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Gold and Silver

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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World Gold Council releases new gold-mining cost metrics – by Martin Creamer (MiningWeekly.com – June 27, 2013)

http://www.miningweekly.com/page/americas-home

http://www.gold.org/

JOHANNESBURG (miningweekly.com) – The World Gold Council (WGC) on Thursday released two new methods of calculating and reporting gold-mining costs to improve clarity and provide greater investor understanding of the complete costs associated with the mining of gold.

The first method is an extension of the existing “cash cost” metrics and incorporates costs that are related to sustaining production, which the council refers to as the “all-in sustaining cost”.

The second method takes into account additional costs and reflects the varying costs of producing gold over the life cycle of a mine, which the WGC dubs the “all-in cost”.

WGC director Terry Heymann told Mining Weekly Online from London that the new metrics had been developed to help provide greater clarity and consistency to improve investor understanding.

WGC has worked closely with its member companies and beyond to develop the non-Generally Accepted Accounting Principles (GAAP) measures and expects them to be helpful to investors, governments, local communities and other stakeholders.

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It’s no fun being a gold miner CEO these days – by Lawrence Williams (Mineweb.com – June 28, 2013)

http://www.mineweb.com/

FUNCHAL, MADEIRA (MINEWEB) – Only just over a couple of years ago gold mining company CEOs could seemingly do no wrong. The gold price was soaring to record levels, stock prices were mostly strong, shareholders mostly seemed happy, and the major funds which provided much of the companies’ support were calling for more and more growth.

The bandwagon was rolling, and the serious underlying problems which were already surfacing, such as hugely escalating capital costs for new projects, and ever ongoing sharp rises in operating costs were largely being ignored as they were being more than covered by the seemingly ever-rising gold price. The gold bulls were predicting ongoing gold price escalation and those who were suggesting caution were being ignored or ridiculed.

Oh what fun it was being a gold mining company CEO. Money was no object. Smaller companies were being absorbed while mega projects, which would make the execs’ names forever were entered into. As an example of what was occurring, Barrick’s huge Pascua Lama mine straddling the Chile/Argentina borders was going to be brought on stream at a mere $1.5 billion to be spent over 20 years – almost peanuts when the companies, and gold prices, were riding so high.

But the writing was already on the wall – perhaps back in 2007 before the initial market crash brought on by the Lehman Brothers collapse.

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Excerpt from “An Insider’s Guide to the Mining Sector: An in-depth study of gold and mining shares”– by Michael Coulson

To order a copy of An Insider’s Guide to the Mining Sector, please click here: http://www.harriman-house.com/book/view/66/investing/michael-coulson/an-insiders-guide-to-the-mining-sector/

Investing in gold

Our main concern in this book is to steer investors through the mining share market, and the gold share sector has always offered an encouraging number of choices. However, investors in particular have in the past dabbled in physical gold whether by buying gold coins such as Krugerrands and Sovereigns, or gold in bar form, so a brief mention here is appropriate.

Physical gold

One of the characteristics of gold that makes it an investment vehicle is the fact that it is high value for low weight, as people fleeing revolution with only one (strong) suitcase have found to their advantage. It is also very easy to store as it is very dense, consequently its weight is compacted into a small dimension. So a 400oz bar measuring, in ‘old money’, around 7x3x3 inches, is worth $340,000 (at $850/oz). If you carried the same amount of wealth in the form of copper you would need to plan for a substantial lorry to carry the 50 tonnes or so – not much good if you’re in a hurry to catch the last plane out of Saigon, for example.

Gold broadly can be bought for physical delivery or for storage in a secure warehouse. There are a number of specialist gold and gold coin dealers who will take small orders, although the bullion banks are after wealthy customers only.

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Small gold, silver miners poised to close if price plunge continues – by Peter Koven (National Post – June 27, 2013)

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

Gold and silver miners are beginning to shut down money-losing mines. And if prices do not recover soon, many more are poised to close in the months ahead, in Canada and elsewhere. A vast portion of the gold industry is struggling to make any money at the current price of US$1,230 an ounce, according to analysts. While precious metal prices are plunging, costs are not falling nearly as fast.

That leaves many companies vulnerable to mine closures. The ones in the toughest positions are small miners with high costs, high debt and limited liquidity. There are several companies operating in Canada that fit that description, experts said. They include San Gold Corp., Claude Resources Inc., and Wesdome Gold Mines Ltd.

“They’re obviously in a dire position,” said Paolo Lostritto, an analyst at National Bank. “Those companies are on the higher end of the cost curve and they’re the most vulnerable.”

Senior and intermediate miners have plenty of liquidity to ride out the bear market in gold and position themselves for a recovery. But the smaller players, who lack the same economies of scale, are struggling with weak balance sheets and high sustaining and operating costs required to keep their mines running.

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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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PRECIOUS-Gold heads for biggest quarterly loss on record – by Jan Harvey (Reuters U.S. – June 26, 2013)

http://www.reuters.com/

LONDON, June 26 (Reuters) – Gold fell to its lowest in almost three years on Wednesday, putting it on course for a record quarterly loss, as U.S. economic data increased fears the Federal Reserve will soon end ultra-loose monetary policy.

Prices could slide further – some investors saying below $1,000 per ounce – while there is little potential for data, market trends or economic developments in the United States or Europe to reverse an accelerating investor move out of gold.

