |
|
|
|
$ - |
|
|
|
$ (25) |
|
|
|
$ (89) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hedge gains/losses classified within |
|
Gold/Silver sales |
|
|
Copper sales |
|
|
Cost of sales |
|
|
Cost of sales |
|
|
General and administrative costs |
|
|
Property, plant, and equipment |
|
|
Interest expense |
|
|
Total |
|
Portion of hedge gain (loss) expected to affect 2015 earnings2 |
|
|
$ 13 |
|
|
|
$ - |
|
|
|
$ - |
|
|
|
$ (54) |
|
|
|
$ (3) |
|
|
|
$ - |
|
|
|
$ (4) |
|
|
|
$ (48) |
|
1 |
Realized gains (losses) on qualifying currency hedges of capital expenditures are transferred from
OCI to PP&E on settlement. |
2 |
Based on the fair value of hedge contracts at December 31, 2014. |
Cash Flow Hedge Gains (Losses) at December 31
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives in cash
flow hedging relationships |
|
Amount of gain (loss)
recognized in OCI |
|
|
Location of gain (loss) transferred from OCI into income/PP&E (effective
portion) |
|
Amount of gain (loss)
transferred from OCI
into income (effective
portion) |
|
|
Location of gain (loss) recognized in income (ineffective portion and amount
excluded from effectiveness testing) |
|
Amount of gain (loss)
recognized in income
(ineffective portion and
amount excluded from
effectiveness testing) |
|
|
|
2014 |
|
|
2013 |
|
|
|
|
2014 |
|
|
2013 |
|
|
|
|
2014 |
|
|
2013 |
|
Interest rate
contracts |
|
|
$(2) |
|
|
|
$2 |
|
|
Finance income/finance
costs |
|
|
$(3) |
|
|
|
$(3) |
|
|
Gain (loss) on non-hedge derivatives |
|
|
$ - |
|
|
|
$ - |
|
Foreign exchange
contracts |
|
|
(41) |
|
|
|
(168) |
|
|
General and administrative costs |
|
|
97 |
|
|
|
293 |
|
|
Gain (loss) on non-hedge derivatives |
|
|
(4) |
|
|
|
(18) |
|
Commodity contracts |
|
|
2 |
|
|
|
110 |
|
|
Revenue/cost of sales |
|
|
(2) |
|
|
|
67 |
|
|
Gain (loss) on non-hedge derivatives |
|
|
(6) |
|
|
|
(7) |
|
Total |
|
|
$ (41) |
|
|
|
$(56) |
|
|
|
|
|
$92 |
|
|
|
$357 |
|
|
|
|
|
$ (10) |
|
|
|
$(25) |
|
Fair Value Hedge Gains at December 31
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives in fair value hedging relationships |
|
Location of gain (loss) recognized in income on derivatives |
|
|
Amount of gain (loss) recognized in income on derivatives |
|
|
|
|
|
|
2014 |
|
|
2013 |
|
Interest rate contracts |
|
|
Interest income/expense |
|
|
|
$ 1 |
|
|
|
$ (2) |
|
|
|
|
|
|
BARRICK YEAR END 2014 |
|
155 |
|
NOTES TO FINANCIAL STATEMENTS |
E Gains (Losses) on Non-hedge Derivatives
|
|
|
|
|
|
|
|
|
For the years ended December 31 |
|
2014 |
|
|
2013 |
|
|
|
|
Commodity contracts |
|
|
|
|
|
|
|
|
Gold |
|
|
$ 1 |
|
|
|
$ 1 |
|
Silver |
|
|
- |
|
|
|
104 |
|
Copper |
|
|
3 |
|
|
|
(9) |
|
Fuel |
|
|
(181) |
|
|
|
12 |
|
Currency contracts |
|
|
(8) |
|
|
|
(8) |
|
Interest rate contracts |
|
|
2 |
|
|
|
1 |
|
|
|
|
$ (183) |
|
|
|
$ 101 |
|
|
|
|
Gains (losses) attributable to silver option collar hedges1 |
|
|
$ - |
|
|
|
$ (36) |
|
Gains (losses) attributable to copper option collar hedges1 |
|
|
(6) |
|
|
|
(17) |
|
Gains (losses) attributable to currency option collar hedges1 |
|
|
1 |
|
|
|
(13) |
|
Hedge ineffectiveness |
|
|
(5) |
|
|
|
41 |
|
|
|
|
$ (10) |
|
|
|
$ (25) |
|
|
|
|
$ (193) |
|
|
|
$ 76 |
|
1 |
Represents unrealized gains (losses) attributable to changes in time value of the collars, which are excluded from the hedge effectiveness assessment.
|
F Derivative Assets and Liabilities
|
|
|
|
|
|
|
|
|
|
|
2014 |
|
|
2013 |
|
At January 1 |
|
|
$ (59) |
|
|
|
$ 278 |
|
Derivatives cash (inflow) outflow |
|
|
|
|
|
|
|
|
Operating activities |
|
|
14 |
|
|
|
(71) |
|
Financing activities |
|
|
(9) |
|
|
|
(4) |
|
Early settlement of derivatives |
|
|
- |
|
|
|
(239) |
|
Change in fair value of: |
|
|
|
|
|
|
|
|
Non-hedge derivatives |
|
|
(183) |
|
|
|
101 |
|
Cash flow hedges: |
|
|
|
|
|
|
|
|
Effective portion |
|
|
(41) |
|
|
|
(56) |
|
Ineffective portion |
|
|
5 |
|
|
|
(41) |
|
Fair value hedges |
|
|
- |
|
|
|
(2) |
|
Excluded from effectiveness changes |
|
|
(5) |
|
|
|
(25) |
|
At December 31 |
|
|
$ (278) |
|
|
|
$ (59) |
|
Classification: |
|
|
|
|
|
|
|
|
Other current assets |
|
|
$ 7 |
|
|
|
$ 37 |
|
Other long-term assets |
|
|
2 |
|
|
|
10 |
|
Other current liabilities |
|
|
(158) |
|
|
|
(31) |
|
Other long-term obligations |
|
|
(129) |
|
|
|
(75) |
|
|
|
|
$ (278) |
|
|
|
$ (59) |
|
|
|
|
|
|
BARRICK YEAR END 2014 |
|
156 |
|
NOTES TO FINANCIAL STATEMENTS |
25 > FAIR VALUE MEASUREMENTS
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date. The fair value hierarchy establishes three levels to classify the inputs to valuation techniques used to measure fair value. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets
or liabilities. Level 2 inputs are quoted prices in markets that are not active, quoted prices for similar assets or liabilities in active markets, inputs other than quoted prices that are
observable for the asset or liability (for example, interest rate and yield curves observable at commonly quoted intervals, forward pricing curves used to value currency and commodity contracts
and volatility measurements used to value option contracts), or inputs that are derived principally from or corroborated by observable market data or other means. Level 3 inputs are unobservable (supported by little or no market activity). The fair
value hierarchy gives the highest priority to Level 1 inputs and the lowest priority to Level 3 inputs.
A Assets and Liabilities
Measured at Fair Value on a Recurring Basis
Fair Value Measurements
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2014 |
|
Quoted Prices in Active Markets for Identical Assets (Level 1) |
|
|
Significant Other Observable Inputs (Level 2) |
|
|
Significant Unobservable Inputs (Level 3) |
|
|
Aggregate Fair Value |
|
Cash and equivalents |
|
|
$ 2,699 |
|
|
|
$ - |
|
|
|
$ - |
|
|
|
$ 2,699 |
|
Available-for-sale securities |
|
|
35 |
|
|
|
- |
|
|
|
- |
|
|
|
35 |
|
Derivatives |
|
|
- |
|
|
|
(278) |
|
|
|
- |
|
|
|
(278) |
|
Receivables from provisional copper and gold sales |
|
|
- |
|
|
|
184 |
|
|
|
- |
|
|
|
184 |
|
|
|
|
$ 2,734 |
|
|
|
$ (94) |
|
|
|
$ - |
|
|
|
$ 2,640 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2013 |
|
Quoted Prices in Active Markets for Identical Assets (Level 1) |
|
|
Significant Other Observable Inputs (Level 2) |
|
|
Significant Unobservable Inputs (Level 3) |
|
|
Aggregate Fair Value |
|
Cash and equivalents |
|
|
$ 2,404 |
|
|
|
$ - |
|
|
|
$ - |
|
|
|
$ 2,404 |
|
Available-for-sale securities |
|
|
120 |
|
|
|
- |
|
|
|
- |
|
|
|
120 |
|
Derivatives |
|
|
- |
|
|
|
(59) |
|
|
|
- |
|
|
|
(59) |
|
Receivables from provisional copper and gold sales |
|
|
- |
|
|
|
246 |
|
|
|
- |
|
|
|
246 |
|
|
|
|
$ 2,524 |
|
|
|
$ 187 |
|
|
|
$ - |
|
|
|
$ 2,711 |
|
|
|
|
|
|
BARRICK YEAR END 2014 |
|
157 |
|
NOTES TO FINANCIAL STATEMENTS |
B Fair Values of Financial Assets and Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At Dec. 31, 2014 |
|
|
At Dec. 31, 2013 |
|
|
|
Carrying amount |
|
|
Estimated fair value |
|
|
Carrying amount |
|
|
Estimated fair value |
|
Financial assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other receivables |
|
|
$ 385 |
|
|
|
$ 385 |
|
|
|
$ 167 |
|
|
|
$ 167 |
|
Available-for-sale securities1 |
|
|
35 |
|
|
|
35 |
|
|
|
120 |
|
|
|
120 |
|
Derivative assets |
|
|
9 |
|
|
|
9 |
|
|
|
47 |
|
|
|
47 |
|
|
|
|
$ 429 |
|
|
|
$ 429 |
|
|
|
$ 334 |
|
|
|
$ 334 |
|
Financial liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt2 |
|
|
$ 13,081 |
|
|
|
$ 13,356 |
|
|
|
$ 13,080 |
|
|
|
$ 12,525 |
|
Derivative liabilities |
|
|
287 |
|
|
|
287 |
|
|
|
106 |
|
|
|
106 |
|
Other liabilities |
|
|
360 |
|
|
|
360 |
|
|
|
355 |
|
|
|
355 |
|
|
|
|
$ 13,728 |
|
|
|
$ 14,003 |
|
|
|
$ 13,541 |
|
|
|
$ 12,986 |
|
1 |
Recorded at fair value. Quoted market prices are used to determine fair value. |
2 |
Debt is generally recorded at amortized cost except for obligations that are designated in a fair-value hedge relationship, in which case the carrying
amount is adjusted for changes in fair value of the hedging instrument in periods when a hedge relationship exists. The fair value of debt is primarily determined using quoted market prices. Balance includes both current and long-term portions of
debt. |
We do not offset financial assets with financial liabilities.
C Assets Measured at Fair Value on a Non-Recurring Basis
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quoted prices in active markets for identical assets
(Level 1) |
|
|
Significant other observable inputs (Level 2) |
|
|
Significant unobservable inputs (Level 3) |
|
|
Aggregate fair value |
|
Property, plant and equipment1 |
|
|
$ - |
|
|
|
$ - |
|
|
|
$ 3,665 |
|
|
|
$ 3,665 |
|
Intangible assets2 |
|
|
- |
|
|
|
- |
|
|
|
2 |
|
|
|
2 |
|
Goodwill3 |
|
|
- |
|
|
|
- |
|
|
|
3,278 |
|
|
|
3,278 |
|
1 |
Property, plant and equipment were written down by $2,672 million which was included in earnings in this period, to their fair value less costs of
disposal of $3,665 million. |
2 |
Intangible assets were written down by $7 million which was included in earnings in this period, to their fair value less costs of disposal of $2
million. |
3 |
Goodwill was written down by $1,409 million which was included in earnings in this period. |
Valuation Techniques
Cash Equivalents
The fair value
of our cash equivalents is classified within Level 1 of the fair value hierarchy because they are valued using quoted market prices in active markets. Our cash equivalents are comprised of U.S. Treasury bills and money market securities that are
invested primarily in U.S. Treasury bills.
Available-for-Sale Securities
The fair value of available-for-sale securities is determined based on the closing price of each security at the balance sheet date. The closing
price is a quoted market price obtained from the exchange that is the principal active market for the particular security, and therefore
available-
for-sale securities are classified within Level 1 of the fair value hierarchy.
