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Barrick Gold Corporation

UPDATE 4-Chilean court suspends Barrick’s Pascua-Lama mine project – by Erik Lopez (Reuters U.S. – July 15, 2013)

http://www.reuters.com/

SANTIAGO, July 15 (Reuters) – A Chilean appeals court on Monday suspended Barrick Gold Corp’s controversial Pascua-Lama gold mine until the company builds infrastructure to prevent water pollution, and ordered the mine’s environmental permit be reviewed.

In April, the Copiapo Court of Appeals temporarily and preventively froze construction of the $8.5 billion project, which straddles the Chile-Argentine border high in the Andes, while it examined claims by indigenous communities that it has damaged pristine glaciers and harmed water supplies.

On Monday, a three-judge panel of the appeals court, in a unanimous decision, ordered a freeze on construction of the
project until all measures required in the government’s environmental license for adequate water management, “as well as
urgent and transitory measures required by the environmental regulator,” are adopted.

Chile’s environmental regulator had already suspended Pascua-Lama, citing major environmental violations, and asked
Barrick, the world’s top gold miner, to build water management canals and drainage systems. “Barrick is committed to operating at the highest environmental standards at all of its operations around the world, including at Pascua-Lama, and is working diligently to meet all regulatory requirements at the project,” the Toronto-based company said in a statement on Monday.

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Gold producers wrestle with dividend dilemma – by Peter Koven (National Post – July 5, 2013)

The National Post is Canada’s second largest national paper.

Gold miners have never been known for paying generous dividends. But thanks to free-falling stock prices across the sector, they carry some unprecedented yields.

Barrick Gold Corp. has a dividend yield of 5.3%, which puts it in the same league as BCE Inc. (5.4%) and ahead of all the Canadian banks. Other gold miners with outsized yields include Iamgold Corp. (6.2%), Newmont Mining Corp. (4.8%) and Centerra Gold Inc. (4.5%).

The situation is not likely to last very long. Experts said at least some gold miners would consider slashing their dividends if the gold market does not turn around soon. The cuts could begin later this month, when they report second quarter earnings and detail their responses to plunging prices.

Traditionally, gold miners paid little to no dividends. That changed over the last several years as they began to generate record profits and investors urged them to return more cash. Every significant gold producer has either introduced or increased its dividend (or both) in recent years.

Now that gold prices are falling, the downside of that strategy is becoming apparent. Margins are getting squeezed and many companies are struggling to generate any free cash flow at today’s price of US$1,250 an ounce.

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Editorial: This is what a washout looks like [Barrick Gold] – by John Cumming (Northern Miner – July 3, 2013)

The Northern Miner, first published in 1915, during the Cobalt Silver Rush, is considered Canada’s leading authority on the mining industry. Editor John Cumming MSc (Geol) is one of the country’s most well respected mining journalists. jcumming@northernminer.com

Barrick Gold is the world’s leading gold company, and its Pascua-Lama gold-silver megaproject under construction on the Chilean-Argentine border is its leading development project. And so the gold industry watches in dismay as the major grapples with the project’s ballooning capital costs and construction delays, slumping gold prices, writedowns, job cuts and a pummelled share price.

At the time of writing, Barrick’s shares trade for only $15.29 — or US$14.69 — off 56% this year alone, and 74% since their peak in April 2011. Here again, Barrick is the leader of the gold sector that has seen overall share price declines around 50% this year.

Barrick has also led in terms of corporate-suite excess, with the pink-slipped minions at head office bearing the brunt. Fired CEO Aaron Regent was paid US$12 million last year, mostly as severance, while the whole management team pulled in an astonishing US$57 million, up 148% year-over-year. In April, Barrick shareholders finally had enough, and there was heated opposition to the $17-million pay package offered to incoming co-chairman John Thornton, a former president of Goldman Sachs.

Barrick may yet prove to be a leader in accumulating unwieldy debt and tabling enormous writedowns as Pascua-Lama moves forward. At the end of the first quarter, Barrick had US$2.3 billion in cash and US$15 billion in debt.

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Top 10 gold miners face 2013 earnings nightmare – by Lawrence Williams (Mineweb.com – July 2, 2013)

http://www.mineweb.com/

The tribulations of the world’s No. 1 gold miner, Barrick, are a sign of huge difficulties ahead for the other gold majors too.

LONDON (MINEWEB) – Barrick Gold’s latest announcement of yet a further delay in the hugely costly Pascua Lama gold mine, high in the Andes makes one wonder if the company will ever bring it on stream – however the huge amount of money spent so far suggests the world’s No.1 gold miner has gone too far to can the project now and maintain any kind of shareholder confidence.