Spot gold tumbled to its lowest since August 2010 at $1,223.54 an ounce and was down 3.8 percent at $1,227.86 an ounce at 1032 GMT. U.S. gold futures for August delivery were down $47.60 at $1,227.90, having hit a low of $1,223.20.

Strong gains in U.S. orders for durable goods, the largest annual rise in house prices in seven years and rising consumer confidence fuelled speculation the Fed would rein in its $85 billion monthly bond-buying programme, which had helped push gold prices to record highs in recent years.

“We bought gold for two reasons – because we were worried about the inflationary impact of policy and because we thought the financial system was going to fall apart,” Sean Corrigan, chief investment strategist at Diapason Commodities Management, said.

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Vancouver mining firm Barkerville admits big error in British Columbia field’s gold estimate – by Peter Koven (Vancouver Sun – June 25, 2013)

 http://www.vancouversun.com/index.html

Frank Callaghan admits it: telling investors his company held 10.6 million ounces of contained gold last year was a big mistake. “I’ve learned that lesson. Not a nice way to learn it by the way, but I did,” the chief executive of Barkerville Gold Mines Ltd. said.

Almost a year ago, Barkerville, a small junior mining company, stunned the mining community by stating its Cow Mountain project in British Columbia had an indicated resource of 10.6 million ounces of gold, and could hold up to 90 million ounces. Barkerville shares soared even though numerous experts thought the numbers were too good to be true.

One of the biggest skeptics was the British Columbia Securities Commission (BCSC). The regulator promptly cease traded the stock and voiced many concerns about how the data was compiled.

That put pressure on both Barkerville and Peter George, the independent geologist who calculated the resource. To address the BCSC’s concerns, Barkerville hired two consulting firms (Snowden Mining Industry Consultants and Apex Geoscience) to work with Mr. George on an updated resource estimate.

It took a long time, but they have finally finished their work. The new numbers are significantly lower, but in Mr. Callaghan’s view they prove Mr. George was on the right track.

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Goldcorp – Marlin Mine: Special focus – by Will Daynes (BE Mining – June 7, 2013)

http://www.bus-ex.com/

Sustainable opportunities

While Guatemala’s enormous mining wealth is no longer the well-kept secret that it once was it is still an industry very much in its infancy. Through its Marlin Mine operations, Montana Exploradora de Guatemala, a subsidiary of the Canadian firm Goldcorp, is working to ensure the country will soon be able to unlock its potential.

Possessing a land mass of almost 109,000 square kilometres, the Central America country of Guatemala shares its borders with Mexico, Belize, Honduras and El Salvador, as well as the Pacific coastline to the Southwest and a part of the Caribbean coastline to the east.

Boasting a diverse history, a rich and distinctive culture, and areas of immense natural beauty, Guatemala has, in more recent times, become just as well known for its enormous gold potential. Indeed in 2007 one mine alone processed some 1.7 million tonnes of mineral with an average gold content of 4.55 grams per tonne and 84.31 grams of silver per tonne, further confirming the country as a mining destination of particular interest.

Possessing a stable, macroeconomic backdrop, Guatemala is fast earning a reputation as having perhaps the greatest future mining potential of any Central American country. Other factors that are helping to attract the interest of international investors include the free movement of goods and trade, and a local labour force with a reputation for being hard working, fast learners.

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Mine Closure: Who Pays Giant Costs? – by Jack Caldwell (I Think Mining.com – June 25, 2013)

http://ithinkmining.com/

At this link is my EduMine course on Mine Closure: The Basics of Success. One issue I do not address in the course is a looming tendency, namely should we tax existing mines to pay for closure of old mines?

This evening in a Vancouver pub, I drank the evening away with friends of forty and more years vintage. We have all been involved in mining for that many years and have seen our share of closed mines and mines that will never be closed. We drifted inexorably to the Giant Mine in Yellowknife, Northwest Territories, Canada.

Here is what I read today about the closure of that mine:

“A northern review board has given its conditional stamp of approval to a federal cleanup plan for an abandoned gold mine near Yellowknife.

The main environmental hazard at Giant Mine is the 237,000 tonnes of highly toxic arsenic trioxide dust stored in 15 underground chambers — there’s enough to kill every person in the world. The arsenic trioxide is a byproduct from decades of gold mining.

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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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South Africans worried Nelson Mandela’s health more dire than officials saying – by Matthew Fisher (National Post – June 25, 2013)

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

PRETORIA — With virtually no fresh information about the precarious state of Nelson Mandela’s health for four days, South Africans Tuesday feared his condition could be even worse than officially acknowledged.

“There are just so many rumours and nobody will tell us anything,” said Kgopotso Nkoe, a law student at Pretoria University. “We know nothing and it is frustrating. We want to know because we love him as a man who chose peace over revenge and because he did so much for our people.”

Ms. Nkoe and her friend, Faith Sithole, had come to the Mediclinic Heart Hospital to learn more than what the country had been told in three terse bulletins since Saturday, when Mr. Mandela was rushed to hospital in the wee hours.

As of late Tuesday, all that had been officially announced was South Africa’s revered first black president, the man who vanquished apartheid, was in intensive care in “serious, but stable condition.”

Despite the dearth of official news or perhaps because of it, the frail 94-year-old statesman’s anxious countrymen had been speculating — often wildly — about his health since he was hospitalized for the fourth time in seven months for urgent treatment for a recurring lung infection.

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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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