Barrick Gold Corporation (NYSE:GOLD) Q4 2022 Earnings Call Transcript

Barrick Gold Corporation (NYSE:GOLD) Q4 2022 Earnings Call Transcript February 15, 2023

Operator: Ladies and gentlemen, thank you for standing by, this is the event operator. Welcome to Barrick’s Results Presentation for the Fourth Quarter and Full Year of 2022. Following today’s presentation, a question-and-answer session will be conducted. As a reminder, this event is being recorded and a replay will be available on Barrick’s website later today, February 15th, 2023. I would now like to turn you over to Mark Bristow, President and CEO of Barrick. Please go ahead, sir.

Mark Bristow: Thank you very much, ma’am and a very good morning and good afternoon, ladies and gentlemen, for those here in Toronto and elsewhere across the globe. As you know, we are going to be talking about our quarter four and 2022 results today. And looking back, the past year didn’t turn out the way anyone expected, I’m sure you’ll agree with me. But against the background of further geopolitical deterioration, there were some fundamental changes in our global financial landscape, which heralded, I believe, the end of the easy money era and a new regime of high interest rates, high inflation, and high risk. On a positive side and in response to this, gold was one of the better performing asset classes, and it was also good to see the copper price pick up.

While gold has always been the world’s most precious metal, copper has, I believe, become its most strategic. Barrick owns the industry’s biggest and best gold portfolio. We are the largest producer in the United States and Africa, and we’re steadily increasing our copper holdings. And as I plan to share with you today, our proven long-term strategy drives our ability to create and deliver value even in difficult times. I draw your attention to the formal cautionary statement, which can be reviewed in full on our website. In 2018, when John Thornton and I agreed on the merger of Barrick and Randgold, we spent a lot of time designing the strategy we would use to create a new industry leader. We wanted a company that would stand out from the crowd, driven by a fundamental promise to our stakeholders that we would do what we said we would do, and we have done exactly that.

Since then, we have produced around 19 million ounces of gold and 1.7 billion pounds of copper. Gold reserves have increased to 76 million ounces. We have returned $4 billion to shareholders, and at the same time, invested $7.5 billion into our rolling 10-year business plans and significantly deleveraged the company. Just in 2022, our copper resource has increased by more than 124% year-over-year, and we’ve set the stage for our growing exposure to this critical future-facing metal. On the portfolio optimization front, we have achieved a $500 million of annual synergies at the Nevada Gold Mines joint venture and have transformed the legacy Acacia assets in Tanzania, which now produced gold at a level that meets Tier 1 production status as a combined complex.

And finally, Moody’s upgraded our long-term credit rating to A3 from Baa1, the highest credit rating in the gold mining industry with a stable outlook. Turning to the results. The highlight of a busy year was the significant increase in our gold reserves and resources. As I’ve said before, our ability over time to more than replace the ounces we mine is one of the attributes that sets us apart from our peers, as it reinforces our sustainability and drives the growth of our 10-year production profile. In line with our strategy of increasing our exposure to copper, we’ve also more than doubled our copper resource base over the past year. Accordingly, we have started work on the reconstituted Reko Diq project in Pakistan, one of the world’s largest and highest quality undeveloped copper-gold deposits.

Added to this, our Pueblo Viejo gold mine in the Dominican Republic added approximately 11 million ounces of reserves and started with the commissioning of its plant expansion project. In Nevada, Goldrush advance to the next stage of its permitting process and Turquoise Ridge commissioned its third shaft. And on the organic growth front, our brownfields exploration continued to unlock potential around our existing assets, while greenfields work started to deliver some real future value. A standout was a very significant intersection at the Dorothy target at our Barrick’s Fourmile project, which I’ll tell you more about later. Despite a strong fourth quarter and the usual solid contribution from the Africa and Middle East region, gold production ended around 1% below guidance, mainly due to the need to fix some of the infrastructure at Turquoise Ridge and lower tonnes processed from Cortez.

Copper production was well within guidance with similar input prices expected in 2023, and a slightly better production profile, cost per ounce are expected to be at or slightly below our 2022 levels. As I pointed out, Barrick post one of the strongest balance sheets in the industry even after the return of another record $1.6 billion to shareholders in 2022 through dividends and share buybacks. At Barrick, we believe that in mining, the greatest value creation opportunities comes from discovery and development. Our preferred strategy is to find our answers, and if we buy, there should be a real future potential to add to what we have been buying. Thanks to the continuing success of our exploration programs, we’ve again grown our gold reserves over and above the annual depletion, delivering 6.7 million ounces of reserve growth year-on-year.

