Barrick Gold Corporation

Gentlemen, thank you for standing by. This is the conference operator. Welcome to the BEREC 2022 First Quarter Results Conference Call. During the presentation, all participants are in a listen-only mode. Following the presentation, we will conduct a question and answer session. At that time, if you have questions, please press star then 1 on your telephone keypad. At any time during the conference call, should you need assistance from an operator, please press star then zero. As a reminder, this conference call is being recorded and a replay will be available on Barrick's website later today, May the 4th, 2022. I would now like to turn the conference over to Mark Bristow, Chief Executive Officer. Please go ahead, sir.

Thank you, and very good morning and good afternoon, ladies and gentlemen. The world today is facing the greatest period of economic, social, and geopolitical disruption it has experienced in more than a generation. Russia's war on the Ukraine and its suspected larger ambitions could redraw the map of Europe, breaking down what everyone thought was a permanently settled order. This is already having a painful economic impact on many countries who are dependent on Russian oil and gas, but also on industries worldwide who are facing serious supply and logistics challenges in a rising inflation environment. Meanwhile, over in China, COVID has come back in a big way, dispelling any notion that the worst of the pandemic was behind us. All in all, it's a time of radical change and no one knows how it's going to turn out. As far as Barrick is concerned, however, scenario planning is an important part of our regular strategic reviews, and they keep us prepared for all reasonably conceivable outcomes, including the worst-case ones. Our global presence means that our risks are spread widely, And the strength of our asset base, our balance sheet, and our management gives us confidence in our ability to navigate the turbulence. Please take note of this cautionary statement, which is also available on the Barrick website. These are the salient features of the past quarter. As we messaged, production was softer than the previous quarters for reasons I'll explain later. As planned, we expect that the second half of the year will be stronger, which should keep us on track to meet our annual guidance. Our best assets generally performed well, with Lulo Goncato delivering exceptionally good results. Other highlights of the quarter include the in-principle agreement with Pakistan for the restart of the Rico-Dick copper-gold project, which we believe will be a Tier 1 asset by any measure. Also important was the progress we made with the permitting process of Pablo Averro's new tailing storage facility, which will transform what is already a Tier 1 mine by adding more than 20 years to its life and as much as 9 million new ounces to the reserves. As we expected, As we expand globally, we continue to strengthen our management team through a number of senior appointments and effective succession planning has facilitated the smooth transition to new chief operating officers for our North American and African and Middle East regions. ESG what we call sustainability, remains high on management's priorities. And last month, we published our fourth annual sustainability report, which highlighted the importance of our integrated approach and updated our greenhouse gas reduction roadmap for the journey to net zero. We haven't seen the report. If you haven't seen the report yet, I would suggest that it's well worth the read. So turning to the numbers. Robust operating and free cash flows and a net cash position again strengthened the balance sheet and supported Barrick's inaugural declaration under our new policy of a 10 cents per share performance dividend, which effectively doubles the 10 cent base dividend. It's also worth noting that Kabali has now paid out $1.2 billion on a 100% basis over the last six months, cleaning the backlog of a locked up cash in that country. The past quarter's gold and copper production provided the base from which performance will improve steadily over the course of the year. We remain on track to deliver within our 2022 production guidance. Cost guidance may be at the higher end of the range due mainly to the increase in global energy prices as well as the inflationary pressures across the global supply chain and the effect of a higher gold price on royalties. At the start of the year, we guided costs by about 5%. And with the recent increases in prices, we see this potentially adding around another 3% to costs. And on the financial side, our improved net cash position of $743 million is was driven by operating cash flow of a billion dollars with free cash flow of $393 million, the distributions received from Kabali, and the continuing monetization of equity positions arising from the sale of non-core assets. Also worth noting is is that during the quarter, SNP upgraded our long-term corporate credit rating to BBB+, from BBB, with a stable outlook. We also published our first standalone tax contribution report, which highlights the significant contributions we make to the countries and economies where we operate. We continue our health and safety journey to zero harm, but an otherwise credible record was sadly marred by two fatalities during the quarter. As you would expect, we take these events extremely seriously. And among other initiatives, we have increased the on-site engagement and visibility of operational leadership to ensure that these do not happen again. By the end of the quarter, 67% of our entire workforce had been fully vaccinated and there were very few active cases on sites across the group. As recent events have shown, however, we can't afford to drop our guard, and so we're keeping our protocols in place and updating them on a regular basis. There were no Class 1 environmental incidents during the quarter, and we again improved our water use efficiency. which at 84% was ahead of the annual target of 80%. Greenhouse gas emissions also decreased by 9% quarter on quarter. As one of the group's many community initiatives, Nevada Gold Mines has provided a $30 million loan for the provision of a broadband internet service to the surrounding towns. And elsewhere across the group, Barrick spent $4.9 million on community development projects. The sustainability report I mentioned earlier details our evolving approach to ESG management. It recognizes that global crises such as climate change, poverty, access to water, and biodiversity loss are inextricably linked and should not be treated in isolation. We believe that it's only by integrating these challenges and approaching them holistically that we'll be able to make a real difference. Our 2019 Sustainability Scorecard was a first for the industry, and the 2022 edition again features a number of firsts. Alignment with the reporting standards of the various ESG guidance frameworks, public disclosure of our Scope 3 emissions and a reduction roadmap, a report on social metrics not aligned to dollars spent, and a biodiversity standard and water policy. It also updates the greenhouse gas roadmap that plots our course to net zero and the progress we're making on resolving legacy issues. This year's report again updates our sustainability scorecard, which rates our performance across a wide range of key metrics. While noting many improvements, we achieved our third overall B grade, an honest acknowledgement that fatalities are not acceptable and there is still a lot of work to be done with regards to our drive to zero harm. We start the operational report with the North American region, where Nevada is home to three of our Tier 1 mines, as well as many of our more interesting future prospects. At the same time, we continue to progress the giant Donilon Gold project in Alaska with an intense winter drilling phase as we search for more opportunities to grow our business in the Americas. These are the operating results for the Nevada gold mines. As expected, production was lower following the record quarter four performance driven by the processing of high-grade stockpiled ore while the gold strike mill was being repaired. Plans are in place and KPIs are being monitored closely to ensure that the full year guidance will be met. In the meantime, Turquoise Ridge's third shaft is on track for completion this year, which will continue to support operational improvements there. Results from drilling across the Nevada projects continue to highlight the huge potential of these systems as new targets are developed and resources are expanded. At Turquoise Ridge, geological modelling of the BBT corridor to the south highlighted the potential for significant additional ounces with early drill results indicating this opportunity. Drilling between and within the legacy Twin Creeks and Turquoise Ridge operations is transforming our understanding of this area, and we continue to make changes to the models with implications for exploration. One of the strongest