Barrick Mining Corporation

Ladies and gentlemen, thank you for standing by. This is the conference operator. Welcome to the BEREC 2020 First Quarter Results Conference Call. During the presentation, all participants are in listen-only mode. Following the presentation, we will conduct a question and answer session. At that time, if you have a question, please press star followed by one on your telephone keypad. At any time during the conference, should you need operator assistance, please press star and zero. As a reminder, this conference is being recorded, and a replay will be available on Barrick's website later today, May 6, 2020. I would now like to turn you over to Mark Bristow, Chief Executive Officer. Please go ahead, sir.

Thank you very much, and very good morning and good afternoon, ladies and gentlemen. Welcome to this presentation of our 2020 Q1 results. When I spoke to you around this time last year, I was able to report that we had made great progress towards achieving the merger's goals. The structure of the company had been made fit for its purpose of becoming a model of a modern mining business. strong regional management teams had been installed, all body ownership transferred back to the mines, debt reduced and the balance sheet strengthened. In the past year, we have worked to further improve our operational performance and amidst all this activity, we concluded four more value creating transactions. the historic Nevada Gold Mines merger, which added a sixth tier one mine to our portfolio, the disposal of our stake in KCGM, and the buyout of the Acacia Minorities, which enabled us to settle that company's dispute with the Tanzanian government and take over control of its assets. In quarter one, we have combined our Messiah project with Teranga's nearby Sabadala mine in a deal which has already delivered significant value to all our stakeholders. The past quarter's results, which were published earlier today, show that we are actively building on the solid foundation laid in 2019 as we look ahead to the next phase of value creation. Please take note of the cautionary statement. For those who would like to read a little more, it is available on our website. The fact that this is a virtual presentation today reflects the grimest reality of our age, the COVID-19 pandemic, which has locked many of us down, whether in our homes, or at our operations, or elsewhere. History will judge how governments responded to this black swan event, which dawned without warning, precipitated an extreme crisis, and will have unforeseeable consequences likely to change the world forever. Speaking for Barrack, however, I can say the team responded immediately to the early signs of the crisis and therefore were prepared to deal with its impact on our people and our business. Comprehensive action plans were promptly rolled out at all our sites and offices in an overall strategy we call the four P's approach. Those P's standing for Proactivity, Preparedness, Prevention and Perspective. While our first priorities have been to safeguard the health and safety of our workforce and communities and to secure our logistics and supply chain, BEREC has also been engaging with our host governments since mid-February to support their own campaigns against the pandemic. On screen are listed some of the community assistance measures we have taken, and as you can see, to date we have contributed more than $20 million to host governments to fund the acquisition of medical supplies and facilities. Many of these countries are economically challenged. And poverty, which we found out, is a global problem from Nevada to Tanzania. We hope at Barrick that our efforts will help not only the ill, but those afflicted in other ways by COVID-19. The fact that sustainability is core to Barrick's management philosophy undoubtedly prepared us to buffer the impact of the pandemic. Last month, we published our annual sustainability report, which you can find online. It contains what we believe to be an industry-first ESG scorecard, which rates our performance against 18 key indicators and takes accountability to a new level. We gave ourselves a B ranking which shows an improvement in overall sustainability performance and progress on many of our KPIs. It also acknowledges that there is still work to be done. We plan to update the scorecard at the end of the second quarter, once some of our peers have published additional 2019 information. The health and safety of our employees is essential for the success of our business. When I spoke to you last year, I said I was not comfortable with Barrick's record on this front. But as you can see here, there has been a steady improvement since then. We plan to have all operational mines ISO certified for health and safety by the end of next year. All the mines in Barrick should also have received their environmental ISO certification later this year, that is by the end of 2020. In the meantime, there were no major environmental incidents during the past quarter. Barrack takes its stewardship of the environment very seriously. Our clean plow strategy is reducing our carbon footprint substantially, and we have set a target of further reducing our emissions by at least 10% in the next 10 years. Water is also a precious resource. and its