See also: Barrick’s huge Pascua-Lama gold mine start-up now delayed to mid-2016

Even so, the project could yet be delayed beyond its new projected start-up date of mid-2016 given continuing local hostility on both sides of the Chile and Argentina borders and one has to anticipate that overall capital costs to bring the mine into production may end up to be yet substantially higher – perhaps in excess of $10 billion when the money is finally counted.

Nowadays Barrick says costs have escalated from around $2 billion, when the initial development plans were set, to the current $8 billion plus and a revised capital cost update has been promised for Q3 this year when the re-sequenced construction schedule has been finalised.

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Barrick may wipe out retained earnings with huge Pascua-Lama writedown – by Peter Koven (National Post – July 3, 2013)

The National Post is Canada’s second largest national paper.

Barrick Gold Corp. is poised to wipe out all of its retained earnings for the second time in less than four years.

An anticipated writedown of US$4.5-billion to US$5.5-billion on the bungled Pascua-Lama project would eliminate the US$3.9-billion in retained profits that the gold giant reported at the end of the first quarter. Back in 2010, Barrick wiped out more than US$2.2-billion of retained earnings when it took a US$5.2-billion charge to close out its hedge book.

It is highly unusual for a company of Barrick’s size and profitability to be in this position twice in such a short time. And while these are non-cash charges, experts said they point to a troubling trend of poor decision-making and oversight at the world’s largest gold producer.

“The writedowns impact them in perception,” said George Topping, an analyst at Stifel Nicolaus.

The red ink could be a lot bigger when the company reports second quarter earnings in four weeks. Barrick warned of other possible impairments last Friday, and analyst Greg Barnes of TD Securities estimated they could total close to US$10-billion.

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Analysis: Latest Barrick mine delay fans price tag fears – by Julie Gordon (Reuters U.S. – June 30, 2013)

http://www.reuters.com/

TORONTO – (Reuters) – Barrick Gold Corp (ABX.TO) has slowed spending at its Pascua-Lama project in South America, delaying first output to 2016, but that may not be enough for the its shareholders, who worry that the final price tag may creep beyond what the mine is worth.

While the flagship development, which straddles the border of Chile and Argentina, is one of the richest untapped gold deposits in the world, the string of delays and budget overruns have been a nightmare for world’s top producer and its investors.

“They should walk from Pascua-Lama,” said John Ing, president of boutique investment and research firm Maison Placements, adding that the embattled miner also needs to divest non-core assets, cut exploration spending and slash hefty board salaries if it wants to turn its fortunes around.

Barrick said late on Friday that it would re-sequence construction of the controversial project to target first production by mid-2016, deferring some $1.5 billion to $1.8 billion of planned capital spending in 2013 and 2014. The company has not updated the market on capital costs, last projected to be up to $8.5 billion.

The delay was in-line with a scenario that Credit Suisse analyst Anita Soni outlined earlier this week, as the bank downgraded Barrick to ‘Neutral’ from ‘Outperform’.

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Barrick faces new setback, more pressure – by Brent Jang (Globe and Mail – July 1, 2013)

The Globe and Mail is Canada’s national newspaper with the second largest broadsheet circulation in the country. It has enormous influence on Canada’s political and business elite.

VANCOUVER — Barrick Gold Corp. has gained some breathing room with its decision to delay development of its Pascua-Lama project, but the company faces pressure to shrink its global mining operations amid tumbling metal prices.

Barrick says first production from the South American gold and silver venture will be postponed by more than 18 months, as the Canadian company forecasts taking a writedown of up to $5.5-billion (U.S.) on the project.

Toronto-based Barrick said it has opted to vastly scale back capital spending this year and in 2014 on the project, which is located in the Andes mountains and straddles the border between Chile and Argentina. While construction of the $8.5-billion project has suffered another setback, the venture remains strategically important to the world’s largest gold producer, analysts say.

“With all this talk about what Barrick could look like in the future, Pascua-Lama will be key to the company’s future operational performance, especially if Barrick wants to shed high-cost mines,” said Chris Thompson, a Vancouver-based mining analyst at Raymond James Ltd.

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PRESS RELEASE: Barrick Provides Updates on Pascua-Lama Project

June 28, 2013

All amounts expressed in US dollars unless otherwise indicated

TORONTO — Barrick Gold Corporation (NYSE:ABX) (TSX:ABX) (Barrick or the “company”) is providing the following updates on the Pascua-Lama project in Chile and Argentina with respect to construction re-sequencing, capital expenditures and impairment testing.

Schedule Re-sequencing and Reduction of 2013-2014 Capital Spending

The company has submitted a plan, subject to review by Chilean regulatory authorities, to construct the project’s water management system in compliance with permit conditions for completion by the end of 2014, after which Barrick expects to complete remaining construction works in Chile, including pre-stripping. Under this scenario, ore from Chile is
expected to be available for processing by mid-2016.