untested geochemical anomalies in the district has been identified at the fence line target on the legacy boundary between the two operations. And shallow drilling is in progress to define vectors for a deeper core drilling project later in the year. North Leeville continues to grow as we step out around the maiden resource of 700,000 ounces declared at the end of last year. Resource delineation drilling is defining additional ounces whilst further drilling is planned to test the open extensions of high-grade structures around the deposit. North Leeville remains one of our highest potential near-mine satellites in Nevada. And Wren is another expanding opportunity. Last year, we declared a maiden inferred resource of 1.2 million ounces, and recent results have not only confirmed the model, but have continued to expand the JB zone resource to the south. Mineralization remains open at both JB and Corona corridors. We have initiated various mining studies on the geotechnical ventilation and dewatering parameters to optimally design this part of the mine. Over now to Latin America and Asia-Pacific. which ended the quarter having made significant progress with its growth projects. In PNG, we continue to get closer to reopening the mine following the passing by Parliament of legislation necessary for our agreed fiscal arrangements. We expect to complete the remaining outstanding agreements in the next quarter. although our planned mid-year restart is expected to be delayed by one more quarter. Pueblo Vero, as I indicated earlier, is a solid Tier 1 asset. which delivered a plan regarding production and costs on the back of record throughput, which bodes well for the future long-term performance of the operation. the new tailing storage facility, a key part of the transformational upgrade and expansion project is continuing to advance down the development path with the ISHA application expected to be filed in quarter three. And at Veladera... The mine delivered on a planned lower production for the quarter, despite being partially impacted by COVID-related absenteeism in January. And the mine remains on track to meet the 2022 guidance. Construction of the Phase 7 leach pad also remains on track, with a second phase expected to commence in the final quarter of this year. You will have also seen the announcement of our agreement with the Government of Pakistan and the Province of Balochistan to reconstitute and restart the Rekadik project. which has been waiting in the wings for more than a decade. It's an extremely exciting project, up there with the best of the best copper deposits and with the added attraction of a significant gold endowment. Since the agreement was signed, there's been a change of government in Pakistan, but this is not expected to negatively impact the process. In fact, I'm due to meet the new Prime Minister later this month to review progress. Rikerdik is another good example of Barrick's partnership philosophy. We'll operate it, but it will be owned 50% by Barrick, 25% by well-established Pakistan state-owned enterprises, and and 25% by the province of Balochistan. The various underlying agreements are currently being finalized, and when that's done, we'll start to update the existing feasibility study, which should take around 24 months. As such, Rickerdick could be in production in five to six years, a very short time frame for a mine of this size. Turning now to Africa and the Middle East, this region finished the quarter ahead of its gold production plan on the back of the usual strong performance from the flagship Lulo Goncoto and Kibale operations. At Lulo Goncoto, The key production driver was higher grades per ounce. Cost matrix were well managed despite the impact of higher energy prices and increased logistics costs from the continued sanctions and border closures imposed on Mali by ECOWAS, albeit operations at Lulo-Konkoto remain unaffected. The Lulo District's key mineralized corridors continue to deliver exciting results. Bambadji, across the border in Senegal, is one of the more prospective pieces of ground in our West African portfolio. And the team there is prioritizing large controls likely to host potential significant deposits. At Lulo, drilling north of the previously mined P129 satellite deposit has also defined mineralization over 600 meters with some high-grade intercepts, while the results have also highlighted the potential to extend the Faraba complex satellite deposits. As we planned... Production in Kabali was lower than the previous quarters due to planned maintenance and waste stripping. Production is expected to improve this quarter and the mine, like the others, remain on track to achieve its annual guidance. Like Lulo, Kabali continues to to maintain its record of replacing reserves depleted through mining. Resource conversion drilling from underground is successfully defining the potential for sustained growth over and above depletion for both 2022 and beyond. And in Tanzania, both North Mara and Bully and Hulu are on track to meet their annual guidance. Their quarter one performance largely reflects the impact of planned maintenance at North Mara and the development of new headings plus the removal of legacy underground waste at Bully and Hulu. North Mara's ramp up of its open pit operations is on schedule. and the project is designed to further de-risk the mine by providing it with another source of mill feed and improved production flexibility. A quick look at the copper portfolio, where Jabal Saeed and Zaldivar both delivered production and costs that were in line with or better than guidance. Zaldivar's chloride project was commissioned, providing the infrastructure for enhancing future production. And as expected, waste stripping impacted on Lemoyne's production, but its performance is forecast to improve steadily throughout the year. Exploration at Lemoyne continues to access multiple targets in parallel, redefining the geological models for existing targets and identifying new projects. The overall aim is the definition of an alternate ore source that can provide production flexibility whilst the Chimi super pit pre-stripping and associated infrastructure upgrades are completed. Early results from ongoing drilling at the Lubwe target are encouraging and show the potential to extend the mineralisation a further one kilometre to the north. So, with gold prices remaining high, driven by global geopolitical and economic fears, it's worth noting the unparalleled leverage our portfolio of six Tier 1 gold bonds gives Barrick. For every $100 per ounce rise in the gold price, the attributable free cash flow generation generated by our operations over a five-year period increases by around $1.5 billion. The same is true of our copper assets. For every 50 cents per pound increase in the copper price, the attributable free cash flow generated by those mines over five years rises by about $800 million. And strong cash flows generate peer-leading returns to shareholders as shown in this slide. The distribution policy inaugurated this quarter effectively doubled the dividend by adding a 10 cent per share performance element to the 10 cents per share base dividend. On an annualized basis, this equates to a yield of approximately 3.5%. The new formula also has the advantage of giving the market guidance on the potential future dividend streams. And while we don't believe our current share price fairly reflects its inherent value, it has performed respectably against the spot gold price and the GDX as shown for these periods. And this leads me to what I believe is the compelling thesis for investing in Barrick. It includes the peerless quality of our asset base, our proven long-term strategy combined with reality-based implementation plans, our ability to more than replenish our reserves and our long, constantly replenished prospect pipeline, our approach to sustainability, characterized by tangible, on-the-ground action and measurable results. And of course, the strength of our balance sheet. But perhaps the characteristic that most distinguishes Barrick from its peers is our focus on tier one assets selected against a set of very clear investment criteria and supported by our ability to operate in both developed and developing countries. There's an old saying, that if you're looking for elephants, you have to go to elephant country. We've searched for and found tier one assets in parts of the world that presented challenges that daunted other mining companies and then proceeded to successfully develop and operate them. whilst we continue to invest in pursuing new tier one opportunities across all three regions in which we operate, our next stop right now looks to be Pakistan, where we once again, where once again, perseverance, partnership, and patience have put us on track to deliver one of the world's greatest mining opportunities to our shareholders, our partners, and all our other key stakeholders. Ladies and gentlemen, thank you for your attention, and the team and I are happy to take any questions.