Derivative Instruments
The fair
value of derivative instruments is determined using either present value techniques or option pricing models that utilize a variety of inputs that are a combination of quoted prices and market-corroborated inputs. The fair value of all our
derivative contracts includes an adjustment for credit risk. For counterparties in a net asset position, credit risk is based upon the observed credit default swap spread for each particular counterparty, as appropriate. For counterparties in a net
liability position, credit risk is based upon Barricks observed credit default swap spread. The fair value of US dollar interest rate and currency swap contracts is determined by discounting contracted cash
|
|
|
|
|
BARRICK YEAR END 2014 |
|
158 |
|
NOTES TO FINANCIAL STATEMENTS |
flows using a discount rate derived from observed LIBOR and swap rate curves and CDS rates. In the case of currency contracts, we convert non-US dollar cash flows into US dollars using an
exchange rate derived from currency swap curves and CDS rates. The fair value of commodity forward contracts is determined by discounting contractual cash flows using a discount rate derived from observed LIBOR and swap rate curves and CDS rates.
Contractual cash flows are calculated using a forward pricing curve derived from observed forward prices for each commodity. Derivative instruments are classified within Level 2 of the fair value hierarchy.
Receivables from Provisional Copper and Gold Sales
The fair value of receivables arising from copper and gold sales contracts that contain provisional pricing mechanisms is determined using the
appropriate quoted forward price from the exchange that is the principal active market for the particular metal. As such, these receivables, which meet the definition of an embedded derivative, are classified within Level 2 of the fair value
hierarchy.
Property, Plant and Equipment, Goodwill and Intangibles
The fair value of property, plant and equipment, goodwill and intangibles is determined primarily using an income approach based on unobservable
cash flows and a market multiples approach where applicable, and as a result is classified within Level 3 of the fair value hierarchy. Refer to note 20 for disclosure of inputs used to develop these measures.
26 > PROVISIONS
A Provisions
|
|
|
|
|
|
|
|
|
|
|
As at Dec. 31, 2014 |
|
|
As at Dec. 31, 2013 |
|
Environmental rehabilitation (PER) |
|
|
$ 2,375 |
|
|
|
$ 2,254 |
|
Post-retirement benefits |
|
|
103 |
|
|
|
83 |
|
RSUs |
|
|
15 |
|
|
|
11 |
|
Other |
|
|
68 |
|
|
|
80 |
|
|
|
|
$ 2,561 |
|
|
|
$ 2,428 |
|
B Environmental Rehabilitation
|
|
|
|
|
|
|
|
|
|
|
2014 |
|
|
2013 |
|
At January 1 |
|
|
$ 2,359 |
|
|
|
$ 2,663 |
|
PERs divested during the year |
|
|
(17) |
|
|
|
(164) |
|
PERs arising (decreasing) in the year |
|
|
125 |
|
|
|
(145) |
|
Impact of revisions to expected cash flows recorded in earnings |
|
|
58 |
|
|
|
91 |
|
Settlements |
|
|
|
|
|
|
|
|
Cash payments relating to continuing operations |
|
|
(108) |
|
|
|
(56) |
|
Cash payments relating to discontinued operations |
|
|
- |
|
|
|
(1) |
|
Settlement gains |
|
|
(8) |
|
|
|
(2) |
|
Accretion |
|
|
75 |
|
|
|
69 |
|
Assets held for sale |
|
|
- |
|
|
|
(96) |
|
At December 31 |
|
|
$ 2,484 |
|
|
|
$ 2,359 |
|
Current portion (note 23) |
|
|
(109) |
|
|
|
(105) |
|
|
|
|
$ 2,375 |
|
|
|
$ 2,254 |
|
The eventual settlement of all PERs is expected to take place between 2015 and 2054.
The PER has increased from third quarter 2014 by $22 million primarily due to changes in cost estimates, partially offset by changes in discount
rates. For the year ended December 31, 2014, our PER balance increased by $125 million as a result of various impacts at our mine sites including new requirements related to water treatment, expanded footprints of our operations and updated
estimates for reclamation activities. A 1% increase in the discount rate would result in a decrease in PER by $323 million and a 1% decrease in the discount rate would result in an increase in PER by $295 million, while holding the other assumptions
constant.
|
|
|
|
|
BARRICK YEAR END 2014 |
|
159 |
|
NOTES TO FINANCIAL STATEMENTS |
27 > FINANCIAL RISK MANAGEMENT
Our financial instruments are comprised of financial liabilities and financial assets. Our principal financial liabilities, other than
derivatives, comprise accounts payable and debt. The main purpose of these financial instruments is to manage short-term cash flow and raise funds for our capital expenditure program. Our principal financial assets, other than derivative
instruments, are cash and equivalents and accounts receivable, which arise directly from our operations. In the normal course of business, we use derivative instruments to mitigate exposure to various financial risks.
We manage our exposure to key financial risks in accordance with our financial risk management policy. The objective of the policy is to support
the delivery of our financial targets while protecting future financial security. The main risks that could adversely affect our financial assets, liabilities or future cash flows are as follows:
a) |
Market risk, including commodity price risk, foreign currency and interest rate risk; |
d) |
Capital risk management. |
Management designs strategies for managing each of these risks, which are summarized below. Our senior management oversees the management of
financial risks. Our senior management ensures that our financial risk-taking activities are governed by policies and procedures and that financial risks are identified, measured and managed in accordance with our policies and our risk appetite. All
derivative activities for risk management purposes are carried out by the appropriate functions.
a) Market Risk
Market risk is the risk that changes in market factors, such as commodity prices, foreign exchange rates or interest rates, will affect the value
of our financial instruments. We manage market risk by either accepting it or mitigating it through the use of derivatives and other economic hedging strategies.
Commodity Price Risk
Gold and
Copper
We sell our gold and copper production in the world market. The market prices of gold and copper are the primary drivers of our
profitability and ability to generate both operating and free cash flow. All of our future gold production is unhedged in order to provide our shareholders with full exposure to changes in the market
gold price. Our corporate treasury function implements hedging strategies on an opportunistic basis to protect us from downside price risk on our copper production. At December 31, 2014, we
have no open position on our copper production and as such all our 2015 copper production is subject to market prices.
Fuel
On average we consume approximately 5 million barrels of diesel fuel annually across all our mines. Diesel fuel is refined from crude oil and
is therefore subject to the same price volatility affecting crude oil prices. Therefore, volatility in crude oil prices has a significant direct and indirect impact on our production costs. To mitigate this volatility, we employ a strategy of using
financial contracts to hedge our exposure to oil prices.
Foreign Currency Risk
The functional and reporting currency for our gold and copper segments and Pascua-Lama is the US dollar and we report our results using the US
dollar. The majority of our operating and capital expenditures are denominated and settled in US dollars. We have exposure to the Australian dollar and Canadian dollar through a combination of mine operating costs and corporate administration costs;
and to the Papua New Guinea kina, Peruvian sol, Chilean peso, Argentinean peso, Dominican Republic peso and Zambian kwacha through mine operating costs. Consequently, fluctuations in the US dollar exchange rate against these currencies increase the
volatility of cost of sales, corporate administration costs and overall net earnings, when translated into US dollars. To mitigate these inherent risks and provide greater certainty over our costs, we have foreign currency hedges in place for some
of our Australian and Canadian dollar exposures as well as a portion of our Chilean peso exposures. In 2013, the Company unwound approximately CLP 500 billion of our Chilean peso hedges and $990 million of our Australian dollar forward contracts. As
a result, we now have greater exposure to fluctuations in the value of the Chilean pesos and Australian dollars compared to the US dollar.
|
|
|
|
|
BARRICK YEAR END 2014 |
|
160 |
|
NOTES TO FINANCIAL STATEMENTS |
The following table shows gains (losses) associated with a 10% change in exchange rate of the
Australian dollar:
Impact of a 10% change in exchange rate of Australian dollar
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average Exchange Rate |
|
|
Effect on Net Earnings |
|
|
Effect on Equity |
|
|
|
2014 |
|
|
2013 |
|
|
2014 |
|
|
2013 |
|
|
2014 |
|
|
2013 |
|
10% strengthening |
|
|
$ 0.90 |
|
|
|
$ 0.89 |
|
|
|
$ (33) |
|
|
|
$ (91) |
|
|
|
$ (33) |
|
|
|
$ (91) |
|
10% weakening |
|
|
0.90 |
|
|
|
0.89 |
|
|
|
33 |
|
|
|
91 |
|
|
|
33 |
|
|
|
91 |
|
Interest Rate Risk
Interest rate risk refers to the risk that the value of a financial instrument or cash flows associated with the instruments will fluctuate due to
changes in market interest rates. Currently, our interest rate exposure mainly relates to interest receipts on our cash balances ($2.7 billion at the end of the year); the mark-to-market value of derivative instruments; the fair value and ongoing
payments under US dollar interest-rate swaps; and to the interest payments on our variable-rate debt ($1 billion at December 31, 2014).
The following table shows the approximate interest rate sensitivities of our financial assets and liabilities as at December 31:
Impact of a 1% change in interest rate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect on Net Earnings |
|
|
Effect on Equity |
|
|
|
2014 |
|
|
2013 |
|
|
2014 |
|
|
2013 |
|
1% increase |
|
|
$ 12 |
|
|
|
$ 6 |
|
|
|
$ 12 |
|
|
|
$ 6 |
|
1% decrease |
|
|
(12) |
|
|
|
(6) |
|
|
|
(12) |
|
|
|
(6) |
|
b) Credit Risk
Credit risk is the risk that a third party might fail to fulfill its performance obligations under the terms of a financial instrument. Credit risk
arises from cash and equivalents, trade and other receivables as well as derivative assets. For cash and equivalents and trade and other receivables, credit risk exposure equals the carrying amount on the balance sheet, net of any overdraft
positions. To mitigate our inherent exposure to credit risk we maintain policies to limit the concentration of credit risk, review counterparty creditworthiness on a monthly basis, and ensure liquidity of available funds. We also invest our cash and
equivalents in highly rated financial institutions, primarily within the United States and other investment grade countries1. Furthermore, we sell our gold and copper production into the world market and to private customers with strong credit
ratings. Historically customer defaults have not had
a significant impact on our operating results or financial position.
For derivatives
with a positive fair value, we are exposed to credit risk equal to the carrying value. When the fair value of a derivative is negative, we assume no credit risk. We mitigate credit risk on derivatives by:
|
|
Entering into derivatives with high credit-quality counterparties; |
|
|
Limiting the amount of net exposure with each counterparty; and |
|
|
Monitoring the financial condition of counterparties on a regular basis. |
The companys maximum exposure to credit risk at the reporting date is the carrying value of each of the financial assets disclosed as
follows:
|
|
|
|
|
|
|
|
|
|
|
As at Dec. 31, 2014 |
|
|
As at Dec. 31, 2013 |
|
Cash and equivalents |
|
|
$ 2,699 |
|
|
|
$ 2,404 |
|
Accounts receivable |
|
|
418 |
|
|
|
385 |
|
Net derivative assets by counterparty |
|
|
1 |
|
|
|
19 |
|
|
|
|
$ 3,118 |
|
|
|
$ 2,808 |
|
1 |
Investment grade countries include Canada, Chile, Australia, and Peru. Investment grade countries are defined as being rated BBB- or higher by S&P.
|
c) Liquidity Risk
Liquidity risk is the risk of loss from not having access to sufficient funds to meet both expected and unexpected cash demands. We manage our
exposure to liquidity risk by maintaining cash reserves, access to undrawn credit facilities and access to public debt markets, by staggering the maturities of outstanding debt instruments to mitigate refinancing risk and by monitoring of forecasted
and actual cash flows. Details of the undrawn credit facility are included in Note 24.
Our capital structure comprises a mix of debt and
shareholders equity. As at December 31, 2014, our total debt was $13.1 billion (debt net of cash and equivalents was $10.4 billion) compared to total debt as at December 31, 2013 of $13.1 billion (debt net of cash and equivalents was
$10.7 billion).
In 2013, we made a number of changes to our capital structure. In first quarter 2013, we drew $2.0 billion on our $4.0
billion revolving credit facility (2012 Credit Facility), using the proceeds to repay $1.2 billion on our $1.45 billion credit facility, which expired in April 2013. In second
|
|
|
|
|
BARRICK YEAR END 2014 |
|
161 |
|
NOTES TO FINANCIAL STATEMENTS |
quarter 2013, we issued $3.0 billion of debt, using $2.0 billion of the net proceeds to repay the outstanding balance on the 2012 Credit Facility. In fourth quarter 2013, we issued new equity for
net proceeds of $2.9 billion, using $2.6 billion of those proceeds to redeem outstanding debt with near-term maturities. The $4.0 billion credit facility was fully undrawn at year end and the termination date has been extended by one year such that
the facility now expires in January 2020.
As part of our capital allocation strategy, we are constantly evaluating our capital expenditures
and making reductions where the risk-adjusted returns do not justify the investment. Since the beginning of 2013, we have also made divestments of non-core assets and assets that do not meet our investment criteria, such as the sale of our
oil & gas business and certain of our Australian and North American assets for total cash proceeds of approximately $720 million. In July 2013, the Companys Board of Directors authorized reducing the quarterly dividend to $0.05 per
share as a further prudent step to improve liquidity (the declaration and payment of dividends is at the discretion of the Board of Directors and will depend on the Companys financial results, cash requirements, future prospects and other
factors deemed relevant by the Board).