At the same time, attributable gold resources increased by 10%, and as I noted earlier, copper resources more than doubled. Despite the continuing improvement in the leading and lagging indicators, Barrick’s safety record has been badly blemished by tragic fatalities in 2022 and the year-to-date. All of these have been thoroughly investigated and the lessons we learned are being applied throughout the group. Significantly, most of these fatalities were suffered by our contractors, showing that our oversight of their safety systems and protocols needs to be tightened up, which we have prioritized as part of our onboarding and ongoing interaction with our business partners. Sustainability, ladies and gentlemen, is fundamental to Barrick’s business.

We believe that climate risks, poverty and biodiversity loss are inextricably linked and should be managed holistically. This approach is based on our commitment to supporting the socioeconomic development of our host countries and communities. Last year, we invested more than $35 million in community projects, decreased our greenhouse gas emissions by around 2%, in line with our plan, continued to expand our green energy sources and achieved a water use efficiency rate well above our target of 80%. Delivering for Barrick, sustainability starts at the mine planning stage and begins well before the mine is constructed. And at Reko Diq, we plan to show how mining can be at the forefront of the achievement of the UN Sustainable Development Goals.

This massive project is expected to have a transformative impact on the impoverish Chagai region in Balochistan, a province of Pakistan, creating thousands of jobs and stimulating the growth of the local economy, as we have done in our other projects across the developing world. While first production is targeted for 2028, we’ve scheduled the disbursement of social development funds and advanced royalties to the Balochistan province well in advance of first production, ensuring that its people will get an early return on their share of this new partnership. We’ve also started employing a local workforce and recently appointed a Balochistan national as our country manager. Moving on to our operational review. We’ll start in North America, as usual, where the relatively new leaderships for the region and Nevada Gold Mines are focusing on teamwork and effectiveness, with particular emphasis on agility, integration and rapid response to operational variations.

As I noted earlier, Carlin, Cortez and Turquoise Ridge were impacted some €“ by some unforeseen production issues, but staged a strong comeback in the fourth quarter. The commissioning of Turquoise Ridge third shaft is expected to deliver continued improved performance as the underground operation ramps up. Nevada is Barrick’s value foundation and the benefits of combining the assets in NGM are now becoming evident in the form of mineral resource growth and new discoveries, supporting future reserve conversion and adding to our rolling 10-year plan, some of which are shown on this map. The quality and prospectivity of this complex cannot be understated, and we are excited about the recent success we have achieved at Fourmile, Robertson and Carlin.

At Robertson, a maiden reserve of 1.6 million ounces was declared with further expansion potential between existing deposits and along strike. Within Carlin, we grew last year’s inaugural resource to 1 million ounces at North Leeville, while North Turf continues to expand towards North Leeville and Horsham is a new project is showing significant growth potential east of the Leeville level fault. And at drain when drilling has added to the resource base and increase our understanding of the controls on mineralization. As I’ve already touched on, Dorothy is a particularly exciting target some 100 meters north of the Fourmile resource. Drill holes have returned some impressive intersections, pointing to a new discovery, a significantly €“ and significantly increasing the potential of Fourmile as well as identifying further untested extensions to the mineralized trend that makes up both Goldrush and Fourmile resource and reserves to date.

These results represent some of the best intersections ever returned from the Fourmile-Goldrush trend and drilling will now focus on expanding the zone of high-grade mineralization. I have seen drawn steps like this before in my career, and they are what every exploration geologist lives for. As a reminder, when we formed Nevada joint venture with Newmont in 2019, the company agree that a number of assets would be retained by each company to be vended into the joint venture at a later date. On that point, Fourmile is 100% Barrick owned asset. And when you look at the resource potential, at the moment, it looks like around 15 million ounces in Goldrush and about four and so certainly, these intersections bring us, if you combine the two, with potential to go well over 20 million ounces.

