UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

Form 6-K

 

 

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16 UNDER THE

SECURITIES EXCHANGE ACT OF 1934

For the month of February 2020

Commission File Number: 1-9059

 

 

Barrick Gold Corporation

(Registrant’s name)

 

 

Brookfield Place, TD Canada Trust Tower, Suite 3700

161 Bay Street, P.O. Box 212

Toronto, Ontario M5J 2S1 Canada

(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.

Form 20-F  ☐            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):  ☐

 

 

 


2019 YEAR-END MANAGEMENT’S DISCUSSION & ANALYSIS AND YEAR-END FINANCIAL STATEMENTS

On February 12, 2020, Barrick Gold Corporation (“Barrick”) released unaudited financial statements in respect of its 2019 year-end and the Management’s Discussion and Analysis in respect thereof (furnished to the SEC on Form 6-K on February 13, 2020). In the final, audited financial statements, certain non-material reclassifications have been made between non-current and current liabilities on the balance sheet and between line items within operating cash flow on the statement of cash flows. The updated Management’s Discussion and Analysis and the final, audited financial statements which reflect these reclassifications are included in this report as Exhibit 99.1.


INCORPORATION BY REFERENCE

This report on Form 6-K is hereby incorporated by reference into the Registration Statements on Form F-3 (File No. 333-206417), Form S-8 (File No. 333-224560) and Form F-10 (File No. 333-230235).


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.

 

 

    BARRICK GOLD CORPORATION
Date: February 20, 2020     By:  

/s/ Richie Haddock

    Name:   Richie Haddock
    Title:   General Counsel


EXHIBIT INDEX

 

Exhibits

  

Description

99.1    Barrick Gold Corporation Consolidated Financial Statements prepared in accordance with International Financial Reporting Standards and the notes thereto as at and for the years ended December 31, 2019 and December 31, 2018 and Management’s Discussion and Analysis for the same periods.
99.2    Consent of PricewaterhouseCoopers LLP
101.INS    XBRL Instance Document
101.SCH    XBRL Taxonomy Extension Schema Document
101.CAL    XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF    XBRL Taxonomy Extension Definition Linkbase Document
101.LAB    XBRL Taxonomy Extension Labels Linkbase Document
101.PRE    XBRL Taxonomy Extension Presentation Linkbase Document
EX-99.1

Exhibit 99.1

MANAGEMENT’S DISCUSSION AND ANALYSIS (“MD&A”)

 

Management’s 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 the present and future business environment. This MD&A, which has been prepared as of February 20, 2020, should be read in conjunction with our audited consolidated financial statements (“Financial Statements”) for the year ended December 31, 2019. 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; (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 91.

 

 

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”, “target”, “plan”, “objective”, “assume”, “intend”, “intention”, “project”, “goal”, “continue”, “budget”, “estimate”, “potential”, “may”, “will”, “can”, “could”, “would” and similar expressions identify forward-looking statements. In particular, this MD&A contains forward-looking statements including, without limitation, with respect to: Barrick’s goal to be the world’s most valued gold mining business; Barrick’s forward-looking production guidance and estimates of future costs ; cash flow forecasts; projected capital, operating and exploration expenditures; targeted debt and cost reductions; mine life and production rates; potential mineralization and metal or mineral recoveries; our ability to identify, invest in and develop potential Tier One, Tier Two and Strategic Assets; our strategies and plans with respect to environmental matters, including climate change; our future plans, growth potential, financial strength, investments and overall strategy; our plans and expected completion and benefits of our growth projects, including construction of twin exploration declines at Goldrush, the Turquoise Ridge Third Shaft, Pueblo Viejo plant expansion, Zaldívar chloride leach project, and Veladero power transmission project; our ability to convert resources into reserves; asset sales, joint ventures and partnerships, including expected closing of the sale of our interest in Massawa; expectations regarding future price assumptions, financial performance and other outlook or guidance.

Forward-looking statements are necessarily based upon a number of estimates and assumptions including material estimates and assumptions related to the factors set forth below that, while considered reasonable by the Company as at the date of this MD&A in light of management’s experience and perception of current conditions and expected developments, 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 and undue reliance should not be placed on such

statements and information. 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, natural gas and electricity); the speculative nature of mineral exploration and development; changes in mineral production performance, exploitation and exploration successes; risks associated with projects in the early stages of evaluation and for which additional engineering and other analysis is required; the Company’s ability to successfully re-integrate Acacia’s operations; whether benefits expected from recent transactions are realized; disruption of supply routes which may cause delays in construction and mining activities at Barrick’s more remote properties; diminishing quantities or grades of reserves; increased costs, delays, suspensions and technical challenges associated with the construction of capital projects; operating or technical difficulties in connection with mining or development activities, including geotechnical challenges and disruptions in the maintenance or provision of required infrastructure and information technology systems; 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; uncertainty whether some or targeted investments and projects will meet the Company’s capital allocation objectives and internal hurdle rate; 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 ratings; the impact of inflation; fluctuations in the currency markets; changes in U.S. dollar interest rates; risks arising from holding derivative instruments; 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 and other jurisdictions in which the Company or its affiliates do or may carry on business in the future; lack of certainty with respect to foreign legal systems, corruption and other factors that are inconsistent with the rule of law; risks associated with illegal and artisanal mining; the risks of operating in jurisdictions where infectious diseases present major health care issues; damage to the Company’s reputation due to the actual or perceived occurrence of any number of events, including negative publicity with respect to the Company’s handling of environmental matters or dealings with community

 

 

BARRICK YEAR-END 2019   1   MANAGEMENT’S DISCUSSION AND ANALYSIS


groups, whether true or not; the possibility that future exploration results will not be consistent with the Company’s expectations; risks that exploration data may be incomplete and considerable additional work may be required to complete further evaluation, including but not limited to drilling, engineering and socioeconomic studies and investment; risk of loss due to acts of war, terrorism, sabotage and civil disturbances; 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; risks associated with the fact that certain of the initiatives described in this MD&A are still in the early stages and may not materialize; our ability to successfully integrate acquisitions or complete divestitures; risks associated with working with partners in jointly controlled assets; employee relations including loss of key employees; increased costs and physical risks, including extreme weather events and resource shortages, related to climate change; and availability and increased costs associated with mining inputs and labor. 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 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 more detailed discussion of some of the factors underlying forward-looking statements and the risks that may affect Barrick’s ability to achieve the expectations set forth in the forward-looking statements contained in this MD&A. 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.

 

 

MERGER WITH RANDGOLD RESOURCES LIMITED

On January 1, 2019, Barrick acquired 100% of the issued and outstanding shares of Randgold Resources Limited (“Randgold”) for $7.9 billion based on the December 31, 2018 closing share price of Barrick’s common shares (the “Merger”). We began consolidating the operating results, cash flows and net assets of Randgold from January 1, 2019 and the results presented in this MD&A reflect that. Refer to note 4 of the Financial Statements for further details of this transaction.

USE OF NON-GAAP FINANCIAL PERFORMANCE MEASURES

We use the following non-GAAP financial performance measures in our MD&A:

    “adjusted net earnings”
    “free cash flow”
    “EBITDA”
    “adjusted EBITDA”
    “total cash costs per ounce”
    “C1 cash costs per pound”
    “all-in sustaining costs per ounce/pound”
    “all-in costs per ounce” and
    “realized price”

For a detailed description of each of the non-GAAP measures used in this MD&A and a detailed reconciliation to the most directly comparable measure under International Financial Reporting Standards (“IFRS”), please refer to the Non-GAAP Financial Performance Measures section of this MD&A on pages 63 to 85. Each non-GAAP financial performance measure has been annotated with a reference to an endnote on page 86. The non-GAAP financial performance measures set out in this MD&A are intended to provide additional information to investors and do not have any standardized meaning under IFRS, and therefore may not be comparable to other issuers, and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS.

Changes in Presentation of Non-GAAP Financial Performance Measures

Realized Price

Starting with this MD&A, we began adjusting for the cumulative catch-up adjustment to revenue relating to our streaming arrangements in our calculation of realized price. The prior periods have been restated to reflect this change. We believe that this additional information will assist analysts, investors and other stakeholders of Barrick to better understand our ability to generate revenue by excluding non-cash amounts from the calculation as they are not necessarily reflective of the underlying operating results for the periods presented.

Total cash costs

Starting from the first quarter of 2019, we have renamed “cash costs” to “total cash costs” when referring to our gold operations. The calculation of total cash costs is identical to our previous calculation of cash costs with only a change in the naming convention of this non-GAAP measure.

All-in sustaining costs and all-in costs

Starting from the first quarter of 2019, we have included sustaining capital expenditures and project capital expenditures on a cash basis instead of an accrual basis. As a result of adopting IFRS 16 Leases, the full lease amount is included in accrued capital expenditures on initial recognition. We believe that the change in capital expenditures from an accrual basis to a cash basis better reflects the timing of costs associated with our operations. The original World Gold Council (“WGC”) Guidance Note explicitly excluded certain financing activities from all-in sustaining costs and all-in costs. As a result of the new lease accounting standard, the WGC Guidance Note was updated to include both the principal and interest portion of the cash lease payment in the all-in sustaining costs and all-in cost metrics. We have updated our calculation accordingly. Prior periods have not been restated but would not be materially different.

 

 

BARRICK YEAR-END 2019   2   MANAGEMENT’S DISCUSSION AND ANALYSIS


 INDEX    page

Overview

  

Our Vision

   4

Our Business

   4

Our Strategy

   4

Sustainability

   4

Financial and Operating Highlights

   6

Safety

   10

Environment

   10

Climate Change

   10

Reserves and Resources

   11

Key Business Developments

   12

Outlook for 2020

   15

Risks and Risk Management

   18

Market Overview

   19

Production and Cost Summary

   21

Operating Divisions Performance

   23

Nevada Gold Mines

   24

Carlin

   25

Cortez

   27

Turquoise Ridge

   29

Other Nevada Gold Mines

   31

Pueblo Viejo

   32

Loulo-Gounkoto

   34

Kibali

   36

Veladero

   38

Porgera

   40

North Mara

   42

Other Mines - Gold

   44

Other Mines - Copper

   45

Growth Projects

   46

Exploration

   47

 

     page
Review of Financial Results    50

Revenue

   50

Production Costs

   51

Capital Expenditures

   53

General and Administrative Expenses

   53

Exploration, Evaluation and Project Costs

   54

Finance Costs, Net

   54

Additional Significant Statement of Income

Items

   55

Income Tax Expense

   56
Financial Condition Review    58

Balance Sheet Review

   58

Shareholders’ Equity

   58

Financial Position and Liquidity

   58

Summary of Cash Inflow (Outflow)

   59

Summary of Financial Instruments

   60
Commitments and Contingencies    61
Review of Quarterly Results    62
Internal Control over Financial Reporting and Disclosure Controls and Procedures    62
IFRS Critical Accounting Policies and Accounting Estimates    63
Non-GAAP Financial Performance Measures    63
Technical Information    86
Endnotes    86
Glossary of Technical Terms    91
Mineral Reserves and Mineral Resources    92
Management’s Responsibility    103
Management’s Report on Internal Control Over Financial Reporting    104
Independent Auditor’s Report    105
Financial Statements    110
Notes to Consolidated Financial Statements    115
 


OVERVIEW

Our Vision

We strive to be the world’s most valued gold mining business by finding, developing and owning the best assets, with the best people, to deliver sustainable returns for our owners and partners.

Our Business

Barrick is one of the world’s leading gold mining companies with annual gold production and gold reserves that are among 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 hold interests in fifteen producing gold mines, including six Tier One Gold Assets1 and a diversified asset portfolio positioned for growth in many of the world’s most prolific gold districts. These gold mines are geographically diversified and are located in Argentina, Canada, Côte d’Ivoire, the Democratic Republic of Congo, the Dominican Republic, Mali, Papua New Guinea, Tanzania and the United States. Our copper business includes a wholly-owned copper mine in Zambia and 50% interests in copper mines in Chile and Saudi Arabia. We also have exploration and development projects located throughout the Americas and Africa. We sell our production in the world market through the following distribution channels: gold bullion is sold in the gold spot market; and gold and copper concentrate is sold to independent smelting companies. Barrick shares trade on the New York Stock Exchange under the symbol GOLD and the Toronto Stock Exchange under the symbol ABX.

2019 Revenue (millions)

 

LOGO

Our Strategy

Our strategy is to operate as business owners by attracting and developing world-class people who are informed and involved in the value chain of the business, act with integrity and are tireless in their pursuit of excellence. We are focused on returns to our stakeholders by optimizing free cash flow, managing risk to create long-term value for our shareholders and partnering with host governments and communities to transform their natural resources into sustainable benefits and mutual prosperity. We aim to achieve this through the following:

Asset Quality

 

Grow and invest in a portfolio of Tier One Gold Assets1, Tier Two Gold Assets and Strategic Assets2 with an emphasis on organic growth. We will focus our efforts on

   

identifying, investing in and developing assets that meet our investment criteria. With respect to Tier One Gold Assets, we are focused on assets with a reserve potential greater than 5 million ounces of gold that will generate an internal rate of return (IRR) of at least 15%. With respect to Tier Two Gold Assets, we are focused on assets with a reserve potential of greater than 3 million ounces of gold that will generate an IRR of at least 20% (in each case based on our long-term gold price assumptions).

 

Focus on brownfields opportunities at Nevada Gold Mines LLC (“Nevada Gold Mines”) following the integration of Barrick’s and Newmont Corporation’s (“Newmont”) interests in Nevada through the creation of the joint venture, together with Pueblo Viejo, Loulo-Gounkoto and Kibali.

 

Invest in exploration across extensive land positions in many of the world’s most prolific gold districts.

 

Maximize the long-term value of our strategic Copper Business3.

  Sell non-core assets over time in a disciplined manner.

Operational Excellence

  Strive for zero harm workplaces.
 

Operate a flat management structure with a strong ownership culture.

 

Streamline management and operations, and hold management accountable for the businesses they manage.

 

Leverage innovation and technology to drive industry-leading efficiencies.

 

Build trust-based partnerships with host governments, business partners, and local communities to drive shared long-term value.

Sustainable Profitability

 

Follow a disciplined approach to growth, emphasizing long-term value for all stakeholders.

 

Increase returns to shareholders, driven by a focus on return on capital, internal rate of return and free cash flow.

Sustainability

Barrick’s sustainability vision is to create long-term value for all our stakeholders. We contribute to the social and economic development of our host countries and communities. We protect the safety and health of our workforce. We respect human rights. And we manage our impacts on the natural environment, both today and with future generations in mind. We live our vision every day, by embedding environmental, social and economic considerations into all our business decisions, through partnerships with host governments and communities and by engaging respectfully with all our stakeholders.

Our approach to achieving these four ambitions is set out in a new overarching Sustainable Development Policy, which commits us to supporting the socio-economic development of host countries and communities. We have also published policies in the areas of Social Performance, which incorporates Community Development and Engagement, Occupational Health and Safety, and Environment and Human Rights. All policies meet or exceed the requirements of host country legislation and international standards such

 

 

BARRICK YEAR-END 2019   4   MANAGEMENT’S DISCUSSION AND ANALYSIS


as the IFC Performance Standards or UN Guiding Principles on Business and Human Rights. Our updated Code of Conduct sets out the ethical behavior expected of everyone working at, or with, Barrick.

Day-to-day ownership of sustainability risks and opportunities is in the hands of individual sites - where our core business is located. Each operation’s General Manager, supported by dedicated teams on site, is accountable for putting Barrick’s vision into action at the site level. This includes maintaining an ISO-certified environmental and safety management system, building robust community engagement mechanisms and managing energy and water plans.

We anticipate that the social and environmental expectations of mining companies will become even higher in the future. We are clear that our ability to maintain our social license to operate will depend on our ability to meet these expectations. To meet this challenge, we will continue to embed environmental, social and economic considerations into our business decisions, engage respectfully with stakeholders and act on their concerns and continue to build deep partnerships with our communities, host governments and other partners.

    

 

 

BARRICK YEAR-END 2019   5   MANAGEMENT’S DISCUSSION AND ANALYSIS


FINANCIAL AND OPERATING HIGHLIGHTS

 

     For the three months ended     For the years ended  
      12/31/2019     9/30/2019     % Change     12/31/19     12/31/18     % Change     12/31/17  

Financial Results ($ millions)

              

Revenues

     2,883       2,678       8     9,717       7,243       34     8,374  

Cost of sales

     1,987       1,889       5     6,911       5,220       32     5,300  

Net earnings (loss)a

     1,387       2,277       (39 )%      3,969       (1,545     357     1,438  

Adjusted net earningsb

     300       264       14     902       409       121     876  

Adjusted EBITDAb

     1,562       1,297       20     4,833       3,080       57     4,115  

Adjusted EBITDA marginc

     54     48     13     50     43     16     49

Total minesite sustaining capital expendituresd

     394       406       (3 )%      1,320       968       36     1,116  

Total project capital expendituresd

     46       96       (52 )%      370       425       (13 )%      280  

Total consolidated capital expendituresd,e

     446       502       (11 )%      1,701       1,400       22     1,396  

Net cash provided by operating activities

     875       1,004       (13 )%      2,833       1,765       61     2,065  

Net cash provided by operating activities marginf

     30     37     (19 )%      29     24     21     25

Free cash flowb

     429       502       (15 )%      1,132       365       210     669  

Net earnings (loss) per share (basic and diluted)

     0.78       1.30       (40 )%      2.26       (1.32     271     1.23  

Adjusted net earnings (basic)b per share

     0.17       0.15       13     0.51       0.35       46     0.75  

Weighted average diluted common shares (millions of shares)

     1,778       1,756       1     1,758       1,167       51     1,166  

Operating Results

              

Gold production (thousands of ounces)g

     1,439       1,306       10     5,465       4,527       21     5,323  

Gold sold (thousands of ounces)g

     1,413       1,318       7     5,467       4,544       20     5,302  

Market gold price ($/oz)

     1,481       1,472       1     1,393       1,268       10     1,257  

Realized gold priceb,g ($/oz)

     1,483       1,476       0     1,396       1,270       10     1,258  

Gold cost of sales (Barrick’s share)g,h ($/oz)

     1,046       1,065       (2 )%      1,005       892       13     794  

Gold total cash costsb,g ($/oz)

     692       710       (3 )%      671       588       14     526  

Gold all-in sustaining costsb,g ($/oz)

     923       984       (6 )%      894       806       11     750  

Copper production (millions of pounds)i

     117       112       4     432       383       13     413  

Copper sold (millions of pounds)i

     91       65       40     355       382       (7 )%      405  

Market copper price ($/lb)

     2.67       2.63       2     2.72       2.96       (8 )%      2.80  

Realized copper priceb,i ($/lb)

     2.76       2.55       8     2.77       2.88       (4 )%      2.95  

Copper cost of sales (Barrick’s share)i,j ($/lb)

     2.26       2.00       13     2.14       2.40       (11 )%      1.77  

Copper C1 cash costsb,i ($/lb)

     1.90       1.62       17     1.69       1.97       (14 )%      1.66  

Copper all-in sustaining costsb,i ($/lb)

     2.82       2.58       9     2.52       2.82       (11 )%      2.34  
      
As at
12/31/19
 
 
   
As at
9/30/19
 
 
   
%
Change
 
 
   
As at
12/31/18
 
 
   
%
Change
 
 
   
As at
12/31/17
 
 
       

Financial Position ($ millions)

              

Debt (current and long-term)

     5,536       5,560       0     5,738       (4 )%      6,423    

Cash and equivalents

     3,314       2,405       38     1,571       111     2,234    

Debt, net of cash

     2,222       3,155       (30 )%      4,167       (47 )%      4,189          

 

a.