conservation is high on our environmental agenda. In the first quarter, we again increased our water reuse and recycling rate to 77%. For us at Barrick, closing a mine responsibly is as important as finding new mines through exploration. The approval of the tailings retreatment project at our Golden Sunlight Mine in Montana goes to the heart of this. This will reduce long-term water treatment requirements and stabilize the old open pit while also generating revenues that will help cover the cost of rehabilitation. I have to say that after the merger, we had to take on some big legacy issues and Tanzania has added to the challenge. But we're dealing systematically with these matters. BAREC also continues to invest in its host communities, and last quarter we spent $4.2 million over and above COVID-19 support on development projects. And now to the results. This table shows shows how our first quarter performance rated against our KPIs. Although the bullets speak for themselves, I will deal with the key points in the course of this presentation. Barrick made a solid start to the year despite the impact of COVID-19 and the lockdowns and gold production and costs were consistent with guidance for the quarter. Copper costs per pound were significantly lower, demonstrating the resilience of the business against lower prices. As you are aware, we placed PORGRA in temporary care and maintenance in late April as a result of the government's response to our SML extension request. I'll elaborate later in the presentation, but this action has forced us to withdraw our 2020 guidance for Pogra at this time. Our revised group guidance without Pogra is now 4.6 to 5 million ounces, while group cost guidance is unchanged. Notwithstanding these events, we remain well-positioned to achieve our revised guidance for the year given our solid start. The situation in Pogra, as you can imagine, is rapidly evolving, so we will provide further updates on our outlook in due course. As previously communicated, gold production in the second quarter is expected to be lower than the first due to mine sequencing and planned maintenance. In addition, a safe and steady remobilization of the Valadera workforce following the lifting of quarantine restrictions in Argentina will also have an impact on performance. Looking forward, production is forecast to improve in the second half of the year in line with our plans and guidance. A good performance from all the operations ensured that the benefit of the higher gold prices was captured and delivered to the bottom line. Free cash flow increased to $438 million, and net debt was reduced by a further 17% to $1.85 billion, with no significant maturities until 2033. Adjusted net earnings were $0.16 per share, and the quarterly dividend underpinned by the strong balance sheet and the free cash flow outlook was maintained at $0.07 per share. I have always said, to be a world-class business, you have to have a global presence. And as you can see here, Barrick is strongly represented in all the world's major gold districts outside Russia and Eastern Europe. Brownfield's exploration around our existing assets last year replaced all the reserves depleted by mining and, I might add, at a higher grade. And we're looking for a similar performance this year. Meanwhile, our generative teams are looking further afield for our next Tier 1 and Tier 2 discoveries, and we are also extending our horizons to Saudi Arabia, Japan, as well as Asia and the Pacific Rim. So we start our tour of the operations in Nevada, which we regard as as our value foundation. Carlin is the largest of our Nevada operations and led by a strong management team, we rank this mine would rank as an impressive standalone mining company. Production at Carlin was slightly lower than quarter four given scheduled autoclave maintenance and lower roaster throughput of Carlin ore as higher grade Cortez ore displaced the relatively lower grade Carlin ore in the feed mix for the roasters. Total cash costs were in line with the previous quarter and I might add the Carlin trend is the most active exploration area in Barrick's portfolio and has real potential to continue replacing the gold we mine well into the future. The Gold Rush project has now been integrated with the Cortez mining complex, where the Deep South underground development is on track to start contributing to production towards the end of the third quarter of this year. Although the oil feed grade compared to last quarter was slightly lower, our cost control efforts led to a 10% decrease in total cash cost per ounce compared to the prior quarter. And of course, Four Mile continues to offer further potential for life of mine extensions, even though it is not yet included in the Nevada Gold Mines portfolio. For the Turquoise Ridge Complex, integrating the two teams as well as geological models across the two legacy operations is key to unlocking the full potential of this Tier 1 facility. This is still a work in progress, but moving in the right direction, I might add. In the meantime, construction of the Turquoise Ridge third shaft continues on schedule and within budget. another key project that will unlock value from the higher-grade underground resources. Among the smaller Nevada mines, Phoenix had a particularly good