Barrick Demonstrates Depth in Project Pipeline
Barrick Gold provided attendees at a company “Investors Day”
in Toronto in late February 2007 with status reports on nine projects it is developing
toward future mine production. In outlining Barrick’s strategy as to the
metals it will mine, CEO Greg Wilkins said, “While Barrick’s focus
is on being the world’s best gold mining company, our exploration program
and acquisitions have added opportunities with silver, copper, platinum, and other
metals, often in combination with gold. These other metals have the potential
to generate valuable cash flow to fund our core business. A good example is our
current operation at Zaldivar, which is an excellent, quality copper mine. Last
year, we issued copper bonds, raising $1 billion to further strengthen our balance
sheet and assist in the funding of our project pipeline.”
Here is a look
at Barrick’s current project development activity:
Cortez Hills, Nevada: The Cortez Hills project (Barrick 60%/Kennecott
Explorations Australia 40%) is currently in the permitting stage. Barrick anticipates
that construction will start in 2008, following receipt of regulatory approvals.
The Cortez Joint Venture (including the existing Pipeline mine and the Cortez
Hills project) has proven and probable gold reserves of 11.2 million oz.
Cortez
Hills production is expected to average in the range of 425,000 to 440,000 oz/y
of gold at total cash costs of $290 to $300/oz during its first 10 years of operation.
The ore will be processed at existing Pipeline facilities. Capital cost to develop
the project is estimated at about $490 million. (Note: All of Barrick’s
capital cost figures in this report exclude capitalized interest.)
During 2007,
Barrick plans to advance detailed engineering, procure a mining equipment fleet,
and conduct 200,000 ft of exploration drilling at Cortez Hills to follow up high-grade
intercepts encountered in 2006. Open-pit feasibility for the Cortez Hills project
was demonstrated in 2005. A pre-feasibility study for underground mining is in
progress, including driving of exploration declines that started in early 2006.
The underground study contemplates underhand cut-and-fill mining on 18 levels
at 72-ft spacing, with ramp access from the open-pit.
Pascua-Lama, Chile/Argentina: Pascua- Lama (100% Barrick) is
a cross-border project on the Chile-Argentina border 10 km north of Barrick’s
Veladero mine in Argentina. Barrick obtained approval of its Pascua-Lama environmental
impact assessment (EIA) from Chile in February 2006 and from Argentina in December
2006. The company has withdrawn its proposal to access some ore by transplanting
glacial ice and as a result has reduced the project’s gold reserves by about
1 million oz from 2005 levels.
During 2007, Barrick is focusing on completing
the permitting process, resolving outstanding fiscal issues, and exploring additional
promising targets in the district. Barrick has updated its Pascua- Lama capital
cost estimate to a range of $2.3 billion to $2.4 billion, up from $1.4 billion
to $1.5 billion in 2004. Key cost increases since 2004 have included labor in
Argentina, up 56%; steel, up from $1,550 to $2,641/mt; oil, up from $30 to $60/bbl;
and cement, up 60% in 2006 alone. While capital to develop the project will be
higher, estimated operating costs for the first five years of operation have been
reduced from $90 to $100/oz in 2004 to $40 to $50/oz currently.
Pascua-Lama now
has proven and probable reserves of 17 million oz of gold, accompanied by 689
million oz of silver and 565 million lb of copper. Plant throughput is planned
at 45,000 mt/d. Mine life is estimated at 23 years. Average annual production
during the first five years of operation is expected to total 750,000 to 775,000
oz of gold and 35 million oz of silver. Life-of-mine annual production is expected
to average about 600,000 oz of gold and 23 million oz of silver. Gold will be
recovered 70% as doré and 30% in concentrate.
Barrick conducted 200,000 m of exploration
drilling at Buzwagi in 2006
During 2006, Barrick completed a positive feasibility study for Buzwagi, along
with 40% of the project’s detailed engineering. It also conducted 200,000
m of exploration drilling on the property and identified further targets. Construction
will take about two years. The project’s close proximity to Barrick’s
Bulyanhulu and Tulawaka operations brings significant synergies, including shared
infrastructure, personnel, training, and equipment.