Net earnings (loss) represents net earnings (loss) attributable to the equity holders of the Company.

b.

Adjusted net earnings, adjusted EBITDA, free cash flow, adjusted net earnings per share, realized gold price, all-in sustaining costs, total cash costs, C1 cash costs and realized copper price are non-GAAP financial performance measures with no standardized meaning under IFRS and therefore may not be comparable to similar measures presented by other issuers. For further information and a detailed reconciliation of each non-GAAP measure to the most directly comparable IFRS measure, please see pages 63 to 85 of this MD&A.

c.

Represents adjusted EBITDA divided by revenue.

d.

Amounts presented on a consolidated cash basis. Project capital expenditures are included in our calculation of all-in costs, but not included in our calculation of all-in sustaining costs.

e.

Total consolidated capital expenditures also includes capitalized interest.

f.

Represents net cash provided by operating activities divided by revenue.

g.

Includes Tanzania on a 63.9% basis until September 30, 2019 (notwithstanding the completion of the Acacia transaction on September 17, 2019, we consolidated our interest in Acacia and recorded a non-controlling interest of 36.1% in the income statement for the entirety of the third quarter of 2019 as a matter of convenience), Pueblo Viejo on a 60% basis, South Arturo on a 60% basis (36.9% from July 1, 2019 onwards as a result of its contribution to Nevada Gold Mines), and Veladero on a 50% basis, which reflects our equity share of production and sales. Also includes Loulo-Gounkoto on an 80% basis, Kibali on a 45% basis, Tongon on an 89.7% basis and Morila on a 40% basis, which reflects our equity share of production and sales, commencing January 1, 2019, the effective date of the Merger. Also removes the non-controlling interest of 38.5% Nevada Gold Mines from July 1, 2019 onwards.

h.

Gold cost of sales (Barrick’s share) is calculated as cost of sales - gold on an attributable basis (excluding sites in care and maintenance) divided by ounces sold.

i.

Amounts reflect production and sales from Jabal Sayid and Zaldívar on a 50% basis, which reflects our equity share of production, and Lumwana.

j.

Copper cost of sales (Barrick’s share) is calculated as cost of sales - copper plus our equity share of cost of sales attributable to Zaldívar and Jabal Sayid divided by pounds sold.

 

BARRICK YEAR-END 2019   6   MANAGEMENT’S DISCUSSION AND ANALYSIS


LOGO

 

a.

These are non-GAAP financial performance measures with no standardized meaning under IFRS and therefore may not be comparable to similar measures presented by other issuers. For further information and a detailed reconciliation of each non-GAAP measure to the most directly comparable IFRS measure, please see pages 63 to 85 of this MD&A.

b.

Cost of sales applicable to gold per ounce is calculated using cost of sales applicable to gold on an attributable basis (removing the non-controlling interest of 40% Pueblo Viejo, 36.1% Tanzania (notwithstanding the completion of the Acacia transaction on September 17, 2019, we consolidated our interest in Acacia and recorded a non-controlling interest of 36.1% in the income statement for the entirety of the third quarter of 2019 as a matter of convenience) and 40% South Arturo from cost of sales (63.1% of South Arturo from July 1, 2019 onwards as a result of its contribution to Nevada Gold Mines)), divided by attributable gold ounces. The non-controlling interest of 20% Loulo-Gounkoto and 10.3% of Tongon is also removed from cost of sales and our proportionate share of cost of sales attributable to equity method investments (Kibali and Morila) is included commencing January 1, 2019, the effective date of the Merger. Also removes the non-controlling interest of 38.5% Nevada Gold Mines from cost of sales from July 1, 2019 onwards. Cost of sales applicable to copper per pound is calculated using cost of sales applicable to copper including our proportionate share of cost of sales attributable to equity method investments (Zaldívar and Jabal Sayid), divided by consolidated copper pounds (including our proportionate share of copper pounds from our equity method investments).

 

BARRICK YEAR-END 2019   7   MANAGEMENT’S DISCUSSION AND ANALYSIS


Factors affecting net earnings and adjusted net earnings4 - three months ended December 31, 2019 versus September 30, 2019

Net earnings attributable to equity holders of Barrick (“net earnings”) for the three months ended December 31, 2019 were $1,387 million compared to $2,277 million in the prior quarter. The decrease was primarily due to a gain of $1.9 billion ($1.5 billion net of taxes) relating to the remeasurement of Turquoise Ridge to fair value as a result of its contribution to Nevada Gold Mines and an impairment reversal of $947 million ($663 million net of taxes) at Lumwana, both occurring in the prior quarter. In the current quarter, there were net impairment reversals of $566 million relating to an impairment reversal at Pueblo Viejo of $865 million ($277 million net of taxes and non-controlling interest) and an impairment charge at Pascua-Lama of $296 million (no tax impact).    Net earnings in the current quarter were further impacted by a $628 million gain on the de-recognition of the deferred revenue liability relating to our silver sale agreement with Wheaton Precious Metals Corp., a gain of $408 million resulting from the sale of our 50% interest in Kalgoorlie, and a gain of $216 million on a settlement of customs duty and indirect taxes at Lumwana.    After adjusting for items that are not indicative of future operating earnings, adjusted net earnings4 of $300 million for the three months ended December 31, 2019 were $36 million higher than the prior quarter, due to an increase in revenue resulting from higher sales volume and marginally higher realized prices4, partially offset by higher cost of sales resulting from the increased sales volume.

Significant adjusting items (pre-tax and excluding non-controlling interest effects) in the three months ended December 31, 2019 include:

   

$845 million in other income adjustments, primarily related to a $628 million gain on the de-recognition of the deferred revenue liability relating to our silver sale agreement with Wheaton Precious Metals Corp. and a gain of $216 million on a settlement of customs duty and indirect taxes at Lumwana;

   

$566 million in net impairment reversals, relating to Pueblo Viejo, partially offset by impairment charges at Pascua-Lama; and

   

$414 million in acquisition/disposition gains, primarily resulting from the sale of our 50% interest in Kalgoorlie.

Refer to page 64 for a full list of reconciling items between net earnings and adjusted net earnings4 for the current and previous periods.

Factors affecting net earnings and adjusted net earnings4 - year ended December 31, 2019 versus December 31, 2018

Net earnings for the year ended December 31, 2019 were $3,969 million compared to a loss of $1,545 million in the same prior year period. The significant increase was mainly due to a gain of $1.9 billion ($1.5 billion net of taxes) relating to the remeasurement of Turquoise Ridge to fair value as a result of its contribution to Nevada Gold Mines and a gain of $408 million resulting from the sale of our 50% interest in Kalgoorlie. This was combined with impairment reversals at Lumwana of $947 million ($663 million net of taxes) and at Pueblo Viejo of $865 million ($277 million net of taxes and non-controlling interest), partially offset by an impairment charge at Pascua-Lama of $296 million (no tax impact). In addition to these impacts, there were significant tax adjustments relating to the de-recognition of deferred tax assets of $814 million occurring in the prior year, a $628 million gain on the de-recognition of the deferred revenue liability relating to our silver sale agreement with Wheaton Precious Metals Corp., and a gain of $216 million on a tax settlement at Lumwana. After adjusting for items that are not indicative of future operating earnings, adjusted net earnings4 of $902 million for the year ended December 31, 2019 were $493 million higher than the same prior year period. The increase in adjusted net earnings was primarily due to higher sales volumes as a result of the Merger and the formation of Nevada Gold Mines. Excluding the impact of the Merger and the formation of Nevada Gold Mines, the increase in adjusted net earnings was primarily due to an increase in realized gold prices4.

Significant adjusting items (pre-tax and excluding non-controlling interest effects) in the year December 31, 2019 include:

   

$2,327 million in acquisition/disposition gains mainly relating to the remeasurement of Turquoise Ridge to fair value as a result of its contribution to Nevada Gold Mines and a gain of $408 million resulting from the sale of our 50% interest in Kalgoorlie;

   

$1,423 million in net impairment reversals, relating to Lumwana and Pueblo Viejo, partially offset by impairments at Pascua-Lama; and

   

$687 million in other income adjustments, primarily related to a $628 million gain on the de-recognition of the deferred revenue liability relating to our silver sale agreement with Wheaton Precious Metals Corp. and a gain of $216 million on a settlement of customs duty and indirect taxes at Lumwana, partially offset by severance costs as a result of the implementation of a number of organizational reductions.

Refer to page 64 for a full list of reconciling items between net earnings and adjusted net earnings4 for the current and previous periods.

 

BARRICK YEAR-END 2019   8   MANAGEMENT’S DISCUSSION AND ANALYSIS


Factors affecting Operating Cash Flow and Free Cash Flow4 - three months ended December 31, 2019 versus September 30, 2019

In the three months ended December 31, 2019, we generated $875 million in operating cash flow, compared to $1,004 million in the prior quarter. The decrease of $129 million was primarily due to an increase in interest paid as a result of the timing of interest payments on our public market debt, partially offset by an increase in gold and copper sales volumes of 7% and 40%, respectively. This was further impacted by higher gold and copper realized prices4 of $1,483 per ounce and $2.76 per pound, respectively, for the three months ended December 31, 2019, compared to $1,476 per ounce and $2.55 per pound, respectively, in the prior quarter.

Free cash flow4 for the three months ended December 31, 2019 was $429 million, compared to $502 million in the prior quarter, reflecting lower operating cash flows, partially offset by lower capital expenditures. In the three months ended December 31, 2019, capital expenditures on a cash basis were $446 million compared to $502 million in the prior quarter primarily due to lower project capital expenditures with the most significant change related to Cortez due to decreases at the Cortez Hills Underground Rangefront project.

Factors affecting Operating Cash Flow and Free Cash Flow4 - year ended December 31, 2019 versus December 31, 2018

For the year ended December 31, 2019, we generated $2,833 million in operating cash flow, compared to $1,765 million in the same prior year period. The increase of $1,068 million was primarily due to higher sales volume as a result of the Merger and the formation of Nevada Gold Mines. This was combined with higher realized gold prices4 of $1,396 per ounce in 2019 compared to $1,270 per ounce in 2018 and, partially offset by higher cost of sales per ounce5.

For 2019, we generated free cash flow4 of $1,132 million compared to $365 million in 2018. The increase primarily reflects higher operating cash flows, partially offset by higher capital expenditures. In 2019, capital expenditures on a cash basis were $1,701 million compared to $1,400 million in the same prior year period. Higher capital expenditures of $301 million were primarily due to an increase in minesite sustaining capital expenditures as a result of the Merger and the consolidation impact of Nevada Gold Mines, partially offset by lower project capital expenditures at Cortez due to decreasing Crossroads dewatering activities and Rangefront project expenditures.

 

BARRICK YEAR-END 2019   9   MANAGEMENT’S DISCUSSION AND ANALYSIS


Safety

Our safety vision is “Every person going home safe and healthy every day.” In 2019, although we operated with zero fatalities, our Total Reportable Injury Frequency Rate6 (“TRIFR”) increased by 5%, from 2.12 to 2.24, year-over-year. In analyzing the incidents and frequencies, the combination of assets into Nevada Gold Mines in the North America region did have an impact on our performance. The Africa and Middle East region improved year-on-year in both Lost Time Injuries (“LTIs”) and TRIFR.

Barrick is fully committed to the safety, health and well-being of our people, their families and the communities in which we operate. We review safety performance and incidents, share lessons learned and communicate best practices across our business during weekly Executive Committee Review meetings, the main forum for senior management to review our current safety performance. We will continue our efforts to further reduce injury occurrences.

Every site has its own site-specific safety procedures, management plans and systems in place, in line with international best practice. Our goal is for the safety management systems at all operational mines to be certified to the internationally recognized ISO 45001 standard by the end of 2021.

Our renewed focus on safety and reaffirmed commitment to prevent fatalities has led to the company-wide roll out of new controls including our ten Fatality Prevention Commitments to help eliminate fatalities and serious injuries. Our Fatality Prevention Commitments align with the International Council on Mining and Metal’s Life Saving Controls, which are based upon lessons learned from fatal incidents within the mining industry, including Barrick’s experience. Our Commitments and Unacceptable Behaviors guideline has also been implemented, which reaffirms our zero tolerance policy for behavior such as working on site under the influence of drugs or alcohol.

Environment

Barrick continues to rebuild its reputation for environmental excellence and aims to become the world’s most valued gold mining business by delivering sustainable returns for our owners and partners, including the host communities and countries in which we operate.

We have set a corporate goal for all sites to have their Environmental Management System (“EMS”) certified to the ISO 14001:2015 standard by the end of 2020. Currently, all operations, except the Jabal Sayid mine in Saudi Arabia and the Tanzanian assets, are certified to this standard.

In 2019, we introduced a new Environmental Incident Reporting and Investigation Standard to better define the classification, reporting, responsibility and investigation of environmental incidents at Barrick sites. As defined by our new system, we had zero Class 1 - High Significance7 incidents and 13 Class 2 - Medium Significance8 incidents in 2019.

Climate Change

Climate change, including shifts in temperature and precipitation and more frequent severe weather events, could affect the mining industry in a range of possible ways. Volatile

climatic conditions can affect the stability and effectiveness of infrastructure and equipment; potentially impact environmental protection and site closure practices; lead to changes in the regulatory environment, including increased carbon tax regimes; and potentially impact the stability and cost of water and energy supplies. We therefore view climate change as a company, community, and global concern. In 2019, following our merger with Randgold and the formation of Nevada Gold Mines, we reviewed and updated the climate change strategy developed in 2017.

Barrick’s climate change strategy has three pillars: identify, understand and mitigate the risks associated with climate change; measure and reduce our impacts on climate change; and improve our disclosure on climate change. Action taken on each pillar in 2019 is described below.

Identify, understand and mitigate the risks associated with climate change

We continue to take steps to identify and manage risks and build resilience to climate change, as well as to position ourselves for new opportunities. In 2019, climate change- related factors continued to be incorporated into Barrick’s formal risk assessment process (for example, consideration is given to the availability of and access to water and the impact of increased precipitation, drought, or severe storms on operations as well as on communities near our operations). We have identified several climate-related risks and opportunities for our business: physical impacts of climate change, such as an increase in extended duration extreme precipitation events; an increase in regulations that seek to address climate change; and increased global investment in innovation and low-carbon technologies.

Measure and reduce the Company’s impact on climate change

Mining is an energy-intensive business, and we understand the important link between energy use and greenhouse gas (“GHG”) emissions. By effectively managing our energy use, we can reduce our draw from local energy grids, reduce our GHG emissions, achieve more efficient production, and reduce direct mining costs. In 2019, we progressed the conversion of the Quisqueya I power generation facility in the Dominican Republic from heavy fuel oil to natural gas. We expect the power plant to receive its first liquefied natural gas deliveries in first quarter 2020. The conversion will help reduce the mine site’s power generation costs and GHG emissions by 30%. We also advanced a power transmission project at Veladero to connect the mine to grid power and started construction of a solar plant at Loulo-Gounkoto. Each of these projects is expected to reduce the need for diesel generators, thereby reducing our emissions and power generation costs.

Improve our disclosure on climate change

In 2019, one of our first reporting activities as a merged Company was to complete the CDP (formerly known as the Carbon Disclosure Project) emissions questionnaire which makes investor-relevant climate data widely available.

Throughout 2019, the Board’s Corporate Governance & Nominating Committee, which met quarterly, was responsible for overseeing Barrick’s policies, programs, and performance relating to the environment, including climate change. The Audit & Risk Committee assisted the Board in overseeing the Company’s management of enterprise risks as well as the implementation of policies and standards for monitoring and

 

 

BARRICK YEAR-END 2019   10   MANAGEMENT’S DISCUSSION AND ANALYSIS


mitigating such risks. Climate change is built into our formal risk management process, outputs of which were reviewed by the Audit & Risk Committee throughout 2019. In addition, the Audit & Risk Committee reviewed the Company’s approach to climate change in the context of Barrick’s public disclosure.

At the management level, in furtherance of its commitment to sustainability, Barrick established the Environmental and Social Oversight (“E&S”) Committee in 2019. The E&S Committee is chaired by the President and Chief Executive Officer, and includes each of the regional Chief Operating Officers, Mine General Managers and health, safety, and environment and closure leads, as well as the Group Sustainability Executive and an independent sustainability consultant. The E&S Committee meets each quarter to review the Company’s sustainability performance and compliance with its sustainability policies, as well as to identify concerns and opportunities at the Company’s operations at an early stage. The President and Chief Executive Officer reviews the reports of the E&S Committee with the Corporate Governance & Nominating Committee on a quarterly basis as part of the Committee’s mandate to oversee Barrick’s environmental, safety and health, corporate social responsibility, and human rights programs, policies and performance.

