[BARRICK LOGO]
THIRD QUARTER REPORT 2005 - OCTOBER 27, 2005
Based on US GAAP and expressed in US dollars
Barrick's Earnings Grow to $113 Million ($0.21 per share) in Q3
New Mines Delivering Results
Highlights
o Barrick's new mines are making a significant contribution to earnings
and cash flow in a positive gold price environment.
o Third-quarter 2005 net income was $113 million, or $0.21 per share, and
cash flow from operations was $232 million, or $0.43 per share,
compared to net income of $32 million, or $0.06 per share, and cash
flow from operations of $152 million, or $0.28 per share, in the
prior-year period.
o Gold sales were 1.5 million ounces at a total cash cost of $210 per
ounce(1) in Q3 2005. The Company remains on track to meet its original
full-year guidance to produce between 5.4 - 5.5 million ounces of gold
for 2005 at total cash costs of about $225 per ounce(2).
o The Lagunas Norte mine in Peru, which achieved start-up in June 2005
ahead of schedule and under budget, produced over 210,000 ounces of
gold at total cash costs of $121 per ounce during Q3 2005. In its first
full quarter of operations, Lagunas Norte has become one of Barrick's
largest producers, second only to the flagship Goldstrike property.
o The Veladero mine in Argentina poured its first gold during Q3, ahead
of schedule. The commissioning of Veladero marks the beginning of
production from the highly prospective Frontera District, a 30-million
ounce gold camp in Chile and Argentina that also contains the sizeable
Pascua-Lama project.
o Significant progress continues at the Company's other development
projects, including Cowal in Australia which is on target to commence
operations in Q1 2006.
o Significant drilling results on the Dee Property could lead to a new
oxide ore deposit on the Carlin Trend.
Barrick Gold Corporation today reported earnings of $113 million ($0.21 per
share) and operating cash flow of $232 million ($0.43 per share) for third
quarter 2005 compared to earnings of $32 million ($0.06 per share) and operating
cash flow of $152 million ($0.28 per share) in the year-earlier period.
"These strong results demonstrate that Barrick has the team, resources
and expertise to develop new mines and deliver value to its shareholders," said
Greg Wilkins, President and Chief Executive Officer. "These new mines solidify
Barrick's foundation for continued growth."
Barrick's new mines began to deliver significant results in third
quarter 2005, with earnings and cash flow increasing appreciably over previous
quarters. Most notably, Lagunas Norte produced 211,000 ounces during the quarter
at a total cash cost of $121 per ounce. The availability of higher-grade ore at
Goldstrike open pit also contributed to higher production and lower total cash
costs per ounce in third quarter 2005, compared to the prior-year quarter.
In addition to higher gold sales volumes and lower total cash costs,
third-quarter 2005 earnings were favorably impacted by a $32-per-ounce higher
realized
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(1) Total cash cost per ounce is defined as cost of sales divided by ounces
sold. Total cash costs per ounce exclude amortization expense, which was
$72 per ounce in third quarter 2005. For further information on this
performance measure see page 20.
(2) The Company's original guidance of $220-$230 per ounce restated for the
impact of the new accounting policy for stripping costs and the inclusion
of accretion expense.
BARRICK THIRD QUARTER 2005 PRESS RELEASE
gold price, compared to the prior-year period, partly offset by higher
income tax expense associated with higher earnings. The Company's third-quarter
2005 earnings also included a number of special items that had a positive effect
totaling $9 million post-tax ($0.02 per share), compared to a positive effect of
$15 million post-tax ($0.03 per share) in the prior-year quarter. See page 9 of
Management's Discussion and Analysis for further details.
PRODUCTION AND COSTS
In third quarter 2005, Barrick produced and sold 1.5 million ounces of gold at
total cash costs of $210 per ounce, compared to 1.2 million ounces produced and
1.3 million ounces sold at total cash costs of $221 per ounce for the prior-year
quarter. Barrick reduced its gold hedge commitments by a further 200,000 ounces,
bringing the Corporate Gold Sales Contracts position down to 6.4 million
committed ounces, or 9% of year-end reserves excluding Pascua-Lama.
The third quarter benefited from a full quarter of production from
Lagunas Norte as well as a stronger operating performance at Goldstrike, and
these trends are expected to continue in the fourth quarter. The Company is on
track with its original guidance to produce 5.4 - 5.5 million ounces of gold for
the year at total cash costs of about $225 per ounce, but remains subject to
increasing cost pressures affecting the entire industry. Refer to the Production
and Cost Summary on page 5 for a mine-by-mine summary of full-year 2005
production and total cash cost estimates.
The North America region saw a significant increase in production over
the second quarter 2005 at lower total cash costs, due primarily to mining
higher-grade ore at the Goldstrike open pit. In the fourth quarter 2005, the
North America region is expected to deliver a similar operating performance as
the third quarter and is on track to meet its full-year production and cash cost
guidance.
The South America region also saw a significant increase in production
over second quarter 2005 at lower total cash costs as Lagunas Norte was in
production for a full quarter subsequent to commencing operations in mid-June
2005. The South America region's production for the full year is expected to be
slightly lower than previously expected and at marginally higher total cash
costs.
The Australia/Africa region's operating performance was similar to the
second quarter 2005. The region is on track to meet its full-year production
guidance at slightly higher total cash costs.
The Company recently consolidated its interests in South America into
one regional business unit with Igor Gonzales as President. The other regions
are led by Greg Lang, North America; John Shipp, Australia/Africa; and Rene
Marion, Russia/Central Asia.
DEVELOPMENT PROJECTS UPDATE
During the third quarter, the Veladero mine in Argentina poured its first gold,
earlier than previously forecast, and is in its final stages of commissioning.
Veladero's construction costs are expected to be in line with the Company's
estimate of about $540 million. Gold production from Veladero is expected to
average approximately 700,000 ounces annually over the first three full years of
operation.
The start-up of Veladero marks the beginning of Barrick's production in
the Frontera district that straddles the Chile/Argentina border. Barrick has a
3,000-square-kilometer land position in the district, including its Pascua-Lama
project. Frontera is one of the most prospective gold camps in the world, with
PascuaLama targeted to be in production in 2009 subject to timely completion of
the permitting process. Within the region, Barrick currently has proven and
probable gold reserves in excess of 30 million ounces, resources of over 3
million ounces(3), and through its current exploration program, is targeting
resource additions.
The Company's Cowal project in Australia is progressing with overall
construction about 50% complete. Procurement is concluded and 85% of materials
and equipment have been delivered to site.
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(3) Based on reserves calculated as at December 31, 2004 using an assumed price
of $375 per ounce for gold, $5.50 per ounce for silver and an exchange rate
of $1.45 CanS/USS. Calculations were performed by employees of Barrick
under the supervision of Rene Marion, P.Eng., Vice President Technical
Services of Barrick. For a breakdown of reserves and resources by category
and additional information on reserves and resources, see the most recent
Annual Information Form/Form 40-F on file with Canadian provincial
regulatory authorities and the US Securities and Exchange Commission.
BARRICK THIRD QUARTER 2005 2 PRESS RELEASE
Construction highlights include the completion of engineering, the structure and
cladding for the plant workshop, the regrind area structural steel and the
backfill for the stockpile reclaim tunnel. Production is expected to commence in
first quarter 2006.
At the East Archimedes project located at the Ruby Hill mine site in
Nevada, permitting approvals were received in October and mining activities are
ramping up. The first gold pour is targeted for mid-2007.
At the Pascua-Lama project in Chile/Argentina, work continues on
community and government relations, permitting, protocol implementation and tax
stability. While approvals for the environmental impact assessments are targeted
in the first quarter of 2006, the timing of the receipt of these approvals, as
well as the resolution of some of the other external issues, such as permitting
and licensing; cross-border operating issues; and fiscal, tax and royalty
issues, is largely beyond Barrick's control.
At the Nevada power plant, all major mechanical and electrical work has
been completed. Performance testing is underway and test energy has been sold.
The plant is expected to be ready for operation in November 2005.
EXPLORATION UPDATE(4)
In Nevada, Barrick's exploration program has been exploring 35 high-quality
opportunities that range from reserve development to grassroots exploration. At
Goldstrike North Post, reserve development drilling is underway and confirming
the shape and grade of the orebody previously defined by surface drilling. Drill
programs are also testing six additional targets on the Goldstrike property,
with positive results for some areas, such as the Meikle Rodeo corridor, where
drilling has intersected mineralized zones both immediately beneath active
mining levels and at depth. The Betze North Pit drill program has recently
returned several significant intercepts that may help expand the open pit or may
represent high-grade underground pit-wall mining opportunities. Elsewhere in the
district, exploration continues at Storm where ore grade mineralization outside
the previously defined deposit has been intersected.
The Company is announcing significant drilling results at the Dee
Property that could lead to a new oxide ore deposit on the Carlin Trend. Barrick
holds a 60% interest at Dee, which includes the South Arturo Zone located to the
southeast of the Storm deposit and the Dee open pit. Eight holes have been
completed on the South Arturo Zone and all eight have intersected significant
oxide gold mineralization. The drilling covers an area of 1,000 feet by 1,500
feet and the mineralization is open to the south, east and west. Drilling
continues and a resource calculation will be done at year-end.
In the Frontera district in South America, exploration drilling and
fieldwork resumed at the end of the quarter. Initial focus is on part of the
Guanaco Zonzo area where a large geophysical anomaly between two known
mineralized areas is being tested. Follow-up drilling is planned at the main
Guanaco Zonzo target where previous drilling obtained potentially ore grades and
widths. Drill programs will commence shortly at Regalito as well as at two other
targets in the Veladero/Pascua-Lama area.
In Tanzania, a drill program at Buzwagi is continuing with results
confirming the potential to add mineralization outside the currently defined pit
outline. Engineering studies are ongoing and a pre-feasibility study is on
schedule for completion by year end. On the Nyanzaga property, drill programs
commenced on two near-surface oxide zones, and are continuing into the fourth
quarter. Assay results confirmed the potential for an oxide resource and show
the zones are open and extend to the south.
* * *
Barrick is building a new generation of mines around the globe and has
the lowest total cash costs among the major gold producers. Its vision is to be
the world's best gold company by finding, developing and producing quality
reserves in a profitable and socially responsible manner. Barrick's shares are
traded on the Toronto, New York, London, Euronext-Paris and Swiss stock
exchanges.
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(4) Barrick's exploration programs are designed and conducted under the
supervision of Alexander J. Davidson, P. Geo., Executive Vice President,
Exploration and Corporate Development of Barrick. For information on the
geology, exploration activities generally, and drilling and analysis
procedures on Barrick's material properties, see Barrick's most recent
Annual Information Form/Form 40-F on file with Canadian provincial
securities regulatory authorities and the US Securities and Exchange
Commission.
BARRICK THIRD QUARTER 2005 3 PRESS RELEASE
Key Statistics
Three months ended Nine months ended
(in United States dollars) September 30, September 30,
----------------------- --------------------
(Unaudited) 2005 2004 2005 2004
- --------------------------------------------------------------------------------------- --------------------
Operating Results
Gold production (thousands of ounces)(1) 1,509 1,240 3,812 3,807
Gold sold (thousands of ounces) 1,456 1,267 3,670 3,736
Per Ounce Data
Average spot gold price $ 439 $ 401 $ 432 $ 401
Average realized gold price 427 395 426 383
Total cash costs(2) 210 221 229 213
Amortization(3) 72 89 77 90
Total production costs 282 310 306 303
- ---------------------------------------------------------------------------------------------------------------------
Financial Results (millions)
Gold sales $ 627 $ 500 $ 1,574 $ 1,431
Net income 113 32 226 92
Operating cash flow 232 152 457 386
Per Share Data (dollars)
Net income (basic and diluted) 0.21 0.06 0.42 0.17
Operating cash flow 0.43 0.28 0.85 0.72
Weighted average common shares outstanding 539 533 537 535
(millions)(4)
As at As at
September 30, December 31,
2005 2004
Financial Position (millions) --------------------------------
Cash and equivalents $ 1,105 $ 1,398
Non-cash working capital 225 141
Long-term debt 1,763 1,655
Shareholders' equity 3,804 3,576
- ---------------------------------------------------------------------------------------
(1) Includes equity ounces in Highland Gold.
(2) Represents cost of goods sold plus royalties, production taxes and accretion
expense, less by-product revenues, divided by ounces of gold sold. For further
information on this performance measure, refer to page 20.
(3) Represents amortization expense at the Company's producing mines divided by
ounces of gold sold.
(4) Fully diluted, includes shares issuable upon exchange of BGI (Barrick Gold
Inc.) exchangeable shares.