Our primary source of liquidity is our operating cash flow. Other options to enhance liquidity include
drawing the $4.0 billion available under our 2012 Credit Facility (subject to
compliance with covenants and the making of certain representations and warranties, this facility is available for drawdown as a source of financing), further asset sales and issuances of debt or
equity securities in the public markets or to private investors, which could be undertaken for liquidity enhancement and/or in connection with establishing a strategic partnership. Many factors, including, but not limited to, general market
conditions and then prevailing metals prices could impact our ability to issue securities on acceptable terms, as could our credit ratings. Moodys and S&P rate our long-term debt Baa2 and BBB, respectively. Changes in our ratings could
affect the trading prices of our securities and our cost of capital. If we were to borrow under our 2012 Credit Facility, the applicable interest rate on the amounts borrowed would be based, in part, on our credit ratings at the time. The key
financial covenant in the 2012 Credit Facility (undrawn as at December 31, 2014) requires Barrick to maintain a consolidated tangible net worth (CTNW) of at least $3.0 billion (Barricks CTNW was $5.7 billion as at
December 31, 2014).
The following table outlines the expected maturity of our significant financial assets and liabilities into relevant
maturity groupings based on the remaining period from the balance sheet date to the contractual maturity date. As the amounts disclosed in the table are the contractual undiscounted cash flows, these balances may not agree with the amounts disclosed
in the balance sheet.
|
|
|
|
|
BARRICK YEAR END 2014 |
|
162 |
|
NOTES TO FINANCIAL STATEMENTS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at December 31, 2014 (in $ millions) |
|
Less than 1 year |
|
|
1 to 3 years |
|
|
3 to 5 years |
|
|
Over 5 years |
|
|
Total |
|
|
|
Cash and equivalents |
|
|
$ 2,699 |
|
|
|
$ - |
|
|
|
$ - |
|
|
|
$ - |
|
|
|
$ 2,699 |
|
Accounts receivable |
|
|
418 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
418 |
|
Derivative assets |
|
|
7 |
|
|
|
1 |
|
|
|
1 |
|
|
|
- |
|
|
|
9 |
|
Trade and other payables |
|
|
1,653 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,653 |
|
Debt |
|
|
333 |
|
|
|
919 |
|
|
|
1,853 |
|
|
|
10,082 |
|
|
|
13,187 |
|
Derivative liabilities |
|
|
157 |
|
|
|
117 |
|
|
|
13 |
|
|
|
- |
|
|
|
287 |
|
Other liabilities |
|
|
67 |
|
|
|
112 |
|
|
|
46 |
|
|
|
135 |
|
|
|
360 |
|
|
|
|
|
|
|
|
|
As at December 31, 2013
(in $ millions) |
|
Less than 1 year |
|
|
1 to 3 years |
|
|
3 to 5 years |
|
|
Over 5 years |
|
|
Total |
|
|
|
Cash and equivalents |
|
|
$ 2,404 |
|
|
|
$ - |
|
|
|
$ - |
|
|
|
$ - |
|
|
|
$ 2,404 |
|
Accounts receivable |
|
|
385 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
385 |
|
Derivative assets |
|
|
34 |
|
|
|
7 |
|
|
|
5 |
|
|
|
1 |
|
|
|
47 |
|
Trade and other payables |
|
|
2,165 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
2,165 |
|
Debt |
|
|
179 |
|
|
|
1,002 |
|
|
|
1,068 |
|
|
|
10,958 |
|
|
|
13,207 |
|
Derivative liabilities |
|
|
32 |
|
|
|
72 |
|
|
|
2 |
|
|
|
- |
|
|
|
106 |
|
Other liabilities |
|
|
111 |
|
|
|
145 |
|
|
|
41 |
|
|
|
58 |
|
|
|
355 |
|
|
|
|
|
|
|
|
BARRICK YEAR END 2014 |
|
163 |
|
NOTES TO FINANCIAL STATEMENTS |
d) Capital Risk Management
Our objective when managing capital is to provide value for shareholders by maintaining an optimal short-term and long-term capital structure in
order to reduce the overall cost of capital while preserving our ability to continue as a going concern. Our capital management objectives are to safeguard our ability to support our operating requirements on an ongoing basis, continue the
development and exploration of our mineral properties and support any expansion plans. Our objectives are also to ensure that we maintain a strong balance sheet and optimize the use of debt and equity to support our business and provide financial
flexibility in order to maximize shareholder value. We define capital as total debt less cash and equivalents and it is managed by management subject to approved policies and limits by the Board of Directors. We have no significant financial
covenants or capital requirements with our lenders or other parties other than what is discussed under liquidity risk section of note 27.
28 > OTHER
NON-CURRENT LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
As at Dec. 31, 2014 |
|
|
As at Dec. 31, 2013 |
|
Deposit on silver sale agreement |
|
|
$668 |
|
|
|
$646 |
|
Derivative liabilities (note 24f) |
|
|
129 |
|
|
|
75 |
|
Deferred revenue |
|
|
85 |
|
|
|
6 |
|
Provision for supply contract restructuring costs |
|
|
8 |
|
|
|
13 |
|
Provision for offsite remediation |
|
|
56 |
|
|
|
62 |
|
Other |
|
|
166 |
|
|
|
174 |
|
|
|
|
$ 1,112 |
|
|
|
$ 976 |
|
Silver Sale Agreement
On September 22, 2009, we entered into an agreement with Silver Wheaton Corp. (Silver Wheaton) to sell the amount equal to 25% of
the life of mine silver production from the Pascua-Lama project and 100% of silver production from the Lagunas Norte, Pierina and Veladero mines (South American mines) until the end of 2013. In return, we were entitled to an upfront cash
payment of $625 million payable over three years from the date of the agreement, as well as ongoing payments in cash of the lesser of $3.90 (subject to an annual inflation adjustment of 1% starting three years after project completion at
Pascua-Lama) and the prevailing market price for each ounce of silver delivered under the agreement.
An imputed interest expense is being
recorded on the liability at the rate implicit in the agreement. The liability plus imputed interest will be amortized based on the difference between the effective contract price for silver
and the amount of the ongoing cash payment per ounce of silver delivered under the agreement.
We had provided Silver Wheaton with a completion guarantee, requiring us to complete Pascua-Lama to at least 75% design capacity by
December 31, 2015. During 2014 and 2015, Silver Wheaton would be entitled to the silver production from the South American mines to the extent of any production shortfall at Pascua Lama, until we satisfy the completion guarantee. Per the terms
of the original silver purchase agreement, if the requirements of the completion guarantee have not been satisfied by December 31, 2015, the agreement may be terminated by Silver Wheaton, in which case Silver Wheaton will be entitled to the
return of the upfront cash consideration paid less a credit for silver delivered up to the date of that event.
In December 2014, Silver
Wheaton agreed to extend the completion date for Pascua-Lama to June 30, 2020 and will continue to receive silver production from the South American mines until March 31, 2018. At December 31, 2014, the cash obligation was $341
million.
29 > DEFERRED INCOME TAXES
Recognition and
Measurement
We record deferred income tax assets and liabilities where temporary differences exist between the carrying amounts of assets
and liabilities in our balance sheet and their tax bases. The measurement and recognition of deferred income tax assets and liabilities takes into account: substantively enacted rates that will apply when temporary differences reverse;
interpretations of relevant tax legislation; estimates of the tax bases of assets and liabilities; and the deductibility of expenditures for income tax purposes. In addition the measurement and recognition of deferred tax assets takes into account
tax planning strategies. We recognize the effect of changes in our assessment of these estimates and factors when they occur. Changes in deferred income tax assets and liabilities are allocated between net income, other comprehensive income, and
goodwill based on the source of the change.
Current income taxes of $78 million have been provided on the undistributed earnings of certain
foreign subsidiaries. Deferred income taxes have not been provided on the undistributed earnings of all other foreign subsidiaries for which we are able to control the timing of the remittance, and it is probable that there will be no remittance in
the foreseeable future. These undistributed earnings amounted to $6,174 million as at December 31, 2014.
|
|
|
|
|
BARRICK YEAR END 2014 |
|
164 |
|
NOTES TO FINANCIAL STATEMENTS |
Sources of Deferred Income Tax Assets and Liabilities
|
|
|
|
|
|
|
|
|
|
|
As at Dec. 31, 2014 |
|
|
As at Dec. 31, 2013 |
|
Deferred tax assets |
|
|
|
|
|
|
|
|
Tax loss carry forwards |
|
|
$ 369 |
|
|
|
$ 251 |
|
Alternative minimum tax
(AMT) credits |
|
|
11 |
|
|
|
9 |
|
Environmental rehabilitation |
|
|
586 |
|
|
|
603 |
|
Property, plant and equipment |
|
|
81 |
|
|
|
4 |
|
Post-retirement benefit obligations and other employee benefits |
|
|
73 |
|
|
|
43 |
|
Accrued interest payable |
|
|
51 |
|
|
|
33 |
|
Derivative instruments |
|
|
32 |
|
|
|
10 |
|
Other |
|
|
55 |
|
|
|
65 |
|
|
|
|
|
|
$ 1,258 |
|
|
|
$ 1,018 |
|
Deferred tax liabilities |
|
|
|
|
|
|
|
|
Property, plant and equipment |
|
|
(2,216) |
|
|
|
(2,367) |
|
Inventory |
|
|
(404) |
|
|
|
(408) |
|
|
|
|
|
|
$ (1,362) |
|
|
|
$ (1,757) |
|
|
|
Classification: |
|
|
|
|
|
|
|
|
|
|
Non-current assets |
|
|
$ 674 |
|
|
|
$ 501 |
|
Non-current liabilities |
|
|
(2,036) |
|
|
|
(2,258) |
|
|
|
|
|
|
$ (1,362) |
|
|
|
$ (1,757) |
|
|
|
The deferred tax asset of $674 million includes $665 million expected to be realized in more than one year. The
deferred tax liability of $2,036 million includes $1,978 million expected to be realized in more than one year.
Expiry Dates of Tax Losses and AMT Credits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2015 |
|
|
2016 |
|
|
2017 |
|
|
2018 |
|
|
2019+ |
|
|
No expiry date |
|
|
Total |
|
Non-capital tax losses1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Canada |
|
|
$4 |
|
|
|
$2 |
|
|
|
$1 |
|
|
|
$- |
|
|
|
$1,533 |
|
|
|
$- |
|
|
|
$1,540 |
|
Dominican |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Republic |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
94 |
|
|
|
94 |
|
Barbados |
|
|
- |
|
|
|
627 |
|
|
|
148 |
|
|
|
4,751 |
|
|
|
1,271 |
|
|
|
- |
|
|
|
6,797 |
|
Chile |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
268 |
|
|
|
268 |
|
Tanzania |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
149 |
|
|
|
149 |
|
Zambia |
|
|
- |
|
|
|
- |
|
|
|
261 |
|
|
|
- |
|
|
|
384 |
|
|
|
- |
|
|
|
645 |
|
Other |
|
|
- |
|
|
|
9 |
|
|
|
5 |
|
|
|
7 |
|
|
|
- |
|
|
|
508 |
|
|
|
529 |
|
|
|
|
|
|
$4 |
|
|
|
$638 |
|
|
|
$415 |
|
|
|
$4,758 |
|
|
|
$3,188 |
|
|
|
$1,019 |
|
|
|
$10,022 |
|
|
|
AMT credits2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$103 |
|
|
|
$103 |
|
|
|
1 |
Represents the gross amount of tax loss carry forwards translated at closing exchange rates at December 31, 2014. |
2 |
Represents the amounts deductible against future taxes payable in years when taxes payable exceed minimum tax as defined by United States
tax legislation. |
The non-capital tax losses include $8,588 million of losses which are not recognized in deferred tax
assets. Of these, $4 million expire in 2015, $629 million expire in 2016, $410 million expire in 2017, $4,751 million expire in 2018, $1,878 million expire in 2019 or later, and $916 million have no expiry date.
The AMT credits include $92 million which are not recognized in deferred tax assets.
Recognition of Deferred Tax Assets
We recognize
deferred tax assets taking into account the effects of local tax law. Deferred tax assets are fully recognized when we conclude that sufficient positive evidence exists to demonstrate that it is probable that a deferred tax asset will be realized.
The main factors considered are:
|
|
Historic and expected future levels of taxable income; |
|
|
Tax plans that affect whether tax assets can be realized; and |
|
|
The nature, amount and expected timing of reversal of taxable temporary differences. |
Levels of future income are mainly affected by: market gold, copper and silver prices; forecasted future costs and expenses to produce gold and
copper reserves; quantities of proven and probable gold and copper reserves; market interest rates; and foreign currency exchange rates. If these factors or other circumstances change, we record an adjustment to the recognition of deferred assets to
reflect our latest assessment of the amount of deferred tax assets that is probable will be realized.