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're using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star then 2. Our first question is from Greg Barnes with TD Securities. Please go ahead.

Thank you. Mark, I just want to understand the timing around the terminating of the new tailings facility at Pueblo Viejo. You said you're going to file an ESIA in Q3, so that would suggest you've picked the site. I was wondering how long it's going to take the government to approve that site. And then the site you've picked, is there going to be a significant delta in the capital costs for the PV expansion, depending on which site you do pick? How much will it potentially change up or down?

So, Greg, just to take you through, I think we've shared this with you before. We've been through a lot of sites, more than 30, but we really got down and evaluated around 22 sites. We shortened that down to... five sites, and then we passed all our assessments. We used two independent engineering firms to audit our process and passed it back to government. And as a consequence, the government then reviewed our selection criteria We have, as the government announced, reached an agreement on a way forward for the final selection of the sites. We are looking at two sites at the moment, both in the same provinces which the mine is located, and we're currently doing invasive evaluation for the foundations of the the walls and also making sure that we don't have any open aquifers that might put the storage of material at risk and whether we have to line it or not. And that work is, we should be ready to file our, make a final decision and of course we'll file that application with all the information with the government and on that basis we will already have collected the key technical data so that we are ready to make the application for the environmental permit. And that will – we are forecasting to do that early Q3. And then it's a matter – and we're working alongside the government in this process, and so we don't see any reason that that process won't – continue as it has in the last couple of quarters. And our plan is that we should certainly be in a position to determine that that project is now approved and it's continuing exactly when we get the final permit. It might be end of this year, towards the end of this year, or even early next year, but that won't change the process. So so that's the first part of your question um and we are engaged now in consultation we have uh we have a couple of infrastructure to finalize the first one is we're going to be moving the material on a conveyor belt and and so that requires consultation as far as people that will might be affected by that infrastructure and then of course As part of our evaluation, we are also consulting with the communities that might be impacted by the final decision. And again, as we indicated originally, we're also looking at a buffer zone, so there are some common areas, no matter what the final decision is, which will also involve relocation. And we've done the first round of consultation on that basis. On the cost side, the original estimate is around $1.4 billion, $900 million-odd for the expansion of the plant and that associated infrastructure, and then the rest looking to the tailings dam, I think between $800 and $900, so between... 500 and 600 was earmarked for the tailings and waste rock storage. The final estimates will come with the final designs or the more advanced designs once we've got the foundation drilling done, particularly on the dam wall. As you know, this wall is... It has to be like the current Lagal Wall. It's a seismic area, so it's a highly engineered bit of infrastructure. It will also, just to make it clear, we build the wall as we go. We don't build the wall complete right in the beginning. The facilities that we have shortlisted certainly cover the current forecast life beyond 2040 and some. And so I'm walking around the capital estimate. We will update that capital estimate as we start – finalizing at least the scope of the design, particularly the wall infrastructure. And there are some offsets that we're looking at. We've got some opportunities to create quarries within or immediately adjacent to one of the sites, and that would impact materially the cost, the long-term cost. And there are a number of other influences. I think we're very comfortable with our estimates on the relocation costs, and we do have a very broad-based support system. for the sites that we've currently chosen, or we've currently prioritized, I would add. So that's really, you know, where we are today. And, Greg, the returns of this asset are significant. You know, they certainly meet, in any conceivable capital cost, Our 15% return based on $1,200 gold and 275 copper. We don't, you know, we've got copper, we don't produce it at this stage in Pueblo Viejo, but it passes the test. So we're very comfortable about this project. It's a very significant project and it really realizes the original Pueblo Viejo investment back 10 years ago.

So Mark, how far away are the two sites from the plant and how many people have to be relocated?

They're the closest of all the sites. Grant, do you want to comment on that?

Yeah, so as you say, the sites are fairly close to the mine. They're not too far from the existing tailings facility itself. I mean, in terms of the numbers around the resettlement, that's something we still need to get to grips with and get onto the ground and start doing those surveys. So that's underway at the moment, and we'll have a clearer picture of the exact numbers in the next couple of months. Okay, good.

Thank you. That's it for me.

Greg, as soon as we've got it, this is a process. As soon as we have definitive framework agreements, we'll share it with the market immediately.

Thanks, Mark. The next question is from Cleve Wilkart with UBS. Please go ahead.

Hey, good morning, good afternoon, everybody. Thanks for taking my question. I want to just zoom out a little bit and think kind of like big picture on what the guidance means. I think gold prices and copper prices, they're tracking maybe a little bit higher about in line with where they were in Q1. Mark, you talked about, I think, production sort of rising and you should get some cost absorption there and cost fall. Is there any reason to think that free cash flow wouldn't be higher sequentially in the second quarter than what it was in the first quarter?

Sure. That's a fair observation. But this all is impacted by tax and when we pay tax. I'll pass it on to Graham. He'll be able to take you through that.