And that’s the sort of €“ and when you look at the size of these deposits, they’re relatively small, as some of you all appreciate, in volume, but very big as far as ounces go. And so we’re super excited about this recent development. The exploration team in the North American region has driven some significant changes in exploration strategy in the last two years with a strong mandate, as we shared with you at our Investor Day, to expand beyond Nevada and evaluate copper opportunities as well. We restarted Barrick’s exploration in Canada, building a new team and portfolio, which has been a real success with our fifth option agreement near Hemlo being signed in the last quarter. In the US, in addition to the exciting brownfields targets, I’ll talk about next, the team has secured three further option agreements, both in the Great Basin area in Arizona and also in the Walker Lane epithermal district in Western Nevada, which are already returning early results.

A dedicated new business team is actively evaluating all opportunities across the continent as always with a clear focus on our strategic filters. Moving south to Latin America, where full year production was within guidance, despite recovery issues at Veladero. Pueblo Viejo ended the year with a record throughput, a major achievement considering the plant downtime required for the expansion. And the expansion project will extend the mine’s Tier 1 state as far into the future. Construction continues to advance and commissioning of the plant is currently underway. Meanwhile, permitting of the new tailings storage facility is expected to be completed around mid-year. The existing facility can handle tailings until the end of 2027, by which time we expect to have the new facility commissioned.

Veladero, which as you’ll recall, is high up in the Andes, was impacted by an extended winter and low leach recovery, which we are still wrestling with, but significantly improved production in the latter part of the year. The long-awaited cross-border link to the Chilean power grid was switched on in December and will reduce the mine’s energy costs as well as its carbon emissions. Veladero continues to suffer the effects of Argentina’s enduring currency crisis, reflected in higher labor and local contractor costs. And we remain engaged with both the federal government and the provincial government to try and find solutions. Our exploration team, on the other hand, has been developing our Latin American portfolio in line with our drive to expand our presence in this region, and we continue to progress a collection of early-stage projects.

Specifically, in the Veladero district, geological work is focused on targets with the potential to add to the Veladero mines life. We have a portfolio of untested targets close to the mine with some exciting results being returned from the Morrow Escondido target specifically, where drilling has confirmed and is extending a zone of strong mineralization near surface. We’ve also been looking closely at the prospective El Indio Belt, which hosts Veladero and other mines. Having completed a large data compilation and reinterpretation exercise, we’re now looking to evaluate the significant remaining target areas over the next three years. Moving across the world to Asia Pacific. Porgera continues its progress towards restart under a new ownership structure.

We expect Porgera to reopen in 2023, but the asset remains excluded from our guidance until such time as we have finalized all the agreements and outstanding matters. In Pakistan, we’ve started the environmental and social baseline studies for Reko Diq, and our inventory — in our introductory engagements with the local communities, I have been personally leading. Reko Diq is a fantastic example of the tremendous value that can be created by developing what is essentially a sound deposit rather than paying large acquisition costs and then having to fund future development obligations as is more common in today’s mining industry. The Africa and Middle East region delivered its usual solid performance with both gold and copper production well within guidance.

Its energetic new management team has been mitigating the impact of inflationary pressures, including through the ongoing solar expansion and battery installation projects at Loulo and Kibali. The Loulo-Gounkoto complex in Mali continues to improve production at lower per ounce costs. It’s expanded solar power and battery plant will replace 23 million liters of heavy fuel and reduce greenhouse gas emissions by a further 62,000 tonnes, when it is fully commissioned. The Loulo district is still one of our happiest hunting grounds. Across the river in the Bambadji permit, in Senegal, we’ve defined the 26-kilometer long highly prospective trend. We call it the Bambadji Main Shear Zone and identified nine key targets along which we will be drilling to test for Tier 1 scale systems.

This is in line with our strategy of testing the major structures on the Mali side of the district, which has delivered so much success. Moving now to the Democratic Republic of Congo, Kibali’s processing capacity was impacted by a rock winder change out, but that is now behind us. As already mentioned, the planned solar power and battery storage system will provide renewable backup during the dry season. Kibali’s KZ zone continues to reveal exciting potential and multiple targets are being progressed. We’re about to start testing the Western side of the KCD deposit, which could host additional high-grade mineralization shoots. Whilst the wary target shown on the long section here confirms the potential of the trend with high-grade mineralization being intersected.