Further to the specific focus of the E&S Committee, regular Executive Committee review meetings throughout 2019 allowed for the discussion of opportunities and risks that may help or hinder the Company from achieving its objectives, including climate-related risks (e.g., spring snow melts, hurricanes, flooding, and mud slides).

We expect our climate change activities to continue into 2020 and beyond. Site-level climate-related risks and mitigation plans will continue to be reviewed in the context of the company-wide risk assessment, and site-level plans to reduce energy and GHG emissions will be strengthened. We also expect to continue providing our climate-related disclosure. Overall, based on the work completed, Barrick continues to build resilience to withstand the potential impacts of climate change and leverage potential opportunities as the global economy transitions to a low-carbon future.

Reserves and Resources

Gold

Barrick’s 2019 reserves were calculated using a gold price assumption of $1,200 per ounce, consistent with 2018. As of December 31, 2019, Barrick’s proven and probable gold reserves were 71 million ounces9 at an average grade of 1.68 g/t, compared to 62 million ounces10 at an average grade of 1.56 g/t in the previous year. Reserve replenishment was achieved across the majority of Barrick’s Tier One Assets1, including Kibali, Loulo-Gounkoto, Turquoise Ridge, together with Goldstrike and Leeville in the Carlin Complex.

There were several significant changes to mineral reserves year-on-year, including the Merger with Randgold, the formation of Nevada Gold Mines with Newmont, the acquisition of the minority interests in Acacia and the divestiture of Kalgoorlie, which had the net impact of adding 13.4 million ounces to attributable proven and probable mineral reserves. Successful mineral resource conversion

added 5.9 million ounces to mineral reserves offsetting annual mining depletion of 6.0 million ounces of mining depletion.

In 2019, the principal addition to mineral reserves was through the Merger with Randgold, which added 13 million ounces at an average grade of 4.0 g/t to Barrick’s attributable proven and probable reserves. The Nevada Gold Mines transaction added a further 3.2 million ounces to attributable proven and probable reserves, net of the changes in ownership. Barrick’s acquisition of the minorities’ interest in Acacia and subsequent signing of the framework agreement with the Government of Tanzania (“GoT”), through which the GoT will acquire a 16% free-carried interest in the former Acacia sites, resulted in the addition of a further 1 million ounces in Barrick’s 84% attributable proven and probable reserves for North Mara, Bulyanhulu and Buzwagi. These additions from acquisition were partially offset by the removal of 3.7 million ounces of attributable proven and probable reserves from the divestment of Kalgoorlie.

In 2019, we also added 5.9 million ounces of attributable proven and probable reserves through the conversion of mineral resources as summarized below.

The Africa and Middle East region added 2.1 million ounces, of which Loulo-Gounkoto and Kibali were the primary contributors adding a combined 1.6 million ounces of attributable proven and probable reserves. This was principally from high-grade underground extensions at Yalea and KCD underground, as well as the addition of the Kalimva-Ikamva open pit at Kibali. Additional contributions came from an increase in the gold price assumption used to estimate mineral reserves to $1,200 per ounce (from $1,000 per ounce) for the acquired Randgold assets. Notably, proven and probable mineral reserve grades at both Loulo-Gounkoto and Kibali have stayed relatively consistent year-on-year, highlighting the quality of these Tier One Assets.

North America added 2.8 million ounces of attributable proven and probable reserves, principally from high-grade underground extensions in Carlin and Turquoise Ridge. As expected, the elimination of the previous Toll Milling Agreement following the formation of Nevada Gold Mines allowed us to optimize the underground cut-off grade at Turquoise Ridge and contribute to the year-on-year increase in reserves. For further information on Goldrush and Fourmile, please refer to the Projects section of this MD&A.

Supporting their potential to become Tier One Assets, Veladero and Porgera added a combined 1.0 million ounces of attributable proven and probable reserves. This was mainly due to the conversion of mineral resources at Veladero and underground extensions at Porgera.

The additions described above were partially offset by mining depletion of 6.0 million ounces of attributable proven and probable reserves, other losses of 4.5 million ounces, which were primarily comprised of the removal of the Phase Six pushback at Hemlo and the reclassification of 3.8 million ounces from mineral reserves at Lagunas Norte to mineral resources, in line with our decision to put the property on care and maintenance in 2019.

 

 

BARRICK YEAR-END 2019   11   MANAGEMENT’S DISCUSSION AND ANALYSIS


In 2019, all mineral resources were calculated using a gold price assumption of $1,500 per ounce, consistent with 2018. Barrick’s mineral resources for 2019 are now reported on an inclusive basis, and include all areas that form mineral reserves, reported at a mineral resource cut-off grade and the assumed commodity price. All open pit mineral resources are contained within a Whittle shell, while all underground mineral resources are contained within stope optimizer shells.    As of December 31, 2019, measured and indicated gold resources were 170 million ounces9 at an average grade of 1.55 g/t and inferred gold resources were 39 million ounces9 at an average grade of 1.3 g/t.

Copper

Copper mineral reserves for 2019 were calculated using a copper price of $2.75 per pound and mineral resources at $3.50 per pound, consistent with 2018. As of December 31, 2019, proven and probable copper reserves were 13 billion pounds9, compared to 11 billion pounds10 at the end of 2018. The growth of copper mineral reserves was primarily driven by Lumwana which added 2.2 billion pounds of proven and

probable reserves. This was from a combination of reclassification and remodeling of the Chimiwungo pit and mine cost optimization. This optimization was a direct outcome of improved plant throughput and mining efficiency in 2019, resulting in a reduction of the cut-off grade at Lumwana.

Measured and indicated copper resources were 26 billion pounds9 at an average grade of 0.38% and inferred copper resources were 2.2 billion pounds9 at an average grade of 0.2% as of December 31, 2019. An increase in copper mineral resources at Zaldívar was driven by the inclusion of leachable primary sulfide ore. Zaldívar is jointly owned by Antofagasta and Barrick and is operated by Antofagasta.

The 2019 mineral reserves and mineral resources are estimated using the combined value of gold, copper and silver. Accordingly mineral reserves and mineral resources are reported for all assets where copper or silver is produced and sold as a primary product or a by-product.

 

 

Key Business Developments

 

2019 Highlights

 

Successful integration of former Randgold executive team and establishment of two additional regions modeled on the Africa regional team after transformational Merger completed on January 1, 2019

 

Negotiation, completion and integration of former Barrick and Newmont operations in Nevada to form the Nevada Gold Mines joint venture - the single largest gold complex in the world and unlocking up to $500 million per annum in synergies

 

Acquisition of Acacia minority shareholdings and finalization of agreement to end dispute with the Government of Tanzania and restore our license to operate

 

Further rationalization of our portfolio to focus on Tier One Gold Assets1, Tier Two Gold Assets and Strategic Assets2 with the divestment of Kalgoorlie and pending sale of Massawa (expected to close in the first quarter of 2020)

 

Full year gold production at upper end and copper production above guidance ranges

 

Strengthened balance sheet through positive free cash flow, dispositions of non-core assets and debt repurchases

 

Debt, net of cash, now at $2.2 billion, a 47% decrease from the prior year and the lowest level since 2007

 

Increasing shareholder returns, having raised the quarterly dividend three times in respect of 2019 performance

Sale of Massawa

On December 10, 2019, Barrick announced that it and its Senegalese joint venture partner have reached an agreement to sell their aggregate 90% interest in the Massawa project (“Massawa”) in Senegal to Teranga Gold Corporation (“Teranga”) for total consideration of up to $430 million.

The consideration consists of an up-front payment of $380 million, including a cash payment of approximately $300 million and Teranga common shares, plus a contingent payment of up to $50 million which is based upon the average gold price for the three-year period immediately following closing.

Barrick will receive 92.5% of the total purchase price for its interest in the Massawa project, with the balance to be received by Barrick’s local Senegalese partner for its minority interest. Barrick is providing $25 million of the $225 million syndicated debt financing secured by Teranga in connection with the transaction.

The transaction is expected to close in the first quarter of 2020 and is subject to receipt of the Massawa exploitation license and residual exploration license from the Government of Senegal, certain other acknowledgments from the Government of Senegal and other customary closing conditions. Refer to note 4 to the Financial Statements for more information.

Sale of Kalgoorlie

On November 28, 2019, we completed the sale of our 50% interest in the Kalgoorlie mine in Western Australia to Saracen Mineral Holdings Limited for total cash consideration of $750 million. The transaction resulted in a gain of $408 million for the year ended December 31, 2019.

Pascua-Lama

In the fourth quarter of 2019, we completed a study of the Pascua-Lama project and concluded that we do not have a plan that meets our investment criteria under our current assumptions. This was an indicator of impairment and we concluded that the carrying value of Pascua-Lama exceeded the Fair Value Less Cost to Dispose (“FVLCD”) and we recorded a non-current asset impairment of $296 million, based on a FVLCD of $398 million. Refer to note 21 to the Financial Statements for more information.

We have also updated the liability for the silver stream agreement to align with the conclusions from the completion of the study. The deferred revenue liability was derecognized, and a current liability was recognized for the residual balance payable to Wheaton Precious Metals Corp. of $253 million under the agreement. This adjustment resulted in $628 million recorded in Other Income. Refer to notes 3 and 9 to the Financial Statements for more information.

 

 

BARRICK YEAR-END 2019   12   MANAGEMENT’S DISCUSSION AND ANALYSIS


In addition, a new closure plan and estimate supported by feasibility level engineering studies was finalized, which resulted in a decrease in the provision for environmental rehabilitation liability of $270 million.

Barrick’s intention is to update our geological understanding of the orebody and this process is expected to take a number of years to complete. The focus in 2020 at Pascua-Lama will be on addressing the gaps identified in the geological and geo-metallurgical understanding of the orebody, building upon the improved 3D geology model completed in 2019. This includes a drill program at the Penelope deposit of Lama, as well as column testing to assess the amenability of Penelope ore for heap leaching at Veladero. Refer to the Exploration section of the MD&A for more information.

Acacia Mining plc

On September 17, 2019, Barrick acquired all of the Acacia Mining plc (“Acacia”) shares we did not already own through a share-for-share exchange of 0.168 Barrick shares and any Acacia Exploration Special Dividends for each ordinary share of Acacia. The Acacia Exploration Special Dividends11 and any deferred cash consideration dividends (if applicable) will be paid as a consequence of a sales process to realize value from the sale of certain Acacia exploration properties to be undertaken during the two-year period following closing. This transaction resulted in the issuance of 24,836,876 Barrick common shares or approximately 1% of Barrick’s share capital. As a result, Acacia ceased trading on the London Stock Exchange and became a wholly-owned subsidiary of Barrick called Barrick TZ Limited. Refer to note 4 to the Financial Statements for more information.

Notwithstanding the completion of the Acacia transaction on September 17, 2019, we consolidated our interest in Acacia and recorded a non-controlling interest of 36.1% in the income statement for the entirety of the third quarter of 2019 as a matter of convenience. As at September 30, 2019, we derecognized the non-controlling interest on the balance sheet related to our former 63.9% ownership of Acacia to reflect our 100% interest at that time. The former Acacia mine sites (Bulyanhulu, North Mara and Buzwagi) will now be referred to individually in this report.

On January 24, 2020, Barrick announced that the Company had ratified the creation of Twiga Minerals Corporation (“Twiga”) at a signing ceremony with the President of Tanzania, formalizing the establishment of a joint venture between Barrick and the Government of Tanzania (“GoT”) and resolution of all outstanding disputes between Barrick and the GoT, including the lifting of the previous concentrate export ban, effective immediately. The GoT will receive a free carried shareholding of 16% in each of the former Acacia mines (Bulyanhulu, Buzwagi and North Mara), and will receive its half of the economic benefits from taxes, royalties, clearing fees and participation in all cash distributions made by the mines and Twiga, after the recoupment of capital investments. Twiga will provide management services to the mines.

The terms of the signed agreement are consistent with those previously announced, including the payment of $300 million to settle all outstanding tax and other disputes (the “Settlement Payment”); the lifting of the concentrate export ban; the sharing of future economic benefits from the mines on a 50/50

basis; and a dispute resolution mechanism that provides for binding international arbitration. The 50/50 division of economic benefits will be maintained through an annual true-up mechanism, which will not account for the Settlement Payment.

Barrick and the GoT continue to fulfill their respective obligations to satisfy all conditions of the signed agreement, primarily with respect to the execution and delivery of formal termination documents for the settlement of all outstanding disputes between the two parties.

Operating results are included at 100% from October 1, 2019 up until the GoT’s 16% free-carried interest is made effective, which is expected to be as of January 1, 2020, and on an 84% basis thereafter.

Nevada Gold Mines LLC

On March 10, 2019, we entered into an implementation agreement with Newmont to create a joint venture, named Nevada Gold Mines, combining our respective mining operations, assets, reserves and talent in Nevada, USA. This includes Barrick’s Cortez, Goldstrike, Turquoise Ridge and Goldrush properties and Newmont’s Carlin, Twin Creeks, Phoenix, Long Canyon and Lone Tree properties. On July 1, 2019, the transaction closed and we began consolidating the operating results, cash flows and net assets of Nevada Gold Mines from that date forward. Barrick is the operator of the joint venture and owns 61.5%, with Newmont owning the remaining 38.5% of the joint venture.

As a result of this transaction, Barrick recognized a gain in our earnings for the third quarter of $1.9 billion on the remeasurement of our previous 75% interest of Turquoise Ridge. Refer to note 4 to the Financial Statements for more information.

Debt Management

On July 15, 2019, Barrick completed a make-whole repurchase of the $248 million of outstanding principal on our 4.95% Notes due 2020 and incurred a loss on debt extinguishment of $3 million in the third quarter of 2019. The debt repayment is expected to result in an annualized interest saving of $12 million.

Subsequent to year end, on January 31, 2020, Barrick completed a make-whole repurchase of the $337 million of outstanding principal on our 3.85% Notes due 2022 and a loss on debt extinguishment of $15 million will be recorded in the first quarter of 2020. The debt repayment is expected to result in an annualized interest saving of $13 million.

Debt, net of cash, has been reduced by 47% from the prior year to $2.2 billion.

Reko Diq Arbitration

On July 12, 2019, the World Bank International Centre for Settlement of Investment Disputes (“ICSID”) awarded $5.84 billion in damages to Tethyan Copper Company Pty Limited (“TCC”), a joint venture held equally by Barrick and Antofagasta plc, in relation to the arbitration claims filed against the Government of Pakistan (“GOP”) following the unlawful denial of a mining lease for the Reko Diq project in Pakistan in 2011.

 

 

BARRICK YEAR-END 2019   13   MANAGEMENT’S DISCUSSION AND ANALYSIS


Damages include compensation of $4.087 billion in relation to the fair market value of the Reko Diq project at the time the mining lease was denied, and interest until the date of the award of $1.753 billion. Compound interest continues to apply at a rate of US Prime +1% per annum until the award is paid.

In November 2019, the GOP applied to annul TCC’s damages award, which resulted in an automatic stay on TCC from pursuing enforcement action. ICSID has constituted a committee to hear the annulment application, consisting of a president from South Korea and additional members from Mexico and Finland. The committee appointed by ICSID to hear the application for annulment will also determine whether the stay on enforcement proceedings should be extended or lifted while it considers the application for annulment. No decision on the GOP’s annulment application or the stay on enforcement proceedings has yet been made.

The proceeds of this award will not be recognized in our financial statements until any such proceeds have been collected. Refer to note 36 to the Financial Statements for more information regarding these and related matters.

Randgold Resources Limited Merger

On January 1, 2019, we acquired 100% of the issued and outstanding shares of Randgold. Each Randgold shareholder received 6.1280 common shares of Barrick for each Randgold share, which resulted in the issuance of 583,669,178 Barrick common shares. After this share issuance, Barrick shareholders owned 66.7%, while former Randgold shareholders owned 33.3%, of the shares of the combined company. We have determined that this transaction represents a business combination with Barrick identified as the acquirer. Based on the December 31, 2018 closing share price of Barrick’s common shares, the total consideration of the acquisition was $7.9 billion.

Randgold was a publicly traded mining company with ownership interests in the following gold mines: Kibali in the

Democratic Republic of Congo; Tongon in Côte d’Ivoire; Loulo-Gounkoto and Morila in Mali; the Massawa project in Senegal and various exploration properties. We began consolidating the operating results, cash flows and net assets of Randgold from January 1, 2019.

In conjunction with the Merger, Barrick has a new management team, effective January 1, 2019. Mark Bristow is now President and Chief Executive Officer of Barrick. He was formerly the Chief Executive Officer of Randgold, a position he held since its incorporation in 1995. Graham Shuttleworth is now Senior Executive Vice-President and Chief Financial Officer of Barrick, having formerly served as Randgold‘s Chief Financial Officer since 2007. Kevin Thomson, Senior Executive Vice-President, Strategic Matters, continues in the role to which he was appointed at Barrick in October 2014.

In addition, Barrick is now managed by three regional Chief Operating Officers, each of whom reports to the President and Chief Executive Officer. Catherine Raw, formerly Barrick’s Chief Financial Officer, was appointed Chief Operating Officer, North America. Mark Hill, formerly Barrick’s Chief Investment Officer, was appointed Chief Operating Officer, Latin America and Asia Pacific. Willem Jacobs, formerly Randgold’s General Manager East and Central Africa, was appointed Chief Operating Officer, Africa and Middle East.

Following the closing of the Merger, Barrick’s Board of Directors was reconstituted with the following nine Directors: John Thornton (Executive Chairman), Brett Harvey (Lead Independent Director), Mark Bristow, María Ignacia Benítez, Gustavo Cisneros, Christopher Coleman, Michael Evans, Brian Greenspun, and Andrew Quinn. Regrettably, on February 28, 2019, María Ignacia Benítez passed away. Barrick’s Corporate Governance & Nominating Committee initiated a search for an equally compelling and qualified female candidate to fill the vacant Board position and on August 9, 2019, we announced the appointment of Loreto Silva to the Board of Directors as an independent director.