Yeah, that's right, Mark. It's very important to note the second quarter is traditionally our lowest cash flow quarter. And that's driven by two key factors. The first is that we pay interest on our bonds semi-annually. So that's second quarter and the fourth quarter. And then the second quarter also has our highest cash tax payments. That's generally when we make the most significant payments. So when we look at our own internal forecasts for cash flow, quarter two is noticeably lower. That said, we will see some benefits from some of the Kibale cash distributions that came through in the first part of the second quarter. So that will assist. But it is generally our lowest cash flow quarter.

Okay. All right. Thanks, Graham. That's helpful to understand. And then, you know, I guess just sort of taking that one step further, you know, sticking on the capital allocation theme, you didn't buy back any stock in Q1. You know, I think at the pace you're going, you're very quickly going to be sort of up in the top level of the, you know, of the graduated dividend framework. You know, if you sort of get to that top level where, you know, the dividend, the special performance dividend is maxed out, would you think about raising it? I mean, is that the point where you would start to buy back stock? Or should we think about the buyback maybe as more opportunistic relative to the share price?

So the first last part of your question first, and that is if we get to that level, that's a high-class problem, and we'll manage it when we get there. I think the key about the ability to buy back stop was that last year we got caught where the market, you know, our share price really got undervalued significantly, and we realized we didn't have a tool to deal with that. You know, we had too many shorts in our stock, and it would have been great to just go and buy up the stock and burn off the shorts. And so we now have that tool available, and that's exactly what it's for, is when we feel that on a relative basis our stock price is underperforming and there's sort of intervention or people impacting it, investment strategies impacting it, we'll definitely buy back that stock. The current situation, as you know, is a very fluid situation, and we are monitoring the market and, of course, the equity values almost on a daily basis.

Okay. We'll just stay tuned on the dividend.

You do that.

Thanks, Mark. Thanks. Take care, guys. Bye.

The next question is from Matthew Murphy with Barclays. Please go ahead.

Hi. Just had one on the gold unit cost guidance. $730 to $790 now headed to the higher end. Just wondering if you can break down some of the drivers, I guess, if you go from the midpoint to the high end, call it $30 an ounce. Would half of that be your energy price assumption. That's the kind of breakdown I'm wondering about.

So I'm going to pass this to Graham on the granular answer, but I just want to also point out, Matt, the lower production this quarter, as we lift the production, get back to gardens, we'll temper that unit cost profile. So this is not the base on which to work on, just to give it some perspective. But again, Graham, you want to pick on the detail? Yeah.

Yeah, so Matt, you're right. The biggest chunk of that cost driver is very much energy prices, so both diesel and gas. We've previously given sensitivities on that, and we're effectively guiding that for every $10 change in the barrel price of oil, that gives us about a 6% increase on our total cash costs. So when you look at energy prices from where we were previously looking at sort of $70 and now they're over $100, you can see that that makes up the biggest chunk of that movement. And then gas on top of it as well. And then the rest is really, I would say, more specific commodities where we're seeing price pressure, things like ammonia nitrate, cyanide, steel balls, those sort of areas. And a lot of those have been specifically impacted through the Ukraine crisis where you've had suppliers either in Russia or Ukraine that are no longer available, and therefore you're seeing a bit of a squeeze on those markets. Related to sort of petrochemical industry and therefore, you know, same drivers as the underlying increase in the in the diesel price. So those those are the biggest changes.

Got it. OK, thanks, Graham. And and then I saw you're trying to hire for Gold Rush. Just wondering how you're seeing the Nevada labor market these days.

Sorry, Matt, just one thing, just a correction. I said 6%, but I meant $6 per ounce for every $10 change in the barrel, just to be clear.

So the labor market, Matt, I think we've been restructuring the whole barrack human resource organogram. I've just finished a global engagement on all our operations with our executive teams, looking at progressing our vision of much flatter structures, deeper reach into our organization, more accountability at levels, taking out management levels. And also, we have a very big commitment to education, both technical skills and educating right at the base from high school across the globe. And whilst there is a tightness in the supervision foreman-based areas of Nevada, we've just replaced about 90% of the people we employed last year we've retained. So again, as we change the profile of our employment base, we're slightly higher on the turnover. But this year to date, we've replaced significantly more than the resignations or leaving. So I think for me it's a challenge, but at the same time it's a significant opportunity as we look to give people more accountability, pay people more, pay people differently, and position, particularly Nevada, for a more modern way of mining. And we've done an enormous amount of work in Latin America. Mark Hill and the team were much more aligned with my vision of how we employ and how we pay. Africa's done extremely well, and as I pointed out in my presentation too, our succession efforts are really paying dividends, and you'll see as we progress and we've appointed senior executives both through promotion or succession and from external sources involved, We've been able to do that without having to say, oh, so-and-so is retiring and we're waiting to fill that position. We've done it well within the time. We've got good transition plans to ensure that we have continuity in our operations. And, you know, again... Our focus has been to beef up on our senior, what we call big mind general managers, some of the more important skills that are under pressure, investing in those. And so it is a challenge. a point that we have to manage in the market. At the same time, as I said, it's an opportunity for us to redefine some of our management and leadership structures across the group.

Interesting. Okay, thank you.

The next question is from Anita Stoney with CIBC. Please go ahead.

Hi, good morning. I just wanted to get a little bit of clarity on that cost number. You said it's headed towards the higher end of the $730 to $790 guidance range, and I think you said something to the order of about 2% to 3% as a result of higher oil prices. So is that 2% to 3% over the $790, or is that just the 2% to 3% that's getting you out of the mid-range and towards the $790?

The latter. That's Anita. Hello, Anita. That's the latter. But I need to point out that, you know, there's no magic in managing inflation. It is what it is. We've still got some, you know, we've been really focused on synergies and efficiencies. And, you know, we've just finished rolling out our new global data platform with all the bolt-ons. We have real-time data. We can process from ore bodies to mine plans. Our managers and operators have access to that real-time data. There's no other mining company that's done that. We've used the latest technology to to develop that platform. So that's very helpful. As you know, Anita, we're very agile and obsessed about our numbers and the ability to respond intraday to changes. And that's where our team is going. So Yes, we've got inflation pressures, but we've also got synergy opportunities and continued improvements that will help mitigate that inflationary pressure. But as you've seen, we've adjusted it upward again at this presentation, and we're going to keep a very sharp focus on inflation and how we manage that.