BARRICK THIRD QUARTER 2005 4 SUMMARY INFORMATION
Production and Cost Summary
Production (attributable ounces) (000's) Total Cash Costs (US$/oz)(1)
---------------------------------------- ------------------------------
Three months Nine months Three months Nine months
ended ended December ended ended
September 30, September 30, 31, September 30, September 30, December 31,
------------- ------------- ----------- ------------- -------------------------------
(Unaudited) 2005 2004 2005 2004 2005E 2005 2004 2005 2004 2005E
- ------------------------------------------------------------------------------------------------------------------
North America
Open Pit 475 356 1,019 1,009 1,470-1,480 $198 $ 249 $245 $256 $ 240-245
Underground 104 140 383 427 530-540 350 279 304 265 300-310
- ------------------------------------------------------------------------------------------------------------------
Goldstrike
Property Total 579 496 1,402 1,436 2,000-2,020 226 256 261 258 255-260
Eskay Creek 41 60 147 216 170-180 60 64 54 41 80-90
Round Mountain
(50%) 97 106 290 297 370-375 235 205 232 211 250-260
Hemlo (50%) 59 54 180 181 235-240 281 269 281 244 275-285
Holt-McDermott2 - 15 - 55 - - 157 - 198 -
Marigold (33%) 15 12 49 32 65-70 277 204 222 200 225-235
- ------------------------------------------------------------------------------------------------------------------
791 743 2,068 2,217 2,840-2,885 224 231 243 227 245-250
- ------------------------------------------------------------------------------------------------------------------
South America
Pierina 153 133 454 552 615-625 123 124 128 104 130-135
Lagunas Norte 211 - 252 - 545-550 121 - 121 - 100-110
Veladero 5 - 5 - 50-55 - - - - 245-255
- ------------------------------------------------------------------------------------------------------------------
369 133 711 552 1,210-1,230 122 124 126 104 120-130
- ------------------------------------------------------------------------------------------------------------------
Australia/Africa
Plutonic 60 72 194 231 250-260 239 223 253 215 250-260
Darlot 41 42 96 112 130-135 237 194 268 200 260-265
Lawlers 32 29 93 82 120-125 302 249 287 246 260-270
Kalgoorlie (50%) 99 129 336 334 435-440 231 233 219 232 245-250
- ------------------------------------------------------------------------------------------------------------------
232 272 719 759 935-960 245 226 245 223 250-257
Bulyanhulu 82 84 239 261 320-325 327 280 347 299 340-350
Tulawaka (70%) 27 - 54 - 75-80 282 - 276 - 270-275
- ------------------------------------------------------------------------------------------------------------------
341 356 1,012 1,020 1,330-1,365 272 241 272 242 275-280
Highland equity 8 8 21 18 20-30 314 212 297 206 300-320
portion
- ------------------------------------------------------------------------------------------------------------------
Total 1,509 1,240 3,812 3,807 5,400-5,500 $210 $ 221 $229 $213 $~225
- ------------------------------------------------------------------------------------------------------------------
Total Production Costs (US$/oz)
-------------------------------
Three months Nine months
ended ended
September 30, September 30,
------------- -------------
(Unaudited) 2005 2004 2005 2004
- -----------------------------------------------------------------------------------------------
Direct mining costs at market foreign exchange rates $237 $251 $263 $244
Gains realized on currency and commodity hedge contracts (21) (20) (23) (20)
By-product credits (23) (26) (27) (28)
- -----------------------------------------------------------------------------------------------
Cash operating costs 193 205 213 196
Royalties 11 10 11 10
Production taxes 4 3 3 2
Accretion and other costs 2 3 2 5
- ------------------------------------------------------------------------------------------------
Total cash costs 210 221 229 213
Amortization 72 89 77 90
- ------------------------------------------------------------------------------------------------
Total production costs $282 $310 $306 $303
- ------------------------------------------------------------------------------------------------
(1) Total cash costs per ounce statistics for 2005 and 2004 are not comparable
due to the change in accounting for deferred stripping costs. Refer to
pages 18 and 19 for further details. For further information on this
performance measure, refer to page 20.
(2) Holt-McDermott ceased production in fourth quarter 2004.
BARRICK THIRD QUARTER 2005 5 SUMMARY INFORMATION
MANAGEMENT'S DISCUSSION AND ANALYSIS ("MD&A")
This portion of the Quarterly Report provides management's discussion and
analysis of the financial condition and results of operations to enable a reader
to assess material changes in financial condition and results of operations as
at and for the three and nine month periods ended September 30, 2005, in
comparison to the corresponding prior-year periods. This MD&A has been prepared
as of October 20, 2005. This MD&A is intended to supplement and complement the
unaudited interim consolidated financial statements and notes thereto, prepared
in accordance with US generally accepted accounting principles ("US GAAP"), for
the three and nine month periods ended September 30, 2005 (collectively, the
"Financial Statements"), which are included in this Quarterly Report on pages 21
to 38. You are encouraged to review the Financial Statements in conjunction with
your review of this MD&A. This MD&A should be read in conjunction with both the
annual audited consolidated financial statements for the three years ended
December 31, 2004, the related annual MD&A included in the 2004 Annual Report,
and the most recent Form 40-F/Annual Information Form on file with the US
Securities and Exchange Commission and Canadian provincial securities regulatory
authorities. Certain notes to the Financial Statements are specifically referred
to in this MD&A and such notes are incorporated by reference herein. All dollar
amounts in this MD&A are in millions of US dollars, unless otherwise specified.
For the purposes of preparing this MD&A, we consider the materiality of
information. Information is considered material if: (i) such information results
in, or would reasonably be expected to result in, a significant change in the
market price or value of Barrick Gold Corporation's shares; or (ii) there is a
substantial likelihood that a reasonable investor would consider it important in
making an investment decision, or if it would significantly alter the total mix
of information available to investors. Materiality is evaluated by reference to
all relevant circumstances, including potential market sensitivity.
- --------------------------------------------------------------------------------
CONTENTS
Executive Summary 6 Cash Flow 15
Key Economic Trends 7 Balance Sheet 16
Results 8 Quarterly Information 17
Overview of 2005 versus 2004 8 Off-Balance Sheet Arrangements 17
Consolidated Gold Production, Critical Accounting Policies
Sales and Costs 9 and Estimates 18
Results of Operating Segments 10 Total Cash Costs Performance
Other Costs and Expenses 13 Measures 20
EXECUTIVE SUMMARY
Production and sales increased and total cash costs per ounce decreased in third
quarter 2005 compared to both the corresponding period in 2004 and the first two
quarters of 2005. In third quarter 2005 we produced and sold 1.5 million ounces
of gold at a total cash costs of $210(1) per ounce. The start-up of Lagunas
Norte in June 2005 and availability of higher-grade ore at Goldstrike open pit
in third quarter 2005 contributed to higher production and lower total cash
costs per ounce than in both the third quarter 2004 and first half of 2005.
Production rates in the first nine months of 2005 at Plutonic and Bulyanhulu
were lower than originally expected, but this was offset by better performance
at a number of our other mines. At Plutonic, open-pit mining ended in second
quarter 2005, and at Bulyanhulu lower throughput led to lower production levels.
Notwithstanding the fact that production at Plutonic and Bulyanhulu in 2005 is
lower than initially expected, we remain on track to meet our original full-year
guidance for 2005 to produce 5.4-5.5 million ounces of gold at an average total
cash costs of about $225(2) per ounce. While we expect lower production levels
at Plutonic, Bulyanhulu and Eskay Creek to continue, we are still targeting an
increase in our gold production to about 6.8 million ounces in 2007.
Earnings of $113 million in third quarter 2005 ($0.21 per share) were 253%
higher than in third quarter 2004, mainly reflecting higher gold production and
sales, higher realized gold prices and lower total cash costs per ounce.
Operating cash flow of $232 million ($0.43 per share) in third quarter 2005 was
53% higher than in third quarter 2004 due to the same factors. For the first
nine months of 2005, both earnings and operating cash flow increased over the
comparable period in 2004 mainly due to the impact of higher realized gold
prices as we benefited from rising market gold prices.
We continue to make significant progress on the development of our new
generation of mines. The Tulawaka mine began production in first quarter 2005,
and the Lagunas Norte mine began production in second quarter 2005. The Veladero
mine made its first gold pour in mid-September 2005, ahead of schedule, and is
expected to commence operations upon completion of ongoing commissioning
activities. At our fourth new
1 Total cash costs per ounce is defined as cost of sales divided by ounces
sold. Total cash costs per ounce exlude amortization expense, which was $72
per ounce in third quareter 2005. For further information on this performance
measure see page 20.
2 The Company's original guidance of $220-$230 per ounce restated for the
impace of the new accounting policy for stripping costs and the inclusion of
accretion expense.
BARRICK THIRD QUARTER 2005 6 MANAGEMENT'S DISCUSSION AND ANALYSIS
mine, Cowal in Australia, production is expected to commence in first quarter
2006. We continued work on advancing our two other projects in development,
Pascua-Lama in Chile/Argentina and East Archimedes in Nevada. While approvals of
the Pascua-Lama environmental impact assessments are targeted in the first
quarter of 2006, the timing of the receipt of these approvals, as well as
resolution of some other external issues, is largely beyond Barrick's control.
KEY ECONOMIC TRENDS
The MD&A included in our 2004 Annual Report contained a discussion of the key
economic trends that affect our business and how they impact our financial
statements. In 2005, there has been a continued trend of higher gold and silver
prices which, while benefiting gold revenues and by-product credits, also leads
to higher royalty expenses, as well as a trend of inflationary pressure in the
cost of other commodities and consumables. Also, while exchange rates between
the US dollar and both the Canadian dollar and Australian dollar have not
changed significantly to date in 2005, our reported total cash costs per ounce
are affected by the exchange rates under our currency hedge position, whose
profile results in increases in costs over time. Assuming that these economic
trends continue, we expect our revenues to benefit from higher gold and silver
prices, but we also expect our total cash costs per ounce in 2006 and beyond to
increase over our guidance for the full year 2005, which is consistent with
recent trends in total cash costs per ounce across the rest of the gold mining
industry.
Gold Prices
The gold price ranged from $411 to $473 per ounce during the first nine months
of 2005, with an average market gold price of $432 per ounce. Gold prices
continued on a general upward trend in 2005, with the average market price in
the first nine months of 2005 being 8% higher than the corresponding period in
2004. In 2005, we sold most of our production at market gold prices and our
average realized selling price was $426 per ounce, slightly lower than the
average spot market price. We continue to view the outlook for market gold
prices to be positive.
Silver Prices
With an average market price of $7.07 per ounce in the first nine months of
2005, silver prices continued to be strong. Higher silver prices help to reduce
total cash costs per ounce of gold as silver sales are recorded as a by-product
credit.
Currency Exchange Rates
At the end of third quarter 2005, through our currency hedge position, we have
protected local currency-based expenditures for about the next three years at
exchange rates that are, on average, more favorable than current market rates.
Through this hedge position, we have been able to mitigate, to a significant
extent, the negative effect of a weaker US dollar on operating costs at our
Australian and Canadian mines. The average rates for currency contracts
designated against operating costs over the next three years are $0.66 for
Australian dollar contracts and $0.74 for Canadian dollar contracts. Further
details of our currency hedge position are included in note 14 to the Financial
Statements.
Inflationary Cost Pressures
The mining industry is experiencing significant inflationary cost pressures,
which has been evident through higher production costs reported by a number of
gold producers. We have been actively seeking ways to mitigate these costs
pressures. In the case of diesel fuel and propane, we have put in place hedge
positions that have been successful to a significant extent in mitigating price
increases, and are expected to provide some further protection for about one
quarter of our annual consumption over the next four years. For other cost
pressures, we have been focusing on supply chain continuous improvement
initiatives to mitigate the effect on our production costs.
Fuel
Crude oil prices rose from $43 per barrel at the end of 2004 to $66 per barrel
at the end of third quarter 2005. To help control the cost of fuel consumed at
our mines, we have a fuel hedge position totaling 2.3 million barrels,
representing about 24% of our estimated future diesel fuel consumption over the
next four years. The average cap price is $44 per barrel.
Propane prices rose from $0.76 per gallon at the end of 2004 to $1.18 per gallon
at the end of third quarter 2005. To help control the costs of propane consumed
at our mines, we have a propane hedge position totaling 21 million gallons,
which represents about 69% of our estimated future propane consumption through
to the end of 2006, at an average price of $0.79 per gallon.
Electricity
Electricity prices continued to rise in 2005, mainly as a result of diesel fuel
and natural gas price increases, as well as the impact of increasing demand for
electricity. To partially mitigate rising electricity costs, we are building a
115-megawatt natural gas-fired power plant that will be available to supply our
Goldstrike mine from fourth quarter 2005 onwards. This power plant will
BARRICK THIRD QUARTER 2005 7 MANAGEMENT'S DISCUSSION AND ANALYSIS
provide Goldstrike with the flexibility to generate its own power or buy cheaper
power from other producers, with the goal of minimizing the cost of power
consumed at the mine.
Consumables
With increasing demand for tires and limitations in supply from tire
manufacturers, tire costs have been rising and many companies have experienced
difficulty securing tires. We have been seeking to mitigate this cost pressure
by finding ways to extend tire lives and looking at the various alternatives for
supply. The limited availability of tires has not had any significant impact on
productivity at our mines to date.
Prices for certain other consumables, such as cyanide and explosives, have also
been generally increasing, which in turn leads to higher mining and processing
costs. We are focusing on supply chain initiatives and continuous improvement
initiatives to mitigate the impact of higher prices for consumables.
Labor costs
With high demand for experienced miners and relatively inflexible supply, the
industry is facing upward pressure on labor costs, and, in some areas, higher
turnover due to the strong demand. The cost pressures have, to date, been most
significant in Australia, where there is a shortage of skilled labor, which has
led to pressure on costs at our Australian mines.
US Dollar Interest Rates
Over the first nine months of 2005, short-term US interest rates have risen,
while long-term rates (10-30 years) have remained relatively unchanged, with
rates at relatively low levels historically. In periods of higher interest
rates, we earn higher interest income on cash balances and expect higher forward
selling prices under our gold sales contracts. A significant portion of our
long-term debt has fixed interest rates and therefore interest costs have not
historically been significantly affected by changing interest rates.
RESULTS
Three months Nine months
($ millions, except per share and ended Sept.30 ended Sept.30
per ounce data in dollars) 2005 2004 2005 2004
- ---------------------------------------------------------------------------------------------------------------------
Gold production ('000s oz) 1,509 1,240 3,812 3,807
Gold sales3
'000s oz 1,456 1,267 3,670 3,736
$ millions $ 627 $ 500 $ 1,574 $ 1,431
Market gold price1 439 401 432 401
Realized gold price1 427 395 426 383
Total cash costs(1),(2),(3) 210 221 229 213
Amortization(1),(3) 72 89 77 90
Total production costs3 282 310 306 303
Net income 113 32 226 92
Net income per share(1),(4) 0.21 0.06 0.42 0.17
Cash inflow (outflow)
Operating activities 232 152 457 386
Capital expenditures (323) (218) (835) (536)
Other investing activities 1 (1) (77) (41)
Financing activities 59 154 160 (1)
Cash position - end of period $ 1,105 $ 775 $ 1,105 $ 775
1 Per ounce weighted average.
2 Total cash costs per ounce statistics for 2005 and 2004 are not comparable
due to the change in accounting for deferred stripping costs - see page 18.