 

 

BARRICK YEAR-END 2019   14   MANAGEMENT’S DISCUSSION AND ANALYSIS


Outlook for 2020

Operating Division Guidance

Our 2019 gold and copper production, cost of sales, total cash costs4, all-in sustaining costs4 and 2020 forecast gold and copper production, cost of sales, total cash costs4 and all-in sustaining costs4 ranges by operating division are as follows:

 

                 
Operating Division    2019
attributable
production
(000s ozs)
    

2019
cost of
salesa

($/oz)

    

2019
total cash
costsb

($/oz)

    

2019 all-in
sustaining
costsb

($/oz)

     2020 forecast
attributable
production
(000s ozs)
     2020 forecast
cost of salesa
($/oz)
     2020
forecast total
cash costsb
($/oz)
     2020 forecast
all-in
sustaining
costsb ($/oz)
 

Gold

                       

Carlin (61.5%)c,d

     968        1,004        746        984        1,000 - 1,050        920 - 970        760 - 810        1,000 - 1,050  

Cortez (61.5%)c

     801        762        515        651        450 - 480        980 - 1,030        640 - 690        910 - 960  

Turquoise Ridge (61.5%)c

     335        846        585        732        430 - 460        900 - 950        540 - 590        690 - 740  

Phoenix (61.5%)c

     56        2,093        947        1,282        100 - 120        1,850 -1,900        700 - 750        920 - 970  

Long Canyon (61.5%)c

     58        1,088        333        681        130 - 150        910 - 960        240 - 290        450 - 500  

Nevada Gold Mines (61.5%)

     2,218        924        634        828        2,100 - 2,250        970 - 1,020        660 - 710        880 - 930  

Hemlo

     213        1,137        904        1,140        200 - 220        960 - 1,010        800 - 850        1,200 - 1,250  

North America

     2,431        943        655        851        2,300 - 2,450        970 - 1,020        660 - 710        900 - 950  

Pueblo Viejo (60%)

     590        747        471        592        530 - 580        840 - 890        520 - 570        720 - 770  

Veladero (50%)

     274        1,188        734        1,105        240 - 270        1,220 - 1,270        670 - 720        1,250 - 1,300  

Porgera (47.5%)

     284        994        838        1,003        240 - 270        890 - 940        770 - 820        960 - 1,010  

Kalgoorlie (50%)e

     206        1,062        873        1,183                                      

Latin America & Asia Pacific

     1,354        937        664        874        1,000 - 1,100        930 - 980        610 - 660        890 - 940  

Loulo-Gounkoto (80%)

     572        1,044        634        886        500 - 540        1,050 - 1,100        620 - 670        970 - 1,020  

Kibali (45%)

     366        1,111        568        693        340 - 370        1,030 - 1,080        600 - 650        790 - 840  

North Maraf

     251        953        646        802        240 - 270        750 - 800        570 - 620        830 - 880  

Tongon (89.7%)

     245        1,469        787        844        240 - 260        1,390 - 1,440        680 - 730        740 - 790  

Bulyanhuluf

     27        1,207        676        773        30 - 50        1,210 - 1,260        790 - 840        1,110 - 1,160  

Buzwagif

     83        1,240        1,156        1,178        80 - 100        850 - 900        820 - 870        850 - 900  

Africa & Middle East

     1,544        1,332        673        834        1,450 - 1,600        1,040 - 1,090        640 - 690       
870 - 920
 

Total Attributable to Barrickg,h,i,j

     5,465        1,005        671        894        4,800 - 5,200        980 - 1,030        650 - 700        920 - 970  
                                                                         
                 
     

2019
attributable
production

(M lbs)

    

2019

cost of

salesa

($/lb)

    

2019 C1
cash
costsb

($/lb)

    

2019 all-in
sustaining
costsb

($/lb)

    

2020 forecast
attributable
production

(M lbs)

    

2020 forecast
cost of salesa

($/lb)

    

2020
forecast C1
cash costsb

($/lb)

    

2020 forecast
all-in
sustaining

costsb ($/lb)

 

Copper

                       

Lumwana

     238        2.13        1.79        3.04        250 - 280        2.20 - 2.40        1.50 - 1.70        2.30 - 2.60  

Zaldívar (50%)

     128        2.46        1.77        2.15        120 - 135        2.40 - 2.70        1.65 - 1.85        2.30 - 2.60  

Jabal Sayid (50%)

     66        1.53        1.26        1.51        60 - 70        1.75 - 2.00        1.40 - 1.60        1.50 - 1.70  

Total Copperi

     432        2.14        1.69        2.52        440 - 500        2.10 - 2.40        1.50 - 1.80        2.20 - 2.50  

 

  a.

Cost of sales applicable to gold per ounce is calculated using cost of sales applicable to gold on an attributable basis (removing the non-controlling interest of 40% Pueblo Viejo, 20% of Loulo-Gounkoto, 10.3% of Tongon, 36.1% of Tanzania (notwithstanding the completion of the Acacia transaction on September 17, 2019, our results include our 63.9% share up until the end of the third quarter of 2019 as a matter of convenience) and 40% of South Arturo (63.1% of South Arturo from July 1, 2019 onwards as a result of its contribution to Nevada Gold Mines) from cost of sales and including our proportionate share of cost of sales attributable to our equity method investments in Kibali and Morila), divided by attributable gold ounces sold. Also removes the non-controlling interest of 38.5% Nevada Gold Mines from cost of sales from July 1, 2019 onwards. Cost of sales applicable to copper per pound is calculated using cost of sales applicable to copper including our proportionate share of cost of sales attributable to our equity method investments in Zaldívar and Jabal Sayid, divided by consolidated copper pounds sold (including our proportionate share of copper pounds sold from our equity method investments).

  b.

Total cash costs, all-in sustaining costs and C1 cash costs are non-GAAP financial performance measures with no standardized meaning under IFRS and therefore may not be comparable to similar measures of performance presented by other issuers. For further information and a detailed reconciliation of the non-GAAP measures used in this section of the MD&A to the most directly comparable IFRS measures, please see pages 63 to 85 of this MD&A.

  c.

These five operations are part of Nevada Gold Mines from July 1, 2019. Amounts include Cortez (100%), Goldstrike (100%) and Turquoise Ridge (75%), also known collectively as Barrick Nevada, from January 1, 2019 to June 30, 2019, and Cortez, Carlin (which includes Goldstrike), Turquoise Ridge (including Twin Creeks), Phoenix and Long Canyon on a 61.5% basis from July 1, 2019 onwards as a result of the formation of Nevada Gold Mines with Newmont on July 1, 2019.

  d.

Includes our 60% share of South Arturo from January 1, 2019 to June 30, 2019 and 36.9% from July 1, 2019 onwards as a result of the formation of Nevada Gold Mines with Newmont on July 1, 2019.

  e.

As a result of the sale of our 50% interest in Kalgoorlie on November 28, 2019, there is no guidance for 2020.

  f.

Formerly known as Acacia Mining plc. On September 17, 2019, Barrick acquired all of the shares of Acacia it did not own. Operating results are included at 100% from October 1, 2019 (notwithstanding the completion of the Acacia transaction on September 17, 2019, we consolidated our interest in Acacia and recorded a non-controlling interest of 36.1% in the income statement for the entirety of the third quarter of 2019 as a matter of convenience) up until the GoT’s 16% free-carried interest is made effective, which is expected to be January 1, 2020, and on an 84% basis thereafter. As the GoT’s 16% free-carried interest is expected to be made effective as of January 1, 2020, our 2020 outlook represents our 84% share.

  g.

Also includes Lagunas Norte, Golden Sunlight, and Morila (40%) and excludes Pierina which is mining incidental ounces as it enters closure. Due to the planned ramp down of operations, we have ceased to include production or non-GAAP cost metrics for Golden Sunlight or Morila after the second quarter and Lagunas Norte after the third quarter.

  h.

Total cash costs and all-in sustaining costs per ounce include costs allocated to non-operating sites.

  i.

Operating division guidance ranges reflect expectations at each individual operating division, and may not add up to the company-wide guidance range total. The company-wide 2019 results and guidance ranges exclude Pierina, which is mining incidental ounces as it enters closure, and Golden Sunlight and Morila after the second quarter of 2019 and Lagunas Norte after the third quarter of 2019 due to the planned ramp down of operations.

  j.

Includes corporate administration costs.

 

BARRICK YEAR-END 2019   15   MANAGEMENT’S DISCUSSION AND ANALYSIS


Operating Division, Consolidated Expense and Capital Guidance

Our 2019 gold and copper production, cost of sales, total cash costs4, all-in sustaining costs4, consolidated expenses and capital expenditures and 2020 forecast gold and copper production, cost of sales, total cash costs4, all-in sustaining costs4, consolidated expenses and capital expenditures are as follows:

 

         
($ millions, except per ounce/pound data)    2019 Original Guidance      Q3 2019 Guidance      2019 Actual     2020 Guidance  

Gold production and costs

          

Production (millions of ounces)

     5.10 - 5.60        5.10 - 5.60        5.47       4.80 - 5.20  

Gold unit production costs

          

Cost of sales - gold ($ per oz)

     880 - 940        940 - 990        1,005       980 - 1,030  

Total cash costs ($ per oz)a

     650 - 700        650 - 700        671       650 - 700  

Depreciation ($ per oz)

     215 - 235        320 - 350        348       300 - 330  

All-in sustaining costs ($ per oz)a

     870 - 920        870 - 920        894       920 - 970  

Copper production and costs

          

Production (millions of pounds)

     375 - 430        375 - 430        432       440 - 500  

Copper unit production costs

          

Cost of sales - copper ($ per lb)

     2.30 - 2.70        2.30 - 2.70        2.14       2.10 - 2.40  

C1 cash costs ($ per lb)a

     1.70 - 2.00        1.70 - 2.00        1.69       1.50 - 1.80  

Depreciation ($ per lb)

     0.60 - 0.70        0.60 - 0.70        0.28       0.60 - 0.70  

Copper all-in sustaining costs ($ per lb)a

     2.40 - 2.90        2.40 - 2.90        2.52       2.20 - 2.50  

Exploration and project expenses

     280 - 340        280 - 340        342       280 - 320  

Exploration and evaluation

     160 - 170        170 - 180        212       210 - 230  

Project expenses

     120 - 150        120 - 150        130       70 - 90  

General and administrative expenses

     ~200        ~200        212       ~170  

Corporate administration b

     ~140        ~140        148       ~130  

Stock-based compensation c

     ~40        ~40        37       ~40  

Acacia/Tanzania d

     ~20        ~20        27       0  

Other expense (income)

     80 - 100        80 - 100        (3,100     80 - 100  

Finance costs, net e

     500 - 550        500 - 550        469       400 - 450  

Attributable capital expenditures:

          

Attributable minesite sustaining

     1,100 - 1,300        1,100 - 1,300        1,176       1,300 - 1,500  

Attributable project

     300 - 400        300 - 400        336       300 - 400  

Total attributable capital expenditures f

     1,400 - 1,700        1,400 - 1,700        1,512       1,600 - 1,900  

 

  a.

Total cash costs, all-in sustaining costs and C1 cash costs are non-GAAP financial performance measures with no standardized meaning under IFRS and therefore may not be comparable to similar measures of performance presented by other issuers. For further information and a detailed reconciliation of the non-GAAP measures used in this section of the MD&A to the most directly comparable IFRS measures, please see pages 63 to 85 of this MD&A.

  b.

2019 actual of $148 million includes $18 million of severance costs.

  c.

2019 actual based on US$18.59 and 2020 guidance based on a three-month trailing average ending December 31, 2019 of US$17.51 per share.

  d.

For 2019, Acacia/Tanzania general and administrative expenses were substantially comprised of stock-based compensation and severance costs related to Acacia prior to the acquisition of the non-controlling interest in September 2019.

  e.

2019 actual includes a net loss on debt extinguishment of $3 million.

  f.

Attributable capital expenditures are presented on the same basis as guidance, which includes our 61.5% share of Nevada Gold Mines, our 60% share of Pueblo Viejo, our 80% share of Loulo-Gounkoto, our 89.7% share of Tongon, our 84% share of North Mara, Bulyanhulu and Buzwagi and our 50% share of Zaldívar and Jabal Sayid. As the GoT’s 16% free-carried interest is expected to be made effective as of January 1, 2020, our 2020 outlook represents our 84% share of North Mara, Bulyanhulu and Buzwagi.

 

BARRICK YEAR-END 2019   16   MANAGEMENT’S DISCUSSION AND ANALYSIS


2020 Guidance Analysis

Estimates of future production, cost of sales, and total cash costs4 presented in this MD&A are based on mine plans that reflect the expected method by which we will mine reserves at each site. Actual gold and copper production and associated costs may vary from these estimates due to a number of operational and non-operational risk factors (see the “Cautionary Statement on Forward-Looking Information” on page 1 of this MD&A for a description of certain risk factors that could cause actual results to differ materially from these estimates).

Gold Production

We expect 2020 gold production to be in the range of 4.8 to 5.2 million ounces. As expected, gold production is lower year-over-year given the depletion of the high-grade Cortez Hills Open Pit deposit, divestment of Kalgoorlie and the decision to place Lagunas Norte, Morila and Golden Sunlight in care and maintenance in 2019. Based on mine sequencing and planned maintenance shutdowns, we expect gold production in the second half of 2020 to be slightly higher than the first half.

Gold Cost of Sales per ounce

On a per ounce basis, cost of sales applicable to gold5, after removing the portion related to non-controlling interests, is expected to be in the range of $980 to $1,030 per ounce in 2020. This is in line with the prior year resulting from a full year impact of the higher depreciation at Nevada Gold Mines offset by lower cost of sales primarily at Kibali and North Mara.

Gold Total Cash Costs per ounce4

Total cash costs per ounce4 are expected to be in the range of $650 to $700, unchanged from the 2019 range. We expect Cortez to have higher total cash costs per ounce4 than 2019 driven primarily by the cessation of the comparatively high-grade, low-cost Cortez Hills Open Pit in the first half of 2019. We also expect higher total cash costs per ounce4 at Pueblo Viejo in 2020 due to lower grades compared to the prior year, in line with the mine plan. Lower costs year-over-year at Veladero, Porgera, and North Mara are expected to offset these impacts on Barrick’s total cash costs per ounce4.

Gold All-In Sustaining Costs per ounce4

All-in sustaining costs per ounce4 are expected to be in the range of $920 to $970 for gold, slightly higher than 2019, and driven primarily by the increase in minesite sustaining capital expenditures as discussed below.

Copper Production and Costs

We expect 2020 copper production to be in the range of 440 to 500 million pounds, up from production of 432 million pounds in 2019. This increase is mainly driven by Lumwana following the sustainable improvements we have made to increase plant efficiency and availability through 2019. Together with cost rationalization, these performance improvements have driven a reduction in mining and processing costs per tonne and increased reserves.

In 2020, cost of sales applicable to copper5 is expected to be in the range of $2.10 to $2.40 per pound, in line with the $2.14 per pound outcome for 2019. C1 cash costs per pound4 guidance of $1.50 to $1.80 per pound for 2020 is also in line with 2019. Notably, we expect Lumwana C1 cash costs per pound4 of $1.50 to $1.70 to be lower year-over-year partially driven by the plant availability and efficiency improvements

we have implemented at the mine as discussed earlier. Copper all-in sustaining costs per pound4 guidance of $2.20 to $2.50 for 2020 represents an improvement from $2.52 in 2019.

Exploration and Project Expenses

We expect to incur approximately $210 to $230 million of exploration and evaluation expenditures in 2020 which includes 100% of the expenditure for Nevada Gold Mines for the full year.

We expect to incur approximately $70 to $90 million of project expenses in 2020, compared to $130 million in 2019. In 2020, project expenses are mainly related to the ongoing site costs at Pascua-Lama and advancing the expansion project at Pueblo Viejo.

General and Administrative Expenses

In 2020, we expect corporate administration costs to be approximately $130 million, a decrease of $18 million compared to 2019. This mainly reflects the additional severance costs incurred in 2019 associated with our workforce reduction following the Merger. This is partially offset by one-off integration costs associated with Randgold, Nevada Gold Mines and Acacia.

Separately, stock-based compensation expense in 2020 is expected to be approximately $40 million.

Finance Costs, Net

In 2020, net finance costs of $400 to $450 million primarily represent interest expense on long-term debt, non-cash interest expense relating to the gold and silver streaming agreements at Pueblo Viejo, and accretion, net of finance income. We expect net finance costs in 2020 to be lower year-over-year from $469 million in 2019 due in part to lower interest expense following debt repayments of $248 million in 2019. This is combined with the absence of non-cash interest expense related to the silver streaming agreement at Pascua-Lama (refer to notes 3 and 9 to the Financial Statements for more information). Our 2020 forecast includes the loss on debt extinguishment of $15 million related to the make-whole repurchase in January 2020 of $337 million of outstanding principal on our 3.85% Notes due 2022.

Capital Expenditures

Total attributable gold and copper capital expenditures for 2020 are expected to be in the range of $1,600 to $1,900 million. We continue to focus on the delivery of our project capital pipeline and we expect attributable project capital expenditures to be in the range of $300 to $400 million, consistent with 2019.

More than half of our attributable project capital expenditures in 2020 relate to advancing the expansion project at Pueblo Viejo, the third shaft project at Turquoise Ridge and construction of the Goldrush twin exploration declines. The remainder of project capital expenditure is mainly associated with the Zaldívar Chloride Leach Project and the restart of mining operations at Bulyanhulu.