Okay, thank you. That's a good answer. And then the second question was with regards to the CapEx. So I think I had, you guys, you spent $611 million this quarter, and I think the guide was 1.9 to 2.2. So it's a little over on a quarterly run rate, and it's actually kind of bucking the trend of what everyone else has done, which has been underspending. It's good that you're finding people to do the work because that's a different problem if you can't do that. But does that mean that, you know, you'll revert back towards the guidance of 1.9 to 2.2 or could we see this level of spending sustained?

No, I think it's just also where our big projects are. And remember, we're coming to the end of the number three shaft in some of the big projects and ongoing capitals, the PV expansion. So it's just the way it's profiled. And I'm glad you recognize that we are spending the capital. So that's important in any business to be able to deliver on the benefits of those expansion or efficiency projects.

Otherwise, you have production problems later on. Okay. Thank you. That's it for my questions.

Okay.

The next question is from Lawson Linder with Bank of America. Please go ahead.

Hi, Mark. Nice to hear from you, and thank you for today's update. Maybe at risk of putting too fine of a point on it, I'd like to just ask quickly again about the buyback. So you have stated in the release that you'll acquire your shares when they're trading below what you consider intrinsic value. And you just recently, earlier on the call, mentioned that... you'll enter when it's relatively underperforming. And I guess it would just be kind of helpful for me anyway to sort of square those two. Is intrinsic value perhaps then based on a bit of a moving gold price target?

Yeah, I think there's many variables that impact that, along with the actual market itself, Lawson. So I think you are putting too fine a focus on this decision. I think what we don't want to do is get caught like we did and don't have any tools to deal with a very soft share price. So, you know, I think right now we're, you know, it's an interesting time. I think also you need to put my strategy in perspective. You know, when we set out to build this new, you know, value-focused organization, one of the key focuses was get rid of the debt, clean up, and make sure we focus on the best people to run our top quality assets. But also, this quarter, quarter one, was a very significant quarter. We dealt with a lot of critical points, things that were worrying analysts and shareholders a lot. But also we strengthen the balance sheet is now makes us independent of the market. And so we're a very different organization than we were just three years ago. And we've got, you know, an environment ahead of us that I believe is, you know, nobody listening to this call or probably very few. have been there before to see hyperinflation and, again, the deglobalization of those sort of stable years of the back end of last century. And so, you know, managing a situation like this, you need the balance sheet strength. Again, we didn't just... transact and keep all their assets. We trim them down, making sure we keep those that can manage the cycle. So all that is a part of it, and the share biotech strategy is an integral part of that. We are completely focused on making sure that our shareholders are protected and benefit from our business in a material manner.

Thank you. And if I may ask one more question, just your latest thoughts on the potential to grow copper production in Zambia, and in particular, what do you see as a basis for growth there, whether it be an expansion at Lamona or building a new mine or potentially acquiring existing assets?

So the opportunities have to be all of what you point to. Right now, our focus is still delivering a more efficient, streamlined, Lemoana, we are forecasting significant improvements in production in our life of mine plant. Just on Lemoana, I touched on the opportunity we've uncovered to build some more flexibility into the operation. Zambia is a country with a new government that's really business-friendly, and so a lot of the conflicts in the industry which led to investors and mining companies leaving and disposing of their assets, that's sort of gone away. At the same time, as we keep reinforcing, we are very disciplined in looking for opportunities that fit our investment filters. Again, right now in this phase of the market, discovery is a good thing, and we have beefed up our exploration competency in the Central African copper belts, and we're definitely focused on building the models and making sure that we pursue... And, of course, the Zambian government is very open and extremely willing to work with any long-term investor. And so we have built a strong relationship with them and particularly the president. And so, you know, let's see what it brings. And, of course, again, there's some stranded infrastructure in Zambia. In Zambia, and Lemwana is a concentrate producer, so we look at everything. If it fits our criteria, we'll pursue it. If it doesn't, one thing we can demonstrate is Zambia meets our long-term filters as we speak today, and it passes the investment test at 275 copper.

Thanks very much for your thoughts.

The next question is from with Scotiabank. Please go ahead.

Great. Good afternoon and good morning. Thank you for taking my questions. A lot of them have been answered, but I do have three remaining, three quick ones. The first one is just on, and thank you for the quarterly guidance that you provided on the assets within your press release. Just from a bigger picture, maybe Mark or Graham, can you guide us whether we are seeing progressive quarter-over-quarter improvement with a strong Q4 and sort of a portfolio? Are we 45-55 production first, half-second, or are we sort of 48-52? I'm just trying to get a feel for the portfolio quarter-over-quarter and then first half, second half.

So I would say, of course, what we do when you have these back-end weighted profiles, Tanya, we try and bring them forward. So that's the focus right now is bringing some of the quarter four production forward. And we've got big commissionings and ramp-ups, particularly at Turquoise Ridge. Gold rush right at the end. There's an opportunity there because Cortez moves quite quickly up the value curve towards a million ounces starting next year. And so we want to get that up and running. You know, your 45, 48, 52, 55, somewhere between those ranges is probably realistic. Graham, you want to add anything to that?

Yeah, no, I think that's right.

It'll be nice to be in the middle of those two ranges, but, you know, somewhere around there.

With quarter over quarter improvements?

Yeah, that's right, Tanya.

Yeah, it's a progressive process.

Okay, perfect. That's the easy one. I wanted to come back just on the inflation. I know that about 40% of your cost structure is labor, so just wanted to make sure on that front, one, if you are seeing any labor pressures, and two, if you have any labor agreements that need to be renegotiated this year.

So I think the team in Nevada has done an excellent job on negotiating with the one union team that we inherited in the deal with Newmont. And that's established and set for another year. And, again, the labor engagements mostly in South America and Africa were largely through them. And, you know, that's normal course of business. We're not seeing that sort of inflation across the other regions. It's really the United States. And, again, we're managing it, Tanya. You know, it's not... It's not, you know, it's difficult, but it's also what we're finding is that when we employ people, we're not short of applications, and when we employ them, and one of the things we're really obsessed about is we want people to join us that are aligned with our vision and our DNA, And we don't see people as numbers that, you know, come and go. We are very focused on building that human capital foundation. So, yes, and the U.S. is really... And it's the way that the U.S. labor market has responded to COVID and the alternate opportunities. And, of course, you've got some... new projects being developed and the juniors are, you know, promising minds and employing people. So all those, that dynamic is real. But I wouldn't say that it's a, you know, that's why we run companies is we manage people.