Total cash costs per ounce statistics exclude amortization - see page 20.
3 Excludes equity ounces from Highland.
4 Basic and diluted.
OVERVIEW OF 2005 VERSUS 2004
Earnings
Earnings in third quarter 2005 were $81 million higher than third quarter 2004.
The main factors and various special items are summarized in the tables below,
together with references to where more information can be found in this MD&A.
Earnings continue to be positively impacted by lower amortization rates, and our
guidance for amortization of the full year has been revised downwards to
$430-$455 million.
Impact on earnings
Increase (decrease)
Q3 2005 Year to
Refer vs date 2005
($ millions) to page Q3 2004 vs 2004
Higher realized gold prices 9 $ 47 $ 158
Total cash costs (increase) decrease 9 16 (59)
Sales volumes increase (decrease)(1) 9 16 (4)
Lower amortization rates 8 25 48
Lower exploration/development
expense 13 11 6
Lower interest expense 14 6 17
Higher income tax expense(2) 14 (23) (22)
Special items(3) 9 (12) (11)
Other (5) 1
Total $ 81 $ 134
1 Impact of changing sales volumes on margin between selling prices, total
cash costs and amortization.
2 Excluding the impact of recording previously unrecognized deferred tax
assets.
3 Excluding impact on the period of deferred stripping accounting changes.
BARRICK THIRD QUARTER 2005 8 MANAGEMENT'S DISCUSSION AND ANALYSIS
Special Items - Effect on earnings increase (decrease)
Refer to Three month period ended September 30, Nine month period ended September 30,
($ millions) page 2005 2004 2005 2004
Pre-Tax Post-Tax Pre-Tax Post-Tax Pre-Tax Post-Tax Pre-Tax Post-Tax
Non-hedge derivative gains 14 $(2) $(2) $ 8 $ 9 $ 7 $ 5 $(1) $ 3
(losses)
Gains (losses) on investments 14 (3) (3) - - 6 5 1 1
Gains on asset sales 14 4 3 2 2 5 4 5 4
Gain on Kabanga transaction 12 - - - - 15 15 - -
Impairment charge on royalty - - (8) (5) - - (8) (5)
interest
Currency translation gains 14 11 9 3 3 6 5 4 4
Deferred stripping accounting
changes
Cumulative effect 18 - - - - 6 6 - -
Impact on the period compared 18 11 6 - - 29 27 - -
to previous policy
Changes in AROs at closed mines (8) (4) (3) (2) (13) (8) (3) (2)
Income tax credits - - - 8 - - - 38
Total $ 15 $ 9 $ 2 $ 15 $ 61 $ 59 $(2) $ 43
Cash Flow
In third quarter 2005, our cash position decreased by $26 million. We generated
$232 million of operating cash flow in third quarter 2005, $80 million higher
than in third quarter 2004, mainly because of higher gold sales volumes, higher
realized gold prices and lower total cash costs per ounce. Capital expenditures
were $323 million, $105 million higher than in third quarter 2004, mainly due to
the levels of construction activity at our development projects. We drew down
$32 million from financing facilities used to fund construction at our
development projects and received $50 million in proceeds on the exercise of
stock options.
In the first nine months of 2005, our cash position decreased by $293 million.
We generated $457 million of operating cash flow, $71 million higher than in
2004, mainly because of higher realized gold prices, partly offset by higher
total cash costs. Capital expenditures were $835 million, $299 million higher
than in 2004, due to the levels of activity at our development projects. We
received $160 million from financing activities in 2005, including $88 million
in proceeds on the exercise of stock options and $170 million in proceeds from
various financing facilities used to fund construction at our development
projects, partly offset by dividend payments of $59 million.
CONSOLIDATED GOLD PRODUCTION, SALES AND COSTS
Gold production in third quarter 2005 was 269,000 ounces higher than in third
quarter 2004, primarily due to the ramp up of production at Lagunas Norte and
higher production levels at Goldstrike open pit. Ounces sold increased by
189,000 ounces compared to third quarter 2004, consistent with the higher
production levels. In the first nine months of 2005, ounces produced and sold
were similar to 2004 as new production from Lagunas Norte and Tulawaka was
offset by lower production at Pierina, Eskay Creek and Plutonic.
In third quarter 2005, we sold most of our production at market prices, and
delivered approximately 0.2 million ounces into existing fixed-price gold sales
contracts and another approximately 0.1 million ounces into existing floating
spot-price gold sales contracts for a total opportunity cost of $19 million
compared to prevailing spot market prices. We realized $427 per ounce of gold in
third quarter 2005, $32 per ounce higher than third quarter 2004, reflecting
higher market gold prices. In the first nine months of 2005, we realized $426
per ounce, $43 per ounce higher than the same period in 2004, also due to higher
market gold prices. The price realized for gold sales in fourth quarter 2005 and
beyond will depend upon market conditions and the selling prices of any gold
sales contracts into which we voluntarily deliver, which could be below
prevailing spot market prices.
Consolidated total cash costs per ounce
Three month period Nine month period
ended Sept.30, ended Sept.30,
(in dollars per ounce) 2005 2004 2005 2004
Cost of goods sold(1),(2) $ 237 $ 251 $ 263 $ 244
Currency/commodity
hedge gains (21) (20) (23) (20)
By-product credits (23) (26) (27) (28)
Royalties/mining taxes 15 13 14 12
Accretion/other costs 2 3 2 5
Total cash costs $ 210 $ 221 $229 $213
1 At market currency exchange rates.
2 Total cash costs per ounce statistics for 2005 and 2004 are not comparable
due to the change in accounting for deferred stripping costs - see page 18.
Total cash costs per ounce excludes amortization - see page 20.
Total cash costs per ounce in third quarter 2005 were lower than in third
quarter 2004, primarily because of the new low-cost production from Lagunas
Norte, and the availability of higher-grade ore at Goldstrike open pit.
BARRICK THIRD QUARTER 2005 9 MANAGEMENT'S DISCUSSION AND ANALYSIS
These factors were partly offset by higher royalties, due to higher gold prices,
and the impact of inflationary cost pressures.
RESULTS OF OPERATING SEGMENTS
In our Financial Statements, we present a measure of historical segment income
that reflects gold sales at average consolidated realized gold prices, less
segment operating costs and amortization of segment property, plant and
equipment. Our segments mainly include producing mines and development projects.
We monitor segment operating costs using "total cash costs per ounce" statistics
that represent segment cost of sales divided by ounces of gold sold in each
period. The discussion of results for producing mines focuses on this statistic
in explaining changes in segment operating costs, and should be read in
conjunction with the mine statistics presented on pages 39 to 42.
NORTH AMERICA
The region produced 791,000 ounces in third quarter 2005 (2004: 743,000 ounces)
at total cash costs of $224 per ounce (2004: $231 per ounce), for a total of
2,068,000 ounces in the first nine months of 2005 (2004: 2,217,000 ounces) at
total cash costs of $243 per ounce (2004: $227 per ounce). Higher gold
production and lower costs in third quarter 2005 were mainly due to higher ore
grades at Goldstrike open pit. For the first nine months of 2005, production was
lower than 2004 mainly due to the depletion of ore reserves at
Holt-McDermott by the end of 2004, as well as processing of lower-grade ore
at Eskay Creek in 2005.
In 2005, total cash costs per ounce increased due to inflationary cost pressures
and higher royalties, partly offset by higher toll milling credits and the
impact of the change in accounting for stripping costs. Results for third
quarter 2005 were affected by similar cost pressures, but total cash costs per
ounce were lower than in 2004 due to the availability of higher-grade ore at
Goldstrike open pit on completion of the ninth west layback. Full-year guidance
for total cash costs has been revised to $245-$250 per ounce and production has
been revised to 2,840,000-2,885,000 ounces.
Goldstrike Open Pit, United States
Ore production rates were impacted in the first half of 2005 by above average
rainfall, but increased again in the third quarter. Tons of ore processed in
third quarter 2005 were similar to third quarter 2004, but at higher grades as
mining occurred in a higher-grade area of the pit, as mining continued in the
area of the ninth west layback. In the first nine months of 2005, the mining of
slightly higher-grade ore was largely offset by lower throughput compared to
2004. Lower throughput was mainly because of harder ore encountered that
impacted milling rates, the above average rainfall that led to lower mining
rates in the first half of 2005, and scheduled roaster maintenance in second
quarter 2005. Lower total cash costs per ounce in 2005, compared to 2004, were
mainly due to the higher production levels, higher toll milling credits, and the
impact of the change in accounting for stripping costs (see page 19), partly
offset by higher royalties and net proceeds taxes, and inflationary cost
pressures.
Goldstrike Underground, United States
In third quarter 2005, mine sequencing changes were implemented to accelerate
drift-and-fill mining at Meikle in view of difficult ground conditions at Rodeo.
Lower mining rates, associated with drift-and-fill mining, a temporarily plugged
backfill raise, and the mining of lower-grade stopes at Meikle, resulted in
lower production in third quarter 2005 compared to the prior-year period. In
the first nine months of 2005 the effect of incremental ore mined in 2004 at
Rodeo and the reallocation of resources to drift-and-fill mining in 2005 was
partly offset by a drawdown of stockpiles in the first half of 2005. Higher
total cash costs per ounce in 2005 were mainly due to the lower production
levels, inflationary cost pressures, higher ground support costs due to
difficult ground conditions and an increase in drift-and-fill mining. Lower
levels of development activity led to a greater allocation of expenses to mining
costs in 2005, which also contributed to the increase in total cash costs per
ounce.
Power Plant for Goldstrike, United States
The construction of a 115-megawatt natural gas-fired power plant in Nevada to
supply our Goldstrike mine is on schedule, with the plant expected to be ready
for operations in November 2005. Project highlights include:
o Construction costs of $29 million were incurred in third quarter 2005, with
total costs of $63 million in the first nine months of 2005.
o All power generators have been received and set in place.
o Interconnections to the power grid have been tested and commissioned.
o Gas supply facilities and the gas pressure reduction station have been
completed.
o Major mechanical and electrical work is complete.
o Commissioning activities commenced in September.
o The hiring of operating personnel is substantially complete and training
has begun.
Eskay Creek, Canada
Fewer tons of higher-grade direct-to-smelter ore were processed in 2005, with a
substitution of lower-grade
BARRICK THIRD QUARTER 2005 10 MANAGEMENT'S DISCUSSION AND ANALYSIS
ore to the mill, leading to lower gold production levels compared to 2004. As
the mine approaches the end of its life (expected in 2007), lower labor,
transportation and smelter costs, partly offset by lower silver by-product
credits (higher silver prices were more than offset by lower volumes produced in
2005), contributed to lower total cash costs per ounce in third quarter 2005
than in the same period of 2004. In the first nine months of 2005, higher
equipment maintenance and contractor costs, combined with the factors affecting
the third quarter, led to an increase in costs over 2005.
Round Mountain (50% owned), United States
Ore tons mined decreased in 2005 from 2004 levels, with higher quantities of
material placed on the leach pads in 2004 than in 2005. Tons processed each
period do not necessarily correlate to the ounces produced in the period as
there is a time delay between placing tons on the leach pad and pouring ounces.
Total cash costs per ounce were higher in 2005 due to inflationary cost
pressures, higher royalties and net proceeds taxes, as well as the effect of the
change in accounting for stripping costs (see page 19).
East Archimedes, United States
The East Archimedes project remains on schedule and we expect production to
commence by mid-2007. Project highlights include:
o Construction costs of $15 million were incurred in third quarter 2005, with
total costs of $27 million in the first nine months of 2005.
o The majority of the mining fleet was received in third quarter 2005.
o About 80% of the workforce has been hired.
o The final Record of Decision was signed by the US Bureau of Land Management
in the first week of October 2005.
SOUTH AMERICA
The region produced 369,000 ounces in third quarter 2005 (2004:133,000 ounces)
at total cash costs of $122 per ounce (2004: $124 per ounce), for a total of
711,000 ounces in the first nine months of 2005 (2004: 552,000 ounces) at total
cash costs of $126 per ounce (2004: $104 per ounce). Lagunas Norte made a
significant contribution to the region's results in third quarter 2005, which we
expect to continue in upcoming quarters. Veladero had its first gold pour in
September 2005, and upon completion of commissioning activities it will begin
full production. We expect South America to produce 1,210,000-1,230,000 ounces
and total cash costs of $120-$130 per ounce, slightly lower than previously
expected and at marginally higher total cash costs per ounce.
Pierina, Peru
With the availability of higher-grade ore in third quarter 2005, partly offset
by lower tons processed, gold production was higher than the prior year period.
Gold production in the first nine months of 2005 was lower than in 2004 as
higher quantities of run-of-mine ore were placed on the leach pad in 2004. Total
cash costs per ounce increased in 2005 as the effect of inflationary cost
pressures, combined with higher maintenance and ground support costs, was partly
offset by higher silver by-product credits. Mining costs were also higher in
2005 as the total tons of ore and waste mined increased in 2005.
Lagunas Norte, Peru
Lagunas Norte produced 211,000 ounces in third quarter 2005, its first full
quarter of production, at total cash costs of $121 per ounce, with mining of
high-grade near-surface ore. Construction contracts were closed out in the
third quarter and we expect the construction capital of the mine to be less than
the previously announced estimate of $340 million.
Veladero, Argentina
The first gold pour at Veladero occurred in September 2005. Upon completion of
ongoing commissioning activities Veladero will begin full production.