Attributable minesite sustaining capital expenditures are expected to be in the range of $1,300 to $1,500 million compared to $1,176 million in 2019. The increase is primarily a result of increased capitalized stripping and underground development at Loulo-Gounkoto, the Phase 6 leach pad

 

 

BARRICK YEAR-END 2019   17   MANAGEMENT’S DISCUSSION AND ANALYSIS


expansion at Veladero, tailings capacity expansion at Hemlo, plant refurbishment at Bulyanhulu and the development of the Kalima-Ikamva pit project at Kibali.

 

Effective Income Tax Rate

At a gold price of $1,350/oz, our expected effective tax rate range for 2020 is between 30% to 35%. The rate is sensitive to the relative proportion of sales in high versus low tax jurisdictions, realized gold and copper prices, the proportion of income from our equity accounted investments and the level of non-tax affected costs in countries where we generate net losses.

 

 

Outlook Assumptions and Economic Sensitivity Analysis

 

         
      2020 Guidance
Assumption
   Hypothetical Change    Impact on EBITDAa
(millions)
  

Impact on All-in
Sustaining  Costsa

Gold revenue, net of royalties

   $1,350/oz    +/- $100/oz    +/- $472    +/- $4/oz

Copper revenue, net of royalties

   $2.75/lb    +/- $0.50/lb    +/- $224    +/- $0.02/lb

 

  a.

EBITDA and all-in sustaining costs are non-GAAP financial performance measures with no standardized definition under IFRS. For further information and a detailed reconciliation, please see pages 63 to 85 of this MD&A.

Risks and Risk Management

 

Overview

The ability to deliver on our vision, strategic objectives and operating guidance depends on our ability to understand and appropriately respond to the uncertainties or “risks” we face that may prevent us from achieving our objectives. In order to achieve this we:

 

Maintain a framework that permits us to manage risk effectively and in a manner that creates the greatest value;

 

Integrate a process for managing risk into all our important decision-making processes so that we reduce the effect of uncertainty on achieving our objectives;

 

Actively monitor key controls we rely on to achieve the Company’s objectives so that they remain in place and are effective at all times; and

 

Provide assurance to senior management and relevant committees of the Board on the effectiveness of key control activities.

Board and Committee Oversight

We maintain strong risk oversight practices, with responsibilities outlined in the mandates of the Board and related committees. The Board’s mandate makes clear its responsibility for reviewing and discussing with management the processes used to assess and manage risk, including the identification by management of the principal risks of the business, and the implementation of appropriate systems to deal with such risks.

The Audit & Risk Committee of the Board of Directors assists the Board in overseeing the Company’s management of principal risks as well as the implementation of policies and standards for monitoring and modifying such risks, and monitoring and reviewing the Company’s financial position and financial risk management programs generally. The Corporate Governance & Nominating Committee assists the Board in overseeing the Company’s environmental, safety and health, corporate social responsibility, and human rights programs, policies and performance.

Management Oversight

Our weekly Executive Committee Review is the main forum for senior management to raise and discuss risks facing the operations and organization more broadly. At regularly scheduled meetings, the Board and the Audit & Risk

Committee are provided with updates on the key issues identified by management at these weekly sessions.

Principal Risks

The following subsections describe some of our key sources of uncertainty and most important risk modification activities. The risks described below are not the only ones facing Barrick. Our business is subject to inherent risks in financial, regulatory, strategic and operational areas. For a more comprehensive discussion of those inherent risks, see “Risk Factors” in our most recent Form 40-F/Annual Information Form on file with the SEC and Canadian provincial securities regulatory authorities. Also see the “Cautionary Statement on Forward-Looking Information” on page 1 of this MD&A.

Financial position and liquidity

Our liquidity profile, level of indebtedness and credit ratings are all factors in our ability to meet short- and long-term financial demands. Barrick’s outstanding debt balances impact liquidity through scheduled interest and principal repayments and the results of leverage ratio calculations, which could influence our investment grade credit ratings and ability to access capital markets. In addition, our ability to draw on our credit facility is subject to meeting its covenants. 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. The ability of our operations to deliver projected future cash flows, 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.

Key risk modification activities:

 

Continued focus on generating positive free cash flow by improving the underlying cost structures of our operations in a sustainable manner;

 

Disciplined capital allocation criteria for all investments, to ensure a high degree of consistency and rigor is applied to all capital allocation decisions based on a comprehensive understanding of risk and reward;

 

Preparation of budgets and forecasts to understand the impact of different price scenarios on liquidity, and formulate appropriate strategies;

 

 

BARRICK YEAR-END 2019   18   MANAGEMENT’S DISCUSSION AND ANALYSIS


 

Reduced notional amount and lengthened average tenor of our outstanding debt through liability management activities; and

 

Other options available to the Company to enhance liquidity include drawing on our $3.0 billion undrawn credit facility, asset sales, joint ventures, or the issuance of debt or equity securities.

Improving free cash flow4 and costs

Our ability to improve productivity, drive down operating costs and reduce working capital remains a focus in 2020 and is subject to several sources of uncertainty. This includes our ability to achieve and maintain industry-leading margins by improving the productivity and efficiency of our operations through automation.

Key risk modification activities:

 

Formation of Nevada Gold Mines joint venture to drive free cash flow through synergies without issuing shares;

 

Weekly Executive Committee Review to assess and respond to risks in a timely manner;

 

General and administrative costs halved in 2019 relative to 2018 guidance despite increase in asset base; and

 

Implemented a flat, operationally focused, agile management structure with a tenet in ownership culture.

Social license to operate

At Barrick, we are committed to building, operating, and closing our mines in a safe and responsible manner. To do this, we seek to build trust-based partnerships with host governments and local communities to drive shared long-term value while working to minimize the social and environmental impacts of our activities. Geopolitical risks such as resource nationalism and incidents of corruption are inherent in the business of a company operating globally. Past environmental incidents in the extractive industry highlight the hazards (e.g., water management, tailings storage facilities, etc.) and the potential consequences to the environment, community health and safety. Our ability to maintain compliance with regulatory and community obligations in order to protect the environment and our host communities alike remains one of our top priorities. Barrick also recognizes climate change as an area of risk requiring specific focus.

Key risk modification activities:

 

Obtaining full ownership of Acacia and resuming day-to-day management of the Tanzanian assets;

 

Our commitment to responsible mining is supported by a robust governance framework, including a new overarching Sustainable Development Policy and refreshed policies in the areas of Biodiversity, Social Performance, Occupational Health and Safety, Environment and Human Rights;

 

We also updated our Code of Business Conduct and Ethics which sets out the ethical behavior expected of everyone working at, or with, Barrick;

 

We take a partnership approach with our home and host governments. This means we work to balance our own interests and priorities with those of our government partners, working to ensure that everyone derives real value from our operations;

 

We open our social and environmental performance to third-party scrutiny, including through the ISO 14001 re-certification process, International Cyanide Management Code audits, and annual human rights impact assessments; and

 

We continually review and update our closure plans and cost estimates to plan for environmentally responsible closure and monitoring of operations.

Resources and reserves and production outlook

Like any mining company, we face the risk that we are unable to discover or acquire new resources or that we do not convert resources into production. As we move into 2020 and beyond, our overriding objective of growing free cash flow per share continues to be underpinned by a strong pipeline of organic projects and minesite expansion opportunities in our core regions. Uncertainty related to these and other opportunities exists (potentially both favorable and unfavorable) due to the speculative nature of mineral exploration and development as well as the potential for increased costs, delays, suspensions and technical challenges associated with the construction of capital projects.

Key risk modification activities:

 

Focus on responsible mineral resource management, continuously improve ore body knowledge, and add to and upgrade reserves and resources;

 

Grow and invest in a portfolio of Tier One Gold Assets1,    Tier Two Gold Assets and Strategic Assets2 with an emphasis on organic growth; and

 

Invest in exploration across extensive land positions in many of the world’s most prolific gold districts.

Market Overview

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.

Gold

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 2019, the gold price ranged from $1,266 per ounce to $1,557 per ounce. The average market price for the year of $1,393 per ounce represented an increase of 10% versus 2018.

Average Monthly Spot Gold Prices

(dollars per ounce)

 

LOGO

The price of gold rose significantly during the middle part of the year, reaching a six-year high in early September. During the year, the gold price was impacted by declining US dollar interest rates, global trade disputes and geopolitical tensions leading to increased investor interest.

Copper

During 2019, London Metal Exchange (“LME”) copper prices traded in a range of $2.50 to $3.00 per pound, averaged $2.72 per pound, and closed the year at $2.79 per pound. Copper prices are significantly influenced by physical demand from emerging markets, especially China.

 

 

BARRICK YEAR-END 2019   19   MANAGEMENT’S DISCUSSION AND ANALYSIS


Copper prices fell to the lows of the year in early September due to a strong US dollar, a weakening Chinese yuan, and concerns over global trade due to tariff actions before rising into the end of the year on low global stockpile levels and an easing in trade tensions between the US and China.

Average Monthly Spot Copper Prices

(dollars per pound)

 

LOGO

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, 2019, we recorded 39 million pounds of copper sales still subject to final price settlement at an average provisional price of $2.80 per pound. The impact to net income before taxation of a 10% movement in the market price of copper would be approximately $11 million, holding all other variables constant.

Currency Exchange Rates

The results of our mining operations outside of the United States are affected by US dollar exchange rates. We have exposure to the Argentine peso through operating costs at our Veladero mine, and peso denominated VAT receivable balances. In addition, we have exposure to the Canadian and Australian dollars, Chilean peso, Papua New Guinea kina, Peruvian sol, Zambian kwacha, Tanzanian shilling, Dominican peso, West African CFA franc, Euro, South African rand, and British pound through mine operating and capital costs.

Fluctuations in the US dollar increase the volatility of our costs reported in US dollars. In 2019, the Australian dollar traded in a range of $0.67 to $0.73 against the US dollar, while the US dollar against the Canadian dollar, Argentine peso, and CFA franc ranged from $1.30 to $1.37 and ARS 36.85 to ARS 62.00, and XOF 568 to XOF 664, respectively. During the year, the US dollar traded strongly. Along with inflation pressures in Argentina and government actions, this led to a continued weakening of the Argentine peso during the year. During 2019, we did not have any currency hedge positions, and are unhedged against foreign exchange exposures as at December 31, 2019 beyond spot requirements.

Fuel

For 2019, the price of West Texas Intermediate (“WTI”) crude oil traded in a wide range between $44 and $67 per barrel, with an average market price of $57 per barrel, and closed the year at $61 per barrel. Oil prices were impacted by global trade tensions, geopolitical events, and the US dollar.

Average Monthly Spot Crude Oil Price (WTI)

(dollars per barrel)

 

LOGO

During 2019, we did not have any fuel hedge positions, and are unhedged against fuel exposures as at December 31, 2019.

US Dollar Interest Rates

After four years of benchmark rate increases by the US Federal Reserve, the benchmark rate was lowered by 75 basis points over the course of 2019 to a range of 1.50% to 1.75% in an effort to keep the economy stable during a period of slowing growth and global trade uncertainty. Further changes to short-term rates in 2020 are expected to be dependent on economic data.

At present, our interest rate exposure mainly relates to interest income received on our cash balances ($3.3 billion at December 31, 2019); the mark-to-market value of derivative instruments; the carrying value of certain long-lived assets and liabilities; and the interest payments on our variable-rate debt ($0.1 billion at December 31, 2019). 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. Changes in interest rates affect the accretion expense recorded on our provision for environmental rehabilitation and therefore would affect our net earnings.

 

 

BARRICK YEAR-END 2019   20   MANAGEMENT’S DISCUSSION AND ANALYSIS


Production and Cost Summary - Gold

 

     For the three months ended     For the years ended  
      12/31/2019      9/30/2019      % Change     12/31/2019      12/31/2018      % Change     12/31/2017  

Nevada Gold Mines (61.5%)a

                  

Gold produced (000s oz)

     585        535        9     2,218        2,368        (6 )%      2,523  

Cost of sales ($/oz)

     1,038        1,027        1     924        814        13     786  

Total cash costs ($/oz)b

     711        693        3     634        526        20     467  

All-in sustaining costs ($/oz)b

     944        946        0     828        664        25     634  

Cortez (61.5%)c

                  

Gold produced (000s oz)

     133        126        6     801        1,265        (37 )%      1,447  

Cost of sales ($/oz)

     945        829        14     762        659        16     657  

Total cash costs ($/oz)b

     681        570        19     515        351        47     300  

All-in sustaining costs ($/oz)b

     1,012        772        31     651        430        51     380  

Carlin (61.5%)d

                  

Gold produced (000s oz)

     276        278        (1 )%      968        835        16     780  

Cost of sales ($/oz)

     975        1,007        (3 )%      1,004        1,054        (5 )%      1,024  

Total cash costs ($/oz)b

     766        775        (1 )%      746        740        1     721  

All-in sustaining costs ($/oz)b

     965        1,014        (5 )%      984        983        0     1,045  

Turquoise Ridge (61.5%)e

                  

Gold produced (000s oz)

     111        82        35     335        268        25     211  

Cost of sales ($/oz)

     971        1,077        (10 )%      846        783        8     715  

Total cash costs ($/oz)b

     625        622        0     585        678        (14 )%      589  

All-in sustaining costs ($/oz)b

     800        840        (5 )%      732        756        (3 )%      733  

Phoenix (61.5%)f

                  

Gold produced (000s oz)

     31        25        24     56          

Cost of sales ($/oz)

     2,025        2,186        (7 )%      2,093          

Total cash costs ($/oz)b

     902        1,010        (11 )%      947          

All-in sustaining costs ($/oz)b

     1,034        1,622        (36 )%      1,282          

Long Canyon (61.5%)f

                  

Gold produced (000s oz)

     34        24        42     58          

Cost of sales ($/oz)

     1,026        1,170        (12 )%      1,088          

Total cash costs ($/oz)b

     317        353        (10 )%      333          

All-in sustaining costs ($/oz)b

     657        714        (8 )%      681                            

Pueblo Viejo (60%)

                  

Gold produced (000s oz)

     179        139        29     590        581        2     650  

Cost of sales ($/oz)

     660        807        (18 )%      747        750        0     699  

Total cash costs ($/oz)b

     422        504        (16 )%      471        465        1     405  

All-in sustaining costs ($/oz)b

     517        631        (18 )%      592        623        (5 )%      525  

Loulo-Gounkoto (80%)g

                  

Gold produced (000s oz)

     144        153        (6 )%      572          

Cost of sales ($/oz)

     1,037        1,018        2     1,044          

Total cash costs ($/oz)b

     631        630        0     634          

All-in sustaining costs ($/oz)b

     917        966        (5 )%      886                            

Kibali (45%)g

                  

Gold produced (000s oz)

     87        91        (4 )%      366          

Cost of sales ($/oz)

     1,205        1,187        2     1,111          

Total cash costs ($/oz)b

     608        554        10     568          

All-in sustaining costs ($/oz)b

     740        703        5     693                            

Kalgoorlie (50%)h

                  

Gold produced (000s oz)

     36        58        (38 )%      206        314        (34 )%      368  

Cost of sales ($/oz)

     1,127        1,037        9     1,062        899        18     806  

Total cash costs ($/oz)b

     940        856        10     873        732        19     642  

All-in sustaining costs ($/oz)b

     1,172        1,170        0     1,183        857        38     729  

Tongon (89.7%)g

                  

Gold produced (000s oz)

     61        62        (2 )%      245          

Cost of sales ($/oz)

     1,476        1,396        6     1,469          

Total cash costs ($/oz)b

     803        793        1     787          

All-in sustaining costs ($/oz)b

     867        869        0     844                            

 

BARRICK YEAR-END 2019   21   MANAGEMENT’S DISCUSSION AND ANALYSIS


Production and Cost Summary - Gold (continued)

 

     For the three months ended     For the years ended  
      12/31/2019      9/30/2019      % Change     12/31/19      12/31/18      % Change     12/31/2017  

Porgera (47.5%)

                  

Gold produced (000s oz)

     82        75        9     284        204        39     235  

Cost of sales ($/oz)

     909        1,024        (11 )%      994        996        0     944  

Total cash costs ($/oz)b

     757        868        (13 )%      838        796        5     781  

All-in sustaining costs ($/oz)b

     894        1,053        (15 )%      1,003        1,083        (7 )%      993  

Veladero (50%)i

                  

Gold produced (000s oz)

     71        58        22     274        278        (1 )%      432  

Cost of sales ($/oz)

     1,138        1,243        (8 )%      1,188        1,112        7     897  

Total cash costs ($/oz)b

     710        773        (8 )%      734        629        17     598  

All-in sustaining costs ($/oz)b

     1,142        1,142        0     1,105        1,154        (4 )%      987  

Hemlo

                  

Gold produced (000s oz)

     54        49        10     213        171        25     196  

Cost of sales ($/oz)

     1,632        1,083        51     1,137        1,157        (2 )%      986  

Total cash costs ($/oz)b

     1,091        953        14     904        1,046        (14 )%      841  

All-in sustaining costs ($/oz)b

     1,380        1,280        8     1,140        1,318        (14 )%      1,092  

North Maraj

                  

Gold produced (000s oz)

     103        29        255     251        215        17     207  

Cost of sales ($/oz)

     1,021        907        13     953        795        20     683  

Total cash costs ($/oz)b

     675        603        12     646        603        7     509  

All-in sustaining costs ($/oz)b

     830        850        (2 )%      802        830        (3 )%      773  

Buzwagij

                  

Gold produced (000s oz)

     28        18        56     83        93        (11 )%      172  

Cost of sales ($/oz)

     1,235        1,292        (4 )%      1,240        939        32     643  

Total cash costs ($/oz)b

     1,144        1,202        (5 )%      1,156        916        26     600  

All-in sustaining costs ($/oz)b

     1,169        1,220        (4 )%      1,178        947        24     632  

Bulyanhuluj

                  

Gold produced (000s oz)

     9        6        50     27        26        4     112  

Cost of sales ($/oz)

     1,293        1,288        0     1,207        1,231        (2 )%      1,309  

Total cash costs ($/oz)b

     752        729        3     676        650        4     848  

All-in sustaining costs ($/oz)b

     909        769        18     773        754        3     1,319  

Total Attributable to Barrickk

                  

Gold produced (000s oz)

     1,439        1,306        10     5,465        4,527        21     5,323  

Cost of sales ($/oz)l

     1,046        1,065        (2 )%      1,005        892        13     794  

Total cash costs ($/oz)b

     692        710        (3 )%      671        588        14     526  

All-in sustaining costs ($/oz)b

     923        984        (6 )%      894        806        11     750  

 

a.