Okay, so that sounded like you don't have any contracts due this year.

No, no, we've got no contracts that would risk our organisation.

And maybe the same on the supply chain contracts. Do you have any for renewal, like cyanide or anything like that?

No. We have very, you know, we've, again, taken out hundreds of millions of dollars out of the supply chain procurement costs in Barrick. And we've still got some way to go before we're comfortable that we're super efficient. And we've, you know, Rian Krobla and the team across the group have done a remarkable job managing. You know, we come from that background, very dynamic situation, and we've managed the COVID issue. We managed the ECOWAS sanctioning of Mali, which brought challenges on the logistics side. We're now managing the Eastern Europe crisis, along with what was not talked about, the impact of the COVID lockdowns in China. And again, what we did is when we put the two companies together, we slimmed down our inventory, our store inventory down to a month because we need to clean out all the working capital. When COVID reared its head, we jacked that up to three months. With the crisis unfolding and there was lots of warning it was coming, we were already running around and moving some of our Eastern European potential impacted consumables up to five months. And we're pretty much in that phase. On the contracts, we have long-term contracts. That's the first thing we did is renegotiate and put in long-term. long-term contracts and work more on a partnership basis. But, you know, in times like this, there's sort of knee-jerk reaction where people use the concept of inflation to widen their margin, particularly on the supply side. And there are others that work open books with us, and we will definitely work with them to make sure that they stay in business profitably. And so we don't look at it as just... And that's why we've got, you know, very effective supply chain partners. You know, we will manage this because the one thing we don't want is our service providers to go out of business.

Okay, so nothing there. And then just on the, you mentioned in the beginning that you had in your guidance just reflected a 5% inflation rate. And now you're seeing 3% more, so that puts you at 8% on the operating costs. Can you comment on the capital side? Everyone's focusing on the operating costs, but we haven't heard much about what's happening. What are you seeing on the capital side as you continue some of your mine build?

In the big capital projects, as you've indicated before, the big pressure at the moment is steel costs, and we pre-purchased most of our steel, certainly for PV and for the Turquoise Ridge No. 3 shaft. And again, we trade that quite actively. We are our owner representative, so we manage that risk. There has been some impact on the timing in Pueblo Viejo, which we shared with you last quarter, because of the logistics impact and getting some of the steel, manufactured steel, into production. a Dominican Republic. But again, that's all baked into our forecast. So as we speak today, there's no material impact on any of our capital projects. Graeme?

No, not on the growth projects. I would just say, obviously, on the sustaining capital, quite a bit of the capital there is stripping, and clearly that does have an energy component to it, so some small pressure there. But we don't expect to be going outside of our guidance on capital.

Okay. And then my final question, if I could, was just on PORGRA. Mark, I think you said that negotiations are going well, but it looks like we've slipped a quarter, so we're going into Q3 2022 for PORGRA. startup, does that still give us, does that still mean that it would be Q2 of 2023 that we sort of, I think it was six months, right, to ramp up to full capacity. So should I be thinking Q2 of 2023 as a full ramp up stage for that operation?

Yeah, that's a reasonable assumption. Of course, while we delay, we're still doing preparation work. So we can't do physical mining, but we can work on making sure our equipment is properly serviced and ready to operate, et cetera, et cetera. The big challenge is going to be employing the people. We've got about 1,000 people employed at the moment. We've got to go to... I want to say 2,500. And then just to update you where we are, we've signed the PPCA, and most importantly, you would have seen ahead of the elections, because Parliament stops passing legislation out to the elections, we got the approval of all the related legislation that needs to endorse our framework agreement. So that's all in place, which is very material for us. And we have one signature outstanding on the shareholders agreement, which we need to incorporate the... the new Pogra company, and with that apply for the SML, the special mining license, a sound SML. That's part of our agreement. And as soon as we get that sorted out, we'll be able to – then apply for the ASML and then it's a procedural thing. We work with the Minerals Resources Authority and we deal with the issues and we'll be moving forward. And we're saying we should be at a place to formally start around October at this stage. Remember there's elections now too, so it's going to impact on our planning.

Okay, so October, so six months after that, so mid-2023 for startup. Okay, thank you.

Pleasure, Tonya.

The next question is from Mike Parkin with National Bank. Please go ahead.

Hi, guys. Thanks for taking my question. With respect to PV, can you just remind us what your current tailings facility has in terms of capacity and Is there a tight spot in terms of getting the new one approved and constructed and ready for initial deposits of tailings versus when the current one gets filled up?

So we've got headroom out to 2027. um, with some additional investments. And, uh, you know, we expect to be ready to process that, uh, long before that. Um, I don't know, granted, um, do you have, are you on the call or John Steele? Maybe you want to just give the detail.

Yeah, you, you're right. Mark 2027 in terms of the current design, um, of the facility, or at least what we have already built, is there is a buffer there where we could raise the wall further. But, you know, based on the schedule that we have now, we don't see that as necessary. But, as I say, there is that bit of fat, you know, while we construct the new TFF. Now, John, is there anything you want to add?

No, that's correct, Grant. We've got the five years up until 265 meters. And we can... go for an extra three meters on that facility with a redesign. So we're comfortable that we have the time on your gal to allow us to get the next TSF ready.

Mark, that answers your question? Thanks, John. Thanks, Ron.

If you decide to exercise an additional three-meter lift, that doesn't require any government approval?

No, but it's capital. We'd prefer not to do it. And right now, there's no plans to do it.

Okay. Thanks, guys. That's it for me.

Thank you.

The next question is from Jatinder Goel with BNP Paribas. Please go ahead.