Construction costs of $78 million were incurred in third quarter 2005, for a
total of $213 million in the first nine months of the year.
Pascua-Lama, Chile/Argentina
In 2004, we made a decision to proceed with the development of the Pascua-Lama
project in Chile/Argentina, contingent upon obtaining the necessary permits,
approvals and fiscal regimes. While approvals for the environmental impact
assessments are targeted in the first quarter of 2006, the timing of the receipt
of these approvals, as well as the resolution of some of the other external
issues, such as permitting and licensing; cross-border operating issues; and
fiscal, tax and royalty issues, is largely beyond Barrick's control.
Capital and operating cost estimates for the Pascua-Lama project were based
on the cost and commodity price environment prevailing at the time of the
updated feasibility study, which was finalized in June of 2004. The design of
the project has been optimized in the course of the permitting process to
incorporate additional operating and construction efficiencies, additional
environmental mitigation measures, and other project improvements. We are in the
course of updating cost estimates to reflect such changes, inflationary cost
pressures and higher commodity prices. Although such factors will result in some
increase in capital and
BARRICK THIRD QUARTER 2005 11 MANAGEMENT'S DISCUSSION AND ANALYSIS
operating cost estimates, based on the current cost and commodity price
environment, and combined with other efficiencies, we do not expect significant
changes to the overall economics of the project.
AUSTRALIA/AFRICA
The region produced 341,000 ounces in third quarter 2005 (2004: 356,000 ounces)
at total cash costs of $272 per ounce (2004: $241 per ounce), for a total of
1,012,000 ounces in the first nine months of 2005 (2004: 1,020,000 ounces) at
total cash costs of $272 per ounce (2004: $242 per ounce). Lower production in
2005 was mainly due to the ending of open-pit mining at Plutonic in the second
quarter, as well as lower production at Kalgoorlie in the third quarter, partly
offset by new production from Tulawaka.
Total cash costs per ounce were higher in 2005 mainly because of inflationary
cost pressures, and lower throughput and ore grades at Plutonic after open-pit
mining ended in the second quarter, partly offset by higher ore grades at
Bulyanhulu in the third quarter. We expect the region to meet its full-year
production guidance of 1,330,000-1,365,000 ounces at slightly higher total cash
costs of $275-$280 per ounce.
Kalgoorlie (50% owned), Australia
In the first nine months of 2005, tons mined were lower than in 2004 due to
reduced shovel capacity. Tons processed were similar to 2004 in the first nine
months of 2005 with the processing of stockpiled material. Mill throughput was
higher due to improved mill utilization and the positive impact of processing
finer ore sizes. A build-up of concentrate inventory occurred in 2005 due to
limitations in roaster capacity. Inflationary cost pressures in 2005, combined
with higher exchange rates under hedge contracts, were more than offset by the
effect of the change in accounting for stripping costs (see page 19), leading to
lower total cash costs per ounce in 2005. In the third quarter 2005, lower
production related to lower ore grades, and higher maintenance costs due to
scheduled maintenance shutdowns, led to an increase in total cash costs per
ounce over the first half of the year.
Kalgoorlie is installing a mercury scrubber on its carbon kilns and is assessing
process changes, controls and other management measures for the roaster facility
to reduce mercury emissions. The assessment is continuing, after which we will
be able to estimate any capital requirements and operating cost impact
associated with such measures.
Plutonic, Australia
At Plutonic we processed fewer ore tons in 2005 than in 2004, after open-pit
mining ceased in the second quarter, which, while partly offset by higher
average ore grades, led to lower gold production in 2005. Lower gold production
levels, combined with inflationary cost pressures, were partly offset by lower
operating costs after open-pit mining ended and the impact of the change in
accounting for stripping costs (see page 19), for an increase in total cash
costs per ounce in 2005.
Bulyanhulu, Tanzania
In the first nine months of 2005 tons mined decreased mainly due to reduced
equipment availability, a hoist gearbox failure and labor issues due to roster
changes. Ore grades were lower in the first half of 2005 than in 2004, although
grades improved in third quarter on accessing higher-grade stopes. These factors
led to lower gold production levels in the first half of 2005 compared to prior
year period. Production in third quarter 2005 improved and was consistent with
third quarter 2004. In the first half of 2005, inventory levels increased due to
container delays that impacted shipments to the smelter. With the delays
resolved in the third quarter, inventory levels decreased back to previous
levels. Lower gold production levels, combined with equipment downtime and
higher maintenance and administrative costs, resulted in higher total cash costs
per ounce in 2005 compared to 2004.
Cowal, Australia
The project remains on schedule for production to commence in first quarter
2006. Project highlights include:
o Capital expenditures incurred were $76 million in third quarter 2005, for a
total of $185 million in the first nine months of 2005, and overall
construction of the project is about 50% complete. Inflationary cost
pressures in Australia have been impacting ongoing capital costs. It is now
anticipated that the public guidance for construction costs of about $305
million may be exceeded by up to five to ten per cent. We have been taking
steps to mitigate cost increases where possible. A cost review is being
undertaken to assess the impact.
o Engineering is substantially complete.
o Plant-site concrete is 85% complete.
o The southern tailings storage facility is about 50% complete and the
northern tailings storage facility was completed in second quarter 2005.
Kabanga (50% owned), Tanzania
In April 2005, we entered into a joint-venture agreement with Falconbridge
Limited ("Falconbridge") with respect to the Kabanga nickel deposit and related
concessions in Tanzania. Falconbridge acquired a 50% indirect interest
BARRICK THIRD QUARTER 2005 12 MANAGEMENT'S DISCUSSION AND ANALYSIS
in respect of the Kabanga project for $15 million and a funding commitment.
Falconbridge will be the operator of the joint venture. The Kabanga project has
a current estimated inferred resource of 26.4 million tonnes grading 2.6%
nickel(1).
Over the next several years, Falconbridge will fund and conduct a further
$50-million work plan that will include additional exploration and infill
drilling, and technical work to update the resource model for Kabanga and bring
the project towards feasibility. It will establish a dedicated team in Tanzania
to coordinate and advance the work plan. Upon conclusion of the work plan,
Falconbridge will fund the next $95 million of any project development
expenditures to advance the Kabanga project. Thereafter, Falconbridge and
Barrick will share equally in joint-venture revenues and expenditures.
RUSSIA/CENTRAL ASIA
In second quarter 2005, we spent $50 million to increase our ownership in
Highland Gold Mining PLC ("Highland") from 14% to 20%. Our 20% ownership
interest is reflected in our financial statements and production statistics on
an equity basis.
OTHER COSTS AND EXPENSES
Exploration, Development and Business Development Expense
Three months Nine months
ended ended
September 30 September 30
($ millions) 2005 2004 2005 2004 Comments on significant trends and variances
Exploration
North America $ 9 $ 6 $ 21 $ 20 Higher exploration activity at Goldstrike in
third quarter 2005.
Australia/Africa 3 10 27 26 Lower levels of exploration activity in
third quarter 2005 at the Buzwagi project.
South America Lower exploration activity in third quarter
2005 at various exploration properties in Peru,
Chile and Argentina, including exploration of
2 5 13 15 Pierina mine site property.
Russia/Central Asia 4 1 7 4 Higher levels of exploration activity in
third quarter 2005.
Other countries - - 1 1
Mine development 2 4 7 13 In 2004, we expensed Lagunas Norte
development costs until May 1,
which was the date when the project achieved
the criteria to classify mineralization as a
reserve for US reporting purposes. Funding
of Kabanga expenditures by Falconbridge also
contributed to lower expenses.
Non-capitalizable project costs 4 5 11 5 Non-capitalizable costs mainly present items
incurred in the development/construction
phase that cannot be capitalized under US
GAAP.
Business development/other 3 7 8 17 Decrease in overhead costs associated with
the administration of exploration and
development projects.
Total $ 27 $ 38 $ 95 $101
1 Resource calculations were prepared by employees of Barrick under the
supervision of Alexander J. Davidson, P. Geo., Executive Vice President,
Exploration and Corporate Development of Barick
BARRICK THIRD QUARTER 2005 13 MANAGEMENT'S DISCUSSION AND ANALYSIS
Amortization, Administration and Interest Expense
- ------------------------------------------------------------------------------------------------------------------------------------
Three months ended Nine months ended
($ millions, except per ounce September 30 September 30
data and percentages) 2005 2004 %Change 2005 2004 %Change Comments on significant trends and variances
Amortization
Absolute amount $111 $117 (5)% $298 $ 352 (15)% Decrease mainly due to lower amortization
rates per ounce.
Per ounce (dollars) 72 89 (19)% 77 90 (14)% Lower rates in 2005 mainly due to reserve
increases at the end of 2004 (particularly
Goldstrike open pit and Pierina - see page
19), the lower book value of Eskay Creek
after an impairment charge was recorded in
fourth quarter 2004 and effect of low
amortization costs per ounce at Lagunas
Norte on the overall average. We do not
expect the overall average rate per ounce
to change significantly for the remainder
of 2005.
Administration 17 16 6% 53 50 6% Higher regulatory compliance costs in 2005.
Interest costs
Incurred 33 13 154% 92 36 156% Increase mainly due to new financing put in
place in 2004 and 2005. Average long-term
debt outstanding increased from $0.7
billion in the first nine months of 2004 to
$1.7 billion in 2005.
Capitalized (33) (7) 371% (91) (18) 406% Increased amounts were capitalized in the
first nine months of 2005 to Lagunas Norte,
Veladero and Cowal development projects as
construction costs were incurred and
capitalized. Capitalization at Lagunas
Norte ceased in third quarter 2005. Average
book value of these three projects was $1
billion in the first nine months of 2005
compared to $0.3 billion in the first nine
months of 2004. Capitalization at
Pascua-Lama began in third quarter 2004.
Expensed - 6 (100)% 1 18 (94)% Following the start-up of the Lagunas Norte
mine, and after commissioning is completed
at the Veladero project, we expect that
interest expense in the future will begin
to increase as the combined book value of
Cowal and Pascua-Lama will likely be lower
than outstanding long-term debt.
- ------------------------------------------------------------------------------------------------------------------------------------
Other (Income) Expense
Three months Nine months
ended ended
September 30 September 30
($ millions) 2005 2004 2005 2004 Comments on significant trends and variances
Non-hedge' derivative $ 2 $(8) $(7) $ 1 The gains and losses arise primarily due to
(gains)/losses changes in commodity prices, currency
exchange rates and interest rates.
Gains on asset sales (4) (2) (5) (5) Gains in third quarter 2005 mainly relate to
land dispositions in Australia.
Gain on Kabanga transaction - - (15) - Gain recorded in second quarter 2005 relates
to the closing of a transaction in which
Falconbridge acquired a 50% indirect
interest in Kabanga.
Gains on investment sales - - (9) (1) Gains of $9 million in first quarter 2005
related to the sale of investments held in a
rabbi trust for a deferred compensation plan
as a result of a change in the plan trustee.
Impairment of investments 3 - 3 - Losses relate to two investments where we
concluded impairment was other than
temporary.
Environmental remediation costs 17 12 31 24 In third quarter 2005 revisions were made to
cost estimates at three closed mines in
North America on completion of an update to
the closure plans that led to a $8 million
charge to earnings.
Currency translation gains (11) (3) (6) (4) Foreign currency translation gains reflect
the effect of strengthening of the Canadian,
Australian and Argentinean currencies against
the US dollar on monetary assets.
Other items 14 13 34 26
Total $ 21 $ 12 $ 26 $ 41
Income Taxes
- --------------------------------------------------------------------------------
Income tax expense increased in 2005 primarily due to the increase in income
before taxes. Excluding the impact of recording previously unrecognized deferred
tax assets, the underlying tax rate for the first nine months of 2005 was 21%
compared to 41% in 2004. The major reasons for the decrease in the effective tax
rate were the impact of a $67 million (2005: $20 million) opportunity cost in
2004, relating to deliveries into gold sales contracts in a low tax-rate
jurisdiction at prices lower than prevailing spot market price; and a change in
the geographic mix of gold production, and therefore income before tax, with a
shift towards jurisdictions with lower tax rates. The effective tax rate in
third quarter 2005 was slightly higher than the rate in the first half of
BARRICK THIRD QUARTER 2005 14 MANAGEMENT'S DISCUSSION AND ANALYSIS
the year because $16 million out of a $19-million opportunity cost occurred in a
low-rate tax jurisdiction.
As gold prices increase, our underlying tax rate also increases, reaching a high
of about 25% with market prices at or above $475 per ounce. The expected
underlying tax rate excludes the effect of gains and losses on non-hedge
derivatives, the effect of delivering into forward gold sales contracts at
prices below prevailing market prices, and any release of deferred tax valuation
allowances.
Operating Activities
Operating cash flow increased by $80 million to $232 million in third quarter
2005 compared to third quarter 2004. The key factors that contributed to the
period over period increase are summarized in the table below.
[Graphic Omitted]
Key factors affecting operating cash flow
- ------------------------------------------------------------------------------------------------------------------------------------
Impact on Impact on
Three months comparative Nine months comparative
ended Sept.30 operating ended Sept.30 operating
2005 2004 cash flow 2005 2004 cash flow Comments on significant trends
and variances
Gold sales volumes 1,456 1,267 $ 33 3,670 3,736 $(11) See page 9.
(000s oz)
Realized gold prices $427 $ 395 47 $ 426 $ 383 158 See page 9.
($/oz)
Total cash costs 210 221 16 229 213 (59) See page 9.
($/oz)
Sub-total 96 88
Other inflows
(outflows)
Income tax (payments) (20) 11 (31) (49) (40) (9) Canadian Federal tax refund of
refunds $18 million was received in third
quarter 2004. The increase in tax
payments in third quarter 2005 relates
to the first full quarter of Lagunas
Norte production and higher realized
gold prices.