A deferred income tax asset totaling
$505 million (December 31, 2013 $322 million) has been recorded in Canada. This deferred tax asset primarily arose from derivative realized losses, finance costs, and general and administrative expenses. Projections of various sources of
income support the conclusion that the realizability of this deferred tax asset is probable and consequently, we have fully recognized this deferred tax asset.
|
|
|
|
|
BARRICK YEAR END 2014 |
|
165 |
|
NOTES TO FINANCIAL STATEMENTS |
Deferred Tax Assets Not Recognized
|
|
|
|
|
|
|
|
|
|
|
As at December 31, 2014 |
|
|
As at December 31, 2013 |
|
|
|
|
Australia and Papua New Guinea |
|
|
$ 367 |
|
|
|
$ 456 |
|
Canada |
|
|
371 |
|
|
|
139 |
|
US |
|
|
93 |
|
|
|
50 |
|
Chile |
|
|
776 |
|
|
|
471 |
|
Argentina |
|
|
823 |
|
|
|
928 |
|
Barbados |
|
|
68 |
|
|
|
71 |
|
Tanzania |
|
|
92 |
|
|
|
107 |
|
Zambia |
|
|
- |
|
|
|
43 |
|
Saudi Arabia |
|
|
67 |
|
|
|
17 |
|
|
|
|
|
|
$ 2,657 |
|
|
|
$ 2,282 |
|
|
|
Deferred Tax Assets Not Recognized relate to: non-capital loss carry forwards of $348 million (2013: $334
million), capital loss carry forwards with no expiry date of $518 million (2013: $200 million), US AMT credits of $92 million (2013: $48 million) and other deductible temporary differences with no expiry date of $1,699 million(2013: $1,700 million).
|
|
|
|
|
|
|
|
|
Source of Changes in Deferred Tax Balances |
|
For the years ended December 31 |
|
2014 |
|
|
2013 |
|
Temporary differences |
|
|
|
|
|
|
|
|
Property, plant and equipment |
|
|
$ 228 |
|
|
|
$ 938 |
|
Environmental rehabilitation |
|
|
(17) |
|
|
|
(121) |
|
Tax loss carry forwards |
|
|
118 |
|
|
|
(179) |
|
AMT credits |
|
|
2 |
|
|
|
(35) |
|
Inventory |
|
|
4 |
|
|
|
(169) |
|
Derivatives |
|
|
22 |
|
|
|
45 |
|
Other |
|
|
38 |
|
|
|
(5) |
|
|
|
|
|
|
$ 395 |
|
|
|
$ 474 |
|
|
|
Intraperiod allocation to: |
|
|
|
|
|
|
|
|
Loss from continuing operations before income taxes |
|
|
$ 380 |
|
|
|
$ 471 |
|
Loss from discontinued operations |
|
|
- |
|
|
|
13 |
|
Barrick Energy disposition |
|
|
- |
|
|
|
(91) |
|
OCI |
|
|
15 |
|
|
|
56 |
|
Issuance of share capital |
|
|
- |
|
|
|
24 |
|
Other |
|
|
- |
|
|
|
1 |
|
|
|
|
|
|
$ 395 |
|
|
|
$ 474 |
|
|
|
|
|
|
|
|
|
|
|
|
Income Tax Related Contingent Liabilities |
|
|
|
|
|
|
|
|
2014 |
|
|
2013 |
|
At January 1 |
|
|
$ 51 |
|
|
|
$ 64 |
|
Additions based on tax positions related to the current year |
|
|
1 |
|
|
|
1 |
|
Reductions for tax positions of prior years |
|
|
(3) |
|
|
|
(2) |
|
Reduction related to discontinued operations |
|
|
- |
|
|
|
(12) |
|
|
|
At December 31 1 |
|
|
$ 49 |
|
|
|
$ 51 |
|
|
|
1If reversed, the total amount of $49 million would be recognized as a benefit
to income taxes on the income statement, and therefore would impact the reported effective tax rate.
We anticipate the amount of income tax
related contingent liabilities to decrease within 12 months of the reporting date by approximately $1 million to $2 million, related primarily to the expected settlement of income tax and mining tax assessments.
We further anticipate that it is reasonably possible for the amount of income tax related contingent liabilities to decrease within 12 months of
the reporting date by approximately $46 million through a potential settlement with tax authorities that may result in a reduction of available tax pools.
|
|
|
|
|
Tax Years Still Under Examination |
|
|
|
Canada |
|
|
2011-2014 |
|
United States |
|
|
2014 |
|
Dominican Republic |
|
|
2011-2014 |
|
Peru |
|
|
2009,2011-2014 |
|
Chile |
|
|
2011-2014 |
|
Argentina |
|
|
2007-2014 |
|
Australia |
|
|
2010-2014 |
|
Papua New Guinea |
|
|
2004-2014 |
|
Saudi Arabia |
|
|
2007-2014 |
|
Tanzania |
|
|
All years open |
|
Zambia |
|
|
2010-2014 |
|
|
|
|
|
|
BARRICK YEAR END 2014 |
|
166 |
|
NOTES TO FINANCIAL STATEMENTS |
30 > CAPITAL STOCK
Authorized Capital Stock
Our authorized capital
stock includes an unlimited number of common shares (issued 1,164,669,608 common shares); an unlimited number of first preferred shares issuable in series (the first series is designated as the First Preferred Shares, Series A and
consists of 10,000,000 First preferred shares (issued nil); the second series is designated as the First Preference Shares, Series B and consists of 10,000,000 first preferred shares (issued nil); and the third series is designated as
the First Preferred Shares, Series C Special Voting Share and consists of 1 Special Voting Share (issued nil); and an unlimited number of second preferred shares issuable in series (the first
series is designated as the Second Preferred Shares, Series A and consists of 15,000,000
second preferred shares (issued nil). Our common shares have no par value.
Common Stock offering
On November 14, 2013, we issued 163.5 million shares of Barrick at a price of $18.35, for net proceeds of $2,910 million.
Dividends
In 2014, we declared and paid
dividends in US dollars totaling $0.20 per share, $232 million (2013: $0.50 per share, $508 million).
31 > NON-CONTROLLING INTERESTS
A) NON-CONTROLLING INTERESTS CONTINUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pueblo Viejo |
|
|
Acacia |
|
|
Cerro Casale |
|
|
Other |
|
|
Total |
|
|
|
NCI in subsidiary at December 31, 2014 |
|
|
40% |
|
|
|
36.1% |
|
|
|
25% |
|
|
|
Various |
|
|
|
|
|
|
|
At January 1, 2013 |
|
|
$ 1,405 |
|
|
|
$ 747 |
|
|
|
$ 512 |
|
|
|
$ - |
|
|
|
$ 2,664 |
|
Share of loss |
|
|
(21) |
|
|
|
(211) |
|
|
|
(5) |
|
|
|
- |
|
|
|
(237) |
|
Cash contributed |
|
|
48 |
|
|
|
- |
|
|
|
7 |
|
|
|
- |
|
|
|
55 |
|
Decrease of non-controlling interest |
|
|
- |
|
|
|
(14) |
|
|
|
- |
|
|
|
- |
|
|
|
(14) |
|
|
|
At December 31, 2013 |
|
|
$ 1,432 |
|
|
|
$ 522 |
|
|
|
$ 514 |
|
|
|
$ - |
|
|
|
$ 2,468 |
|
Share of income (loss) |
|
|
89 |
|
|
|
62 |
|
|
|
(199) |
|
|
|
(4) |
|
|
|
(52) |
|
Cash contributed |
|
|
- |
|
|
|
- |
|
|
|
4 |
|
|
|
25 |
|
|
|
29 |
|
Increase (decrease) in non-controlling interest1 |
|
|
- |
|
|
|
174 |
|
|
|
- |
|
|
|
(4) |
|
|
|
170 |
|
|
|
At December 31, 2014 |
|
|
$ 1,521 |
|
|
|
$ 758 |
|
|
|
$ 319 |
|
|
|
$ 17 |
|
|
|
$ 2,615 |
|
|
|
1 Primarily represents the increase in non-controlling
interests as a result of divestment of 10% of issued ordinary share capital of Acacia (see note 4c).
|
|
|
|
|
BARRICK YEAR END 2014 |
|
167 |
|
NOTES TO FINANCIAL STATEMENTS |
B) SUMMARIZED FINANCIAL INFORMATION ON SUBSIDIARIES WITH MATERIAL NON-CONTROLLING INTERESTS
Summarized Balance Sheets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pueblo Viejo |
|
|
Acacia |
|
|
Cerro Casale |
|
|
|
|
|
|
|
|
As at Dec. 31, 2014 |
|
|
As at Dec. 31, 2013 |
|
|
As at Dec. 31, 2014 |
|
|
As at Dec. 31, 2013 |
|
|
As at Dec. 31, 2014 |
|
|
As at Dec. 31, 2013 |
|
|
|
Current assets |
|
|
$ 771 |
|
|
|
$ 473 |
|
|
|
$ 672 |
|
|
|
$ 675 |
|
|
|
$ 5 |
|
|
|
$ 5 |
|
Non-current assets |
|
|
5,209 |
|
|
|
5,252 |
|
|
|
1,810 |
|
|
|
1,655 |
|
|
|
561 |
|
|
|
2,040 |
|
|
|
Total assets |
|
|
$ 5,980 |
|
|
|
$ 5,725 |
|
|
|
$ 2,482 |
|
|
|
$ 2,330 |
|
|
|
$ 566 |
|
|
|
$ 2,045 |
|
|
|
Current liabilities |
|
|
1,338 |
|
|
|
1,487 |
|
|
|
214 |
|
|
|
152 |
|
|
|
40 |
|
|
|
36 |
|
Non-current liabilities |
|
|
1,175 |
|
|
|
744 |
|
|
|
365 |
|
|
|
322 |
|
|
|
42 |
|
|
|
526 |
|
|
|
|
|
|
$ 2,513 |
|
|
|
$ 2,231 |
|
|
|
$ 579 |
|
|
|
$ 474 |
|
|
|
$ 82 |
|
|
|
$ 562 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Summarized Statements of Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pueblo Viejo |
|
|
Acacia |
|
|
Cerro Casale |
|
|
|
|
|
|
For the years ended December 31 |
|
2014 |
|
|
2013 |
|
|
2014 |
|
|
2013 |
|
|
2014 |
|
|
2013 |
|
|
|
Revenue |
|
$ |
1,552 |
|
|
$ |
995 |
|
|
$ |
923 |
|
|
$ |
937 |
|
|
$ |
- |
|
|
$ |
- |
|
Income (loss) from continuing operations after tax |
|
|
311 |
|
|
|
199 |
|
|
|
79 |
|
|
|
(1,022) |
|
|
|
(1,018) |
|
|
|
(20) |
|
Other comprehensive income (loss) |
|
|
- |
|
|
|
- |
|
|
|
(1) |
|
|
|
2 |
|
|
|
- |
|
|
|
- |
|
|
|
Total comprehensive income (loss) |
|
$ |
311 |
|
|
$ |
199 |
|
|
$ |
78 |
|
|
$ |
(1,020) |
|
|
$ |
(1,018) |
|
|
$ |
(20) |
|
|
|
Dividends paid to NCI |
|
$ |
- |
|
|
$ |
- |
|
|
$ |
5 |
|
|
$ |
14 |
|
|
$ |
- |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Summarized Statements of Cash Flows |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pueblo Viejo |
|
|
Acacia |
|
|
Cerro Casale |
|
|
|
|
|
|
For the years ended December 31 |
|
|
2014 |
|
|
|
2013 |
|
|
|
2014 |
|
|
|
2013 |
|
|
|
2014 |
|
|
|
2013 |
|
|
|
Net cash provided by (used in) operating activities |
|
$ |
533 |
|
|
$ |
190 |
|
|
$ |
286 |
|
|
$ |
172 |
|
|
$ |
(2) |
|
|
$ |
11 |
|
Net cash used in investing activities |
|
|
(184) |
|
|
|
(259) |
|
|
|
(255) |
|
|
|
(375) |
|
|
|
(1) |
|
|
|
(21) |
|
Net cash provided by (used in) financing activities |
|
|
(101) |
|
|
|
96 |
|
|
|
(19) |
|
|
|
84 |
|
|
|
4 |
|
|
|
8 |
|
|
|
Net increase (decrease) in cash and cash equivalents |
|
$ |
248 |
|
|
$ |
27 |
|
|
$ |
12 |
|
|
$ |
(119) |
|
|
$ |
1 |
|
|
$ |
(2) |
|
|
|
Under the terms of Pueblo Viejos project financing agreement described in note 24b, Pueblo Viejo Dominicana
Corporation is prohibited from making cash payments to Barrick and Goldcorp in the form of dividends or certain shareholder loan interest and principal payments until Pueblo Viejo achieves specified requirements, including requirements relating to
operational, social, and environmental matters.