Represents the combined results of Cortez, Goldstrike (including our 60% share of South Arturo) and our 75% interest in Turquoise Ridge until June 30, 2019. Commencing July 1, 2019, the date Nevada Gold Mines was established, the results represent our 61.5% interest in Cortez, Carlin (including Goldstrike and 60% of South Arturo), Turquoise Ridge (including Twin Creeks), Phoenix and Long Canyon.

b.

These are non-GAAP financial performance measures with no standardized meaning under IFRS and therefore may not be comparable to similar measures presented by other issuers. For further information and a detailed reconciliation of each non-GAAP measure used in this section of the MD&A to the most directly comparable IFRS measure, please see pages 63 to 85 of this MD&A.

c.

On July 1, 2019, Cortez was contributed to Nevada Gold Mines, a joint venture with Newmont. As a result, the amounts presented are on an 100% basis up until June 30, 2019, and on a 61.5% basis thereafter.

d.

On July 1, 2019, Barrick’s Goldstrike and Newmont’s Carlin were contributed to Nevada Gold Mines and are now referred to as Carlin. As a result, the amounts presented represent Goldstrike on a 100% basis (including our 60% share of South Arturo) up until June 30, 2019, and the combined results of Carlin and Goldstrike (including our 60% share of South Arturo) on a 61.5% basis thereafter.

e.

Barrick owned 75% of Turquoise Ridge through to the end of the second quarter of 2019, with our joint venture partner, Newmont, owning the remaining 25%. Turquoise Ridge was proportionately consolidated on the basis that the joint venture partners that have joint control have rights to the assets and obligations for the liabilities relating to the arrangement. The figures presented in this table are based on our 75% interest in Turquoise Ridge until June 30, 2019. On July 1, 2019, Barrick’s 75% interest in Turquoise Ridge and Newmont’s Twin Creeks and 25% interest in Turquoise Ridge were contributed to Nevada Gold Mines. Starting July 1, 2019, the results represent our 61.5% share of Turquoise Ridge and Twin Creeks, now referred to as Turquoise Ridge.

f.

These sites were acquired as a result of the formation of Nevada Gold Mines on July 1, 2019.

g.

These sites did not form a part of the Barrick consolidated results in 2018 and 2017 as these sites were acquired as a result of the Merger.

h.

On November 28, 2019, we completed the sale of our 50% interest in Kalgoorlie in Western Australia to Saracen Mineral Holdings Limited for total cash consideration of $750 million. Accordingly, these represent our 50% interest until November 28, 2019.

i.

On June 30, 2017, we sold 50% of Veladero; therefore, these represent results on a 100% basis from January 1 to June 30, 2017 and on a 50% basis from July 1, 2017 onwards.

j.

Formerly known as Acacia Mining plc. On September 17, 2019, Barrick acquired all of the shares of Acacia it did not own. Operating results are included at 100% from October 1, 2019 (notwithstanding the completion of the Acacia transaction on September 17, 2019, we consolidated our interest in Acacia and recorded a non-controlling interest of 36.1% in the income statement for the entirety of the third quarter of 2019 as a matter of convenience) up until the GoT’s 16% free-carried interest is made effective, which is expected to be January 1, 2020, and on an 84% basis thereafter.

k.

With the end of mining at Golden Sunlight and Morila in the second quarter and Lagunas Norte in the third quarter as previously reported, we have ceased to include production or non-GAAP cost metrics for these sites from July 1, 2019 and October 1, 2019, respectively, onwards although these sites are included in the Total Attributable to Barrick in the prior period comparatives.

l.

Cost of sales per ounce (Barrick’s share) is calculated as cost of sales - gold on an attributable basis (excluding sites in care and maintenance) divided by gold equity ounces sold.

 

BARRICK YEAR-END 2019   22   MANAGEMENT’S DISCUSSION AND ANALYSIS


Production and Cost Summary - Copper

 

     For the three months ended     For the years ended  
      12/31/2019      9/30/2019      % Change     12/31/19      12/31/18      % Change     12/31/17  

Lumwana

                  

Copper production (millions lbs)

     63        65        (3 )%      238        224        6     256  

Cost of sales ($/lb)

     2.22        2.04        9     2.13        2.51        (15 )%      1.57  

C1 cash costs ($/lb)a

     2.10        1.83        15     1.79        2.08        (14 )%      1.66  

All-in sustaining costs ($/lb)a

     3.41        3.66        (7 )%      3.04        3.08        (1 )%      2.35  

Zaldívar (50%)

                  

Copper production (millions lbs)

     36        32        13     128        104        23     114  

Cost of sales ($/lb)

     2.59        2.18        19     2.46        2.55        (4 )%      2.15  

C1 cash costs ($/lb)a

     1.95        1.55        26     1.77        1.97        (10 )%      1.66  

All-in sustaining costs ($/lb)a

     2.56        1.91        34     2.15        2.47        (13 )%      2.21  

Jabal Sayid (50%)

                  

Copper production (millions lbs)

     18        15        20     66        55        20     43  

Cost of sales ($/lb)

     1.47        1.63        (10 )%      1.53        1.73        (12 )%      1.90  

C1 cash costs ($/lb)a

     1.29        1.42        (9 )%      1.26        1.53        (18 )%      1.70  

All-in sustaining costs ($/lb)a

     1.78        1.65        8     1.51        1.92        (21 )%      2.30  

Total Copper

                  

Copper production (millions lbs)

     117        112        4     432        383        13     413  

Cost of sales ($/lb)b

     2.26        2.00        13     2.14        2.40        (11 )%      1.77  

C1 cash costs ($/lb)a

     1.90        1.62        17     1.69        1.97        (14 )%      1.66  

All-in sustaining costs ($/lb)a

     2.82        2.58        9     2.52        2.82        (11 )%      2.34  

 

a.

These are non-GAAP financial performance measures with no standardized meaning under IFRS and therefore may not be comparable to similar measures presented by other issuers. For further information and a detailed reconciliation of each non-GAAP measure used in this section of the MD&A to the most directly comparable IFRS measure, please see pages 63 to 85 of this MD&A.

b.

Cost of sales per pound (Barrick’s share) is calculated as cost of sales - copper plus our equity share of cost of sales attributable to Zaldívar and Jabal Sayid divided by copper pounds sold.

OPERATING DIVISIONS PERFORMANCE

Review of Operating Divisions Performance

Following the Merger in the first quarter of 2019 and the events surrounding Nevada Gold Mines and Acacia in the third quarter of 2019 (refer to page 12 for further details), our presentation of reportable operating segments consists of nine gold mines (Cortez, Carlin, Turquoise Ridge, Pueblo Viejo, Loulo-Gounkoto, Kibali, Veladero, Porgera and North Mara). The remaining operating segments, including our remaining gold mines, copper mines and projects, have been

grouped into an “other” category and will not be reported on individually. Segment performance is evaluated based on a number of measures including operating income before tax, production levels and unit production costs. Certain costs are managed on a consolidated basis and are therefore not reflected in segment income.

 

 

BARRICK YEAR-END 2019   23   MANAGEMENT’S DISCUSSION AND ANALYSIS


Nevada Gold Mines (61.5% basis)a, Nevada USA

 

Summary of Operating and Financial Data    For the three months ended     For the years ended  
      12/31/19     9/30/19     % Change     12/31/19     12/31/18     % Change     12/31/17  

Total tonnes mined (000s)

     53,267       52,528       1     189,456       182,204       4     211,733  

Open pit ore

     9,316       7,706       21     26,942       20,605       31     17,530  

Open pit waste

     42,623       43,572       (2 )%      157,868       157,960       0     190,710  

Underground

     1,328       1,250       6     4,646       3,639       28     3,493  

Average grade (grams/tonne)

              

Open pit mined

     0.82       0.77       6     0.93       2.96       (69 )%      2.70  

Underground mined

     10.70       9.97       7     10.52       10.96       (4 )%      10.58  

Processed

     1.96       2.02       (3 )%      2.29       3.47       (34 )%      3.45  

Ore tonnes processed (000s)

     11,586       10,211       13     36,724       25,680       43     24,366  

Oxide mill

     3,044       3,124       (3 )%      8,338       4,527       84     4,562  

Roaster

     1,344       1,309       3     5,377       5,104       5     4,902  

Autoclave

     1,556       1,316       18     5,656       5,338       6     4,730  

Heap leach

     5,642       4,462       26     17,353       10,711       62     10,172  

Recovery rate

     80     79     1     82     83     (1 )%      86

Oxide Mill

     60     60     0     69     83     (17 )%      91

Roaster

     86     87     (1 )%      87     89     (3 )%      89

Autoclave

     74     79     (6 )%      74     69     8     62

Gold produced (000s oz)

     585       535       9     2,218       2,368       (6 )%      2,523  

Oxide mill

     76       76       0     336       590       (43 )%      957  

Roaster

     286       275       4     1,070       1,120       (4 )%      929  

Autoclave

     155       112       39     547       497       10     459  

Heap leach

     68       72       (6 )%      265       161       65     178  

Gold sold (000s oz)

     565       537       5     2,223       2,359       (6 )%      2,579  

Revenue ($ millions)

     861       804       7     3,128       2,986       5     3,241  

Cost of sales ($ millions)

     573       552       4     2,035       1,921       6     2,028  

Income ($ millions)

     277       237       17     1,050       1,011       4     1,169  

EBITDA ($ millions)b

     440       403       9     1,642       1,688       (3 )%      1,990  

EBITDA marginc

     51     50     2     52     57     (7 )%      61

Capital expenditures ($ millions)d,e

     145       164       (12 )%      627       626       0     620  

Minesite sustainingd

     124       110       13     380       272       40     392  

Projectd

     21       54       (61 )%      247       354       (30 )%      228  

Cost of sales ($/oz)

     1,038       1,027       1     924       814       13     786  

Total cash costs ($/oz)b

     711       693       3     634       526       20     467  

All-in sustaining costs ($/oz)b

     944       946       0     828       664       25     634  

All-in costs ($/oz)b

     982       1,048       (6 )%      938       814       15     726  

 

  a.

Represents the combined results of Cortez, Goldstrike (including our 60% share of South Arturo) and our 75% interest in Turquoise Ridge until June 30, 2019. Commencing July 1, 2019, the date Nevada Gold Mines was established, the results represent our 61.5% interest in Cortez, Carlin (including Goldstrike and 60% of South Arturo), Turquoise Ridge (including Twin Creeks), Phoenix and Long Canyon.

  b.

These are non-GAAP financial performance measures with no standardized meaning under IFRS and therefore may not be comparable to similar measures presented by other issuers. For further information and a detailed reconciliation of each non-GAAP measure used in this section of the MD&A to the most directly comparable IFRS measure, please see pages 63 to 85 of this MD&A.

  c.

Represents EBITDA divided by revenue.

  d.

Presented on a cash basis as a result of adopting IFRS 16 Leases starting in the first quarter of 2019. Capital expenditures for 2018 and 2017 are presented on an accrued basis. Please refer to page 2 of this MD&A for more details.

  e.

Amounts presented exclude capitalized interest.

As discussed on page 12, on July 1, 2019, Nevada Gold Mines was established which encompasses Barrick’s former Cortez, Goldstrike, Turquoise Ridge and Goldrush properties and Newmont’s former Carlin, Twin Creeks, Phoenix, Long Canyon and Lone Tree properties. Barrick is the operator of the joint venture and owns 61.5%, with Newmont owning the remaining 38.5% of the joint venture. Refer to the following pages for a detailed discussion of Cortez, Carlin (including Goldstrike) and Turquoise Ridge (including Twin Creeks) results.

 

BARRICK YEAR-END 2019   24   MANAGEMENT’S DISCUSSION AND ANALYSIS


Carlin (61.5% basis)a, Nevada USA

 

Summary of Operating and Financial Data    For the three months ended     For the years ended  
      12/31/19     9/30/19     % Change     12/31/19     12/31/18     % Change     12/31/17  

Total tonnes mined (000s)

     13,639       11,584       18  %      49,343       59,605       (17 )%      76,587  

Open pit ore

     1,832       1,627       13  %      4,773       4,626       3  %      1,575  

Open pit waste

     10,966       9,145       20  %      41,978       53,387       (21 )%      73,374  

Underground

     841       812       4  %      2,592       1,592       63  %      1,638  

Average grade (grams/tonne)

              

Open pit mined

     1.84       1.44       28  %      2.08       3.75       (44 )%      3.56  

Underground mined

     9.40       8.61       9  %      9.09       9.39       (3 )%      8.88  

Processed

     3.65       3.33       10  %      3.80       4.32       (12 )%      4.20  

Ore tonnes processed (000s)

     3,156       3,188       (1 )%      10,467       8,075       30  %      8,041  

Oxide mill

     705       663       6  %      1,368       n/a       n/a       n/a  

Roaster

     991       980       1  %      3,627       3,341       9  %      3,783  

Autoclave

     892       810       10  %      4,169       4,734       n/a       4,258  

Heap leach

     568       735       (23 )%      1,303       n/a       n/a       n/a  

Recovery rate

     75     76     (1 )%      75     74     1  %      77

Roaster

     86     87     (1 )%      86     89     (2 )%      88

Autoclave

     58     63     (9 )%      59     53     12  %      62

Gold produced (000s oz)

     276       278       (1 )%      968       835       16  %      780  

Oxide mill

     11       14       (21 )%      25       n/a       n/a       n/a  

Roaster

     205       213       (4 )%      694       606       15  %      531  

Autoclave

     49       38       29  %      225       229       (2 )%      248  

Heap leach

     11       13       (15 )%      24       n/a       n/a       n/a  

Gold sold (000s oz)

     275       272       1  %      967       842       15  %      868  

Revenue ($ millions)

     408       401       2  %      1,355       1,066       27  %      1,091  

Cost of sales ($ millions)

     268       274       (2 )%      971       886       10  %      889  

Income ($ millions)

     133       121       10  %      370       166       123  %      186  

EBITDA ($ millions)b

     191       183       5  %      609       428       42  %      446  

EBITDA marginc

     47     46     3  %      45     40     12  %      41

Capital expenditures ($ millions)d,e

     51       56       (9 )%      211       186       13  %      263  

Minesite sustainingd

     51       56       (9 )%      211       186       13  %      263  

Projectd

     0       0       0  %      0       0       0  %      0  

Cost of sales ($/oz)

     975       1,007       (3 )%      1,004       1,054       (5 )%      1,024  

Total cash costs ($/oz)b

     766       775       (1 )%      746       740       1  %      721  

All-in sustaining costs ($/oz)b

     965       1,014       (5 )%      984       983       0  %      1,045  

All-in costs ($/oz)b

     965       1,014       (5 )%      984       983       0  %      1,045  

 

  a.

On July 1, 2019, Barrick’s Goldstrike operations and Newmont’s Carlin operations were contributed to Nevada Gold Mines and are now collectively referred to as Carlin. As a result, the amounts presented represent Goldstrike on a 100% basis (including our 60% share of South Arturo) up until June 30, 2019, and the combined results of Carlin and Goldstrike (including our 60% share of South Arturo) on a 61.5% basis thereafter.

  b.

These are non-GAAP financial performance measures with no standardized meaning under IFRS and therefore may not be comparable to similar measures presented by other issuers. For further information and a detailed reconciliation of each non-GAAP measure used in this section of the MD&A to the most directly comparable IFRS measure, please see pages 63 to 85 of this MD&A.

  c.

Represents EBITDA divided by revenue.

  d.

Presented on a cash basis as a result of adopting IFRS 16 Leases starting in the first quarter of 2019. Capital expenditures for 2018 and 2017 are presented on an accrued basis. Please refer to page 2 of this MD&A for more details.

  e.

Amounts presented exclude capitalized interest.

 

On July 1, 2019, Barrick’s Goldstrike operations and Newmont’s Carlin operations were contributed to Nevada Gold Mines and are now collectively referred to as Carlin. As a result, the amounts presented represent Goldstrike on a 100% basis (including our 60% share of South Arturo) up until June 30, 2019, and the combined results of Carlin and Goldstrike (including our 60% share of South Arturo) on a 61.5% basis thereafter. As a result of this transaction, there is now a higher proportion of open pit ore mined and, consequently, the average grade processed is lower, which

also aligns with the inclusion of a heap leach facility contributed by Newmont.

Safety and Environment

Three LTIs were recorded during the quarter (at Goldstrike surface and Carlin) with an LTIFR of 1.27 per million hours worked versus 2.05 the previous quarter. Goldstrike underground reported zero LTIs during the fourth quarter. No Class 1 environmental incidents occurred during the quarter.

 

 

BARRICK YEAR-END 2019   25   MANAGEMENT’S DISCUSSION AND ANALYSIS


Financial Results

Q4 2019 compared to Q3 2019

Carlin’s income for the fourth quarter of 2019 increased by 10% primarily due to lower cost of sales per ounce5 and higher sales volumes resulting from higher grade ore mined and processed.

Gold production in the fourth quarter of 2019 was 1% lower compared to the prior quarter, mainly due to lower production from the roasters and oxide mill offset by higher autoclave production. The higher autoclave production is a result of higher throughput from processing Carlin stockpiles from Pete open pit, a synergy unlocked by the creation of Nevada Gold Mines.

Cost of sales per ounce5 and total cash costs per ounce4 in the fourth quarter of 2019 were 3% and 1% lower, respectively, than the prior quarter mainly due to a higher proportion of lower cost underground production in the feed mix. In the fourth quarter of 2019, all-in sustaining costs per ounce4 decreased by 5% compared to the prior quarter primarily due to lower minesite sustaining capital expenditures.