Tanzania, as I pointed out in my introduction, is also a standout example of what Barrick is capable of achieving. And under three-and-a-half years, we’ve completely rebuilt the two derelict mines we took over from the previous operators, to a point where their combined production is at a Tier 1 level. We’ve also resolved some of Barrick’s most challenging legacy issues and regained our social license in a pioneering partnership with the government. You can see the results of our efforts here. We’ve got big plans for both mines, as mining is scheduled to commence at the new Gena open pit later in quarter one and we’ll leverage the investments made from our transition to owner mining, while the new underground fleet at Bulyanhulu continues to deliver on our ramp-up plans.

Turning now to our copper portfolio. The Lumwana mine in Zambia is another asset we’ve successfully revitalized and forms a key part of our growth plans. The past year’s production was at the upper half of the guidance range and our ongoing transition to owner mining, including the investment in a brand-new fleet has positioned Lumwana well for potential expansion and significant mine life extensions. The team is busy with the pre-feasibility study, which is expected to bring the development of a new super pit into our business plan by the end of 2024. Jabal Sayid in Saudi Arabia also delivered production and cost metrics that were within or better than guidance, together with reserve growth above depletion, adding another year to the mine life.

Zaldivar in Chile produced a consistent performance. In Saudi Arabia, we’re expanding our exploration presence in partnership with Ma’aden with two new greenfields projects, Jabal Sayid South and the Umm Ad Damar projects. Also at Jabal Sayid mine itself, strong results from deep drilling at Lode 1 are on track to support another year of reserve growth, while exploration results continue to confirm the further discovery potential within the mining lease. Demonstrating our commitment to strong shareholder returns, our 2022 payout was, as I pointed out in my introduction, a record $1.6 billion and included $424 million in share buybacks. We have introduced a new share buyback program of up to $1 billion for the next 12 months. Our returns to shareholders have not been at the expense of organic growth, as can be seen from this profile.

We continue to invest in and roll over our 10-year gold and copper plans, which demonstrates real organic growth in addition to a consistent base case production profile. Since the merger with Randgold, Barrick has consistently outperformed its peers in operational delivery and capital discipline. In line with our clear strategy, the delivery of our plans on the back of the quality of our portfolio, means we are in the privileged position of being able to generate significant free cash flow into the future. This ensures we can continue to invest in our future and provide returns to our shareholders. Embedded in our existing portfolio is an unmatched pipeline of quality projects in which we are steadily unlocking value, as we have done from the existing operating assets.

The ability to grow without having to buy is a significant differentiator, and I believe that in time, this embedded value in our portfolio will be recognized. Putting it all together presents the powerful case for investment in Barrick. There is no other mining company that has our proven long-term strategy. Our quality assets, our growth projects, our world-class team and our social license to operate earned through our mutually beneficial partnerships with our host countries. Our existing copper portfolio is a differentiator both in terms of the significant contribution it is already making and the ability to grow it further with banked long-term plans firmly in place and a world-class team, we have the ability to ensure we will be sustainable into the future.

Thank you, ladies and gentlemen, for your attention. And we have a team here in Toronto, and we’ll be happy to take any questions.

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Q&A Session

Operator: Thank you. We will now begin the telephone question-and-answer session. The first question comes from John Tumazos , a private investor. Please go ahead.

Unidentified Analyst: Thank you very much for all the great work. Looking ahead to a year from now, which technical studies do you anticipate getting done in 2023 to permit large additions to reserves and resources comparable to the Reko Diq, Lumwana and Pueblo Viejo additions at year-end 2022 as those multi-year programs bore fruit?

Mark Bristow : So thank you for that. I think the big focus for new growth is Nevada itself. That is more lumpy, because we define sort of expansion resource inventory initially, then we drill it out to an inferred resource. But really, we only bank it when we get underground and drill from underground. And we’ve got a lot of development going in — particularly in the Northern Leeville area, Horsham, as I pointed out. The REN project has now got a development drive going in. We’re excited about that. We think that’s got potential to more than double its current mineable resource and converted all to reserves. The Robertson project itself has a lot of upside. We’ve just started drilling that out now, and again, we are drilling some of the gap areas like the fence line in between the old Twin Creeks and Turquoise Ridge.