The project financing agreement contains covenants which limit certain activities by Pueblo
Viejo Dominicana, including Pueblo Viejos ability to sell assets and incur debt. Furthermore, Pueblo Viejos material tangible and intangible assets, including the proceeds from metal sales, are segregated and pledged for the benefit of
the project lenders, thus restricting our access to those assets and our ability to use those assets to settle our liabilities to third parties.
|
|
|
|
|
BARRICK YEAR END 2014 |
|
168 |
|
NOTES TO FINANCIAL STATEMENTS |
32 > REMUNERATION OF KEY MANAGEMENT PERSONNEL
Key management personnel include the members of the Board of Directors and the Executive leadership team. Compensation for key management
personnel (including Directors) was as follows:
|
|
|
|
|
|
|
|
|
|
|
For the years ended December 31 |
|
|
2014 |
|
|
|
|
|
2013 |
|
|
|
Salaries and short-term employee benefits1 |
|
|
$ 20 |
|
|
|
|
|
$ 22 |
|
Post-employment benefits2 |
|
|
2 |
|
|
|
|
|
3 |
|
Termination Benefits |
|
|
11 |
|
|
|
|
|
7 |
|
Share-based payments and other3 |
|
|
6 |
|
|
|
|
|
13 |
|
|
|
|
|
|
$ 39 |
|
|
|
|
|
$ 45 |
|
|
|
1 Includes annual salary and annual short-term
incentives/other bonuses earned in the year.
2 Represents company contributions to
retirement savings plans.
3 Relates to stock option, RSU, and PRSU grants and other
compensation.
33 > STOCK-BASED COMPENSATION
A Stock Options
Under Barricks stock option plan, certain officers and key employees of the Corporation may purchase common shares at an exercise price that
is equal to the closing share price on the day before the grant of the option. The grant date is the date when the details of the award, including the number of options granted by individual and the exercise price, are approved. Stock options vest
evenly over four years, beginning in the year after granting. Options are exercisable over seven years. At December 31, 2014, 5.4 million (2013: 6.5 million) common shares were available for granting options.
Compensation recovery for stock options was $5 million in 2014 (2013: $8 million), and is presented
as a component of corporate administration and operating segment administration, consistent with the classification of other elements of compensation expense for those employees who had stock options. The recognition of compensation expense for
stock options reduced earnings per share for 2014 by $nil per share (2013: $0.01 per share).
Total intrinsic value relating to options exercised in 2014 was
$nil million (2013: $nil million).
Employee Stock
Option Activity (Number of Shares in Millions)
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2014 |
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2013 |
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Shares |
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Average Price |
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Shares |
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Average Price |
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C$ options |
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At January 1 |
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0.1 |
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$ 19 |
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0.6 |
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$ 28 |
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Granted |
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0.1 |
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20 |
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0.1 |
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18 |
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Exercised |
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- |
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- |
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- |
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- |
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Cancelled/expired |
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- |
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- |
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(0.6) |
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28 |
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At December 31 |
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0.2 |
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$19 |
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0.1 |
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$ 19 |
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US$ options |
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At January 1 |
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6.4 |
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$ 41 |
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6.3 |
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$ 42 |
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Granted |
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- |
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- |
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1.1 |
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32 |
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Exercised |
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- |
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- |
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- |
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- |
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Forfeited |
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(0.3) |
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42 |
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(0.5) |
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32 |
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Cancelled/expired |
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(0.9) |
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41 |
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(0.5) |
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42 |
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At December 31 |
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5.2 |
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$ 41 |
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6.4 |
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$ 41 |
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BARRICK YEAR END 2014 |
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169 |
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NOTES TO FINANCIAL STATEMENTS |
Stock Options Outstanding (Number of Shares in Millions)
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Outstanding |
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Exercisable |
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Range of exercise prices |
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Shares |
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Average price |
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Average life (years) |
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Intrinsic value1 ($ millions) |
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Shares |
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Average price |
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Intrinsic value1 ($ millions) |
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C$ options |
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$ 18 - $ 21 |
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0.2 |
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$ 19 |
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6.1 |
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$ (1) |
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- |
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- |
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$ - |
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0.2 |
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$ 19 |
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6.1 |
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$ (1) |
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- |
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- |
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$ - |
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US$ options |
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$ 20 - $ 27 |
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0.4 |
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$ 26 |
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0.8 |
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$ (6) |
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0.4 |
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26 |
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$(6) |
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$ 28 - $ 41 |
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1.8 |
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34 |
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3.9 |
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(42) |
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0.9 |
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36 |
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(23) |
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$ 42 - $ 55 |
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3.0 |
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47 |
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2.5 |
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(111) |
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2.6 |
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47 |
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(95) |
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5.2 |
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$ 41 |
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2.8 |
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$ (159) |
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3.9 |
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$ 42 |
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$ (124) |
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1 Based on the closing market share price on December 31,
2014 of C $12.52 and US $10.75.
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Option Information |
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(per share and per option
amounts in dollars) |
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Dec. 31, 2014 |
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Dec. 31, 2013 |
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Valuation assumptions |
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Lattice1,2 |
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Lattice1,2 |
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Expected term (years) |
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5.5 |
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5.5 |
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Expected volatility2 |
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30%-35% |
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30%-35% |
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Expected dividend yield |
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2.02% |
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2.02% |
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Risk-free interest rate2 |
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0.10%-1.91% |
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0.10%-1.91% |
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Options granted (in millions) |
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0.1 |
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1.2 |
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Weighted average fair value per option |
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$ 5 |
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$ 7 |
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1 |
Different assumptions were used for the multiple stock option grants during the year.
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2 |
The volatility and risk-free interest rate assumptions varied over the expected term of these
stock option grants. |
The expected volatility assumptions have been developed taking into consideration both historical and
implied volatility of our US dollar share price. Forfeitures have also been factored in based on historical forfeiture rates. The risk-free rate for periods within the contractual life of the option is based on the US Treasury yield curve in effect
at the time of the grant.
The expected term assumption is derived from the option valuation model and is in part based on historical data regarding the
exercise behavior of option holders based on multiple share-price paths. The Lattice model also takes into consideration employee turnover and voluntary exercise patterns of option holders.
As at December 31, 2014, there was $3 million (2013: $8 million) of total unrecognized compensation cost relating to
unvested stock options. We expect to recognize this cost over a weighted average period of 1 year (2013: 1 year).
B Restricted Share Units (RSUs) and Deferred Share Units (DSUs)
Under our RSU plan, selected employees are granted RSUs where each RSU has a value equal to one Barrick common share. RSUs generally vest from
two-and-a-half-year to three years and are settled in cash upon vesting. Additional RSUs are credited to reflect dividends paid on Barrick common shares over the vesting period.
Compensation expense for RSUs incorporates an expected forfeiture rate. The expected forfeiture rate is estimated based on historical forfeiture
rates and expectations of future forfeiture rates. We make adjustments if the actual forfeiture rate differs from the expected rate. At December 31, 2014, the weighted average remaining contractual life of RSUs was 1.46 years (2013: 1.17
years).
Compensation expense for RSUs was an $8 million credit to earnings in 2014 (2013: $1 million reversal) and is presented as a
component of corporate administration and operating segment administration, consistent with the classification of other elements of compensation expense for those employees who had RSUs.
Under our DSU plan, Directors must receive a specified portion of their basic annual retainer in the form of DSUs, with the option to elect to
receive 100% of such retainer in DSUs. Officers may also elect to receive a portion or all of their incentive compensation in the form of DSUs. Each DSU has the same value as one Barrick common share. DSUs must be retained until the Director or
officer leaves the Board or Barrick, at which time the cash value of the DSUs will be paid out. Additional DSUs are credited to
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BARRICK YEAR END 2014 |
|
170 |
|
NOTES TO FINANCIAL STATEMENTS |
reflect dividends paid on Barrick common shares. DSUs are recorded at fair value on the grant date and are adjusted for changes in fair value. The fair value of amounts granted each period
together with changes in fair value are expensed.
DSU and RSU Activity
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DSUs (thousands) |
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Fair value ($ millions) |
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RSUs (thousands) |
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Fair value ($ millions) |
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At January 1,
2013 |
|
|
207 |
|
|
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$ 7.0 |
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2,489 |
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$ 54.1 |
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Settled for
cash |
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(72) |
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(1.2) |
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(803) |
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(19.2) |
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Forfeited |
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- |
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- |
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(764) |
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(15.8) |
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Granted |
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|
66 |
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1.3 |
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1,847 |
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|
58.7 |
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Credits for
dividends |
|
|
- |
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|
- |
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|
|
81 |
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1.8 |
|
Change in
value |
|
|
- |
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|
|
(2.4) |
|
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|
- |
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(49.8) |
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At December
31, 2013 |
|
|
201 |
|
|
|
$ 4.7 |
|
|
|
2,850 |
|
|
|
$ 29.8 |
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Settled for
cash |
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(53) |
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(0.6) |
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(992) |
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(17.2) |
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Forfeited |
|
|
- |
|
|
|
- |
|
|
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(629) |
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|
|
(11.5) |
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Granted |
|
|
113 |
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|
|
1.6 |
|
|
|
2,327 |
|
|
|
42.9 |
|
Credits for
dividends |
|
|
- |
|
|
|
- |
|
|
|
49 |
|
|
|
0.7 |
|
Change in
value |
|
|
- |
|
|
|
(2.9) |
|
|
|
- |
|
|
|
(14.6) |
|
|
|
At December
31, 2014 |
|
|
261 |
|
|
|
$ 2.8 |
|
|
|
3,605 |
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|
|
$ 30.1 |
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|
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C Performance Restricted Share Units (PRSUs)
In 2008, Barrick launched a PRSU plan. Under this plan, selected employees are granted PRSUs, where each PRSU has a value equal to one Barrick
common share. At December 31, 2014, 1,675 thousand units were outstanding (2013: 598 thousand units).
D Performance Granted Share Units (PGSUs)
In 2014, Barrick launched a PGSU plan. Under this plan, selected employees are granted PGSUs, where each PGSU has a value equal to one Barrick
common share. At December 31, 2014, no units had been granted.
E Employee Share Purchase Plan (ESPP)
In 2008, Barrick launched an Employee Share Purchase Plan. This plan enables Barrick employees to purchase Company shares through payroll
deduction. During 2014, Barrick contributed and expensed $0.6 million to this plan (2013: $0.8 million).
34 > POST-RETIREMENT BENEFITS
Barrick operates various post-employment plans, including both defined benefit and defined contribution pension plans and other post-retirement
plans. The table below outlines where the Companys post-employment amounts and activity are included in the financial statements:
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For the years ended December 31 |
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2014 |
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|
2013 |
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|
|
Balance sheet obligations for: |
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|
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Defined pension benefits |
|
|
$ 96 |
|
|
|
$ 77 |
|
Other post-retirement benefits |
|
|
7 |
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|
|
6 |
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|
|
Liability in the balance sheet |
|
|
$ 103 |
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|
|
$ 83 |
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|
|
Income statement charge included income statement for: |
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|
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|
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Defined pension benefits |
|
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$ 3 |
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|
|
$ 3 |
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Other post-retirement benefits |
|
|
- |
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|
|
- |
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|
|
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|
|
$3 |
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$ 3 |
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|
|
Measurements for: |
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|
|
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|
|
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Defined pension benefits |
|
|
$ (29) |
|
|
|
$ 36 |
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Other post-retirement benefits |
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|
(1) |
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|
1 |
|
|
|
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|
|
$ (30) |
|
|
|
$ 37 |
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|
|
|
|
|
|
|
BARRICK YEAR END 2014 |
|
171 |
|
NOTES TO FINANCIAL STATEMENTS |
The amounts recognized in the balance sheet are determined as follows:
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|
|
For the years ended December 31 |
|
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2014 |
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|
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2013 |
|
|
|
Present value of funded obligations |
|
$ |
241 |
|
|
$ |
216 |
|
Fair value of plan assets |
|
|
(218) |
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|
|
(216) |
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|
|
Deficit of funded plans |
|
$ |
23 |
|
|
$ |
- |
|
Present value of unfunded obligations |
|
|
73 |
|
|
|
72 |
|
|
|
Total deficit of defined benefit pension plans |
|
$ |
96 |
|
|
$ |
72 |
|
Impact of minimum funding requirement/asset ceiling |
|
|
- |
|
|
|
5 |
|
|
|
Liability in the balance sheet |
|
$ |
96 |
|
|
$ |
77 |
|
|
|
A Defined Benefit Pension Plans
We have qualified defined benefit pension plans that cover certain of our former United States and
Canadian employees and provide benefits based on an employees years of service. The plans operate under similar regulatory frameworks and generally face similar risks. The majority of benefit payments are from trustee-administered funds;
however, there are also a number of unfunded plans where the Company meets the benefit payment obligation as it falls due. Plan assets held in trust are governed by local regulations and practice in each country. Responsibility for governance of the
plans overseeing all aspects of the plans including investment decisions and contribution schedules lies with the Company. We have set up pension committees to assist in the management of the plans and have also appointed experienced
independent professional experts such as actuaries, custodians and trustees.