Increase in (20) - (20) (94) (26) (68) Higher inventory at development
inventories projects to support start-up of
production.
Other non-cash 12 10 2 53 30 23
working capital
Interest expense - 6 6 1 18 17 See page 14.
Income tax expense 28 3 25 47 33 14 See page 14.
Effect of other 2 6
factors
Total $ 80 $ 71
BARRICK THIRD QUARTER 2005 15 MANAGEMENT'S DISCUSSION AND ANALYSIS
Investing Activities
Investing activities in 2005 principally comprised capital expenditures as
detailed below.
- ------------------------------------------------------------------------------------------------------------------------------------
Three months ended Nine months ended
($ millions) September 30 September 30
2005 2004 $Change 2005 2004 $Change Comments
Growth capital
expenditures(1)
Veladero $ 78 $ 65 $ 13 $ 213 $ 207 $ 6 Construction activity at similar levels in
each period.
Lagunas Norte 28 83 (55) 128 115 13 Construction activity started in second
quarter 2004. Production start-up in second
quarter 2005, with lower capital
expenditures in third quarter 2005 on
completion of construction.
Cowal 76 13 63 185 44 141 Construction activity started in second
quarter 2004. Higher levels of activity
generally in 2005, leading up to production
start-up expected in first quarter 2006.
Tulawaka - 12 (12) 8 27 (19) Production began in first quarter 2005,
with lower capital expenditures on
completion of construction.
Pascua-Lama 27 8 19 66 18 48 Higher levels of activity since decision in
mid-2004 to proceed with the project, as
well as higher capitalized interest.
Nevada Power Plant 29 - 29 63 - 63 Construction activity started in fourth
quarter 2004.
East Archimedes 15 - 15 27 - 27 Construction activity started in first
quarter 2005.
Sub-total 253 181 72 690 411 279
Sustaining capital
expenditures
North America 37 17 20 70 63 7 Purchases of equipment at Goldstrike in
third quarter 2005.
Australia/Africa 27 14 13 61 52 9 Purchases of equipment at Australian
operating mines in third quarter 2005.
South America 5 - 5 10 2 8 Purchases of equipment at Pierina in third
quarter 2005.
Other 1 6 (5) 4 8 (4)
Sub-total 70 37 33 145 125 20
Total $ 323 $ 218 $ 105 $ 835 $ 536 $ 299
1 Includes construction costs and capitalized interest.
Financing Activities
The most significant financing cash inflows in third quarter 2005 were $50
million received on the exercise of employee stock options and $32 million of
proceeds from various financings, partly offset by $23 million of repayments
made in third quarter 2005 under long-term debt obligations. In the nine-month
period ended in 2005, we received $88 million of proceeds on exercise of stock
options and $170 million of financing proceeds, partly offset by long-term debt
repayments of $38 million and dividends paid of $59 million.
BALANCE SHEET
SHAREHOLDERS' EQUITY
Outstanding Share Data
As at October 14, 2005, 537.2 million of our common shares, one special voting
share and 1.4 million Exchangeable Shares not owned by Barrick (exchangeable
into 0.7 million of our common shares) were issued and outstanding. As at
October 14, 2005, options to purchase 20.5 million common shares were
outstanding under our option plans, as well as options to purchase 0.4 million
common shares under certain option plans inherited by us in connection with
prior acquisitions.
Comprehensive Income
Comprehensive income consists of net income or loss, together with certain other
economic gains and losses that collectively are described as "other
comprehensive income", and excluded from the income statement.
In third quarter 2005, the other comprehensive income of $9 million mainly
included gain reclassification adjustments totaling $37 million on hedge
contracts that were transferred to earnings in third quarter 2005; partly offset
by gains of $49 million on hedge contracts designated for future periods caused
primarily by changes in currency exchange rates, interest rates and fuel prices.
For the nine-month period ended September 30, 2005, the other comprehensive loss
of $28 million mainly included gain reclassification adjustments totaling $100
million on hedge contracts that were transferred to earnings and gains of $9
million on sale of investments, partly offset by gains of $75 million on hedge
contracts designated for future periods caused primarily by changes in currency
exchange rates, interest rates, and fuel prices.
BARRICK THIRD QUARTER 2005 16 MANAGEMENT'S DISCUSSION AND ANALYSIS
QUARTERLY INFORMATION ($ millions, except where indicated)
2005 2004 2003
Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4
Gold sales $ 627 $ 463 $ 484 $ 501 $ 500 $ 454 $ 477 $ 536
Net income 113 53 60 156 32 34 26 77
Net income per share - basic (dollars) 0.21 0.10 0.11 0.30 0.06 0.06 0.05 0.14
Our financial results for the last seven quarters through to second quarter 2005
reflect the following general trends: rising spot gold prices with a
corresponding rise in prices realized from gold sales; and rising total cash
costs per ounce as a number of our mines have been processing lower-grade ore
and experienced inflationary cost pressures. In third quarter 2005, after our
low-cost Lagunas Norte mine began production, these trends began to reverse,
with an increase in production and decrease in total cash costs per ounce, that
also resulted in a significant increase in both gold sales and net income. We
expect this new trend of increasing production to continue. Net income in each
quarter also reflects the timing of various special items. The items affecting
the third quarter and first nine months of both 2005 and 2004 are presented in a
table on page 9.
OFF-BALANCE SHEET ARRANGEMENTS
The MD&A included in our 2004 Annual Report contained a detailed discussion of
off-balance sheet arrangements. In this interim MD&A, we have included an update
of any significant changes in off-balance sheet arrangements.
Gold and Silver Sales Contracts
We have historically used gold and silver sales contracts as a means of selling
a portion of our gold and silver production. The contracting parties are bullion
banks whose business includes entering into contracts to purchase gold or silver
from mining companies. All our gold and silver sales contracts (including
Corporate Gold Sales Contracts, Pascua-Lama Gold Sales Contracts and Floating
Spot-Price Gold Sales Contracts) retain all the benefits of our Master Trading
Agreements ("MTAs") and are not subject to margining, downgrade or unilateral
and discretionary "right to break" provisions.
Corporate Gold Sales and Floating Spot-Price Gold Sales Contracts
Fixed-price Corporate Gold Sales Contracts, which at September 30, 2005 totaled
6.4 million ounces, represent approximately one year of expected future gold
production and approximately 9% of our proven and probable reserves, excluding
Pascua-Lama. We reduced our fixed-price Corporate Gold Sales contract
commitments by delivering 0.2 million ounces in third quarter 2005.
At September 30, 2005, we had floating spot-price gold sales contracts under
which we are committed to deliver 0.7 million ounces of gold over the next ten
years at spot prices, less an average fixed-price adjustment of $86 per ounce.
We reduced our floating spot-price gold sales contract commitments by 0.1
million ounces through gold deliveries in third quarter 2005.
Key Aspects of Corporate Gold Sales Contracts
(at September 30, 2005)
Current termination date of contracts. 2015 in most cases.
Average estimated realizable price in 2015. $439/oz.(1)
Mark-to-market value at Sept.30, 2005.
Corporate Gold Sales Contracts $(1,100) million.(2)
Floating Spot-Price Gold Sales Contracts. $(60) million.(2)
1 Approximate estimated value based on current market US dollar interest
rates and an average gold lease rate assumption of 1%. Accelerating gold
deliveries would likely lead to reduced contango that would otherwise have
built up over time. Barrick may choose to settle any gold sales contract in
advance of this termination date at any time, at its discretion.
Historically, delivery has occurred in advance of the contractual
termination date.
2 At a spot gold price of $473 per ounce, and market interest rates.
Pascua-Lama Gold Sales Contracts
In anticipation of building Pascua-Lama and in support of any related financing,
we have 6.5 million ounces of existing fixed-price gold sales contracts
specifically allocated to Pascua-Lama (the "Pascua-Lama Gold Sales Contracts").
The allocation of these contracts will help reduce gold price risk at
Pascua-Lama and is expected to help secure the financing for its construction.
We expect the allocation of these contracts to eliminate any requirement by
lenders to add any incremental gold sales contracts in the future to support the
financing of Pascua-Lama. The forward sales prices on our Pascua-Lama Gold
Sales Contracts have not been fully fixed, and thus remain sensitive to
long-term (2009-2017) interest rates. Increasing long-term interest rates in the
third quarter have resulted in a higher expected realizable sales price for
these contracts. If these interest rates continue to rise, we anticipate the
expected realizable sales price to increase (in 2009-2017).
As part of our MTAs, Pascua-Lama Gold Sales Contracts are not subject to any
provisions regarding any final go-ahead decisions with Pascua-Lama
construction, or any possible delay or change in the Pascua-Lama project.
BARRICK THIRD QUARTER 2005 17 MANAGEMENT'S DISCUSSION AND ANALYSIS
Barrick guarantees the performance of all its gold and silver sales contracts.
Key Aspects of Pascua-Lama Gold Sales Contracts
(at September 30, 2005)
Expected delivery dates.(1) 2009-2017, the term
of the expected financing.
Future estimated average realizable price. $368/oz.(2)
Mark-to-market value at Sept. 30, 2005. $(1,190) million.(3)
1 The contract termination dates are 2014-2017 in most cases, but we expect
to deliver Pascua-Lama production against these contracts starting in 2009,
subject to the timing of receipt of approvals of the environmental impact
assessments, as well as the resolution of other external issues, both of
which are largely beyond our control.
2 Upon delivery of production from 2009-2017, the term of expected financing.
Approximate estimated value based on current market contango which is
sensitive to US dollar interest rates.
3 At a spot gold price of $473 per ounce and market interest rates.
These contracts represent about 37% of the 17.6 million ounces of gold reserves
at Pascua-Lama, and do not impact any of the 643 million ounces of silver
contained in gold reserves.
Fair Value of Derivative Positions
At Sept.30, At Dec.31,
Unrealized Gain/(Loss) 2005 2004
Corporate Gold Sales Contracts(1) $ (1,160) $ (975)
Pascua-Lama Gold Sales Contracts (1,190) (966)
Silver Sales Contracts(1) (34) (26)
Currency contracts 219 298
Interest and lease rate contracts 35 45
Fuel contracts 58 4
$ (2,072) $ (1,620)
1 Includes floating spot-price contracts.
Contractual Obligations and Commitments
Purchase obligations include only those items where binding commitments have
been entered into. They do not include the full amount of future capital
expenditures required to complete construction of our development projects
because commitments have yet to be made for all of the estimated future capital
costs. Significant changes to the December 31, 2004 contractual obligations and
commitments include an additional $0.3 billion of purchase obligations for
supplies and consumables and power contracts that we expect to incur mainly in
2005 to 2010.
In third quarter 2005, we drew down a further $32 million under two lease
facilities put in place to fund Lagunas Norte construction costs. The lease
facilities will be repaid evenly on a quarterly basis over five years.
Capital expenditures not yet committed
We expect to incur about $1.5 billion in capital to complete the development of
our present projects over the next five years (Cowal, Pascua-Lama, East
Archimedes and the Nevada Power Plant). A total of about $80 million of these
amounts had been committed at the end of third quarter 2005, with the remainder
not yet committed.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Management has discussed the development and selection of our critical
accounting estimates with the Audit Committee of the Board of Directors, and the
Audit Committee has reviewed the disclosure relating to such estimates in
conjunction with its review of this MD&A. The accounting policies and methods we
utilize determine how we report our financial condition and results of
operations, and they may require management to make estimates or rely on
assumptions about matters that are inherently uncertain. In this MD&A, we have
not repeated information provided in our 2004 annual MD&A. We have provided an
update for any changes in accounting policies and critical accounting estimates
that were not included in our 2004 annual MD&A.
Accounting Policy Changes
EITF Issue No. 04-6, Accounting for Stripping Costs Incurred during Production
in the Mining Industry ("EITF 04-6")
In 2005, the FASB approved EITF 04-6, and we chose to adopt it in second quarter
2005. EITF 04-6 relates to the accounting for stripping costs in the production
stage at a mine. Previously we capitalized stripping costs incurred in the
production phase. Results for 2005 reflect the method of accounting under EITF
04-6, but periods prior to 2005 were not restated in accordance with the
transition rules of EITF 04-6. Cost of sales and related total cash costs per
ounce statistics for 2004 and prior periods have not been restated, and are
therefore not comparable to current-year results and statistics.
The new accounting rules require the actual stripping costs incurred each period
be reflected in the cost of ore mined for the same period, and will likely lead
to greater period-to-period volatility in total cash costs. Previously,
stripping costs were deferred and amortized based on a life-of-mine stripping
ratio that smoothed the costs over time. The impact of this change was to
increase net income for third quarter 2005 by $6 million, ($0.01 per share) and
for the nine months ended September 30, 2005 by $27 million ($0.05 per share).
Cost of sales for third quarter 2005 was $11 million lower ($7 per ounce lower
total cash costs) and $29 million lower in the nine months ended September 30,
2005 ($8 per ounce lower total cash costs). Results for 2005 also include a
$6-
BARRICK THIRD QUARTER 2005 18 MANAGEMENT'S DISCUSSION AND ANALYSIS
million post-tax credit ($0.01 earnings per share) to reflect the cumulative
effect of the policy for periods prior to January 1, 2005.
Impact of EITF 04-6 on Total Cash Costs Per Ounce Statistics
Three months ended Nine months ended
September 30, 2005 $eptember 30, 2005
(dollars per ounce) Increase (decrease) Increase (decrease)
Goldstrike open pit $ (13) $ (7)
Round Mountain 42 21
Hemlo 6 9
Pierina (46) (33)
Lagunas Norte (27) (26)
Kalgoorlie 25 (12)
Plutonic - (22)
Lawlers - 8
Tulawaka 62 50
Total cash costs per ounce $ (7) $ (8)
Critical Accounting Estimates
Certain accounting estimates have been identified as being "critical" to the
presentation of our financial condition and results of operations because they
require management to make particularly subjective and/or complex judgments
about matters that are inherently uncertain; and there is a reasonable
likelihood that materially different amounts could be reported under different
conditions or using different assumptions and estimates. Following the adoption
of EITF 04-6, stripping ratios are no longer a critical accounting estimate.