quarter, increasing production and reducing costs. Long Canyon, where permitting for the pit expansion continues, posted lower production, but costs were well-contained. Nevada is probably the world's most prolific gold district, and accordingly, there is enormous upside within Nevada Goldmine's portfolio. I've already mentioned Cortez Deep South and Turquoise Ridge Third Shaft, but in addition to these, the final feasibility study on the Gold Rush project is on track while drilling at 4-mile depth continues to expand the mineralization. At Carlin, we are focused on Greater Leval, that is the area to the north of the current Leval underground operations and surrounding area. At Turquoise Ridge, the integrated geological model is showing us that between and below the Turquoise Ridge and Twin Creeks ore bodies are favorable host rocks which are surprisingly underexplored and where Tier 1 potential remains at depth. Mineral resource management and exploration at the existing mines are focused on optimizing their mining plans and extending their ore bodies, and the exploration teams are hunting for more Tier 1 assets. So staying with 4 Mile for a bit, we already have a substantial mineral inventory at 4 Mile, and we believe there's potential for a lot more. As you can see on this slide, an isolated hole 900 meters north of Dorothy points to additional extensions to what is already a significant mineral system. Also shown here are some very exciting results from drilling west of Four Mile. Our focus is to continue with our drilling program aimed at defining the full potential of the area and to build a district-scale framework. At the same time, our mineral resource teams are in full drilling to establish continuity and get a better stoke definition. We are also in the process of permitting the conversion of Nevada Goldmine's coal-fired TS power plants to a dual fuel system, which will allow it to produce power from natural gas. We expect the permit to be approved later this year, with the goal of commissioning in the second quarter of 2022. The conversion will enable the facility to reduce carbon emissions by as much as 50%. That's roughly 650,000 tonnes of CO2 emissions saved per year. We are also progressing with a new solar project at the TSF power plant. We intend to permit a 200 megawatt facility, although phase one will be for 100 megawatts. Permits are expected to be received between quarter three of this year and the first quarter next year. And the initial 100 megawatt of power will reduce our greenhouse gas emissions by a further 130,000 tons per year. of CO2. Moving up north into Canada, Hemlo continues on its path to potential Tier 2 status after we put in a new management team and changed the way it operated last year. Among other things, it has moved to an underground contract mining model and the open-pit operation will end in the second half of this year. Since we restructured Hemlo, its performance has proved significantly, as you can see here. But operationally, it still has further to go to deliver the efficiencies and throughput to become a true Tier 2 operation. Through taking a fresh and disciplined approach to understanding the ore body, and controls to mineralization, we are now looking at extending its life beyond 10 years, as well as re-evaluating the potential of the whole Hemlo district. This is an overview of our North American assets. The numbers speak for themselves, and it's worth noting that Gold Rush and 4 Mile will ensure that Cortez, like Carlin and Turquoise Ridge, maintains its Tier 1 status well into the future. There has been a big drive to review the regional geology, and accordingly several framework drilling programs are underway to fill in gaps in our knowledge, open up new search areas, and pave the way for targeting and defining mineral inventories. This has also included taking a fresh look at our closure portfolio. I have already discussed our new approach to golden sunlight through tailings retreatment. And another example is the value being uncovered by our partners at SK Creek in British Columbia. So moving south now to the Dominican Republic, where the Pueblo Vehicle Management Team is doing an outstanding job as the mine prepares for the expansion project. Production for the quarter was lower than the prior quarter due to the planned mine and processing sequence. Despite the lower production, costs were very well contained. We expect production to be lower in the second quarter due to annual maintenance schedules and then pick up to within guidance by the end of the year. Incidentally, PV was the first of our mines to cooperate with the government on COVID-19 rapid screening tests. The plant expansion engineering design and costing were completed during the quarter. The current Elriogal tailings storage facility has capacity for the expanded production until 2028. So the program for the plant expansion can now progress independently of the TSF3 program. A combination of COVID-19 and postponement of the presidential election in the Dominican Republic to July, has delayed the TSF-3 permitting process. And we are working with the government, as well as the political opposition, to bring the program back on track. The picture for your information in this slide is the Cresquea power plant, which has been