With gold assets scarce, Barrick will mine other metals

Barrick Gold Looks Beyond Yellow Metal

Lisa Wright
Toronto Star
Friday, February 23, 2007

http://www.thestar.com/Business/article/184912

Nickel, copper, zinc. Silver, platinum, palladium. Even energy.

They aren't words you expect to hear at all -– especially not in a positive light -– from the world's biggest gold miner in a three-hour presentation to the international investment community.

Yet Barrick Gold Corp.'s chief executive Greg Wilkins stood before analysts yesterday and talked about some of the company's future plans in base metals and other precious metals as a reality of an industry, given the lack of major new discoveries on the global bullion front.

"Good gold assets are a scarce resource. It's like owning great property in Muskoka: Boy, it looked really expensive 10 years ago but there's not much of it" left, he said in speaking to analysts at the Metro Toronto Convention Centre.

So in the face of rapidly depleting resources, flat production, rising costs, and longer approval times to open new mines, Wilkins touted other developments besides gold, including a big nickel project in Tanzania, platinum-palladium projects in Russia and South Africa, along with a copper and gold property in Pakistan.

Already 20 percent of Barrick's overall sales are from its copper operations in Chile. Its Pascua Lama project on the border of Chile and Argentina also hosts a world-class silver deposit.

And the Pueblo Viejo property in the Dominican Republic will crank out silver, copper, and zinc once it gets approved.

"We're going to harness these non-gold assets," said Barrick's vice president of exploration, Alex Davidson.

"Our business is gold. ... But reserves are an issue. Can we sustain them, can we grow from here?" Wilkins said.

He complained that the Toronto-based mining giant is trading at a discount to its North American peer group, including Newmont Mining Corp. and Goldcorp Inc., not to mention the gold price itself.

"Spot gold outpaced the company" last year. "Frankly, that's just embarrassing."

Shares of Barrick fell another 78 cents yesterday to close at $36.47 on the Toronto Stock Exchange, even though the company's fourth-quarter profit soared on robust bullion prices.

Net income more than doubled to $418 million (U.S.), or 48 cents a share, from $175 million or 32 cents, a year earlier.

Denver-based Newmont, the world's second-largest producer, said net income tripled to $223 million, or 49 cents a share, from $62 million, or 14 cents.

Wilkins pointed out that although 2006 was a banner year for Barrick, its share price is still not performing the way it should.

Barrick lowered its 2007 production guidance, but enjoyed a mammoth, 139 per cent rise in fourth-quarter profit.

The firm now expects gold production of 8.1 million to 8.4 million ounces for the year, down from a previous forecast of 8.5 million ounces, as well as copper production of about 400 million pounds.

Cash costs are expected to be in the range of $335 to $350 an ounce for gold and 90 cents per pound for copper.

Davidson noted there are very few nickel sulphide projects in the world today, so Barrick's Kabanga project in Tanzania, in which it is a partner with Xstrata PLC, has "tremendous potential to become a world-class nickel mine," he said.

"Only Voisey's Bay nickel grade is higher and we know how much Inco paid for that," he added.

Analysts were buoyed by the financial results but questioned the strategy of venturing into other areas outside the company's core gold focus.

"It's a little bit risky. You might find yourself with a base-metal multiple," said Steve Butler of Canaccord Adams.

The company also boasted it has taken a further hunk out of its hedge position with a reduction of another 11 million ounces over the last year.

The hedge book served the company well in down times, but flopped in the market as prices started to rise in 2003.

"We remain very bullish on the price of gold," said chief financial officer Jamie Sokalsky.

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