Pueblo Viejo, Dominican Republic: Proven and probable gold reserves
at Pueblo Viejo (Barrick 60%/Goldcorp 40%) have increased to 18.1 million oz from
13.4 million oz of gold as a result of successful exploration drilling. Barrick
has also added significant amounts of zinc (2.6 billion lb), copper (358 million
lb), and silver (88 million oz) to the project’s reserve totals. Mine life
is currently estimated at about 20 years.
Production at Pueblo Viejo is expected
to average between 575,000 and 600,000 oz/y of gold at total cash costs of $285
to $295/oz. Updated estimated capital costs are in the range of $2.1 billion to
$2.3 billion, up from Placer Dome’s 2005 estimate of $1.35 billion. The
increase reflects additions to project scope–such as new recovery circuits
for zinc, copper, and silver— as well as inflationary pressures.
Basic engineering
will be conducted through the course of 2007, and work will begin on detailed
engineering and applications for outstanding permits. The joint venture must notify
the government by February 2008 if it intends to proceed with construction of
the project.
Donlin Creek, Alaska: At Donlin Creek (Barrick 30% with a right
to earn up to 70%/NovaGold 70%), $87 million will be invested during 2007 to complete
the feasibility study by November and conduct 70,000 m of additional infill and
inpit drilling. The study envisions mine production of 50,000 mt/d from two openpits
at a strip ratio of 6:1. The anticipated construction timetable once permitting
is completed is about 2.5 years.
Donlin Creek’s measured and indicated gold
resources have increased from 14.8 million to 19.8 million oz as a result of conversion
of inferred ounces based on 2006 drilling results. Inferred resources have been
reduced to 1.6 million oz from 13.6 million oz as a result of conversion to measured
and indicated resources, reinterpretation of geology, and changes in economic
assumptions. Results from about half of 42,000 m of drilling completed in late
2006 are not reflected in these resource estimates.
Reko Diq, Pakistan: Reko Diq (Barrick 37.5%/Antofagasta 37.5%/Baluchistan
Development Authority 25%) has measured and indicated mineral resources of approximately
9.6 million oz of gold and 15.1 billion lb of copper and inferred resources of
11.7 million oz of gold and 11.5 billion lb of copper. The orebody is open at
depth, and exploration potential is considered significant.
An aggressive exploration
program of 25,000 m was conducted in 2006, and approximately 70,000 m of drilling
is planned for 2007. Also during 2007, the partners will complete a scoping study
to examine potential parameters that would lead to a feasibility study.
Sedibelo, South Africa: Sedibelo (Barrick earning an interest
of up to 50%/Bakgatla Ba-Kgafela Community) is a promising Bushveld Complex platinum
group metals exploration project. The project currently has measured and indicated
platinum resources of 3.8 million oz, inferred platinum resources of 5.3 million
oz, measured and indicated palladium resources of 1.7 million oz, and inferred
palladium resources of 2.5 million oz.
Barrick has completed 100,000 m of drilling
in the Sedibelo area over the past two years. During 2007, the company will spend
$26 million on exploration and completion of a pre-feasibility study.
Federova, Russia: Federova (Barrick 50% with a right to earn
up to 79%/CJCS-CEM 50%) is a platinum group metals project with measured and indicated
platinum resources of 6.5 million oz, platinum inferred resources of 0.6 million
oz, palladium measured and indicated resources of 2.1 million oz, and palladium
inferred resources of 2.6 million oz in a large, near-surface deposit. The project
is located in the Murmansk region of northwest of Russia. Barrick is the operator.
In 2007, Barrick plans to spend about $30 million for drilling and completion
of a pre-feasibility study.
Kabanga, Tanzania: Kabanga (Barrick 50%/Xstrata 50% and operator)
is a high-grade, high-tonnage nickel sulphide deposit. The estimated indicated
resource now totals 9.7 million mt, grading 2.37% nickel, while the estimated
inferred resource totals 36.3 million mt, grading 2.8% nickel. Xstrata recently
committed $95 million to advance a prefeasibility study. Diamond drilling is ongoing,
with 10 drills active on the property. A full feasibility study is slated for
completion by the latter part of 2008.
Exploration Spending: Barrick will spend
about $170 million on drilling and exploration during 2007–$69 million in
North America, $49 million in Australia and the Pacific, $29 million in South
America, and $23 million in Africa.