successfully converted to natural gas, another major contribution to the reduction in our greenhouse gas emissions. Valadera had a very challenging end to the quarter, mainly because of the way the Argentine government responded to COVID-19, first by shutting down the mining industry and then allowing it to reopen. but this time with restrictions due to social distancing. We expect two more tough quarters and production for the year is likely to be at the lower end of guidance for this operation. Valadera's projects, including the power transmission line, phase six pad expansion and airstrip construction, were ramped down due to the camp occupancy limitations imposed by the government during the COVID-19 outbreak. The commissioning of the power line has now been postponed from mid-2020 to the end of this year, and the phase six commissioning is postponed by three months. Staying in South America, The El Indio trend, which runs along the Andes and includes Valadera and our Pasco Llama project, is rich in potential for major gold and copper discoveries. Now that we have a full exploration team for that region, we have embarked on an extensive compilation of legacy data to generate new ideas. At Valadera itself, Indications are that satellite deposits could extend its life beyond the current 10 years. And this is an overview of our Latin American footprint, which you can see boasts a mineral inventory approaching 100 million ounces of gold and ownership of some of the largest undeveloped assets in the region. We continue to believe in the prospectivity of this ground and hence our focused exploration effort in this region. In Papua New Guinea, as you know, the government's recent response to our engagement towards the extension of the SML came as a surprise. Consequently, we were forced to place the mine on care and maintenance. Last week we filed a lawsuit in the P&G Court seeking to quash the government's decision. We received a preliminary order that directed the government to cooperate with our efforts to secure and protect the mine and also directed the government to engage in negotiations with us to attempt to resolve the matter. So now, over to my old hunting grounds in Africa, starting at Lulo Goncoto, where throughput and recovery were up, and production, while slightly behind the previous quarter, was still ahead of plans. Development of the complex's third underground mine at Gunkoto is scheduled to start in the fourth quarter of this year. Meanwhile, the initial 5 megawatts of capacity of Barrick's first solar power plant in Africa has been installed, but its commissioning will have to wait for the arrival of currently locked-down contractors. with the remainder of the 20 megawatt capacity still to be completed by the end of September this year. In the DRC, Kibale came out of the block strongly, increasing production and reducing costs, and is on track for another good year. We have now installed and commissioned the best battery Storage needed to reduce the number of diesel generators required as spinning reserve. Ongoing brownfields and greenfields exploration opportunities also bode well for the mine to replace its reserve depletion again this year. And production at Tongon and Cote d'Ivoire remained on plan at lower unit costs. and this mine is on track to meet its guidance for the year. The mine continues to be a significant cash contributor to all its stakeholders, and exploration to extend its life beyond the current two years is continuing. West Africa remains another exciting place to hunt for gold. Lulo Goncato continues to deliver new opportunities to add resources and reserves, and an interesting target has been identified at Faraba North. In the Bambadji joint venture, modelling has highlighted new styles of mineralisation, suggesting the existence of a prospective new corridor along the prolific Senegal-Mali share zone. And in Tanzania, we've made enormous progress since we established the Twiga joint venture in January, bolstering our partnership with government. North Mara has successfully transitioned from contractor mining to owner mining. Export of the concentrate previously suspended by the government when it was in dispute with Acacia has begun and will be recognized in net income starting in Q2. In Tanzania, we have now settled most of the key issues between Acacia and the government. However, we still have to deal with some legacy issues that the company left in its wake. I'm confident we'll resolve these and in the meantime, our initial observations have made us feel quite bullish about resource extensions and new targets around the mine. Elsewhere in Tanzania, Bully and Hulu has sufficient tailings material to keep the plant running while we progress to restart underground mining there on plan later this year. And Buswagi is also processing stockpiles And it's interesting that we have discovered some potential new resource opportunities which are currently being evaluated at Buswagi. Following the incorporation of Tanzania, we have stepped up our exploration in the highly prospective Central and East African region, where we now have a strong presence. While it's early days, we've identified some exciting opportunities. And all I can say is, watch this space. As Rangold's track record showed, Africa is a place