A Year of Delivery and Development as Barrick Meets Targets, Advances Growth Projects
Reviewed by Grivin Ngongula
TORONTO — Barrick Gold Corporation (NYSE:GOLD)(TSX:ABX) reported that it had met its production targets for 2020, thanks to a consistent operating performance across the group that demonstrated management’s ability to manage the impact of the Covid-19 pandemic and other challenges. While cost of sales per ounce was impacted, total cash costs1 and AISC per ounce1 were contained within guidance despite higher royalty expenses from the higher gold price environment.
At the same time, Barrick has continued to progress major capital projects, including the Pueblo Viejo plant expansion, the development of the underground mine at Gounkoto, the transition to a new heap leach phase at Veladero and the re-establishment of the Bulyanhulu mine.
Key Performance Indicators
- Barrick delivers on 2020 gold production guidance
- Consistent operating performance across all quarters of the year demonstrated Barrick’s ability to manage impact of Covid-19
- Higher gold and copper prices delivered annual operating cash flow of $5.4 billion and record annual free cash flow2 of $3.4 billion
- Gold total cash costs1 and AISC1 within guidance in spite of higher royalty costs
- Strong performance from Barrick operated copper assets with costs at low end, or below, the guidance range
- Zero net debt achieved and credit rating upgraded
- Net earnings per share of $1.31 for 2020; adjusted net earnings per share3 of $1.15 for the year (up 125% on prior year)
- Pueblo Viejo plant expansion approved and work commences
- Attributable group reserves partially replaced net of depletion, excluding Massawa disposition, while resources grow as focus on geology models pays dividends
- Continued portfolio rationalization supports further industry consolidation
- Exploration results confirm significant orebody extensions at most operations
- High-grade resource continues to grow at Fourmile as attention turns to accelerating the project into the mine plan
- Bedded down exploration focus and developing significant exploration opportunities across the portfolio; new frontiers opening in all regions
- Significant safety improvement in 2020: 38% decrease in LTIFR9 and 29% decrease in TRIFR10 year-on-year
- Zero Class 1 Environmental Incidents11 for Q4; continued to exceed 75% water reuse and recycling target for 2020
- Barrick declares $0.09 quarterly dividend per share plus proposes $750 million capital return
Financial and Operating Highlights
|Financial Results Q4 2020 Q3 2020 2020 2019|
Realized gold price4,5
($ per ounce) 1,871 1,926 1,778 1,396
($ millions) 685 882 2,324 3,969
Adjusted net earnings3
($ millions) 616 726 2,042 902
Net cash provided by operating activities
($ millions) 1,638 1,859 5,417 2,833
Free cash flow2
($ millions) 1,092 1,311 3,363 1,132
Net earnings per share
($) 0.39 0.50 1.31 2.26
Adjusted net earnings per share3 ($) 0.35 0.41 1.15 0.51
Attributable capital expenditures
($ millions) 445 436 1,651 1,512
Debt, net of cash
($ millions) (33) 417 (33) 2,222
Gold Q4 2020 Q3 2020 2020 2019
(000s of ounces) 1,206 1,155 4,760 5,465
Cost of sales (Barrick’s share)5,6
($ per ounce) 1,065 1,065 1,056 1,005
Total cash costs1,5
($ per ounce) 692 696 699 671
All-in sustaining costs1,5
($ per ounce) 929 966 967 894
(millions of pounds) 119 103 457 432
Cost of sales (Barrick’s share)6,7
($ per pound) 2.06 1.97 2.02 2.14
C1 cash costs7,8
($ per pound) 1.61 1.45 1.54 1.69
All-in sustaining costs7,8
($ per pound) 2.42 2.31 2.23 2.52
Higher gold and copper prices drove annual operating cash flow up 91% to $5.4 billion and annual free cash flow2 to a new record high of $3.4 billion. Net earnings per share were $1.31 for 2020 and adjusted net earnings per share3 of $1.15 was up 125% on the previous year. The company ended the year with zero debt, net of cash, down from a peak of $13.4 billion in 2013, and with an improved credit rating of Baa1 from Moody’s, among the best in the gold sector.
Barrick declared an unchanged quarterly dividend of 9 cents per share and announced that it would propose a return of capital distribution of approximately 42 cents per share based on the issued and outstanding shares as of December 31, 2020. The total distribution of $750 million is derived from the $1.5 billion in proceeds from the company’s sale of non-core assets since 2019, and will be effected in three equal tranches to shareholders of record on dates to be determined in May, August and November this year. This return of capital is subject to shareholder approval at the Annual and Special Meeting on May 4, 2021.
Senior executive vice-president and chief financial officer Graham Shuttleworth said this return of capital, which will provide shareholders with a significantly enhanced return in 2021, was in line with Barrick’s strategy of returning surplus funds to shareholders.
President and chief executive Mark Bristow said despite 2020’s unprecedented difficult operating conditions — which in addition to the pandemic had included a coup in Mali, the financial meltdown in Argentina and the Papua New Guinea government’s flirtation with resource nationalism — the company made further progress towards delivering on its environmental, social and governance (ESG) commitments, and expected to improve on its rating in last year’s industry-first scorecard, published in its sustainability report.
“We have a detailed road map towards clearly defined emission reduction targets, based on climate science and operational realities. Unlike others, our plan does not rely on mine closures and production cutbacks. Our ultimate aim is net zero emissions with landmarked targets towards this goal, which are constantly reviewed and updated as new emissions-reduction opportunities are identified and realized. In addition, each operation has an effective plan for the continued transition to cleaner, more efficient energy sources, and our water usage performance continues to improve,” Bristow said.
“Our long-established partnership philosophy is the beating heart of our ESG strategy. It was invaluable in our management of the impact of the coronavirus on our business and our people and it also enabled us to provide much-needed support to our host communities and governments. On an everyday level, every operational site now has a fully functional community development committee to deal with local issues.”
The group’s total attributable gold resources grew in 2020, net of depletion and excluding the impact of the disposition of Massawa, as a result of the focus on high-confidence geology models following the merger with Randgold. Attributable gold reserves achieved a 76% replacement of depleted ounces, excluding Massawa, with the Africa and Middle East region once again more than replenishing their reserves.12
Bristow said that since the merger with Randgold, the company had made significant progress in improving its knowledge of the legacy Barrick orebodies and in developing Life of Mine optimizations based on updated models, operating plans and cost forecasts.
“As our understanding of the orebodies increases, the potential for resource conversion to reserves will grow, but we still have some way to go to reach the replacement levels of the Africa and Middle East region across the group,” he said.
Bristow said an in-principle agreement about the future of the Porgera mine, which has been on care and maintenance for most of the past year, was reached with the government of Papua New Guinea in October 2020 and teams from both sides continue to work on the details of a mutually acceptable settlement.
In the meantime, Porgera has been excluded from the group’s 2021 production guidance of 4.4 to 4.7 million ounces of gold but, if an agreement is reached, will be added back in once the terms and timing of the settlement have been finalized. The company is expecting per ounce costs to be similar to prior year actual results. Sustaining capital guidance includes investments previously deferred due to the Covid-19 pandemic.