Critical accounting estimates include:
o Reserve estimates used to measure amortization of property, plant and
equipment;
o Impairment assessments of long-lived assets and investments;
o Assessments as to whether mine development costs should be capitalized or
expensed;
o The fair value of asset retirement obligations;
o The measurement of deferred income tax assets and liabilities and
assessments of the amounts of valuation allowances recorded; and
o Assessments of the likelihood of loss contingencies occurring and the
amount of potential loss.
Reserve Estimates Used to Measure Amortization of Property, Plant and Equipment
We record amortization expense based on the estimated useful economic lives of
long-lived assets. Effective December 31, 2004, we updated our estimates of
proven and probable gold mineral reserves. Following the update of these
estimates, we prospectively revised calculations of amortization and caused
amortization for third quarter 2005 and the first nine months of 2005 to
decrease by $10 million and $28 million, respectively, for the mines listed
below, which had reserve estimate changes (other than production) greater than
10%.
Impact of Historic Changes in Reserve Estimates on Amortization
Reserves increase Amortization increase (decrease)
($ millions, except reserves in (decrease)(1) Periods ended Sept.30, 2005
millions of contained oz) As at Dec.31, 2004 Three months Nine months
Goldstrike open pit 1.8 $ (4) $ (11)
Round Mountain 0.3 (2) (6)
Lawlers 0.1 (1) (2)
Eskay Creek (0.1) 2 5
Pierina 0.3 (6) (16)
Hemlo (0.2) 1 2
Total 2.2 (10) (28)
Impact on total amortization per ounce
(dollars) $ (7) $ (8)
1 Each year we update our reserve estimates as at the end of the year as part
of our normal business cycle. Reserve changes, shown in millions of
contained ounces, affect amortization expense on a prospective basis.
- --------------------------------------------------------------------------------
Impairment Assessments of Investments
Each reporting period we review all available-for-sale securities whose fair
value at the end of the period is below cost to determine whether an
other-than-temporary impairment has occurred. We consider both positive and
negative evidence in order to reach a conclusion on whether any impairment is
other-than-temporary, and if necessary, record any losses that are
other-than-temporary in earnings within other expense. Changes in the values of
these investments are caused by market factors beyond our control and could be
significant. The amount of any impairment charges recorded could materially
impact earnings in a reporting period. In third quarter 2005, we reviewed an
investment in an unrealized loss position that had a fair value that was $12
million below cost, and concluded that an impairment charge was not required. If
a further or prolonged deterioration in value of this investment occurs, we may
reach a different conclusion that could lead to the recognition of an impairment
charge in earnings of a future period.
Impairment Assessments of Property, Plant and Equipment
At the end of 2004, we conducted detailed impairment assessments for Eskay Creek
and Cowal. In 2005, we have not performed any detailed impairment assessments on
any groups of assets. We are monitoring the impact of economic trends and other
economic factors on our producing mines and development projects. It is
reasonably possible that a detailed impairment assessment could be required for
some
BARRICK THIRD QUARTER 2005 19 MANAGEMENT'S DISCUSSION AND ANALYSIS
properties in future periods if industry-wide inflationary cost pressures
persist or increase in the future.
TOTAL CASH COSTS PERFORMANCE MEASURES
Total cash costs include all costs absorbed into inventory, including royalties,
by-product credits, mining taxes and accretion expense, except for amortization.
Total cash costs per ounce is calculated by dividing the aggregate of these
costs by gold ounces sold. Total cash costs and total cash costs per ounce are
calculated on a consistent basis for the periods presented. On our income
statement we present amortization separately from cost of sales. Some companies
include amortization in cost of sales, which results in a different measurement
of cost of sales on the income statement. We have provided below a
reconciliation to illustrate the impact of excluding amortization from cost of
sales and total cash costs per ounce statistics.
In managing our mining operations, we disaggregate cost of sales between
amortization and the other components of cost of sales. We use total cash costs
per ounce statistics as a key performance measure internally to monitor the
performance of our mines. We use the statistics to assess how well our mines are
performing against internal plans, and also to assess the overall effectiveness
and efficiency of our mining operations. We also use amortization cost per ounce
statistics to monitor business performance. By disaggregating cost of sales into
these two components and separately monitoring them we are able to better
identify and address key performance trends. We believe that the presentation of
these statistics in this manner in our MD&A, together with commentary explaining
trends and changes in the statistics, enhances the ability of investors to
assess our performance. These statistics also enable investors to better
understand year on year changes in cash production costs, which in turn affect
our profitability and ability to generate cash flow.
The principal limitation associated with total cash costs per ounce statistics
is that they do not reflect the total costs to produce gold, which in turn
impacts the earnings of Barrick. We believe that we have compensated for this
limitation by highlighting the fact that total cash costs exclude amortization
as well as providing details of the financial effect. We believe that the
benefits of providing disaggregated information outweigh the limitation in the
method of presentation of total cash costs per ounce statistics.
Total cash costs per ounce statistics are intended to provide additional
information and should not be considered in isolation or as a substitute for
measures of performance prepared in accordance with US GAAP. The measures are
not necessarily indicative of operating profit or cash flow from operations as
determined under US GAAP.
Illustration of Impact of excluding Amortization from Total Cash Costs Per Ounce
Three months ended September 30, Nine months ended September 30,
($ millions, except per ounce information in 2005 2004 2005 2004
dollars)
Cost of sales per Barrick income statement $ 310 $ 279 $ 847 $ 795
Amortization at producing mines 106 113 284 335
Cost of sales including amortization $ 416 $ 392 $1,131 $1,130
Ounces sold (thousands) 1,456 1,267 3,670 3,736
Total cash costs per ounce as reported $ 210 $ 221 $ 229 $ 213
Amortization per ounce 72 89 77 90
Cost of sales (including amortization) per ounce $ 282 $ 310 $ 306 $ 303
BARRICK THIRD QUARTER 2005 20 MANAGEMENT'S DISCUSSION AND ANALYSIS
Consolidated Statements of Income
Barrick Gold Corporation Three months ended Nine months ended
(in millions of United States dollars, except per share data) September 30, September 30,
(Unaudited) ------------------------- ----------------------
2005 2004 2005 2004
------------------------- ----------------------
Gold sales (notes 3 and 4) $ 627 $ 500 $ 1,574 $ 1,431
- ---------------------------------------------------------------------------------------- ----------------------
Costs and expenses
Cost of sales(1) (note 5) 310 279 847 795
Amortization (note 3) 111 117 298 352
Administration 17 16 53 50
Exploration, development and business development 27 38 95 101
Other expense (note 6) 21 12 26 41
- ---------------------------------------------------------------------------------------- ----------------------
486 462 1,319 1,339
- ---------------------------------------------------------------------------------------- ----------------------
Interest income 9 5 28 18
Equity in investees (note 11) (1) - (2) -
Interest expense (note 14a) - (6) (1) (18)
- ---------------------------------------------------------------------------------------- ----------------------
Income before income taxes and other items 149 37 280 92
Income tax expense (note 7) (36) (5) (60) -
- ---------------------------------------------------------------------------------------- ----------------------
Income before cumulative effect of change in accounting
principles 113 32 220 92
Cumulative effect of change in accounting principles, net of
tax (note 2b) - - 6 -
- ---------------------------------------------------------------------------------------- ----------------------
Net income for the period $ 113 $ 32 $ 226 $ 92
- ---------------------------------------------------------------------------------------- ----------------------
Earnings per share data:
Income before cumulative effect of change in accounting
principles
Basic and diluted $ 0.21 $ 0.06 $ 0.41 $ 0.17
Net income
Basic and diluted (note 8) $ 0.21 $ 0.06 $ 0.42 $ 0.17
- ---------------------------------------------------------------------------------------- ----------------------
1 Exclusive of amortization (note 3).
The accompanying notes are an integral part of these unaudited interim
consolidated financial statements.
BARRICK THIRD QUARTER 2005 21 MANAGEMENT'S DISCUSSION AND ANALYSIS
Consolidated Statements of Cash Flow
Barrick Gold Corporation Three months ended Nine months ended
(in millions of United States dollars) September 30, September 30,
(Unaudited) ------------------------------ -------------------------
2005 2004 2005 2004
------------------------------ -------------------------
OPERATING ACTIVITIES
Net income for the period $ 13 $ 32 $ 226 $ 92
Amortization (note 3) 111 117 298 352
Gains on sale of investments (note 6) - - (9) (1)
Gain on Kabanga transaction (note 6) - - (15) -
Other items (note 9) 8 3 (43) (57)
- ---------------------------------------------------------------------------------------- ----------------------
Net cash provided by operating activities 232 152 457 386
- ---------------------------------------------------------------------------------------- ----------------------
INVESTING ACTIVITIES
Property, plant and equipment
Capital expenditures (note 3) (323) (218) (835) (536)
Sales proceeds 4 3 7 11
Cash receipt from Kabanga transaction - - 15 -
Investments
Purchases (note 11) (3) - (86) (45)
Other items - (4) (13) (7)
- ---------------------------------------------------------------------------------------- ----------------------
Net cash used in investing activities (322) (219) (912) (577)
- ---------------------------------------------------------------------------------------- ----------------------
FINANCING ACTIVITIES
Capital stock
Proceeds on exercise of stock options 50 3 88 29
Repurchased for cash - - - (95)
Long-term debt
Proceeds (note 14a) 32 167 170 167
Repayments (23) - (38) (27)
Dividends (note 16a) - - (59) (59)
Other items - (16) (1) (16)
- ---------------------------------------------------------------------------------------- ----------------------
Net cash provided by (used in) financing activities 59 154 160 (1)
- ---------------------------------------------------------------------------------------- ----------------------
Effect of exchange rate changes on cash and 5 3 2 (3)
equivalents
Net increase (decrease) in cash and equivalents (26) 90 (293) (195)
Cash and equivalents at beginning of period 1,131 685 1,398 970
- ---------------------------------------------------------------------------------------- ----------------------
Cash and equivalents at end of period $ 1,105 $ 775 $ 1,105 $ 775
- ---------------------------------------------------------------------------------------- ----------------------
The accompanying notes are an integral part of these unaudited interim
consolidated financial statements.
BARRICK THIRD QUARTER 2005 22 FINANCIAL STATEMENTS
Consolidated Balance Sheets
Barrick Gold Corporation
Barrick Gold Corporation
(in millions of United States dollars) As at September 30, September 30,
(Unaudited) 2005 2004
------------------------- ----------------------
Assets
Current assets
Cash and equivalents $ 1,105 $1,398
Accounts receivable 50 58
Inventories (note 10) 361 215
Other current assets 324 286
- ---------------------------------------------------------------------------------------- ------------------
1,840 1,957
Available for sale securities (note 11) 71 59
Equity method investments (note 11) 144 88
Property, plant and equipment (note 12) 3,982 3,391
Capitalized mining costs (note 2b) - 226
Other assets (note 13) 753 566
- ---------------------------------------------------------------------------------------- ------------------
Total assets $ 6,790 $ 6,287
- ---------------------------------------------------------------------------------------- ------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $ 421 $ 335
Other current liabilities 89 83
- ---------------------------------------------------------------------------------------- ------------------
510 418
Long-term debt (note 14) 1,763 1,655
Other long-term obligations (note 15) 565 499
Deferred income tax liabilities 148 139
- ---------------------------------------------------------------------------------------- ------------------
Total liabilities 2,986 2,711
- ---------------------------------------------------------------------------------------- ------------------
Shareholders' equity
Capital stock (note 16) 4,218 4,129
Deficit (455) (622)
Accumulated other comprehensive income (note 18) 41 69
- ---------------------------------------------------------------------------------------- ------------------
Total shareholders' equity 3,804 3,576
- ---------------------------------------------------------------------------------------- ------------------
Contingencies and commitments (notes 12 and 19)
- ---------------------------------------------------------------------------------------- ------------------
Total liabilities and shareholders' equity $ 6,790 $ 6,287
- ---------------------------------------------------------------------------------------- ------------------
The accompanying notes are an integral part of these unaudited interim
consolidated financial statements.
BARRICK THIRD QUARTER 2005 23 FINANCIAL STATEMENTS
Consolidated Statements of Shareholders' Equity
Barrick Gold Corporation
For the nine months ended September 30
(in millions of United States dollars) (Unaudited) 2005 2004
----------------- ----------------
Common shares (number in millions) $ 534 $ 535
At January 1 4 2
Issued on exercise of stock options 4 2
Repurchased (note 16a) - (5)
- ---------------------------------------------------------------------------------------------------------------
At September 30 538 532
- ---------------------------------------------------------------------------------------------------------------
Common shares (dollars in millions) -
At January 1 $ 4,129 $ 4,115
Issued on exercise of stock options 89 29
Repurchased (note 16a) - (35)
- ---------------------------------------------------------------------------------------------------------------
At September 30 $ 4,218 $ 4,109
- ---------------------------------------------------------------------------------------------------------------
Deficit
At January 1 $ 622) $ (694)
Net income 226 92
Dividends (note 16a) (59) (59)
Adjustment on repurchase of common shares (note 16a) - (60)
- ---------------------------------------------------------------------------------------------------------------
At September 30 $ (455) $ (721)
- ---------------------------------------------------------------------------------------------------------------
Accumulated other comprehensive income (loss) (note 18) $41 $ (12)
- ---------------------------------------------------------------------------------------------------------------
Total shareholders' equity at September 30 $ 3,804 $ 3,376
- ---------------------------------------------------------------------------------------------------------------
Consolidated Statements of Comprehensive Income
- ------------------------------------------------------------------------------------------------------------------------------------
Barrick Gold Corporation Three months ended Nine months ended
(in millions of United States dollars) (Unaudited) September 30, September 30,
------------------------------ --------------------------------------
2005 2004 2005 2004
------------------------------ --------------------------------------
Net income $ 113 $ 32 $ 226 $ 92
Other comprehensive income (loss), net of tax (note 9 30 (28) (72)
18)
- ------------------------------------------------------------------------------------------------------------------------------------
Comprehensive income $ 122 $ 62 $ 198 $ 20
- ------------------------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these unaudited interim
consolidated financial statements.