where one can discover major gold deposits and convert them into world-class mines. while at the same time making a difference for the better in countries challenged by underdevelopment. We have a strong asset base and two tier one mines there. And while Africa itself still has vast potential, we're also looking further north for growth. We already have a foothold in Saudi Arabia, and we're looking closely at the Nubian Arabian Shield, which, while prospective, has thus far only delivered one significant gold mine in the form of the Saqqari gold mine in Egypt. In our copper portfolio, Lemwana and Jabal Said both increased production and reduced costs. Notably, at Jabal, Exploration has been very promising, and we have intersected very high-grade mineralization from step-out drilling that point to mine life extensions. Production at Zolderweil was impacted by lower grades and recoveries. Operated by our partner, Antofagusta, the development of Zolderweil's secondary sulfide leaching project has been temporarily delayed recently. by COVID-19 movement restrictions. Whilst maintaining a very strong operational performance is important to us, across the Barrick Group we continue to look to how we can add more value to our operations and innovation and technology plays a key role in this. Work has continued on our SAP Enterprise Resource Planning System global rollout, where the first deployment will begin across the Nevada gold mining group during quarter three as planned. Despite COVID-19 challenges, we remain on track for completion of this large SAP rollout project by year end. And we then plan that the other regions will follow during 2021. This more streamlined and standardized global design will further improve our ability to report real-time cost and efficiency data and more importantly, manage on real-time information. We also continued our digital innovation in our underground mines, including projects where we can now remotely monitor in real-time a machine's location, productivity and health, as well as that of operators, increasing our efficiencies and predictive maintenance capabilities. Being already quite advanced in our underground automation, we are now focusing our attention on surface mining with haulage and drilling projects advancing throughout the quarter. Our surface haulage proof of concept, which will allow both manned and unmanned operations within the same zone, was successfully completed this quarter. In the quarter, we also embarked on our first trials of battery-powered electric underground equipment, which we believe has the potential to lower operating costs and increase efficiencies. Similarly, our team at Lulo Underground helped develop a system that automatically turns secondary fans on and off by using personal RFID tracking systems, which will help in reducing power consumption. This project is now being implemented across Africa underground mines. We've touched on the microgrid stabilization at Kibale and are seeing significant benefits in our advanced process control systems in our milling and processing circuits. By using these real-time data and model predictive control to rapidly optimize the circuits, we can increase throughput and reduce reagent usage. Along with this year's annual report, as promised, we published what we believe to be an industry-first 10-year gold production plan, which you can see here. I will point out that we have left Pogra in the forecast, but with its contributions shaded a different color, given that the asset is currently in care and maintenance. What makes us different to our peers is that our 10-year plan is built on our portfolio of Tier 1 strategic and embedded projects, of which all boast plus 10-year life of mine plans, except for Tongan. Consequently, our business has a standout value foundation that does not require new greenfields, bulls or discoveries to support our 10-year plan, giving our investors the comfort they require to invest for the long term. It goes without saying that any discoveries or acquisitions will add to our value proposition. In line with our mission, we have both the quality in management and the financial bench strength to continue to generate value for all our stakeholders and to provide Barrick with the free cash flow to invest in its own future. Ladies and gentlemen, I end as usual with a share price performance comparison. Barrick's mantra is that the best assets combined with the best people will deliver the best returns. And this is one way of measuring that. In the year to date, Barrick's share price has increased by 45%. and if we measure it from the time of the Rangold merger announcement, it is substantially more, outpacing both the industry and the gold price. I thank you for your attention, and I do have most of our senior executives on the call with me, and so with that, we would be delighted to take any questions you might post.

Thank you. We will now begin the question and answer session. To join the question queue, you may press star, then 1 on your telephone keypad. You will hear a tone acknowledging your request. If you are using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star, then 2. We will pause for a moment as callers join the queue. Our first question comes from Chris Terry of Deutsche Bank. Please go ahead.