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Present value of obligation |
|
|
Fair value of plan assets |
|
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Total |
|
|
Impact of minimum funding requirement/asset ceiling |
|
|
Total |
|
|
|
At January 1, 2013 |
|
|
$ 328 |
|
|
|
$ (207) |
|
|
|
$ 121 |
|
|
|
$ - |
|
|
|
$ 121 |
|
Current service cost |
|
|
1 |
|
|
|
- |
|
|
|
1 |
|
|
|
- |
|
|
|
1 |
|
Interest expense (income) |
|
|
11 |
|
|
|
(9) |
|
|
|
2 |
|
|
|
- |
|
|
|
2 |
|
|
|
|
|
|
$ 340 |
|
|
|
$ (216) |
|
|
|
$ 124 |
|
|
|
$ - |
|
|
|
$ 124 |
|
Remeasurements: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from demographic assumptions |
|
|
6 |
|
|
|
- |
|
|
|
6 |
|
|
|
- |
|
|
|
6 |
|
Gain from financial assumptions |
|
|
(25) |
|
|
|
- |
|
|
|
(25) |
|
|
|
- |
|
|
|
(25) |
|
Experience gains |
|
|
(5) |
|
|
|
(17) |
|
|
|
(22) |
|
|
|
- |
|
|
|
(22) |
|
Change in asset ceiling |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
5 |
|
|
|
5 |
|
|
|
|
|
|
$ (24) |
|
|
|
$ (17) |
|
|
|
$ (41) |
|
|
|
$ 5 |
|
|
|
$ (36) |
|
Exchange differences |
|
|
(4) |
|
|
|
1 |
|
|
|
(3) |
|
|
|
- |
|
|
|
(3) |
|
Contributions - employers |
|
|
- |
|
|
|
(8) |
|
|
|
(8) |
|
|
|
- |
|
|
|
(8) |
|
Benefit payments |
|
|
(24) |
|
|
|
24 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
At December 31, 2013 |
|
|
$ 288 |
|
|
|
$ (216) |
|
|
|
$ 72 |
|
|
|
$ 5 |
|
|
|
$ 77 |
|
Interest expense (income) |
|
|
12 |
|
|
|
(9) |
|
|
|
3 |
|
|
|
- |
|
|
|
3 |
|
|
|
|
|
|
$ 300 |
|
|
|
$ (225) |
|
|
|
$ 75 |
|
|
|
$ 5 |
|
|
|
$ 80 |
|
Remeasurements: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from demographic assumptions |
|
|
25 |
|
|
|
- |
|
|
|
25 |
|
|
|
- |
|
|
|
25 |
|
Loss from financial assumptions |
|
|
24 |
|
|
|
- |
|
|
|
24 |
|
|
|
- |
|
|
|
24 |
|
Experience gains |
|
|
(4) |
|
|
|
(11) |
|
|
|
(15) |
|
|
|
- |
|
|
|
(15) |
|
Change in asset ceiling |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(5) |
|
|
|
(5) |
|
|
|
|
|
|
$ 45 |
|
|
|
$ (11) |
|
|
|
$ 34 |
|
|
|
$ (5) |
|
|
|
$ 29 |
|
Exchange differences |
|
|
(5) |
|
|
|
1 |
|
|
|
(4) |
|
|
|
- |
|
|
|
(4) |
|
Contributions - employers |
|
|
- |
|
|
|
(8) |
|
|
|
(8) |
|
|
|
- |
|
|
|
(8) |
|
Benefit payments |
|
|
(21) |
|
|
|
21 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Settlements |
|
|
(5) |
|
|
|
4 |
|
|
|
(1) |
|
|
|
- |
|
|
|
(1) |
|
|
|
At December 31, 2014 |
|
|
$ 314 |
|
|
|
$ (218) |
|
|
|
$ 96 |
|
|
|
$ - |
|
|
|
$ 96 |
|
|
|
|
|
|
|
|
BARRICK YEAR END 2014 |
|
172 |
|
NOTES TO FINANCIAL STATEMENTS |
The significant actuarial assumptions were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at December 31 |
|
Pension Plans 2014 |
|
|
Other Post-Retirement Benefits 2014 |
|
|
Pension Plans 2013 |
|
|
Other Post-Retirement Benefits 2013 |
|
Discount rate |
|
|
1.95 - 4.05% |
|
|
|
3.40 - 3.55% |
|
|
|
2.15 - 4.90% |
|
|
|
3.90 - 4.10% |
|
The sensitivity of the defined benefit obligation to changes in assumptions is set out below. The effects on each
plan of a change in an assumption are weighted proportionately to the total plan obligations to determine the total impact for each assumption presented.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impact on defined benefit obligation |
|
|
|
Change in assumption |
|
|
Increase in assumption |
|
|
Decrease in assumption |
|
Discount rate |
|
|
0.50% |
|
|
|
Decrease by 5.3% |
|
|
|
Increase by 5.8% |
|
|
|
|
|
|
|
|
|
|
Increase by 1 year in assumption |
|
|
Decrease by 1 year in assumption |
|
Life expectancy |
|
|
|
|
|
|
Increase by 4.2% |
|
|
|
Decrease by 4.1% |
|
B Other Post-Retirement Benefits
We provide post-retirement medical, dental, and life insurance benefits to certain employees in the US. All of these plans are unfunded.
The movement in the defined benefit liability over the year is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Present value of
obligation |
|
|
Fair value of plan
assets |
|
|
Total |
|
At January 1, 2013 |
|
|
$ 8 |
|
|
|
$ - |
|
|
|
$ 8 |
|
Remeasurements: |
|
|
|
|
|
|
|
|
|
|
|
|
Experience gains |
|
|
(1) |
|
|
|
- |
|
|
|
(1) |
|
|
|
|
$ (1) |
|
|
|
$ - |
|
|
|
$ (1) |
|
Contributions - employers |
|
|
- |
|
|
|
(1) |
|
|
|
(1) |
|
Benefit payments |
|
|
(1) |
|
|
|
1 |
|
|
|
- |
|
Settlements |
|
|
- |
|
|
|
- |
|
|
|
- |
|
At December 31, 2013 |
|
|
$ 6 |
|
|
|
$ - |
|
|
|
$ 6 |
|
Remeasurements: |
|
|
|
|
|
|
|
|
|
|
|
|
Loss from demographic assumptions |
|
|
1 |
|
|
|
- |
|
|
|
1 |
|
|
|
|
$ 1 |
|
|
|
$ - |
|
|
|
$ 1 |
|
Contributions - employers |
|
|
- |
|
|
|
(1) |
|
|
|
(1) |
|
Benefit payments |
|
|
- |
|
|
|
1 |
|
|
|
1 |
|
At December 31, 2014 |
|
|
$ 7 |
|
|
|
$ - |
|
|
|
$ 7 |
|
The sensitivity of the defined benefit obligation to changes in assumptions is set out below. The effects on each
plan of a change in an assumption are weighted proportionately to the total plan obligations to determine the total impact for each assumption presented.
|
|
|
|
|
BARRICK YEAR END 2014 |
|
173 |
|
NOTES TO FINANCIAL STATEMENTS |
|
|
|
|
|
|
|
|
|
Impact on defined benefit obligation |
|
|
Change in assumption |
|
Increase in assumption |
|
Decrease in assumption |
Discount rate |
|
0.50% |
|
Decrease by 3.7% |
|
Increase by 4.0% |
Healthcare cost increase |
|
1% |
|
Increase by 8.6% |
|
Decrease by 7.7% |
|
|
|
|
|
|
|
|
Increase by 1 year in assumption |
|
Decrease by 1 year in assumption |
Life expectancy |
|
|
|
Increase by 9.1% |
|
Decrease by 8.3% |
Plan assets, which are funding the Companys defined pension plans are comprised as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2014 |
|
|
|
|
|
2013 |
|
|
|
|
As at December 31 |
|
in % |
|
|
Total |
|
|
in % |
|
|
Total |
|
Composition of plan assets1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash |
|
|
3% |
|
|
|
$ 7 |
|
|
|
- |
|
|
|
$ - |
|
Equity instruments |
|
|
48% |
|
|
|
104 |
|
|
|
53% |
|
|
|
116 |
|
Fixed income securities |
|
|
49% |
|
|
|
107 |
|
|
|
47% |
|
|
|
100 |
|
|
|
|
100% |
|
|
|
$ 218 |
|
|
|
100% |
|
|
|
$ 216 |
|
1 Holdings in equity and fixed income securities consist of
Level 1 and Level 2 assets within the fair value hierarchy.
Through the defined benefit pension plans and other post-retirement benefit plans, we are exposed to
a number of risks, most significant of which are detailed below:
Asset Volatility
The plan liabilities are calculated using discount rates that were developed by matching the cash flows underlying the pension obligation with a
spot rate curve based on the actual returns available on high-quality (Moodys Aa) US corporate bonds. If plan assets underperform this yield, this will create a deficit. Our plans hold a significant proportion of equities, which contribute
certain degree of risk and volatility.
As the plans mature, we intend to reduce the level of investment risk by investing more in assets that
better match the liabilities. However, we believe that due to the long-term nature of the plan liabilities, a level of continuing equity investment is an appropriate component of our long-term strategy to manage the plans efficiently.
Changes in bond yields
A decrease in corporate
bond yields will increase plan liabilities, although this be would likely be partially offset by an increase in the value of the plans bond holdings.
Inflation risk
Most of the plans
obligations are linked to inflation and higher inflation will lead to higher liabilities (although, in most cases, caps on the level of inflationary increases are in place to protect the plan against extreme inflation). The majority of the
plans assets are either unaffected by (fixed interest bonds) or loosely correlated with (equities)
inflation, meaning that an increase in inflation will also increase the deficit.
Life expectancy
The majority of the plans obligations are to provide benefits for the life of the member, so increases in the life expectancy will
result in an increase in the plans liabilities.
Each sensitivity analysis disclosed in this note is based on changing one assumption
while holding all other assumptions constant. In practice, this is unlikely to occur, and changes in some of the assumptions may be correlated. When calculating the sensitivity of the defined benefit obligation to variations in significant actuarial
assumptions, the same method (present value of the defined benefit obligation calculated with the project unit credit method at the end of the reporting period) has been applied as for calculating the liability recognized in the balance sheet.
In case of the funded plans, the Company ensures that the investment positions are managed within an asset-liability matching (ALM) framework that
has been developed to achieve long-term investments that are in line with the obligations under the pension plans. Within this framework, the Companys ALM objective is to match assets to the pension obligations by investing in long-term fixed
interest securities with maturities that match the benefit payments as they fall due and in the appropriate currency. The Company actively monitors how the duration and the expected yield of the investments are matching the expected cash outflows
arising from the pension obligations. The Company has not changed the processes used to manage its risks from previous periods. The
|
|
|
|
|
BARRICK YEAR END 2014 |
|
174 |
|
NOTES TO FINANCIAL STATEMENTS |
Company does not currently use derivatives to manage its risk. Investments are well diversified, such that the failure of any single investment would not have a material impact on the overall
level of assets. All of the assets in 2014 consist of equities and fixed income securities. The Company believes that equities offer the best returns over the long term with an acceptable level of risk. The majority of equities are in a globally
diversified portfolio of international blue chip entities. The plans are not exposed to significant foreign currency risk.
The Company has
pension plans (mostly in the US) at December 31, 2014. The expected contribution to post-employment benefit plans for the year ending December 31, 2014 is $6 million (2013: $8 million).