Thanks, Alberto. Good morning. I've got a question related to your recordic analogy, Mark. While acknowledging your experience of working in challenging jurisdiction, the question is more about risk assessment, which is how do you ensure that there aren't other potentially dangerous elements while looking for elephants? It's a country with no mining history, volatile political regime, and difficult history of the project itself. So how do you add a safety net against the known elephants that might come across in the future. As an example, Rio Tinto had put in a loan for Mongolian project, including international agencies, but that didn't prevent the government to renegotiate the contract, which got concluded earlier this year. Just starting to understand your approach to risk assessment, and presumably you've used the same copper and gold prices that you use for other large-scale projects. Have you used a bigger risk premium to make the IRR hurdle higher for this project?

So this project passes a hurdle rate of around 15% at 1,200 gold and 275 copper. We don't change that. And just to point out, risks are binary in mining. You either have a mine or you don't. And I would point out that It's unfair to suggest or blame the Mongolian government for the renegotiation of the Mongolian Rio Tinto investment. The reason was because Rio didn't deliver on the original plan and ran up a massive debt. So every project's got a story. We have a very strong reputation of delivering on what we say. And that's the first trick in building strong license to operate. This is an asset that has been effectively... there for Barak for over a decade. It's been a matter of dispute between Barak and the Pakistan government, and that dispute went to arbitration. It received award. It was awarded against. But at the same time, as you know, in Barak and myself, we believe in finding solutions, not really focusing on fighting with our host country. And so the product of this negotiation, which I must say took an enormous amount of effort from our negotiating team, is a clear 50-50, as we've demonstrated, is the right way to look at partnerships, both in Tanzania and more recently in Papua New Guinea. And on the same time, it's the first time that the Balochistan province has been recognized and will receive a substantial component of the benefits of this investment. And again, our commitment to ensure that we start investing in the community and particularly on upskilling the Baluch people ahead of the mining operations. And there's so many things that have been neglected there today. And one of them, for instance, is just the accessibility to potable water, for instance. And in Barrick's sense, we have three primary pillars in our commitment to our communities, potable water, primary health and primary education, all of which need improvement in that region. You know, so we've worked in these sort of environments before. I've spent my entire life working in these sort of environments. This is a perfect opportunity for the mining industry to demonstrate what it can bring to the economy of a country, as we've been able to demonstrate in many parts of the world. So, you know, I think this is a very fair deal. It's a deal in which the government of Pakistan are investing in. So, again, a new way of looking at it. We are bringing the international agencies in. It's a very material – it's the biggest single investment Pakistan's seen. And it has enormous social and economic impacts for the entire Pakistan country and specifically the Balochistan province. So I'm very comfortable. Of course, there are going to be challenges and bumps along the road. But so far, our experience, despite starting with sort of a conflict situation, the state of Pakistan, and we've been through many governments, just to remind you, in this process, has always upheld our agreements. And I think that bodes well for a long-term successful partnership with the people of Pakistan.

Thanks, Mark, for the detailed explanation. Just to follow briefly on the same project, is the decision to reactivate, obviously there is a long history and obviously there was a dispute, but was there anything else competing against this project for capital as well, either organically or inorganically, or is the quality of geology so attractive that other things just find it difficult to compete whatever is in your near-term time horizon?

So we've got another really big project in partnership with Novigold in Alaska, which we're moving forward on. As I indicated last time, I spoke in a public forum and the question was asked. They are mutually exclusive projects. We can afford, you've seen our balance sheet. In my lifetime, I've built three mines at a time. And definitely Barrick and its executive team within the three regions, every one of those teams are quite capable of shepherding a new tier one asset into our portfolio. So, you know, RickerDix fits under the... LATAM Asia-Pacific region. We've still got the African region and the North American region and Donlan fits in under the North American region. We are never going to sequence world-class assets that meet our filters. We're going to invest and bring them to account.

Thank you very much, Mark.

The next question is from Adam Josephson with KeyBank. Please go ahead.

Mark and Graham, good afternoon. Thanks very much for taking my questions. Mark, you mentioned earlier just about your stock trading at a discount to what you consider to be its fair value. And on the last call, you talked about the discount to, obviously, Newmont. I'm just wondering how you think about, you balance your desire to invest in Tier 1 assets, which you obviously have many of, against some investors' perception that, you know, there's more riskiness here because of your willingness to invest in what they consider risky jurisdictions. And so you're trying to do the right thing, but balance that with whatever investor perceptions are about the riskiness of your portfolio. So how do you kind of balance those two things, given your belief that you continue to trade at a discount to fair value, presumably in part because of these perceptions?

Okay, so let me try and deal with that quite complicated question. The first part to it is, remember if you look at the second to last slide, our performance against the GDX is at, you know, we're above the GDX performance where you look at it over the last 12 months, six months, or since we incorporated the joint venture or merged with Rangold. So, We are performing in the market at the upper end. Of course, as you point out, Newmont recently has been higher than that. But this is a long-term game. And again, if you look at what we've come from, a negative net debt of over $4 billion to a positive net debt of $700 million. And when you look at our cash flow and you look at the... And we've paid out... $3.5 billion of cash, both in the capital returns and the dividends. to our shareholders over that three years. So you've got to conclude that Barrick is very much a sustainably profitable mining company. And if you stop, and there are many examples of it, when you think I started Rangold with $10 million in 1995, and look where we've taken that, and now Barrick. and you look at the big companies that were there in the market with us back in 1995, so many of them have disappeared. Because mining is a consumptive industry, and risk is how you manage it. And we just have to look at... Chile and Peru today, if you look at the dynamics, the tax dynamics within the United States and how it changes from one government to another. And you've seen us navigate the challenges across Africa. And the point is, people miss the real point of mining. And that is, if you can partner with your host country, you create value and you deliver meaningful change and a contribution to the economy and the people of your host country. That's called license to operate, which we all look at as some sort of intangible tag. It's a genuinely important component of our business in Barrick. A bad asset in a good country is still a bad asset. A good asset in any country is a good asset. And to bring back your point about Mongolia is that it's how you exploit it and share the benefits of that exploitation that allows you to keep that asset or not. And I'd finish off by something I always say, and that is, have you ever seen the landlord kick out a tenant that's paying full rental? So that's really our philosophy on it. And we know, because I know from experience, as we deliver on that, people will want to own our stock.

No, I really appreciate that, Mark. And just one other question. Newmont was asked this as well about, you know, there's all this discussion about inflation for understandable reasons. And that prompted... a question on their call about potentially revisiting their gold price assumption for budgeting purposes. Is that something that you've considered and weighed the pros and cons of? And what is your thinking along those lines?