- --------------------------------------------------------------------------------
BARRICK THIRD QUARTER 2005 24 FINANCIAL STATEMENTS
NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
Tabular dollar amounts in millions of United States dollars, unless otherwise
shown. References to CS, A$, (euro) and ARS are to Canadian dollars, Australian
dollars, Euros and Argentinean pesos respectively.
1 > NATURE OF OPERATIONS
Barrick Gold Corporation ("Barrick" or the "Company") engages in the production
and sale of gold from underground and open-pit mines, including related
activities such as exploration and mine development. Our operations are mainly
located in North America, South America, Australia and Africa.
2 > SIGNIFICANT ACCOUNTING POLICIES
A Basis of preparation
The United States dollar is the principal currency of our operations. These
unaudited interim consolidated financial statements have been prepared in United
States dollars and under United States generally accepted accounting principles
("US GAAP") for the preparation of interim financial information. Accordingly,
they do not include all of the information and disclosures required by US GAAP
for annual consolidated financial statements. The accounting policies used in
the preparation of the accompanying unaudited interim consolidated financial
statements are the same as those described in our audited consolidated financial
statements and the notes thereto for the three years ended December 31, 2004,
except as noted below in note 2b.
In the opinion of management, all adjustments considered necessary for the fair
presentation of results for the periods presented have been reflected in these
financial statements. These unaudited interim consolidated financial statements
should be read in conjunction with the audited annual consolidated financial
statements and the notes thereto for the three years ended December 31, 2004.
The preparation of these financial statements requires us to make estimates and
assumptions. The most significant estimates and assumptions are: quantities of
proven and probable gold reserves; expected value of mineral resources not
considered proven and probable reserves; expected future costs and expenses to
produce proven and probable reserves; expected future commodity prices and
foreign currency exchange rates; and expected costs to meet asset retirement
obligations. Decisions and assessments affected by our critical estimates and
assumptions include:
>> decisions as to whether mine development costs should be capitalized or
expensed;
>> assessments of whether groups of long-lived assets are impaired and the
fair value of those groups of assets that are the
basis for measuring impairment charges;
>> assessments of our ability to realize the benefits of deferred income
tax assets;
>> the useful lives of long-lived assets and the measurement of
amortization recorded in earnings;
>> the fair value of asset retirement obligations;
>> assessments of the likelihood of loss contingencies occurring
and the amount of potential loss; and
>> assessments of whether investments are impaired.
We regularly review these estimates and assumptions that affect our financial
statements, however, actual outcomes could differ from our estimates and
assumptions.
B Accounting changes
EITF Issue No. 04-6, Accounting for Stripping Costs Incurred during Production
in the Mining Industry (EITF 04-6)
In second quarter 2005, we adopted EITF 04-6
prospectively and changed our accounting policy for stripping costs. Previously,
we capitalized stripping costs incurred in the production phase. We included
amortization of capitalized costs in inventory based on a "stripping ratio"
using the units of production method. Under EITF 04-6, stripping costs incurred
each period during the production phase are recorded as a component of the cost
of inventory produced each period. On adoption of EITF 04-6 in second quarter
2005, we recorded: a decrease in capitalized mining costs of $226 million; an
increase in inventory of $232 million; and a $6 million increase in earnings for
the cumulative effect of adopting EITF 04-6. For the three month period ended
September 30, 2005, the effect on earnings of adopting EITF 04-6 was an increase
in income, of $11 million ($0.01 per share), and for the nine month period ended
September 30, 2005, the effect was an increase in income, of $29 million ($0.04
per share).
C Accounting developments
FAS 123R, Accounting for Stock-Based Compensation (FAS 123R)
In December 2004, the Financial Accounting Standards Board ("FASB") issued FAS
123R. FAS 123R is applicable to transactions in which an entity exchanges its
equity instruments for goods and services. It focuses primarily on transactions
in which an entity obtains employee
BARRICK THIRD QUARTER 2005 24 FINANCIAL STATEMENTS
services in share-based payment transactions. FAS 123R requires that the fair
value of such equity instruments be recorded as an expense as services are
performed. Prior to FAS 123R, only certain pro forma disclosures of the effect
of accounting for these transactions at fair value were required. FAS 123R will
be effective for our first quarter 2006 financial statements, and permits
different transition methods including: retroactive adjustment of prior periods
as far back as 1995 to give effect to the fair value based method of accounting
for awards granted in those prior periods; or a modified prospective application
beginning in 2006. We are presently evaluating the effect of the different
methods of adopting FAS 123R. We expect to adopt FAS 123R using the modified
prospective method effective January 1, 2006.
FIN 47, Accounting for Conditional Asset Retirement Obligations (FIN 47)
FIN 47 was issued in March 2005 and relates to the accounting for a legal
obligation to perform an asset retirement activity, when the timing or method of
settlement are conditional on a future event, which may not be within the
control of the entity. FIN 47 requires recognition of a liability for the fair
value of a conditional asset retirement obligation if the fair value can be
reasonably estimated. FIN 47 is effective no later than the end of fiscal years
ending after December 31, 2005. We would recognize the cumulative effect of
adopting FIN 47 as a change in accounting policy with the cumulative effect
reported in our income statement. We are presently evaluating the impact of FIN
47.
FAS 151, Inventory Costs
FAS 151 was issued in November 2004 as an amendment to ARB No. 43. FAS 151
specifies the general principles applicable to the pricing and allocation of
certain costs to inventory. Under FAS 151, abnormal amounts of idle facility
expense, freight, handling costs and wasted materials are recognized as current
period charges rather than capitalized to inventory. FAS 151 also requires that
the allocation of fixed production overhead to the cost of inventory be based on
the normal capacity of production facilities. FAS 151 will be effective for
inventory costs incurred beginning in our 2006 fiscal year. We are presently
evaluating the impact of FAS 151 on our financial statements.
FAS 154, Accounting Changes and Error Corrections, a replacement of APB Opinion
No. 20 and FAS 3
FAS 154 relates to the accounting for and reporting of a change
in accounting principle and applies to all voluntary changes in accounting
principles. The reporting of corrections of an error by restating previously
issued financial statements is also addressed by this statement. FAS 154 applies
to pronouncements in the event they do not include specific transition
provisions. When a pronouncement includes specific transition provisions, those
provisions should be followed. FAS 154 requires retrospective application to
prior periods' financial statements of changes in accounting principle, unless
the period specific effects or cumulative effects of an accounting change are
impracticable to determine, in which case the new accounting principle is
required to be applied to the assets and liabilities as of the earliest period
practicable, with a corresponding adjustment made to opening retained earnings.
Prior to FAS 154, most accounting changes were recorded effective at the
beginning of the year of change, with the cumulative effect at the beginning of
the year of change recorded as a charge or credit to earnings in the period a
change was adopted. FAS 154 will be effective for us for accounting changes and
corrections of errors beginning in 2006. FAS 154 does not change the transition
provisions of any existing accounting pronouncements, including those that are
in the transition phase as of the effective date of FAS 154.
Exposure Draft, Accounting for Uncertain Tax Positions
On July 14, 2005, the FASB issued an exposure draft of a proposed
Interpretation, Accounting for Uncertain Tax Positions - an Interpretation of
FASB Statement No. 109. The proposed Interpretation would require companies to
recognize the best estimate of an uncertain tax position only if it is probable
of being sustained on audit by the taxation authorities. Subsequently, the tax
benefit would be derecognized (by either recording a tax liability or decreasing
a tax asset) when the probable threshold is no longer met and it is more likely
than not that the tax position will not be sustained.
The proposed interpretation would be effective for years ending after December
15, 2005 and treated as a change in accounting policy. It would require
companies to assess all uncertain tax positions and only those meeting the
probable threshold at the transition date would continue to be recognized. The
difference between the amount previously recognized and the amount recognized
after applying the proposed Interpretation would be recorded as a
cumulative-effect adjustment in the 2005 income statement (restatement is not
permitted). The comment period ended on September 12, 2005. We are presently
evaluating the impact of this exposure draft on our financial statements.
D Changes in estimates
Gold Mineral Reserves
Effective December 31, 2004, we updated our estimates of proven and probable
gold mineral reserves. Following the update of these estimates, we prospectively
revised calculations of amortization of property, plant and equipment. The
effect of the change in reserve estimates on amortization of property, plant and
BARRICK THIRD QUARTER 2005 26 FINANCIAL STATEMENTS
equipment for the three months ended September 30, 2005 was a decrease in this
expense by approximately $10 million and for the nine months ended September 30,
2005, a decrease in amortization of property, plant and equipment of $28
million, for mines with a greater than 10% change (excluding production for the
period) in the reserve estimates.
Asset Retirement Obligations (AROs)
In 2005, we revised cost estimates at various closed mines and recorded an
increase in the fair value of AROs, which was included as a charge within
environmental remediation costs in other expense. An amount of $5 million was
recorded in second quarter 2005 (second quarter 2004 - $nil), with a further
amount of $8 million in third quarter 2005 (third quarter 2004 - $3 million).
3 > SEGMENT INFORMATION
Income statement information
- ----------------------------------------------------------------------------------------------------------------------
Gold sales Segment expenses(1) Segment income (loss)
- ----------------------------------------------------------------------------------------------------------------------
For the three months ended September 30 2005 2004 2005 2004 2005 2004
- ----------------------------------------------------------------------------------------------------------------------
Goldstrike $ 225 $ 190 $ 120 $ 124 $ 70 $ 27
Round Mountain 40 40 22 20 13 15
Eskay Creek 17 24 2 4 8 7
Hemlo 27 21 17 15 6 3
Other producing mines 6 14 4 6 1 5
- -------------------------------------- ------------- ------------ ------------ ------------- ------------ ------------
North America 315 289 165 169 98 57
- -------------------------------------- ------------- ------------ ------------ ------------- ------------ ------------
Kalgoorlie 39 50 21 30 13 13
Plutonic 24 29 13 16 8 10
Bulyanhulu 45 44 35 29 (1) 3
Tulawaka 17 - 11 - 1 -
Other producing mines 31 28 20 16 7 9
Cowal - - 1 1 (1) (1)
- -------------------------------------- ------------- ------------ ------------ ------------- ------------ ------------
Australia/Africa 156 151 101 92 27 34
- -------------------------------------- ------------- ------------ ------------ ------------- ------------ ------------
Pierina 67 60 20 19 30 16
Lagunas Norte 89 - 25 2 55 (2)
Veladero - - 2 3 (2) (3)
Pascua-Lama - - 2 - (2) -
- -------------------------------------- ------------- ------------ ------------ ------------- ------------ ------------
South America 156 60 49 24 81 11
- -------------------------------------- ------------- ------------ ------------ ------------- ------------ ------------
Exploration group - - 20 27 (20) (27)
- -------------------------------------- ------------- ------------ ------------ ------------- ------------ ------------
Segment total $ 627 $ 500 $ 335 $ 312 $ 186 $ 75
- -------------------------------------- ------------- ------------ ------------ ------------- ------------ ------------
- ----------------------------------------------------------------------------------------------------------------------
Gold sales Segment expenses(1) Segment income (loss)
- ----------------------------------------------------------------------------------------------------------------------
For the nine months ended September 30 2005 2004 2005 2004 2005 2004
- ----------------------------------------------------------------------------------------------------------------------
Goldstrike $ 579 $ 525 $ 356 $ 355 $ 117 $ 59
Round Mountain 122 109 66 60 43 33
Eskay Creek 62 82 8 9 34 36
Hemlo 80 68 52 44 17 15
Other producing mines 21 36 11 19 5 8
- -------------------------------------- ------------- ------------ ------------ ------------- ------------ ------------
North America 864 820 493 487 216 151
- -------------------------------------- ------------- ------------ ------------ ------------- ------------ ------------
Kalgoorlie 128 131 66 79 47 36
Plutonic 82 91 48 51 27 32
Bulyanhulu 104 102 85 77 (8) (3)
Tulawaka 29 - 18 - 2 -
Other producing mines 79 77 52 44 16 23
Cowal - - 4 1 (4) (1)
- -------------------------------------- ------------- ------------ ------------ ------------- ------------ ------------
Australia/Africa 422 401 273 252 80 87
- -------------------------------------- ------------- ------------ ------------ ------------- ------------ ------------
Pierina 187 210 57 57 80 62
Lagunas Norte 101 - 29 11 62 (11)
Veladero - - 5 3 (5) (3)
Pascua-Lama - - 4 - (4) -
- -------------------------------------- ------------- ------------ ------------ ------------- ------------ ------------
South America 288 210 95 71 133 48
- -------------------------------------- ------------- ------------ ------------ ------------- ------------ ------------
Exploration group - - 76 71 (76) (71)
- -------------------------------------- ------------- ------------ ------------ ------------- ------------ ------------
Segment total $1,574 $1,431 $ 937 $ 881 $ 353 $ 215
- -------------------------------------- ------------- ------------ ------------ ------------- ------------ ------------
1 In second quarter 2005, we revised our internal definition of segment expenses to include accretion expense.
Segment information for all the periods presented reflects this change in the measurement of segment expenses.
