Barrick elaborates on new gold production

Barrick Gold Corp reports on progress on projects with the potential to contribute up to 1.1 Moz of gold production at Cortez, Goldrush, Lagunas Norte, and Turquoise Ridge. It has also initiated a PFS to evaluate the construction of an underground mine at Lama, on the Argentinean side of the Pascua-Lama project. Optimization work in Chile remains underway.

All projects go through a rigorous, independent peer review process led by the Evaluations team. At every stage of the investment review process Barrick challenges assumptions, incorporate improvements, and evaluate alternative development scenarios to maximize value creation. It measures its projects against a 15% hurdle rate, using a long-term gold price of $1,200/oz. They are then ranked, prioritized, and sequenced to optimize capital spending over time, allowing Barrick to anticipate and plan for funding requirements.

Cortez Underground Expansion – Expand underground mining into Deep South area, below currently permitted levels

Status: On track

The Deep South project, located within the Lower Zone of the Cortez Hills underground mine, remains on track to contribute average underground production of more than 300,000 oz/y between 2022 and 2026.

Development of the range front twin declines that will provide access to the lower zone of the mine began in the fourth quarter of 2016. For the first time, the mine is using a roadheader, rather than traditional drilling and blasting.

The PFS anticipated a cost of sales of $840/oz, and average all-in sustaining costs of $580/oz, for mining in the Deep South zone. Optimization work underway as part of the feasibility study has identified a number of opportunities to reduce these costs, including through the use of autonomous loading with a smart conveyance system, compared to a traditional conveyor system contemplated in the prefeasibility study.

Initial capital costs for the project remain unchanged, and are estimated to be $153 million. The expansion will enable the company to access approximately 1.9 Moz of Proven and Probable reserves in the Deep South zone, of which more than 80% are oxide.

Permitting was initiated in 2016 with the submission of an amendment to the current Mine Plan of Operations to the Bureau of Land Management. The permitting process is expected to take approximately three to four years, including the preparation of an Environmental Impact Statement. A record of decision is expected in 2019 or 2020. On this basis, dewatering and development work could begin as early as 2019 or 2020, with initial production from Deep South commencing in 2022 or 2023.

Barrick expects to complete the feasibility study by the end of 2017, which will focus on processing, backfill, and stope sequencing to optimize free cash flow.

Development of an underground mine at Goldrush

Status: On track

The Goldrush project continues to advance according to schedule, with the potential to become Barrick’s newest mine in Nevada by 2021. Average annual production for the first full five years of operation is expected to be approximately 450,000 oz of gold. Goldrush is expected to have a mine life of 21 years, with first production as early as 2021, and sustained production in 2023. The PFS anticipated a cost of sales of $800/oz, and average all-in sustaining costs of $620/oz; and Barrick has identified opportunities to further reduce operating costs. It continues to anticipate initial capital costs of approximately $1 billion.

Goldrush now has 9.6 Moz of Measured and Indicated gold resources, and 1.9 Moz of inferred gold resources.

During 2016, Barrick obtained the necessary permits for the construction of twin exploration declines. This will enable further drilling of the orebody in support of the feasibility study, including the conversion of measured and indicated resources to proven and probable reserves. The twin decline portal access site has been cleared, and work is expected to begin on the portal pad in the first quarter of 2017. Barrick is also carrying out additional surface exploration drilling in the Red Hill zone, the shallowest portion of the Goldrush deposit. Permitting is expected to commence in 2018, initiating a three- to four-year Environmental Impact Statement process. Underground development and production activities would commence following receipt of permits.

The Goldrush deposit remains open in a number of directions. In addition, the company continues to drill at the highly prospective Fourmile target, just north of the Goldrush discovery.

Lagunas Norte Life Extension Project, Peru – Optimization of carbonaceous oxide ore recovery, and installation of refractory ore processing circuit

Status: On track

Barrick is now evaluating a sequenced approach to extending the life of the Lagunas Norte mine by first optimizing the recovery of carbonaceous oxide ore contained in existing stockpiles, followed by extraction and processing of refractory ores.

The prefeasibility study for the Refractory Ore project contemplated an initial capital investment of approximately $640 million for the installation of a 6,000 t/d grinding-flotation-autoclave and carbon-in-leach processing circuit to treat refractory material. Once ramped up, the circuit has the potential to produce an average of 240,000 oz/y of gold at a cost of sales of approximately $1,080/oz and all-in sustaining costs of $625/oz.

Over the past year, Lagunas Norte has developed a process to treat certain carbonaceous oxide material already stockpiled at the mine through heap leaching, helping to bridge the gap between processing of oxide and refractory materials. This has created an opportunity to first construct a grinding and carbon-in-leach processing circuit that would treat the remaining carbonaceous oxide material at the site. This would allow Barrick to defer the construction of the flotation and pressure oxidation circuits required for treating refractory ore, optimizing the timing of capital expenditures.