Capital expenditures in the fourth quarter of 2019 were 9% lower than the prior quarter due to lower underground development and equipment purchases, lower maintenance component replacements for the open pit and the completion of the autoclave brick re-line in the third quarter. Capital drilling also decreased due to the completion of drilling programs for the winter season.

2019 compared to 2018

Carlin’s income for 2019 reflects our 61.5% interest in Nevada Gold Mines and is inclusive of income from Newmont’s former Carlin operations and the Goldstrike operations from July 1, 2019. Income for Carlin for the first six months of 2019 and the twelve months of 2018 represents Barrick’s 100% interest in the Goldstrike operations (including the 60% interest in South Arturo) prior to the formation of Nevada Gold Mines. This was the primary driver of the 123% increase in Carlin’s income compared to 2018.

Income and EBITDA4,a

 

LOGO

a The results represent Goldstrike on a 100% basis (including our 60% share of South Arturo) from January 1, 2017 to June 30, 2019 and on the combined results of Carlin and Goldstrike (including our 60% share of South Arturo) on a 61.5% basis from July 1, 2019 onwards.

Gold production for 2019 was 16% higher compared to the prior year, primarily due to the inclusion of Newmont’s former Carlin operations from July 1, 2019. Production in the first six months of 2019 was also higher due to scheduled roaster maintenance at Goldstrike in the first six months of 2018. This was partially offset by the reduction in Barrick’s interest in Goldstrike (including the 60% interest in South Arturo) from 100% to 61.5% from July 1, 2019.

Productiona

(000s ounces)

 

LOGO

a The results represent Goldstrike (including our 60% share of South Arturo) on a 100% basis from January 1, 2018 to June 30, 2019 and the combined results of Carlin and Goldstrike (including our 60% share of South Arturo) on a 61.5% basis from July 1, 2019 onwards.

Cost of sales per ounce5 was 5% lower than the prior year due to lower depreciation expense on a per ounce basis. Total cash costs per ounce4 and all-in sustaining costs per ounce4 were in line with the prior year.

Cost of Sales5, Total Cash Costs4 and AISC4

($ per ounce)

 

LOGO

Capital expenditures for 2019 increased by 13% from the same prior year period due to higher minesite sustaining capital expenditures. Higher minesite sustaining capital expenditures are attributed to the inclusion of Newmont’s former Carlin operations, partially offset by the reduction in Barrick’s interest in Goldstrike (including the 60% interest in South Arturo) from 100% to 61.5% from July 1, 2019.

2019 compared to Outlook

Gold production for 2019 of 968 thousand ounces was within the guidance range of 960 to 1,020 thousand ounces. Cost of sales per ounce5 of $1,004 was lower than the guidance range of $1,020 to $1,080 per ounce. Total cash costs per ounce4 and all-in sustaining costs per ounce4 of $746 and $984, respectively, were within the guidance ranges of $740 to $790 per ounce, and $955 to $995 per ounce, respectively.

 

 

BARRICK YEAR-END 2019   26   MANAGEMENT’S DISCUSSION AND ANALYSIS


Cortez (61.5% basis)a, Nevada USA

 

Summary of Operating and Financial Data    For the three months ended     For the years ended  
      12/31/19     9/30/19     % Change     12/31/19     12/31/18     % Change     12/31/17  

Total tonnes mined (000s)

     23,422       23,357       0  %      105,949       121,929       (13 )%      134,503  

Open pit ore

     3,876       2,158       80  %      14,640       15,979       (8 )%      15,955  

Open pit waste

     19,275       20,948       (8 )%      90,029       104,573       (14 )%      117,336  

Underground

     271       251       8  %      1,280       1,377       (7 )%      1,212  

Average grade (grams/tonne)

              

Open pit mined

     0.45       0.42       7  %      0.67       2.73       (75 )%      2.65  

Underground mined

     11.58       11.41       2  %      10.66       10.73       (1 )%      13.28  

Processed

     1.29       1.54       (16 )%      1.60       2.67       (40 )%      3.10  

Ore tonnes processed (000s)

     4,259       2,837       50  %      17,583       17,001       3  %      15,853  

Oxide mill

     638       654       (2 )%      3,462       4,527       (24 )%      4,562  

Roaster

     353       329       7  %      1,750       1,763       (1 )%      1,119  

Heap leach

     3,268       1,854       76  %      12,371       10,711       15  %      10,172  

Recovery rate

     75     84     (10 )%      86     87     (1 )%      92

Oxide Mill

     69     79     (13 )%      78     83     (6 )%      91

Roaster

     86     86     0  %      87     91     (4 )%      91

Gold produced (000s oz)

     133       126       6  %      801       1,265       (37 )%      1,447  

Oxide mill

     35       34       3  %      253       590       (57 )%      956  

Roaster

     81       62       31  %      376       514       (27 )%      312  

Heap leach

     17       30       (43 )%      172       161       7  %      178  

Gold sold (000s oz)

     132       126       5  %      798       1,255       (36 )%      1,489  

Revenue ($ millions)

     194       185       5  %      1,086       1,589       (32 )%      1,870  

Cost of sales ($ millions)

     124       105       19  %      608       828       (27 )%      979  

Income ($ millions)

     69       77       (10 )%      459       726       (37 )%      873  

EBITDA ($ millions)b

     105       109       (4 )%      656       1,112       (41 )%      1,405  

EBITDA marginc

     54     59     (9 )%      60     70     (14 )%      75

Capital expenditures ($ millions)d,e

     43       53       (19 )%      255       340       (25 )%      294  

Minesite sustainingd

     40       22       80  %      90       65       38  %      96  

Projectd

     3       31       (89 )%      165       275       (40 )%      198  

Cost of sales ($/oz)

     945       829       14  %      762       659       16  %      657  

Total cash costs ($/oz)b

     681       570       19  %      515       351       47  %      300  

All-in sustaining costs ($/oz)b

     1,012       772       31  %      651       430       51  %      380  

All-in costs ($/oz)b

     1,039       1,020       2  %      854       649       31  %      512  

 

  a.

On July 1, 2019, Cortez was contributed to Nevada Gold Mines, a joint venture with Newmont. As a result, the amounts presented are on a 100% basis up until June 30, 2019, and on a 61.5% basis thereafter.

  b.

These are non-GAAP financial performance measures with no standardized meaning under IFRS and therefore may not be comparable to similar measures presented by other issuers. For further information and a detailed reconciliation of each non-GAAP measure used in this section of the MD&A to the most directly comparable IFRS measure, please see pages 63 to 85 of this MD&A.

  c.

Represents EBITDA divided by revenue.

  d.

Presented on a cash basis as a result of adopting IFRS 16 Leases starting in the first quarter of 2019. Capital expenditures for 2018 and 2017 are presented on an accrued basis. Please refer to page 2 of this MD&A for more details.

  e.

Amounts presented exclude capitalized interest.

 

On July 1, 2019, Barrick’s Cortez operations were contributed to Nevada Gold Mines, a joint venture with Newmont. As a result, the amounts presented represent Cortez on a 100% basis up until June 30, 2019 and on a 61.5% basis thereafter.

Safety and Environment

There were no LTIs at Cortez during the quarter which resulted in an LTIFR of zero per million hours, which is consistent with the prior quarter. No Class 1 environmental incidents occurred during the quarter.

Financial Results

Q4 2019 compared to Q3 2019

Cortez’s income for the fourth quarter of 2019 was 10% lower than the prior quarter primarily due to higher cost of sales per ounce5, partially offset by higher sales volume resulting from higher gold production.

Gold production in the fourth quarter of 2019 was 6% higher compared to the prior quarter, primarily due to increased underground ore mined and then processed at the Carlin Roasters combined with higher recoveries, partially offset by lower heap leach production. The routing of Cortez underground ore through Mill 6 at Carlin was a synergy unlocked by the creation of Nevada Gold Mines.

 

 

BARRICK YEAR-END 2019   27   MANAGEMENT’S DISCUSSION AND ANALYSIS


Cost of sales per ounce5 and total cash costs per ounce4 in the fourth quarter of 2019 were 14% and 19% higher, respectively, versus the prior quarter primarily due to sales mix and ore routing. In the third quarter of 2019, the remaining higher grade, low-cost stockpiles from the Cortez Hills Open Pit (“CHOP”) were processed. In the fourth quarter of 2019, all-in sustaining costs per ounce4 increased by 31% compared to the prior quarter due to higher cash costs per ounce4 together with higher minesite sustaining capital expenditure.

Capital expenditures in the fourth quarter of 2019 decreased by 19% compared to the prior quarter due to lower project capital expenditures, partially offset by higher minesite sustaining capital expenditures. The lower project capital expenditures relative to the third quarter of 2019 were due to decreases at the Cortez Hills Underground Rangefront project and the change in classification of the Crossroads open pit project from project to sustaining capital. At the Rangefront project, the contractor was removed from site in the fourth quarter due to sub-standard work and safety performance and we are in the process of finding a replacement. The Crossroads open pit project transitioned to production status late in the third quarter from pre-production in the second quarter. Accordingly, higher minesite sustaining capital expenditures relative to the third quarter of 2019 is attributed to this transition.

2019 compared to 2018

Cortez’s income for 2019 reflects our 61.5% interest following the formation of Nevada Gold Mines as described above. Income for Cortez for the same prior year period represents Barrick’s 100% share of the Cortez operations. In addition to this impact, Cortez’s income was impacted by a decrease in sales volume reflecting lower gold production and higher cost of sales per ounce5 partially offset by the higher realized gold price4.

Income and EBITDA4,a

 

LOGO

a The results are on a 100% basis from January 1, 2017 to June 30, 2019 and on a 61.5% basis from July 1, 2019 onwards.

Gold production for 2019 was 37% lower, primarily due to the reduction in Barrick’s interest in Cortez from July 1, 2019 combined with lower grades mined and processed from CHOP as mining was completed in the second quarter of 2019. This was partially offset by higher leach production, and a reduction of gold in circuit. Leach production has increased as mining and placement from Crossroads ramped up in the current year and additional tonnes were placed under solution. The lower gold in circuit balances were also related to the completion of mining at CHOP as the high-grade CHOP ore in circuit was drawn down by the end of the second quarter of 2019.

Productiona

(000s ounces)

 

LOGO

a The results are on a 100% basis from January 1, 2017 to June 30, 2019 and on a 61.5% basis from July 1, 2019 onwards.

Cost of sales per ounce5 for 2019 increased by 16%, due to higher total cash costs per ounce4 offset slightly by lower depreciation expense as mined ounce production has dropped significantly with the transition away from mining predominantly ore in the CHOP pit to waste stripping at Crossroads. Total cash costs per ounce4 was 47% higher than the prior year due to lower grades as mining from CHOP was completed in the second quarter of 2019 combined with increased royalty costs and higher tonnes hauled. Royalties have increased as production shifts from CHOP to Crossroads, which carries a higher royalty rate. For 2019, all-in sustaining costs per ounce4 increased by 51% compared to 2018, due to higher total cash costs per ounce4 and increased sustaining capital expenditures.

Cost of Sales5, Total Cash Costs4 and AISC4

($ per ounce)

 

LOGO

Capital expenditures for 2019 were 25% lower than the prior year due to the reduction in Barrick’s interest in Cortez from 100% to 61.5% from July 1, 2019. In addition to this, the lower project capital expenditures were due to decreasing Crossroads dewatering activities and Rangefront project expenditures. Sustaining capital increased over the prior year due to Area 30 leach pad expansion work.

2019 compared to Outlook

Gold production for 2019 of 801 thousand ounces was at the high end of the guidance range of 760 to 810 thousand ounces. Cost of sales per ounce5 for 2019 was $762, which was lower than the guidance range of $810 to $850 per ounce. Total cash costs per ounce4 and all-in sustaining costs per ounce4 of $515 and $651, respectively, also came in better than guidance, with ranges of $530 to $580 per ounce and $670 to $710 per ounce, respectively.

 

 

BARRICK YEAR-END 2019   28   MANAGEMENT’S DISCUSSION AND ANALYSIS


Turquoise Ridge (61.5%)a, Nevada USA

 

Summary of Operating and Financial Data    For the three months ended     For the years ended  
      12/31/19     9/30/19     % Change     12/31/19     12/31/18     % Change     12/31/17  

Total tonnes mined (000s)

     3,819       4,811       (21 )%      9,001       670       1,243  %      643  

Open pit ore

     608       732       (17 )%      1,340       n/a       n/a       n/a  

Open pit waste

     2,995       3,892       (23 )%      6,887       n/a       n/a       n/a  

Underground

     216       187       16  %      774       670       16  %      643  

Average grade (grams/tonne)

              

Open pit mined

     1.80       1.01       78  %      1.37       n/a       n/a       n/a  

Underground mined

     14.09       13.28       6  %      14.44       15.00       (4 )%      15.45  

Processed

     4.28       3.78       13  %      5.62       14.79       (62 )%      15.01  

Ore tonnes processed (000s)

     934       950       (2 )%      2,201       604       264  %      472  

Oxide Mill

     114       107       6  %      221       n/a       n/a       n/a  

Autoclave

     660       506       30  %      1,483       604       146  %      472  

Heap leach

     160       337       (53 )%      497       n/a       n/a       n/a  

Recovery Rate

     86     89     (3 )%      89     93     (4 )%      92

Oxide Mill

     87     87     0  %      87     n/a       n/a       n/a  

Autoclave

     86     89     (3 )%      89     93     (4 )%      92

Gold produced (000s oz)

     111       82       35  %      335       268       25  %      211  

Oxide Mill

     3       5       (40 )%      8       n/a       n/a       n/a  

Autoclave

     105       74       42  %      321       268       20  %      211  

Heap leach

     3       3       (11 )%      6       n/a       n/a       n/a  

Gold sold (000s oz)

     99       96       3  %      356       262       36  %      222  

Revenue ($ millions)

     152       142       7  %      504       331       52  %      280  

Cost of sales ($ millions)

     95       103       (8 )%      300       206       46  %      159  

Income ($ millions)

     56       38       47  %      201       126       59  %      119  

EBITDA ($ millions)b

     90       81       12  %      293       154       90  %      147  

EBITDA marginc

     59     57     4  %      58     47     25  %      53

Capital expenditures ($ millions)d

     24       26       (7 )%      85       62       37  %      36  

Minesite sustainingd

     18       18       1  %      50       20       149  %      32  

Projectd

     6       8       (25 )%      35       42       (17 )%      4  

Cost of sales ($/oz)

     971       1,077       (10 )%      846       783       8  %      715  

Total cash costs ($/oz)b

     625       622       0  %      585       678       (14 )%      589  

All-in sustaining costs ($/oz)b

     800       840       (5 )%      732       756       (3 )%      733  

All-in costs ($/oz)b

     863       927       (7 )%      834       916       (9 )%      753  

 

  a.

Prior to July 1, 2019, Barrick owned 75% of Turquoise Ridge with our joint venture partner, Newmont, owning the remaining 25%. Turquoise Ridge was proportionately consolidated on the basis that the joint venture partners that have joint control have rights to the assets and obligations for the liabilities relating to the arrangement. The figures presented in this table are based on our 75% interest in Turquoise Ridge until June 30, 2019. On July 1, 2019, Barrick’s 75% interest in Turquoise Ridge and Newmont’s 100% interest in Twin Creeks and 25% interest in Turquoise Ridge were contributed to Nevada Gold Mines. Starting July 1, 2019, the results represent our 61.5% share of Turquoise Ridge and Twin Creeks, now collectively referred to as Turquoise Ridge.

  b.

These are non-GAAP financial performance measures with no standardized meaning under IFRS and therefore may not be comparable to similar measures presented by other issuers. For further information and a detailed reconciliation of each non-GAAP measure used in this section of the MD&A to the most directly comparable IFRS measure, please see pages 63 to 85 of this MD&A.

  c.

Represents EBITDA divided by revenue.

  d.

Presented on a cash basis as a result of adopting IFRS 16 Leases starting in the first quarter of 2019. Capital expenditures for 2018 and 2017 are presented on an accrued basis. Please refer to page 2 of this MD&A for more details.

 

Barrick owned 75% of Turquoise Ridge through to the end of the second quarter of 2019, with our joint venture partner, Newmont, owning the remaining 25%. The figures presented in this table are based on our 75% interest in Turquoise Ridge until June 30, 2019. On July 1, 2019, Barrick’s 75% interest in Turquoise Ridge and Newmont’s Twin Creeks and 25% interest in Turquoise Ridge were contributed to Nevada Gold Mines. Starting July 1, 2019, our results represent our 61.5% share of Turquoise Ridge and Twin Creeks, now referred to as Turquoise Ridge. As a result of this transaction, from July 1, 2019, Turquoise Ridge includes the Twin Creeks open pit operations resulting in considerably higher tonnes mined at

a lower average grade of ore processed. It also includes the Twin Creeks processing operations and heap leach facility contributed by Newmont.

Safety and Environment

There were two LTIs during the quarter, which resulted in an LTIFR of 2.57 per million hours worked versus 1.41 the previous quarter. Site leadership teams continue to focus their field engagements to reinforce safe work requirements and reduce hand injury occurrences. No Class 1 environmental incidents occurred during the quarter.

 

 

BARRICK YEAR-END 2019   29   MANAGEMENT’S DISCUSSION AND ANALYSIS


Financial Results

Q4 2019 compared to Q3 2019

Turquoise Ridge’s income for the fourth quarter of 2019 increased by 47% mainly due to lower cost of sales per ounce5 in conjunction with higher sales volumes reflecting higher production.

Gold production in the fourth quarter of 2019 was 35% higher than the prior quarter, primarily due to increased autoclave throughput in addition to the processing of higher grade ore. The higher autoclave throughput is due to higher availability following a planned shutdown in the prior quarter.

Cost of sales per ounce5 in the fourth quarter of 2019 was 10% lower than the prior quarter. Inventory that was subject to a positive remeasurement to fair value upon the formation of Nevada Gold Mines on July 1, 2019 was largely sold and reflected in cost of sales for the third quarter of 2019.