In line with this timeframe, and in light of challenging market conditions and materially lower metal prices, the company intends to re-sequence construction of the process plant and other facilities in Argentina in order to target first production by mid-2016 (compared to the previous schedule of the second half of 2014).

Re-sequencing the project primarily entails a reduction in project staffing levels as construction is extended over a longer period of time to coincide with the availability of ore from Chile in mid-2016.

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The misery only gets worse for Barrick Gold – by Darcy Keith (Globe and Mail – June 26, 2013)

The Globe and Mail is Canada’s national newspaper with the second largest broadsheet circulation in the country. It has enormous influence on Canada’s political and business elite.

The misery at Barrick Gold Corp. is only getting worse, with the stock today sinking to its lowest level in more than two decades amid plunging bullion prices and as Credit Suisse backed away from an earlier gutsy recommendation to buy its beaten-down shares.

Analyst Anita Soni downgraded Barrick to “neutral” from “outperform,” and dramatically cut her price target, as Credit Suisse lowered its price forecasts for gold. It now sees bullion averaging $1,452 (U.S.) an ounce in 2013 and $1,390 in 2014, down from earlier forecasts of $1,580 from $1,500, respectively.

But Ms. Soni also made clear it’s not just the gold price that is hurting the outlook on Barrick, but rather a “confluence” of factors that also includes uncertainty over the Pascua-Lama project, high debt levels relative to peers, and potential write-downs. These “in isolation would likely have been weathered, but in combination reduces the risk/reward profile for the company.”

“We are reducing our rating until the company provides clarity on the path for Pascua and for handling asset sales and its financial leverage,” Ms. Soni said. She expects Barrick will provide some clarity on Pascua-Lama, located on the Chilean-Argentian border, before third-quarter results are released in late October.

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Barrick plans board changes after ‘huge wake-up call’ from investors – by Jacquie McNish (Globe and Mail – June 25, 2013)

The Globe and Mail is Canada’s national newspaper with the second largest broadsheet circulation in the country. It has enormous influence on Canada’s political and business elite.

Barrick Gold Corp. plans to overhaul its board of directors in the wake of a backlash from powerful shareholders. Two of Barrick’s independent directors, Donald Carty and Robert Franklin, recently met or telephoned officials from eight major Canadian pension funds that spearheaded a revolt by shareholders complaining about lavish compensation practices.

More than 85 per cent of Barrick’s shareholders signalled in a non-binding vote in April that they opposed a $17-million (U.S.) paycheque for the company’s new vice-chairman John Thornton and multimillion-dollar payments to company founder Peter Munk and director Brian Mulroney.

According to people familiar with the meetings, Mr. Carty, a Dallas-based director with Virgin America and Porter Airlines Inc. described the vote as “a huge wake-up call” about the need for better governance at Barrick.

The directors told the pension funds the board has launched a search for independent directors with an emphasis on executives with mining operating experience. It is expected that some of Barrick’s current directors will be replaced but the number of departures is unclear.

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Barrick Gold slashes 100 corporate jobs, mostly in Toronto – by Dana Flavelle (Toronto Star – June 25, 2013)

The Toronto Star has the largest circulation in Canada. The paper has an enormous impact on federal and Ontario politics as well as shaping public opinion.

Company cuts 30 per cent of head office jobs as gold prices sinks.

As the price of gold continues to lose its lustre, some of the biggest miners in the world are feeling the strain. Barrick Gold Inc. is cutting about 100 jobs, mostly at its Toronto headquarters, the company confirmed Monday.

Meanwhile, Newcrest Mining Ltd., in Australia, wrote down the value of its mines by as much as $5.5 billion (U.S.), the biggest one-time charge in gold mining history. Global miners spent $195 billion buying new assets in the past decade as gold prices soared. But the precious metal has been sinking on talk of the end of low interest rates.

Goldman Sachs Inc. has cut its year-end price forecast for gold to $1,300 (U.S.) an ounce from $1,435. The spot price of gold slipped $12 to trade at $1,287 in New York Monday.

Gold is down 33 per cent from its peak of $1,921 in September 2011, with much of the losses coming since January. That’s been bad new for gold miners.

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Hemlo dodges Barrick cuts – by Carl Clutchey (Thunder Bay Chronicle-Journal – June 25, 2013)

Thunder Bay Chronicle-Journal is the daily newspaper of Northwestern Ontario.

Barrick Gold’s flagship Hemlo mining operation won’t be negatively affected by major job cuts that the company announced on Monday. But locals are worried that the operation will be hurt if the price of gold continues to lose its shine.