The weighted average duration of the defined benefit obligation is 11 years (2013: 10 years).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less
than a year |
|
|
Between
1-2 years |
|
|
Between
2-5 years |
|
|
Over
5 years |
|
|
Total |
|
Pension benefits |
|
|
$ 21 |
|
|
|
$ 21 |
|
|
|
$ 61 |
|
|
|
$ 381 |
|
|
|
$ 484 |
|
Other post-retirementbenefits |
|
|
1 |
|
|
|
1 |
|
|
|
1 |
|
|
|
6 |
|
|
|
9 |
|
At December 31, 2013 |
|
|
$ 22 |
|
|
|
$ 22 |
|
|
|
$ 62 |
|
|
|
$ 387 |
|
|
|
$ 493 |
|
Pension benefits |
|
|
20 |
|
|
|
20 |
|
|
|
60 |
|
|
|
421 |
|
|
|
521 |
|
Other post-retirementbenefits |
|
|
1 |
|
|
|
1 |
|
|
|
2 |
|
|
|
5 |
|
|
|
9 |
|
At December 31, 2014 |
|
|
$ 21 |
|
|
|
$ 21 |
|
|
|
$ 62 |
|
|
|
$ 426 |
|
|
|
$ 530 |
|
C Defined Contribution Pension Plans
Certain employees take part in defined contribution employee benefit plans and we also have a retirement plan for certain officers of the Company.
Our share of contributions to these plans, which is expensed in the year it is earned by the employee, was $42 million in 2014 (2013: $64 million).
35
> CONTINGENCIES
Certain conditions may exist as of the date the financial statements are issued that 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. The impact of any resulting loss from such matters affecting these financial statements and noted below may be material.
A) Litigation and Claims
In assessing loss
contingencies related to legal proceedings that are pending against us or unasserted claims that may result in such proceedings, the Company with assistance
from 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.
U.S. Shareholder Class Action
On
December 6, 2013, lead counsel and plaintiffs in the securities class action filed a consolidated amended complaint (the Complaint) in the U.S. District Court for the Southern District of New York (the Court), on behalf
of anyone who purchased the common stock of the Company between May 7, 2009, and November 1, 2013. The Complaint asserts claims against the Company and individual defendants Jamie Sokalsky, Aaron Regent, Ammar Al-Joundi, Igor Gonzales,
Peter Kinver, George Potter and Sybil Veenman (collectively, the Defendants). The Complaint alleges that the Defendants made false and misleading statements to the investing public relating (among other things) to the cost of the
Pascua-Lama project (the Project), the amount of time it would take before production commenced at the Project, and the environmental risks of the Project, as well as alleged internal control failures. The Complaint seeks an unspecified
amount of damages.
The Complaint largely tracks the legal theories advanced in three prior complaints filed on June 5,
2013, June 14, 2013 and August 2, 2013. The Court consolidated those complaints and appointed lead counsel and lead plaintiffs for the resulting consolidated action in September 2013.
The Court held oral arguments on Defendants motion to dismiss on September 5, 2014. A decision of the Court is pending. The Company
intends to vigorously defend this matter. No amounts have been recorded for any potential liability arising from this matter, as the Company cannot reasonably predict the outcome.
Proposed Canadian Securities Class Actions
Between April and September 2014, eight proposed class actions were commenced against the Company in Canada in connection with the Pascua-Lama
project. Four of the proceedings were commenced in Ontario, two were commenced in Alberta, one was commenced in Saskatchewan, and one was commenced in Quebec. The allegations in each of the eight Canadian proceedings are substantially similar to
those in the Complaint filed by lead counsel and plaintiffs in the U.S. shareholder class action (see U.S. Shareholder Class Action above). Of the eight proposed class actions, three of the Ontario claims, both of the Alberta claims, the
Quebec claim and the Saskatchewan claim have been formally served on the Company.
|
|
|
|
|
BARRICK YEAR END 2014 |
|
175 |
|
NOTES TO FINANCIAL STATEMENTS |
The first Ontario and Alberta actions were commenced by Statement of Claim on April 15, 2014
and April 17, 2014, respectively, and served on May 20, 2014 and July 29, 2014, respectively. The same law firm acts for the plaintiffs in these two proceedings, and the Statements of Claim are largely identical. Aaron Regent, Jamie
Sokalsky and Ammar Al-Joundi are also named as defendants in the two actions. Both actions purport to be on behalf of anyone who, during the period from May 7, 2009 to May 23, 2013, purchased Barrick securities in Canada. Both actions seek
$4.3 billion in general damages and $350 million in special damages for alleged misrepresentations in the Companys public disclosure.
The second Ontario action was commenced by Notice of Action on April 24, 2014, and the Statement of Claim was served on May 27, 2014.
Aaron Regent, Jamie Sokalsky, Ammar Al-Joundi and Peter Kinver are also named as defendants. Following a September 8, 2014 amendment to the Statement of Claim, this action purports to be on behalf of anyone who acquired Barrick securities
during the period from October 29, 2010 to October 30, 2013, and seeks $6 billion in damages for alleged misrepresentations in the Companys public disclosure. The amended claim also reflects the addition of a law firm that previously
acted as counsel in the third Ontario action referred to below.
The third Ontario action was commenced by Notice of Action on April 28,
2014. Aaron Regent, Jamie Sokalsky, Ammar Al-Joundi and Peter Kinver are also named as defendants. This action purports to be on behalf of anyone who acquired Barrick securities during the period from May 7, 2009 to November 1, 2013, and seeks
$3 billion in damages for alleged misrepresentations in the Companys public disclosure. This action has not been served and will not be pursued as counsel has joined the second Ontario action noted above.
The Quebec action was commenced and served on April 30, 2014. Aaron Regent, Jamie Sokalsky, Ammar Al-Joundi and Peter Kinver are also named
as defendants. This action purports to be on behalf of any person who resides in Quebec and acquired Barrick securities during the period from May 7, 2009 to November 1, 2013. The action seeks unspecified damages for alleged
misrepresentations in the Companys public disclosure.
The second Alberta action was commenced by Statement of Claim on May 23,
2014, and served on June 6, 2014. Aaron Regent, Jamie Sokalsky, Ammar Al-Joundi and Peter Kinver are also named as defendants. This action purports to be on behalf of any person who acquired Barrick securities during the period from May 7,
2009 to
November 1, 2013, and seeks $6 billion in damages for alleged misrepresentations in the Companys public disclosure.
The Saskatchewan action was commenced by Statement of Claim on May 26, 2014, and served on May 28, 2014. Aaron Regent, Jamie Sokalsky,
Ammar Al-Joundi and Peter Kinver are also named as defendants. This action purports to be on behalf of any person who acquired Barrick securities during the period from May 7, 2009 to November 1, 2013, and seeks $6 billion in damages for
alleged misrepresentations in the Companys public disclosure.
The fourth Ontario action was commenced on September 5, 2014. Aaron
Regent, Jamie Sokalsky, Ammar Al-Joundi and Peter Kinver are also named as defendants. This action purports to be on behalf of any person who acquired Barrick securities during the period from May 7, 2009 to November 1, 2013 in Canada. The
action seeks $3 billion in damages for alleged misrepresentations in the Companys public disclosure. The Statement of Claim was amended on October 20, 2014, to include two additional law firms, one of which is acting as counsel in the
first Ontario action referred to above. The Amended Statement of Claim was served on October 22, 2014.
In November 2014, an Ontario
court heard a motion to determine which of the competing counsel groups will take the lead in the Ontario litigation. On December 10, 2014, the court issued a decision in favor of the counsel group that commenced the first and fourth Ontario
actions, which will be consolidated in a single action. The losing counsel group has sought and obtained leave to appeal. The appeal is scheduled to be heard in March 2015.
The Company intends to vigorously defend all of the proposed Canadian securities class actions. No amounts have been recorded for any potential
liability arising from any of the proposed class actions, as the Company cannot reasonably predict the outcome.
Pascua-Lama SMA Regulatory
Sanction
In May 2013, Compañía Minera Nevada (CMN), Barricks Chilean subsidiary that holds the Chilean
portion of the Pascua-Lama project (the Project), received a Resolution (the Resolution) from Chiles environmental regulator (the Superintendencia del Medio Ambiente, or SMA) that requires the company to
complete the water management system for the Project in accordance with the Projects environmental permit before resuming construction activities in Chile. The Resolution also required CMN to pay an administrative fine of approximately $16
million for deviations from certain requirements of the Projects Chilean environmental approval, including a series of
|
|
|
|
|
BARRICK YEAR END 2014 |
|
176 |
|
NOTES TO FINANCIAL STATEMENTS |
reporting requirements and instances of non-compliance related to the Projects water management system. CMN paid the administrative fine in May 2013.
In June 2013, CMN began engineering studies to review the Projects water management system in accordance with the Resolution. These studies
indicate that an increase in the capacity of the water management system may be required above the volume approved in the Projects Chilean environmental approval. An increase in the capacity of the system may require a new environmental
approval and the construction of additional water management facilities, which could impact the schedule and estimated budget for completion of water management activities in Chile to the satisfaction of the authorities.
In June 2013, a group of local farmers and indigenous communities challenged the Resolution. The challenge, which was brought in the Environmental
Court of Santiago, Chile (the Environmental Court), claims that the fine was inadequate and requests more severe sanctions against CMN including the revocation of the Projects environmental permit. The SMA presented its defense of
the Resolution in July 2013. On August 2, 2013, CMN joined as a party to this proceeding and vigorously defended the Resolution. On March 3, 2014, the Environmental Court annulled the Resolution and remanded the matter back to the SMA for
further consideration in accordance with its decision (the Environmental Court Decision). In particular, the Environmental Court ordered the SMA to issue a new administrative decision that recalculates the amount of the fine to be paid
by CMN using a different methodology and addresses certain other errors it identified in the Resolution. A new resolution from the SMA could include more severe sanctions against CMN such as a material increase in the amount of the fine above the
approximately $16 million imposed by the SMA in May 2013 and/or the revocation of the Projects environmental permit. The Environmental Court did not annul the portion of the SMA Resolution that required the Company to halt construction on the
Chilean side of the project until the water management system is completed in accordance with the projects environmental permit. On December 30, 2014, the Chilean Supreme Court declined to consider CMNs appeal of the Environmental
Court Decision on procedural grounds. As a result of the Supreme Courts ruling, the SMA will now re-evaluate the Resolution in accordance with the Environmental Court Decision. A new resolution from the SMA in this matter is pending. No
amounts have been recorded for any potential liability or asset impairment arising from this matter, as the Company cannot reasonably predict the outcome or, in particular, the
potential financial impact in the event that more severe sanctions are imposed.
Pascua-Lama
Environmental Damage Claim
In June 2013, a group of local farmers filed an environmental damage claim against CMN in the Environmental
Court, alleging that CMN has damaged glaciers located in the Project area. The plaintiffs are seeking a court order requiring CMN to remedy the alleged damage and implement measures to prevent such environmental impact from continuing, including by
halting construction of the Project in Chile. CMN presented its defense on October 9, 2013. A settlement and evidentiary hearing took place on January 8, 2014. Having failed to reach a settlement during that hearing, the parties proceeded
to present documentary evidence and witness testimony to the Environmental Court. A final hearing was held in this matter on December 3, 2014, and a decision of the Environmental Court is pending. The Company intends to vigorously defend this
matter. No amounts have been recorded for any potential liability or asset impairment arising from this matter, as the Company cannot reasonably predict the outcome.
Pueblo Viejo Amparo Action
In October
2014, Pueblo Viejo Dominicana Corporation (PVDC) received a copy of an action filed in an administrative court (the Administrative Court) in the Dominican Republic by Rafael Guillen Beltre (the Petitioner), who
claims to be affiliated with the Dominican Christian Peace Organization. The action alleges that environmental contamination in the vicinity of the Pueblo Viejo mine has caused illness and affected water quality in violation of the Petitioners
fundamental rights under the Dominican Constitution and other laws. The primary relief sought in the action, which is styled as an Amparo remedy, is the suspension of operations at the Pueblo Viejo mine as well as other mining projects
in the area until an investigation into the alleged environmental contamination has been completed by the relevant governmental authorities. On November 21, 2014, the Administrative Court granted PVDCs motion to remand the matter to a
trial court in the Municipality of Cotuí (the Trial Court) on procedural grounds. On January 27, 2015, the Trial Court granted PVDCs motion to suspend the action pending receipt of the litigation file from the
Administrative Court. The Company intends to vigorously defend this matter. No amounts have been recorded for any potential liability or asset impairment arising from this matter, as the Company cannot reasonably predict any potential losses.
|
|
|
|
|
BARRICK YEAR END 2014 |
|
177 |
|
NOTES TO FINANCIAL STATEMENTS |
Argentine Glacier Legislation and Constitutional Litigation
On September 30, 2010, the National Law on Minimum Requirements for the Protection of Glaciers was enacted in Argentina, and came into force
in early November 2010. The federal law bans new mining exploration and exploitation activities on glaciers and in the peri-glacial environment, and subjects ongoing mining activities to an environmental audit. If such audit identifies
significant impacts on glaciers and peri-glacial environment, the relevant authority is empowered to take action, which according to the legislation could include the suspension or relocation of the activity. In the case of the Veladero mine and the
Pascua-Lama project, the competent authority is the Province of San Juan. In late January 2013, the Province announced that it had completed the required environmental audit, which concluded that Veladero and Pascua-Lama do not impact glaciers or
peri-glaciers.