Total cash costs per ounce4 was in line with the prior quarter. All-in sustaining costs per ounce4 decreased by 5% compared to the prior quarter primarily reflecting lower minesite sustaining capital expenditures on a per ounce sold basis.

Capital expenditures in the fourth quarter of 2019 decreased by 7% compared to the prior quarter primarily due to lower project spend on the Third Shaft project.

2019 compared to 2018

Turquoise Ridge’s income for 2019 reflects our 61.5% interest in Nevada Gold Mines and is inclusive of income from Newmont’s former Twin Creeks operations and the Turquoise Ridge operations from July 1, 2019. Income for Turquoise Ridge for the first six months of 2019 and the twelve months of 2018 represents Barrick’s 75% interest in the Turquoise Ridge operations prior to the formation of Nevada Gold Mines. Consequently, this was the primary driver of the 59% increase in Turquoise Ridge’s income compared to 2018.

Income and EBITDA4,a

 

LOGO

a The results represent Turquoise Ridge on a 75% basis from January 1, 2017 to June 30, 2019 and the combined results of Turquoise Ridge and Twin Creeks on a 61.5% basis from July 1, 2019 onwards.

Gold production for 2019 was 25% higher compared to the prior year, primarily due to the inclusion of Newmont’s former Twin Creeks operations from July 1, 2019. Production was also higher in the first six months of 2019 relative to the first six months of 2018 due to higher ore tonnes mined at better grades. This was partially offset by the reduction in Barrick’s

interest in the Turquoise Ridge operations from 75% to 61.5% from July 1, 2019.

Productiona

(000s ounces)

 

LOGO

a The results represent Turquoise Ridge on a 75% basis from January 1, 2017 to June 30, 2019 and the combined results of Turquoise Ridge and Twin Creeks on a 61.5% basis from July 1, 2019 onwards.

Cost of sales per ounce5 in 2019 was 8% per ounce higher than the prior year mainly reflecting an increase in depreciation resulting from the restatement of assets to fair value on the formation of Nevada Gold Mines as explained above. Total cash costs per ounce4 was 14% lower than the prior year due to more high-grade underground ore being processed and the elimination of the Toll Milling Agreement as a result of the formation of Nevada Gold Mines. In 2019, all-in sustaining costs per ounce4 decreased by 3% compared to the prior year due to lower total cash costs per ounce4.

Cost of Sales5, Total Cash Costs4 and AISC4

($ per ounce)

 

LOGO

In 2019, capital expenditures increased by 37% compared to the prior year. The increase was due to higher minesite sustaining capital as a result of combining Turquoise Ridge with Twin Creeks, offset by lower project capital spend for the Third Shaft project.

2019 compared to Outlook

Gold production in 2019 of 335 thousand ounces was within the guidance range of 330 to 370 thousand ounces. Cost of sales per ounce5 and total cash costs per ounce4 of $846 and $585, respectively, were also within the guidance ranges of $800 to $850 per ounce and $550 to $600 per ounce, respectively. All-in sustaining costs per ounce4 of $732 was slightly over the guidance range of $680 to $730 per ounce.

 

 

BARRICK YEAR-END 2019   30   MANAGEMENT’S DISCUSSION AND ANALYSIS


Other Nevada Gold Mines

 

Summary of Operating and Financial Data              For the three months ended  
      12/31/19      9/30/19  
      Gold
produced
(000s oz)
     Cost of
sales
($/oz)
    

Total
cash
costs

($/oz)a

     All-in
sustaining
costs
($/oz)a
     Capital
Expend-
ituresb
     Gold
produced
(000s oz)
     Cost of
sales
($/oz)
    

Total
cash
costs

($/oz)a

    

All-in
sustaining
costs

($/oz)a

     Capital
Expend-
ituresb
 

Phoenix (61.5%)c

     31        2,025        902        1,034        5        25        2,186        1,010        1,622        9  

Long Canyon (61.5%)c

     34        1,026        317        657        10        24        1,170        353        714        6  

 

  a.

These are non-GAAP financial performance measures with no standardized meaning under IFRS and therefore may not be comparable to similar measures presented by other issuers. For further information and a detailed reconciliation of each non-GAAP measure used in this section of the MD&A to the most directly comparable IFRS measure, please see pages 63 to 85 of this MD&A.

  b.

Includes both minesite sustaining and project capital expenditures.

  c.

These sites were acquired as a result of the formation of Nevada Gold Mines on July 1, 2019.

 

Phoenix (61.5%)

Gold production in the fourth quarter of 2019 for Phoenix was 24% higher compared to the prior quarter, primarily due to a more optimized ore blend leading to better mill recoveries. Cost of sales per ounce5 in the fourth quarter of 2019 was 7% lower than the prior quarter due to an improvement in production and sales. Third quarter attributable sales were impacted by the timing of the first gold concentrate sale following the formation of Nevada Gold Mines. In the fourth quarter of 2019, all-in sustaining costs per ounce4 decreased by 36% compared to the prior quarter primarily due to the increase in ounces sold and higher copper by-product credits offset slightly by increased sustaining capital expenditures. Sustaining capital expenditures decreased in the fourth quarter of 2019 due to timing of the tailings damn construction.

Compared to our outlook, gold production of 56 thousand ounces in 2019 was within the guidance range of 50 to 70 thousand ounces. Cost of sales per ounce5 of $2,093 was better than the guidance range of $2,250 to $2,300 per ounce. Total cash costs per ounce4 of $947 was at the lower end of the guidance range of $940 to $990 per ounce, while all-in sustaining costs per ounce4of $1,282 was above the guidance range of $1,120 to $1,150 per ounce.

 

Long Canyon (61.5%)

Gold production for Long Canyon in the fourth quarter of 2019 was 42% higher compared to the third quarter of 2019, primarily due to additional cells placed under leach, leading to improved recoveries. Cost of sales per ounce5 in the fourth quarter of 2019 was 12% lower than the prior quarter, mainly due to higher ounces sold driven by higher production. All-in sustaining costs per ounce4 decreased by 8% compared to the prior quarter, primarily due to higher production and sales driving lower total cash costs per ounce4 offset slightly by increased sustaining capital expenditures. Sustaining capital expenditures increased in the fourth quarter due to an increase in capitalized waste mined from Cut 7 of the open pit. Permitting for the open pit and underground expansions at Long Canyon is underway, though currently only the open pit is included in the life of mine plan.

Gold production in 2019 of 58 thousand ounces was above the guidance range of 40 to 50 thousand ounces. Cost of sales per ounce5 of $1,088 was better than the guidance range of $1,100 to $1,150 per ounce. Total cash costs per ounce4 of $333 was within the guidance range of $300 to $350 per ounce, while all-in sustaining costs per ounce4 of $681 was significantly better than the guidance range of $920 to $950 per ounce.

 

 

BARRICK YEAR-END 2019   31   MANAGEMENT’S DISCUSSION AND ANALYSIS


Pueblo Viejo (60% basis)a, Dominican Republic

 

Summary of Operating and Financial Data    For the three months ended     For the years ended  
      12/31/19     9/30/19     % Change     12/31/19     12/31/18     % Change     12/31/17  

Open pit tonnes mined (000s)

     5,729       5,817       (2 )%      24,732       24,063       3  %      23,430  

Open pit ore

     3,083       1,767       74  %      8,085       9,418       (14 )%      13,514  

Open pit waste

     2,646       4,050       (35 )%      16,647       14,645       14  %      9,916  

Average grade (grams/tonne)

              

Open pit waste

     2.92       2.98       (2 )%      2.76       2.78       (1 )%      3.07  

Processed

     4.20       4.05       4  %      3.91       4.04       (3 )%      4.57  

Autoclave ore tonnes processed (000s)

     1,464       1,182       24  %      5,164       5,008       3  %      4,791  

Recovery Rate

     89     90     (1 )%      89     89     0  %      92

Gold produced (000s oz)

     179       139       29  %      590       581       2  %      650  

Gold sold (000s oz)

     174       136       28  %      584       590       (1 )%      637  

Revenue ($ millions)

     240       213       13     843       798       6  %      850  

Cost of sales ($ millions)

     114       109       5     435       443       (2 )%      445  

Income ($ millions)

     125       104       20     402       342       18  %      395  

EBITDA ($ millions)b

     159       133       20     522       457       14  %      538  

EBITDA marginc

     66     62     6  %      62     57     8  %      63

Capital expenditures ($ millions)d

     14       16       (13 %)      64       87       (26 )%      69  

Minesite sustainingd

     14       16       (13 %)      64       87       (26 )%      69  

Projectd

     0       0       0     0       0       0  %      0  

Cost of sales ($/oz)

     660       807       (18 %)      747       750       0  %      699  

Total cash costs ($/oz)b

     422       504       (16 %)      471       465       1  %      405  

All-in sustaining costs ($/oz)b

     517       631       (18 %)      592       623       (5 )%      525  

All-in costs ($/oz)b

     525       636       (17 %)      600       623       (4 )%      525  

 

  a.

Pueblo Viejo is accounted for as a subsidiary with a 40% non-controlling interest. The results in the table and the discussion that follows are based on our 60% share only.

  b.

These are non-GAAP financial performance measures with no standardized meaning under IFRS and therefore may not be comparable to similar measures presented by other issuers. For further information and a detailed reconciliation of each non-GAAP measure used in this section of the MD&A to the most directly comparable IFRS measure, please see pages 63 to 85 of this MD&A.

  c.

Represents EBITDA divided by revenue.

  d.

Presented on a cash basis as a result of adopting IFRS 16 Leases starting in the first quarter of 2019. Capital expenditures for 2018 and 2017 are presented on an accrued basis. Please refer to page 2 of this MD&A for more details.

 

Safety and Environment

There were no LTIs at Pueblo Viejo during the quarter which resulted in an LTIFR of zero per million hours worked, consistent with the previous quarter. No Class 1 environmental incidents were reported during the quarter.

Financial Results

Q4 2019 compared to Q3 2019

Pueblo Viejo’s income for the fourth quarter of 2019 was 20% higher than the third quarter of 2019 due to higher sales volume and lower cost of sales per ounce5.

Gold production for the fourth quarter of 2019 was 29% higher than the prior quarter mainly due to higher throughput following optimization work resulting in record oxidized sulfur tonnes as well as the completion of scheduled maintenance that occurred in the third quarter of 2019.

Cost of sales per ounce5 and total cash costs per ounce4 for the fourth quarter of 2019 were 18% and 16% lower, respectively, than the prior quarter primarily reflecting the impact of higher sales volume that was driven by the increase in grade and throughput. For the fourth quarter of 2019, all-in sustaining costs per ounce4 decreased by 18% mainly reflecting lower total cash costs per ounce4 and lower minesite sustaining capital expenditures.

Capital expenditures for the fourth quarter of 2019 decreased by 13% compared to the prior quarter, primarily due to lower expenditures at the Llagal Tailings Storage Facility and the completion of the replacement of oxygen plant motors in the third quarter of 2019.

2019 compared to 2018

Pueblo Viejo’s income for 2019 was 18% higher than the prior year due to higher realized gold prices4, while sales volume and cost of sales per ounce5 remained relatively consistent.

Income and EBITDA4

 

LOGO

Gold production for 2019 was 2% higher than the prior year mainly due to higher tonnes processed, partially offset by lower grade.

 

 

BARRICK YEAR-END 2019   32   MANAGEMENT’S DISCUSSION AND ANALYSIS


Production

(000s ounces)

 

 

LOGO

Cost of sales per ounce5 and total cash costs per ounce4 for 2019 were in line and increased by 1%, respectively, compared to the prior year primarily reflecting the impact of slightly lower sales volume. For 2019, all-in sustaining costs per ounce4 decreased by 5% mainly reflecting lower minesite sustaining capital expenditures, partially offset by slightly higher total cash costs per ounce4.

Cost of Sales5, Total Cash Costs4 and AISC4

($ per ounce)

 

 

LOGO

 

Capital expenditures for 2019 decreased by 26% compared to the prior year, primarily due to lower capitalized stripping from the Monte Negro and Cumba pits compared to a higher proportion of tonnes mined in the prior year from the Moore pit in accordance with the mine plan. This was combined with a decrease in tailings storage facility construction activities during the year.

2019 compared to Outlook

Gold production in 2019 of 590 thousand ounces was at the high end of the guidance range of 550 to 600 thousand ounces. Cost of sales per ounce5 of $747 was better than the guidance range of $780 to $830 per ounce. Total cash costs per ounce4 of $471 was at the low end of the guidance range of $465 to $510 per ounce. All-in sustaining costs per ounce4 of $592 was better than the guidance range of $610 to $650 per ounce.

 

 

BARRICK YEAR-END 2019   33   MANAGEMENT’S DISCUSSION AND ANALYSIS


Loulo-Gounkoto (80% basis)a, Mali

 

Summary of Operating and Financial Data    For the three months ended     For the years ended  
      12/31/19     9/30/19     % Change     12/31/19     12/31/18b     % Change     12/31/17b  

Total tonnes mined (000s)

     7,250       8,115       (11 )%      32,192       30,926       4  %      27,972  

Open pit ore

     1,080       286       278  %      2,726       3,484       (22 )%      1,875  

Open pit waste

     5,566       7,244       (23 )%      27,183       25,278       8  %      23,925  

Underground

     604       585       3  %      2,283       2,164       5  %      2,172  

Average grade (grams/tonne)

              

Open pit mined

     5.69       4.06       40  %      4.83       3.10       56  %      4.10  

Underground mined

     5.14       5.09       1  %      4.67       5.10       (8 )%      6.20  

Processed

     5.64       5.14       10  %      4.90       4.31       14  %      4.98  

Ore tonnes processed (000s)

     886       1,013       (13 )%      3,945       4,123       (4 )%      3,934  

Recovery rate

     89     92     (3 )%      92     92     0  %      93

Gold produced (000s oz)

     144       153       (6 )%      572       528       8  %      584  

Gold sold (000s oz)

     144       155       (7 )%      575       534       8  %      579  

Revenue ($ millions)

     214       230       (7 )%      806        

Cost of sales ($ millions)

     149       159       (7 )%      601        

Income ($ millions)

     65       64       1  %      190        

EBITDA ($ millions)c

     123       125       (1 )%      426        

EBITDA margind

     58     54     6  %      53      

Capital expenditures ($ millions)

     38       49       (22 )%      136        

Minesite sustaining

     37       49       (24 )%      133        

Project

     1       0       100  %      3        

Cost of sales ($/oz)

     1,037       1,018       2  %      1,044        

Total cash costs ($/oz)c

     631       630       0  %      634        

All-in sustaining costs ($/oz)c

     917       966       (5 )%      886        

All-in costs ($/oz)c

     922       971       (5 )%      891                          

 

  a.

Barrick owns 80% of Société des Mines de Loulo SA and Société des Mines de Gounkoto with the Republic of Mali owning 20%. Loulo-Gounkoto is accounted for as a subsidiary with a 20% non-controlling interest on the basis that Barrick controls the asset. The results in the table and the discussion that follows are based on our 80% share inclusive of the impact of the purchase price allocation resulting from the Merger.

  b.

These results did not form a part of the Barrick consolidated results as this site was acquired as a result of the Merger. As a result, operational statistics are presented for reference purposes only.

  c.

These are non-GAAP financial performance measures with no standardized meaning under IFRS and therefore may not be comparable to similar measures presented by other issuers. For further information and a detailed reconciliation of each non-GAAP measure used in this section of the MD&A to the most directly comparable IFRS measure, please see pages 63 to 85 of this MD&A.

  d.

Represents EBITDA divided by revenue.

 

Safety and Environment

There were no LTIs during the fourth quarter at Loulo-Gounkoto, which was in line with the previous quarter. No Class 1 environmental incidents were recorded.

Financial Results

Q4 2019 compared to Q3 2019

Loulo-Gounkoto’s income for the fourth quarter of 2019 was in line with the prior quarter.

Gold production for the fourth quarter of 2019 was 6% lower than the prior quarter mainly due to lower plant throughput due to a girth gear failure, partially offset by higher feed grade from both Yalea and the Gounkoto South Pit. The girth gear was repaired in December 2019.

Cost of sales per ounce5 for the fourth quarter of 2019 was 2% higher than the prior quarter primarily due to higher depreciation per ounce. Total cash costs per ounce4 was in line with the prior quarter as the impact of lower throughput was largely offset by the impact of the higher grade processed. For the fourth quarter of 2019, all-in sustaining costs per ounce4 decreased by 5% compared to the prior quarter

reflecting lower sustaining capital expenditures from reduced capitalized stripping.

Capital expenditures for the fourth quarter of 2019 decreased by 22% compared to the prior quarter, primarily due to lower capitalized stripping costs.

2019

Loulo-Gounkoto’s income for 2019 was $190 million.

Gold production in 2019 was 8% higher compared to the same prior year period, primarily due to higher feed grade from Yalea and the Gounkoto South Pit.

Production

(000s ounces)

 

 

LOGO

 

 

                                                                                                                                                                                                                                                                                                                                                                                                                                                       

 

BARRICK YEAR-END 2019   34   MANAGEMENT’S DISCUSSION AND ANALYSIS


Cost of sales per ounce5 and total cash costs per ounce4 in 2019 were $1,044 and $634, respectively. Cost of sales per ounce5 and total cash costs per ounce4 were positively impacted primarily by the higher feed grade to the mill. For 2019, all-in sustaining costs4 were $886 per ounce.

Cost of Sales5, Total Cash Costs4 and AISC4

($ per ounce)

 

 

LOGO

Capital expenditures in 2019 were $136 million, consisting of underground development and drilling in Gara and Yalea, as well as sustaining capital related to our solar power project at Loulo, capitalized drilling and expansion of the TSF.

2019 compared to Outlook

Gold production in 2019 of 572 thousand ounces was marginally above the guidance range of 520 to 570 thousand ounces. Cost of sales per ounce5 of $1,044 was higher than the guidance range of $880 to $930 per ounce. Total cash costs per ounce4 and all-in sustaining costs per ounce4 of $634 and $886, respectively, were also marginally above the guidance ranges of $575 to $625 per ounce and $810 to $850 per ounce, respectively.