“The job reductions announced (Monday) do not impact the Hemlo mine,” Barrick spokesman Andy Lloyd said in an email.
Barrick is laying off about 100 corporate staff, mostly from its Toronto headquarters, as it struggles with falling gold prices and various internal challenges.

Barrick employs about 700 full-time workers and contract employees at its Williams and David Bell gold mines about 40 kilometres east of Marathon. The jobs that are being cut represent about 30 per cent of the total corporate office positions for the Toronto-based mining company, which is the world’s largest gold producer.

Most of jobs are at Barrick’s head office in Toronto, but some are at its regional offices. An email to The Canadian Press from Barrick says staff at a Barrick office in Salt Lake City, Utah, may also be affected.

The company advised staff last week that the layoffs were coming. The cuts affect a small portion of the 25,000 employees that Barrick has worldwide, but represent its ongoing efforts to streamline during a period of falling gold prices and internal challenges, including mounting costs at its Pascua-Lama project in South America and losses at its copper business in Africa.

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Gold Miner Writedowns at $17 Billion After Newcrest – by David Stringer & Liezel Hill (Bloomberg News – June 24, 2013)

http://www.bloomberg.com/

Newcrest Mining Ltd (NCM).’s decision to write down the value of its mines by as much as A$6 billion ($5.5 billion) will lead to the biggest one-time charge in gold mining history. It also heralds pain for competitors.

Barrick Gold Corp. (ABX), the biggest producer, Newmont Mining Corp. (NEM) and Gold Fields Ltd (GFI). may be next, according to Jefferies International Ltd. Nouriel Roubini, professor of economics and international business at New York University and known as Dr. Doom for predicting turmoil before the global financial crisis began in 2008, says gold may drop to $1,000 an ounce by 2015. The metal traded as low as $1,277.20 in New York today.

Gold companies that spent $195 billion on acquisitions in a decade-long price boom are at risk of taking writedowns like Newcrest’s. Producers face more stresses with brokers from Goldman Sachs Group Inc. to Citigroup Inc. cutting price forecasts as bullion heads for its first annual drop since 2000.

“We would expect that there would be several, if not many companies, who would also in the next reporting period be coming to a list of impairments,” Michael Elliott, sector leader for Ernst & Young LLP’s global mining practice, said in a phone interview from Sydney. “It’s just a question of timing, and who had the largest exposures.”

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UPDATE 1- Barrick to lay off up to a third of its corporate staff – sources -by Euan Rocha (Reuters U.S. – June 24, 2013)

http://www.reuters.com/

TORONTO, June 24 (Reuters) – Barrick Gold Corp will lay off up to a third of its corporate staff at its headquarters in Toronto and other offices, sources said, as the world’s top bullion producer intensifies a downsizing plan amid a slump in the price of gold.

Barrick and miners such as Newmont Mining and Newcrest Mining are shaking up operations and taking measures like shutting down development projects, slashing exploration spending and cutting jobs due to the sliding gold price.

The cuts were announced by Barrick’s Chief Executive Jamie Sokalsky at a town hall meeting with staff in Toronto last week, said the sources, who asked not to be named as they are not officially authorized to speak about the matter.

One source said this is the first ever round of across-the- board layoffs for the company at its corporate headquarters in Toronto. Besides the falling gold price, it is also facing operational and regulatory issues at some of its mines and projects.

Barrick has over 400 people working as corporate staff with the vast majority of those located in Toronto, said the sources. A spokesman for Barrick was not immediately able to comment on the matter.

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Barrick delays Pascua-Lama mine start again (Reuters U.S. – June 4, 2013)

http://www.reuters.com/

TORONTO, (Reuters) – Canada’s Barrick Gold Corp said it would delay the startup of its Pascua-Lama gold mine in Chile and Argentina past late 2014 and that the project would probably exceed its current budget of up to $8.5 billion as a result.

In a filing late with Canadian regulators late on Monday, Barrick attributed the delay to water management work required by Chile’s new environmental regulator.

A Chilean court in April partially halted construction of the project, which straddles the border between Chile and Argentina, to weigh claims by indigenous communities that Barrick has damaged pristine glaciers and harmed water supplies.

Chile’s environmental regulator then put its own halt on work at the gold-silver project in May, citing serious violations.

“While the company is assessing opportunities for potential reductions in certain expenditures, the delay beyond 2014 is expected to result in a related increase in capital cost,” Barrick said in the filing.

While all nonenvironmental work is halted in Chile, construction continues on the Argentine side of the project. The delay is just the latest hurdle for the project, which Barrick has had on its books for more than decade. Last year, the miner pushed back first production by a year and raised its estimate of capital costs by about 70 percent.

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