The constitutionality of the federal glacier law is the subject of a challenge before the National Supreme Court of Argentina,
which has not yet ruled on the issue. On October 27, 2014, the Company submitted its response to a motion by the federal government to dismiss the constitutional challenge to the federal glacier law on standing grounds. A decision on the motion
is pending. If the federal governments arguments with respect to standing are accepted then the case will be dismissed. If they are not accepted then the National Supreme Court of Argentina will proceed to hear evidence on the merits. No
amounts have been recorded for any potential liability or asset impairment under this matter, as the Company cannot reasonably predict the outcome and in any event the provincial audit concluded that the Companys activities do not impact
glaciers or peri-glaciers.
Marinduque Complaint
Placer Dome Inc. was named the sole defendant in a Complaint filed in October 2005 by the Provincial Government of Marinduque, an island province
of the Philippines (Province), with the District Court in Clark County, Nevada (the Court). The complaint asserted that Placer Dome Inc. was responsible for alleged environmental degradation with consequent economic damages
and impacts to the environment in the vicinity of the Marcopper mine that was owned and operated by Marcopper Mining Corporation (Marcopper). Placer Dome Inc. indirectly owned a minority shareholding of 39.9% in Marcopper until the
divestiture of its shareholding in 1997. The Province sought to recover damages for injuries to the natural, ecological and wildlife resources within its territory. In addition, the Province sought compensation for the costs of restoring
the environment, an order directing Placer Dome Inc. to undertake and complete the remediation,
environmental cleanup, and balancing of the ecology of the affected areas, and payment of the costs of environmental monitoring. The Complaint addressed the discharge of mine tailings into
Calancan Bay, the 1993 Maguila-guila dam breach, the 1996 Boac river tailings spill, and alleged past and continuing damage from acid rock drainage. In October 2010, the Court issued an order granting the Companys motion to dismiss the action
on the grounds of forum non conveniens. The Province appealed the Courts dismissal order to the Nevada Supreme Court. Oral arguments were held on February 3, 2015, and a decision of the Court is pending. The Company intends to continue to
defend the action vigorously. No amounts have been recorded for any potential liability under this complaint, as the Company cannot reasonably predict the outcome.
Perilla Complaint
In 2009, Barrick Gold Inc. and
Placer Dome Inc. were purportedly served in Ontario with a complaint filed in November 2008 in the Regional Trial Court of Boac (the Court), on the Philippine island of Marinduque, on behalf of two named individuals and purportedly on
behalf of the approximately 200,000 residents of Marinduque. The complaint alleges injury to the economy and the ecology of Marinduque as a result of the discharge of mine tailings from the Marcopper mine into Calancan Bay, the Boac River, and the
Mogpog River. The plaintiffs are claiming for abatement of a public nuisance allegedly caused by the tailings discharge and for nominal damages for an alleged violation of their constitutional right to a balanced and healthful ecology. In June 2010,
Barrick Gold Inc. and Placer Dome Inc. filed a motion to have the Court resolve their unresolved motions to dismiss before considering the plaintiffs motion to admit an amended complaint and also filed an opposition to the plaintiffs
motion to admit on the same basis. It is not known when these motions or the outstanding motions to dismiss will be decided by the Court. The Company intends to defend the action vigorously. No amounts have been recorded for any potential liability
under this complaint, as the Company cannot reasonably predict the outcome.
Writ of Kalikasan
In February 2011, a Petition for the Issuance of a Writ of Kalikasan with Prayer for Temporary Environmental Protection Order was filed in the
Supreme Court of the Republic of the Philippines (the Supreme Court) in Eliza M. Hernandez, Mamerto M. Lanete and Godofredo L. Manoy versus Placer Dome Inc. and Barrick Gold Corporation (the Petition). In March 2011, the
Supreme Court issued an En Banc Resolution and Writ of Kalikasan, directed service of summons on Placer Dome Inc. and the Company, ordered Placer Dome Inc. and the Company to make a verified
|
|
|
|
|
BARRICK YEAR END 2014 |
|
178 |
|
NOTES TO FINANCIAL STATEMENTS |
return of the Writ with ten (10) days of service and referred the case to the Court of Appeal for hearing. The Petition alleges that Placer Dome Inc. violated the petitioners
constitutional right to a balanced and healthful ecology as a result of, among other things, the discharge of tailings into Calancan Bay, the 1993 Maguila-Guila dam break, the 1996 Boac river tailings spill and failure of Marcopper to properly
decommission the Marcopper mine. The petitioners have pleaded that the Company is liable for the alleged actions and omissions of Placer Dome Inc., which was a minority indirect shareholder of Marcopper at all relevant times, and is seeking orders
requiring the Company to environmentally remediate the areas in and around the mine site that are alleged to have sustained environmental impacts. The petitioners purported to serve the Company in March 2011, following which the Company filed an
Urgent Motion For Ruling on Jurisdiction with the Supreme Court challenging the constitutionality of the Rules of Procedure in Environmental Cases (the Environmental Rules) pursuant to which the Petition was filed, as well as the
jurisdiction of the Supreme Court over the Company. In November 2011, two local governments, or baranguays (Baranguay San Antonio and Baranguay Lobo) filed a motion with the Supreme Court seeking intervenor status with the intention of
seeking a dismissal of the proceedings. No decision has as yet been issued with respect to the Urgent Motion for Ruling on Jurisdiction, the motion for intervention, or certain other matters before the Supreme Court. The Company intends to continue
to defend the action vigorously. No amounts have been recorded for any potential liability under this matter, as the Company cannot reasonably predict the outcome.
b) Other contingencies
Jabal Sayid
After the Company acquired its interest in the Jabal Sayid project through its acquisition of Equinox Minerals in 2011, the Deputy Ministry for
Mineral Resources (DMMR), which oversees the mining license, questioned whether such change in the indirect ownership of the project, as well as previous changes in ownership, required the prior consent of the DMMR. In December 2012, the
DMMR required the project to cease commissioning of the plant using stockpiled ore, citing alleged noncompliances with the mining investment law and the mining license, and in January 2013 required related companies to cease exploration activities,
citing noncompliance with the law and the exploration licenses related to the ownership changes.
On December 3, 2014, the Company
announced that it formed a joint venture with Saudi Arabian Mining Company (Maaden) to operate the Jabal Sayid project. The
Company and Maaden own equal shares in a new joint venture company established to hold the Jabal Sayid assets free of the restrictions that had been placed on Bariq Mining Ltd., the former
owner. The arrangement was approved by the DMMR, and the matter is now closed.
Cerro Casale
One of the environmental permits related to the open pit and water management system at the Companys 75 percent-owned Cerro Casale project in
Chile is subject to an environmental regulation (the Regulation) that, if applied as written, would have required the Company to begin construction of the project by January 26, 2015. Construction did not begin by that date, and the
environmental permit is therefore subject to cancellation. However, the Company is seeking relief from the Regulation under a procedure established by the Chilean environmental authority. If the Company does not obtain the requested relief then it
will evaluate a potential legal challenge to the Regulation. Permits required for the majority of the projects proposed operations have been obtained under a new environmental approval not subject to the January 26, 2015 construction
deadline.
Although it is not subject to the January 26, 2015 construction deadline, the new environmental approval mentioned above is
currently being challenged by local and indigenous community members in an administrative proceeding before the Chilean environmental authority for, among other claims, alleged deficiencies in water quality baseline information and the indigenous
consultation process. An unfavorable outcome in this proceeding could result in cancellation of, or changes to, the new environmental permit.
Cerro Casale had a carrying value on a 100 percent basis of $500 million as at December 31, 2014, reflecting an impairment loss that was
recorded on the project in the fourth quarter of 2014 (see note 20). Cancellation of either of the two environmental permits could result in a further impairment charge against the carrying value of the asset.
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BARRICK YEAR END 2014 |
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179 |
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NOTES TO FINANCIAL STATEMENTS |
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CORPORATE OFFICE |
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TRANSFER AGENTS AND REGISTRARS |
Barrick Gold Corporation |
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CST Trust Company |
Brookfield Place, TD Canada Trust Tower |
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P.O. Box 700, Postal Station B |
Suite 3700 |
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Montreal, Quebec, Canada H3B 3K3 |
161 Bay Street, P.O. Box 212 |
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or |
Toronto, Canada M5J 2S1 |
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American Stock Transfer & Trust Company, LLC |
Tel: (416) 861-9911 Fax: (416) 861-0727 |
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6201 15 Avenue |
Toll-free throughout North America: 1-800-720-7415 |
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Brooklyn, NY 11219 |
Email: investor@barrick.com |
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Tel: 1-800-387-0825 |
Website: www.barrick.com |
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Toll-free throughout North America |
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Fax: 1-888-249-6189 |
SHARES LISTED |
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Email: inquiries@canstockta.com |
ABX The New York Stock Exchange |
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Website: www.canstockta.com |
The Toronto Stock Exchange |
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INVESTOR CONTACT |
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MEDIA CONTACT |
Amy Schwalm |
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Andy Lloyd |
Vice President, |
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Vice President, |
Investor Relations |
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Communications |
Tel: (416) 307-7422 |
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Tel: (416) 307-7414 |
Email: aschwalm@barrick.com |
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Email: alloyd@barrick.com |
CAUTIONARY STATEMENT ON FORWARD-LOOKING INFORMATION
Certain information contained or incorporated by reference in this Fourth Quarter and Year-End Report 2014, including any information as to our
strategy, projects, plans or future financial or operating performance, constitutes forward-looking statements. All statements, other than statements of historical fact, are forward-looking statements. The words believe,
expect, anticipate, contemplate, target, plan, intend, 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 the company, are inherently subject to significant
business, economic and competitive uncertainties and contingencies. Known and unknown factors could cause actual results to differ materially from those projected in the forward-looking statements. Such factors include, but are not limited to:
fluctuations in the spot and forward price of gold, copper or certain other commodities (such as silver, diesel fuel and electricity); changes in national and local government legislation, taxation, controls or regulations and/or changes in the
administration of laws, policies and practices, expropriation or nationalization of property and political or economic developments in Canada, the United States, Zambia and other jurisdictions in which the Company does or may carry on business in
the future; failure to comply with environmental and health and safety laws and regulations; timing of receipt of, or failure to comply with, necessary permits and approvals; diminishing quantities or grades of reserves; increased costs, delays,
suspensions and technical challenges associated with the construction of capital projects; the impact of global liquidity and credit availability on the timing of cash flows and the values of assets and liabilities based on projected future cash
flows; adverse changes in our credit rating; the impact of inflation; operating or technical difficulties in connection with mining or development activities; the speculative nature of mineral exploration and development; risk of loss due to acts of
war, terrorism, sabotage and civil disturbances; fluctuations in the currency markets; changes in U.S. dollar interest rates; risks arising from holding derivative instruments; litigation; contests over title to properties, particularly title to
undeveloped properties, or over access to water, power and other required infrastructure; business opportunities that may be presented to, or pursued by, the company; our ability to successfully integrate acquisitions or complete divestitures;
employee relations; availability and increased costs associated with mining inputs and labor; and the organization of our previously held African gold operations and properties under a separate listed company. In addition, there are risks and
hazards associated with the business of mineral exploration, development and mining, including environmental hazards, industrial accidents, unusual or unexpected formations, pressures, cave-ins, flooding and gold bullion, copper cathode or gold or
copper concentrate losses (and the risk of inadequate insurance, or inability to obtain insurance, to cover these risks). Many of these uncertainties and contingencies can affect our actual results and could cause actual results to differ materially
from those expressed or implied in any forward-looking statements made by, or on behalf of, us. Readers are cautioned that forward-looking statements are not guarantees of future performance. All of the forward-looking statements made in this Fourth
Quarter and Year-End Report 2014 are qualified by these cautionary statements. Specific reference is made to the most recent Form 40-F/Annual Information Form on file with the SEC and Canadian provincial securities regulatory authorities for a
discussion of some of the factors underlying forward-looking statements.
The company disclaims any intention or obligation to update or
revise any forward-looking statements whether as a result of new information, future events or otherwise, except as required by applicable law.
EXHIBIT 99.2
CONSENT OF INDEPENDENT AUDITOR
We hereby
consent to the incorporation by reference on Form S-8 (File Nos. 333-121500, 333-131715, 333-135769) of Barrick Gold Corporation (the Company) of our report dated February 18, 2015 relating to the 2014 consolidated financial statements and the
effectiveness of internal control over financial reporting of the Company which appears in Exhibit 99.1 to the Companys current report on Form 6-K furnished to the U.S. Securities and Exchange Commission on February 20, 2015.
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/s/ PricewaterhouseCoopers LLP |
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Chartered Professional Accountants, Licensed Public Accountants |
Toronto, Ontario |
February 20, 2015 |
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