So the one thing that, you know, we've shared this with the market going back to 2001. We have a policy. It's a formulaic policy. That's why we've kept the gold price where it is. We don't make it up. We don't look at the sort of who does what with the gold price. And we set the long-term gold price based on input costs. And we have a reference point going back to 1998, where we built a model, a specific model, for exactly that reason. And we've used long-term gold price of 450 when the gold price was 260. And of course, as you know, in 2011 or 2010, when everyone chased the gold price up, And we stuck at $1,000. And so we've moved from $400, $450, $650 through the first decade of this century, stopped at $1,000 in 2010. And we moved up to $1,200 when we did the deal with Barrick. Because again, when you fiddle with the gold price without a cost impact, you impact your cut-off grade and also your production profile. And so, yes, with inflation coming through on our costs, it makes sense that we will automatically and continue to review that. We do anyway because we run our reserves at 1,200 and our resources, and we have full mine plans that support our resource estimates at 1,500. And we look at sensitivities all the time. Rod Quicken, his group, that's their job. So there will be a time when the gold price will go down, as there will be times when the gold price we use might go down. So that's inevitable in an industry where the input costs are changing, and they're most definitely changing.

I appreciate that. I just want to follow up to that. If you were to change your gold price assumption, when do you think that might be? Would it be end of this year? Is there any kind of timeline you could give us?

So we review our reserves and the assumptions every end of the year as part of our declaration of our resources and reserves. So we're very comfortable that we remain profitable at our assumptions throughout this year because we've set those plans, and they are designed to make money at $1,200, so we've got a fair margin. And as we do every year, we'll re-look at it when we come to reflect on our reserve statements for the end of this year.

Thanks very much, Mark.

The next question is from John Tomasos with John Tomasos Very Independent Research. Please go ahead.

Mark, thank you very much for your cost breakdowns in great detail. I see that the Nevada cost per ton for open pit mining has risen 39.6% over five quarters. That's a very accurate measure of industry costs. It doesn't affect ore grade. It doesn't involve ore grade. Your cash costs per ounce over five quarters have only risen 20.2%, and this was a bad quarter with low output. The next quarter should be lower. In the copper division, cash costs over five quarters have only risen 12.4%. I wish I was where you are and I could shine your shoes. How is the physics... Of your cost per ounce or cost per pound only rising a third as much as mining cost per ton. You're doing a great job of controlling cost.

So we are obsessed about controlling costs, but I think you've sort of laid out a metric that we wrestle with all the time, and I'll try and deal with it. So the copper costs, you know, we... La Mana, when we really got our teeth into it, was very inefficient, and we effectively halved the costs of mining. And we now are just putting in new fleets, so you're going to see even better efficiencies. And, of course, we are working in an inflationary environment, and so there will be some cost creep on that. And that's the flow-through with Lemuana. The same goes for Jabal Said, which is really driven by our expansion of the mining industry the efficiencies of mining. So we've effectively increased the throughput or production by 50%. And as you know, in mining, the economies of scale always win. And so we've dropped the grade in Jabal Said slightly, but we've increased the efficiency with the same infrastructure. So we've increased the throughput and the copper production materially. And so that drives... copper, but copper was like a neglected part of our business. And so that's where the extra efficiency comes from. On Nevada, there's a big change in how we're managing. We've got some fleet that we have to use to shore up an old pit as part of our commitment to the First Nations. So there's some inefficient mining there. We are also doing some big tailings upgrades. Again, we try and sequence that when we strip for mining purposes so we can move the material to the tailings facility or the leach pads when we build new leach pads. And again, Greg and the team in Nevada have been looking at... One of the next steps we've got on efficiency is looking across the Nevada group and saying, are we allocating our fleets, both underground and surface, in the most appropriate manner and still further breaking down the... the fences, so to speak, between our individual, the four big operations we've got in Nevada. So again, you'll see that that open cost will come down in Nevada. So those are really the drivers. We've got some additional cost pressure in Nevada. In Valadera, you would have seen, and also we operated, as you correctly pointed out, a lower production for the group and particularly for Valadera. We are investing in a new fleet or a second-hand but relatively new fleet in Argentina, and that's going to bring with it some efficiencies as well. And then we are mobilizing fleet, which we haven't started yet, but we are mobilizing fleet for Pogra, which will in itself also bring significant improvements in our economy. So that's why I say when we talk about costs, they're very variable. You can't blame it all on inflation. Some of it is efficiency. Some of it is, you know, the age of the equipment and so on. But we really drive unit costs. That's how we run Barrick. We don't run per ounce. We run per ton unit costs. I hope that answers your question.

Thank you. If I could follow up. Several years ago, the Nevada cost per ton for Barrick was as low as $1.40 per ton and appeared to be as good as anybody in the world or pretty close. Do you think it's possible to get back under $2 a ton? And those costs per ton were before the Newmont merger and however that affected it. improvement or otherwise. But do you think it's possible to get to $2 a ton again?

So at $2, you need 300-ton trucks and a big pit. And Nevada's open pits are quite far apart now. There is some efficiencies in the Carlin pits still. But that's the point I'm making. And the real cost now, it's changed a lot. I think you're talking about... a decade and a half ago. You know, I think long gone are the days where with a 300-ton truck or a 170-ton truck, which is most of the stuff that we use, you get down under $2. In Zambia, we are close, you know, to that, sort of $2.20, $2.50 with big 300-ton Komatsus. Yeah.

There are no more questions on the conference call.

Well, thank you, everyone. That was quite an exhaustive set of questions. I appreciate the interest. We stayed the course. Everyone here is sort of sweating under the lights. But appreciate your time and your interest. Again, we'll be seeing you, some of you, in Miami next week, hopefully. And again, we'll be... At Indaba, for those who are going to Indaba, and then some of our team will also be here at PDAC in Toronto. And otherwise, please, if you have any further questions, reach out to the team. We're always very committed to making sure that you get the right information. So thanks again. Have a good day.

This concludes today's conference call. Should you have any additional questions, please contact the Barrick Investor Relations Department. You may now disconnect your lines. Thank you for participating and have a pleasant day.