Engineering for the grinding and carbon-in-leach circuits is underway at a feasibility level, and will be available for Investment Committee review by the end of 2017. Pending a positive investment decision and receipt of permits, construction of these facilities could begin in late 2018, with first production in 2020.

Following this, and subject to Environmental Impact Assessment approval, construction of the refractory ore processing facilities (flotation and pressure oxidation circuits) could begin as early as 2020, with first production in 2023.

Turquoise Ridge Underground Expansion – Expand underground mining through construction of an additional production shaft

Status: On track

Barrick continues to advance a phased approach to expansion at its 75% owned Turquoise Ridge mine that maximizes free cash flow from the operation, while optimizing the timing of capital spending for expansion. Through the development of a third shaft, the mine has the potential to increase output to an average of 500,000 oz/y (100% basis) from existing reserves at a cost of sales of $750-$800/oz, and all-in sustaining costs of about $625-$675/oz. The project would require capital expenditures of approximately $300-$325 million (100% basis) for additional underground development and shaft construction.

The first phase of expansion has been focused on leveraging Best-in-Class initiatives to maximize productivity from the existing mine infrastructure, with strong results. Turquoise Ridge recorded its highest-ever level of production in 2016, producing 355,000 oz of gold (100% basis), at a cost of sales applicable to gold of $593/oz, and all-in sustaining costs of $618/oz.

Average throughput increased by 40%, from 1,500 t/d in 2015, to 2,100 t/d in 2016. Improvements in mining intensity and reliability have been driven by upgrades to underground ventilation systems, increasing top cut mining widths, greater equipment standardization, and better maintenance. Additional Best-in-Class initiatives under evaluation include the introduction of continuous mining, increased automation, additional ventilation modifications, and alternative mining methods.

Based on the rapid pace of improvement at the mine, we are evaluating whether to proceed directly to the construction of a third production shaft, instead of the installation of a new ventilation shaft, which was previously contemplated as the second phase of the mine expansion. All necessary permits for a third production shaft are already in place.

At the end of 2016, the Turquoise Ridge mine had 4 Moz of gold in reserves (75% basis) at an average grade of 15.1 g/t—the highest reserve grade in the company’s operating portfolio, and among the highest in the entire gold industry. The mine also has 3.0 Moz of Measured gold resources, and 6.5 Moz of Indicated gold resources (75% basis). The Turquoise Ridge deposit remains open to the northeast, with significant potential to add additional reserves and resources through drilling.

Pascua-Lama and Frontera District Update

Following a detailed review of multiple development options for Pascua Lama in 2016, both open-pit and underground, Barrick has initiated a PFS to evaluate the construction of an underground mine at Lama. The study will evaluate the use of low-cost bulk mining methods, including sub-level cave and block cave mining, designed to target higher-value ore on the Argentinean side of the border in the initial stages of the operation. Cash flow from Lama could support a staged development that would, over time, incorporate ore from the Chilean side of the border, subject to additional permitting in Chile. Efforts in Chile this year will focus on advancing project concepts in parallel with the Lama study, with the intention of moving to a prefeasibility level study in 2018.

Conceptually, initial ore processing at Lama would be undertaken using one of three partially completed processing streams at the site, with a capacity of approximately 15,000 t/d. Existing infrastructure could be scaled up to 25,000 t/d at a later date. An underground mine would reduce the surface footprint of the operation and would be less susceptible to weather-related production interruptions during the winter season.

Estimated capital costs for the project will be available following the completion of the PFS. Based on scoping work, the returns of the Lama project deteriorate if initial capital is much more than $1.5 billion. Returns are also dependent on the ability to access Chilean ore sources in future phases of the project. If Barrick cannot build the project at an attractive return, it will not pursue it. As part of the PFS, Barrick is evaluating opportunities to leverage innovation and new technology to strengthen the economics of the project, in addition to potential synergies with the nearby Veladero mine. Assuming a positive PFS result, permitting could begin in 2018. The timing of first production would depend on multiple factors, including permitting timelines, funding requirements, and a decision to proceed with the project.

Beyond Pascua-Lama, Barrick is evaluating an integrated development strategy for the Frontera District, which includes Veladero and Alturas. At the Alturas project in Chile, it has added an additional 1.1 Moz of Inferred gold resources, bringing the total Inferred resource to 6.8 Moz. Barrick expects to complete a scoping study for the project in 2017. “Ultimately, our objective is to capitalize on the significant growth potential of this highly prolific and prospective district, leveraging our existing footprint and infrastructure in the region, as a platform for long-term value creation.”