We’ve got some interesting work coming on the BBT corridor. As an interest, we call it BBT because it stands for Better Be There, and we’ve confirmed that it is there. So we’re now developing towards that target. So Nevada for us is really exciting. We’ve got some new exploration targets, which we’ll be sharing with you in due course across the Americas, the Northern Americas, and we’ve opened up new exploration projects in Dominican Republic. I’ve shared the work that we’re doing in around Veladero, which is important to ensure that we extend that life of mine. And then in Africa, we’ve got a significant opportunity that we’re now focused in on in the joint venture with Ma’aden on the Umm Ad Damar project, which is a very real copper target.

It’s got mineralization on surface. And again, we think that we can — well, we believe, we can model the VMS surface, geological service that connects these targets together to the Jabal Sayid deposits, which are high-grade copper deposits. Our team has now started consolidating ground in Tanzania. And again, Tanzania, as you know, has been largely neglected by the industry for more than a decade, and so we’re excited about that. We also have a big team focused in on Central African copper belt as well as the Eastern — the whole eastern part from €“ from Kibali down into the Victoria Gold Fields. So if you look at that — and that’s a product of us investing over the last four years in really lifting the game and quality of our exploration teams.

And I absolutely believe that we’re there today. And so we — like in Africa, because of the history of our work there, we can show you how we’re going to replace the reserves into this year, but we’re not going to replace all the reserves every year. But over time, like if you look back to 2018 in the merger, we’ve produced 19 million ounces of gold, and we’ve replaced it all plus. So — and that’s the difference. That’s why this industry, I’ve been repeatedly saying, doesn’t invest in its future. And then it has to go to the last resort of buying assets at whatever it can get in the market. And in my career, I’ve spent my entire career building organic opportunities, which is the only real way you make €“ you create value. And that doesn’t mean to say, we’re not shy of doing M&A.

And if you go back to the history of both Barrick and Randgold, Barrick built its business on M&A, but more importantly, on the work after the acquisition and adding significant value through the drill bit and so did Randgold. So these two companies now, one, has a good memory on how to do this properly, and I think we €“ you can say whatever you like, but the fact is, we’ve done it. We said we’d do it. We’ve done it, and we’ve now got a foundation on which to continue to deliver that value and that’s really the difference. And we’ll still look at opportunities when they arrive, but we don’t have to force an opportunity just because we haven’t been able to replace the gold we lined.

Operator: The next question comes from Martin Pradier with Veritas Investment Research. Please go ahead.

Martin Pradier: Thanks for the opportunity. I wonder on the cost of sales in Q4 was 1,324, up 8% versus 1,226 in Q3. And I wonder, why was given that you had bigger volumes, which usually tend to imply lower cost?

Mark Bristow: I’m going to pass you to Graham.

Graham Shuttleworth: Yeah. Martin, hi, it’s Graham Shuttleworth here. Martin, the key driver there really was depreciation, and so there is two aspects to that. One is, when you have increased volumes, then you generally tend to have increased depreciation because it’s linked to the production. And then also, when we do our annual tie-ins really for the purposes of the final financial audits, we do some adjustments that reflect the full year accounts, and so some of that comes through as additional depreciation in the fourth quarter.

Martin Pradier: Okay. Thank you.

Operator: The next question comes from Tanya Jakusconek with Scotiabank. Please go ahead.

Tanya Jakusconek: Good morning, everyone. Can you hear me?

Mark Bristow: Yes, Tanya. Hello. How are you?

Tanya Jakusconek: Good. Thank you. Thank you for taking my questions. I have three, if I could. The first one has to do with Porgera. I know I asked about Porgera all the time. Just, Mark, can you give us an update on where we are with Porgera? I know, on our last conference call and on Investor Day, we talked about a potential startup maybe as early as the end of Q1. We’re not too far off from there. So I just wondered if we’ve seen slippage, or how should we be thinking about Porgera this year? I know, it’s not in your guidance I’m just talking about the real?

Mark Bristow: And the other two?

Tanya Jakusconek: Oh, Sorry. My second one is to do with health and safety. Just wanted to understand what exactly is happening? Because there’s quite a number of fatalities in a very short period of time, and I’m just trying to understand like what changes have you implemented? And like what have you seen and what have you learned to move forward on this? And then my last one is to do with the copper side. Do you think, Mark, you have enough copper in your portfolio from what you have in your current portfolio for copper growth, or do you see other opportunities on the M&A front in copper?