BARRICK THIRD QUARTER 2005 27 NOTES TO FINANCIAL STATEMENTS
Reconciliation of segment income
- ---------------------------------------------------------- ----------------------------- -----------------------------
Three months ended Nine months ended
September 30 September 30
2005 2004 2005 2004
- ---------------------------------------------------------- -------------- -------------- -------------- --------------
Segment income $ 186 $ 75 $ 353 $ 215
Amortization of corporate assets (5) (4) (14) (17)
Business development costs (2) (5) (5) (15)
Administration (17) (16) (53) (50)
Equity in investees (1) - (2) -
Interest income 9 5 28 18
Interest expense - (6) (1) (18)
Other expense (21) (12) (26) (41)
- ---------------------------------------------------------- -------------- -------------- -------------- --------------
Income before income taxes and other items $ 149 $ 37 $ 280 $ 92
- ---------------------------------------------------------- -------------- -------------- -------------- --------------
Asset information
- ---------------------------------------------------------- ----------------------------- -----------------------------
Amortization $egment capital expenditures
- ---------------------------------------------------------- -------------- -------------- -------------- --------------
For the three months ended September 30 2005 2004 2005 2004
- ---------------------------------------------------------- -------------- -------------- -------------- --------------
Goldstrike $ 35 $ 39 $ 57 $ 10
Round Mountain 5 5 - 2
Eskay Creek 7 13 - 1
Hemlo 4 3 1 2
Ruby Hill - - 15 -
Other Operating segments 1 3 8 2
- ---------------------------------------------------------- -------------- -------------- -------------- --------------
North America 52 63 81 17
- ---------------------------------------------------------- -------------- -------------- -------------- --------------
Plutonic 3 3 6 3
Kalgoorlie 5 7 6 2
Cowal - - 76 13
Bulyanhulu 11 12 10 8
Tulawaka 5 - - 12
Other operating segments 4 3 5 1
- ---------------------------------------------------------- -------------- -------------- -------------- --------------
Australia/Africa 28 25 103 39
- ---------------------------------------------------------- -------------- -------------- -------------- --------------
Pierina 17 25 5 -
Lagunas Norte 9 - 28 83
Veladero - - 78 65
Pascua-Lama - - 27 8
- ---------------------------------------------------------- -------------- -------------- -------------- --------------
South America 26 25 138 156
- ---------------------------------------------------------- -------------- -------------- -------------- --------------
Segment total 106 113 322 212
Other items not allocated to segments 5 4 1 6
- ---------------------------------------------------------- -------------- -------------- -------------- --------------
Enterprise total $ 111 $ 117 $ 323 $ 218
- ---------------------------------------------------------- -------------- -------------- -------------- --------------
BARRICK THIRD QUARTER 2005 28 NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------------------------------------------
Amortization Segment capital expenditures
- --------------------------------------------------------------------------------------------------------------------
For the nine months ended September 30 2005 2004 2005 2004
- --------------------------------------------------------------------------------------------------------------------
Goldstrike $ 106 $111 $ 117 $ 39
Round Mountain 13 16 1 4
Eskay Creek 20 37 1 5
Hemlo 11 9 4 5
Ruby Hill - - 27
Other operating segments 5 9 10 10
- ---------------------------------------------------------------------------------------------------------------------
North America 155 182 160 63
- ---------------------------------------------------------------------------------------------------------------------
Plutonic 7 8 13 11
Kalgoorlie 15 16 9 7
Cowal - - 185 44
Bulyanhulu 27 28 26 26
Tulawaka 9 - 8 27
Other operating Segments 11 10 13 8
- ---------------------------------------------------------------------------------------------------------------------
Australia/Africa 69 62 254 123
- ---------------------------------------------------------------------------------------------------------------------
Pierina 50 91 10 2
Lagunas Norte 10 - 128 115
Veladero - - 213 207
Pascua-Lama - - 66 18
- ---------------------------------------------------------------------------------------------------------------------
South America 60 91 417 342
- ---------------------------------------------------------------------------------------------------------------------
Segment total 284 335 831 528
Other items not allocated to segments 14 17 4 8
- ---------------------------------------------------------------------------------------------------------------------
Enterprise total $ 298 $ 352 $ 835 $ 536
- ---------------------------------------------------------------------------------------------------------------------
4 > REVENUE AND GOLD SALES CONTRACTS
- ---------------------------------------------------------------------------------------------------------------------
Three months ended September 30 Nine months ended September 30
2005 2004 2005 2004
- ---------------------------------------------------------------------------------------------------------------------
Gold bullion sales
Spot market sales $ 493 $ 398 $ 1,354 $ 767
Gold sales contracts 97 68 135 577
- ---------------------------------------------------------------------------------------------------------------------
590 466 1,489 1,344
Concentrate sales 37 34 85 87
$ 627 $ 500 $ 1,574 $ 1,431
- ---------------------------------------------------------------------------------------------------------------------
At September 30, 2005, we had fixed-price Corporate gold sales contracts with
various counterparties for 6.4 million ounces of future gold production,
fixed-price gold sales contracts specifically allocated to Pascua-Lama for 6.5
million ounces of future gold production and floating price forward gold
sales contracts for 0.7 million ounces. In 2004, we allocated 6.5 million ounces
of fixed-price gold sales contracts specifically to Pascua-Lama. The allocation
of these contracts will help reduce gold price risk at Pascua-Lama and is
expected to help secure financing for its construction. In addition to the gold
sales contracts allocated to Pascua-Lama, we had 6.4 million ounces of Corporate
gold sales contracts that we intend to settle through delivery of future gold
production from our operating mines and development projects, excluding
Pascua-Lama. The mark-to-market on the fixed-price gold sales contracts (at
September 30, 2005) was negative $1,190 million for the Pascua-Lama Gold Sales
Contracts and negative $1,100 million for the Corporate Gold Sales Contracts.
Floating spot price sales contracts were previously fixed price forward
sales contracts for which, in accordance with the terms of our master trading
agreements, we have elected to receive floating spot gold and silver prices,
adjusted by the difference between the spot price and the contract price at the
time of such election. Floating prices were elected for these contracts so that
we could economically regain spot gold price leverage under the terms of
delivery into these contracts. Floating price mechanisms were elected for these
contracts at a time when the then current market price was higher than the
fixed-price in the contract, resulting in a mark-to-market on these contracts
(at September 30, 2005) of negative $60 million, which equates to an average
reduction to the future spot sales price of approximately $86 per ounce, when we
deliver gold at spot prices against these contracts. At September 30, 2005, we
held gold lease rate swaps, under which we receive a fixed gold lease rate, and
pay a floating gold lease rate, on a notional 1.0 million ounces of gold spread
from 2005 to 2013. The swaps are associated with fixed-
BARRICK THIRD QUARTER 2005 29 NOTES TO FINANCIAL STATEMENTS
price gold sales contracts with expected delivery dates beyond 2006. Lease rate
swaps are classified as non-hedge derivatives (note 14b).
5 > COST OF SALES
Three months ended Nine months ended
September 30 September 30
- --------------------------------------------------------------------------------
2005 2004 2005 2004
- --------------------------------------------------------------------------------
Cost of goods sold(1) $ 321 $ 296 $ 894 $ 852
By-product revenues(2) (34) (33) (100) (103)
Royalty expense 17 13 43 37
Mining taxes 6 3 10 9
- --------------------------------------------------------------------------------
$ 310 $ 279 $ 847 $ 795
- --------------------------------------------------------------------------------
1 Cost of goods sold includes accretion expense at producing mines of $2 million
(2004 - $3 million) in the three months ended September 30, 2005 and $8 million
in the nine months ended September 30, 2005 (2004 - $8 million). The cost of
inventory sold in the period reflects all components capitalized to inventory,
except that, for presentation purposes, the component of inventory cost relating
to amortization of property, plant and equipment is classified in the income
statement under "amortization". Some companies present this amount under "cost
of sales". The amount presented in amortization rather than cost of sales was
$106 million in the three months ended September 30, 2005 (2004 - $113 million)
and $284 million in the nine months ended September 30, 2005 (2004 - $335
million).
2 We use silver sales contracts to sell a portion of silver produced as a
by-product. Silver sales contracts have similar delivery terms and pricing
mechanisms as gold sales contracts. At September 30, 2005, we had fixed-price
commitments to deliver 12.7 million ounces of silver at an average price of
$6.04 per ounce, and floating spot price sales contracts for 10.61 million
ounces, over periods primarily of up to 10 years. The mark-to-market on the
silver sales contracts (at September 30, 2005) was negative $34 million.
BARRICK THIRD QUARTER 2005 29 NOTES TO FINANCIAL STATEMENTS
6 > OTHER EXPENSE
- --------------------------------------------------------------------------------------------------------------------
Three months ended September 30 Nine months ended September 30
2005 2004 2005 2004
- --------------------------------------------------------------------------------------------------------------------
Non-hedge derivative (gains) losses (note 14b) $ 2 $ (8) $ (7) $ 1
Gains on sale of assets (4) (2) (5) (5)
Gain on Kabanga transaction - - (15) -
Environmental remediation costs(1) 17 12 31 24
Gains on sale of investments - - (9) (1)
Other than temporary impairment of investments 3 - 3 -
World Gold Council fees 3 2 7 7
Currency translation gains (11) (3) (6) (4)
Pension expense 1 1 3 3
Other items 10 10 24 16
- ---------------------------------------------------------------------------------------------------------------------
$ 21 $ 12 $ 26 $ 41
- ---------------------------------------------------------------------------------------------------------------------
1 Includes costs at development projects and closed mines and changes in the
expected costs of AROs at closed mines (see note 2d).
Kabanga transaction
In April 2005 we finalized a joint-venture agreement with Falconbridge Limited
("Falconbridge") for the Kabanga nickel deposit and related concessions located
in Tanzania. Under the terms of the agreement, Falconbridge has acquired a 509
indirect joint venture interest for $15 million cash and will be the operator of
the joint venture. On closing of the transaction with Falconbridge we recorded a
gain of $15 million.
Pension expense
- ---------------------------------------------------------------------------------------------------------------------
Three months ended September 30 Nine months ended September 30
2005 2004 2005 2004
- ---------------------------------------------------------------------------------------------------------------------
Expected return on plan assets $ (3) $ (3) $ (9) $ (8)
Interest cost on benefit obligation 3 4 9 10
Actuarial losses 1 - 3 1
- ---------------------------------------------------------------------------------------------------------------------
$ 1 $ 1 $ 3 $ 3
- ---------------------------------------------------------------------------------------------------------------------
BARRICK THIRD QUARTER 2005 30 NOTES TO FINANCIAL STATEMENTS
7 > INCOME TAX EXPENSE
- -----------------------------------------------------------------------------------------------------
Three months ended Nine months ended
September 30 September 30
2005 2004 2005 2004
- -----------------------------------------------------------------------------------------------------
Current $ 28 $ 3 $ 47 $ 33
Deferred 8 10 13 5
- -----------------------------------------------------------------------------------------------------
$ 36 $13 $ 60 $38
Recognition of deferred tax assets - (8) - (38)
- -----------------------------------------------------------------------------------------------------
$ 36 $ 5 $ 60 $-
- -----------------------------------------------------------------------------------------------------
Actual effective income tax rate, excluding
recognition of deferred tax assets 24% 35% 21% 41%
- -----------------------------------------------------------------------------------------------------
The primary reasons why our actual effective income tax rate differs from the
38% Canadian statutory rate are due to certain allowances and special deductions
unique to extractive industries, and also because we operate in multiple tax
jurisdictions that have different tax rates than the Canadian federal and
provincial rates.
8 > EARNINGS PER SHARE
- --------------------------------------------------------------------------------------------------------------------
Three months ended Nine months ended September
September 30 30
($ millions, except shares in millions and per share 2005 2004 2005 2004
amounts in dollars)
- --------------------------------------------------------------------------------------------------------------------
Income available to common stockholders
Basic $ 113 $ 32 $ 226 $ 92
Effect of dilutive stock options - - - -
- --------------------------------------------------------------------------------------------------------------------
Diluted $ 113 $ 32 $ 226 $ 92
- --------------------------------------------------------------------------------------------------------------------
Weighted average shares outstanding
Basic 536 532 535 533
Effect of dilutive stock options 3 1 2 2
- --------------------------------------------------------------------------------------------------------------------
Diluted 539 533 537 535
- --------------------------------------------------------------------------------------------------------------------
Earnings per share
Basic and diluted $ 0.21 $ 0.06 $ 0.42 $ 0.17
- --------------------------------------------------------------------------------------------------------------------
9 > SUPPLEMENTAL CASH FLOW INFORMATION
- ----------------------------------------------------------------------------------------------------------------------
Three months ended September 30 Nine months ended September 30
2005 2004 2005 2004
- -----------------------------------------------------------------------------------------------------------------------
Income statement items:
Currency translation gains $ (6) $(12) $ (4) $ (7)
Accretion expense 6 6 16 14
Non-hedge derivative (gains) losses (note 14) 2 (8) (7) 1
Current income tax expense (note 7) 28 3 47 33
Revisions to expected cost of AROs at closed mines 8 - 13 -
(note 2d)
Cumulative effect of changes in accounting principles - - (6) -
(note 2b)
Deferred income taxes (note 7) 8 2 13 (33)
Gains on sale of assets (4) (2) (5) (5)
Changes in:
Accounts receivable 11 (1) 7 (6)
Inventory (20) - (94) (26)
Accounts payable 36 11 72 31
Capitalized mining costs - 2 - 5
Taxes recoverable (22) (23) (15) (40)
Other assets and liabilities (13) 21 (11) 40
Cash payments:
Asset retirement obligations (6) (7) (20) (24)
Current income taxes (20) 11 (49) (40)
- --------------------------------------------------------------------------------------------------------------------
Other net operating activities $ 8 $ 3 $ (43) $ (57)
- --------------------------------------------------------------------------------------------------------------------
BARRICK THIRD QUARTER 2005 31 NOTES TO FINANCIAL STATEMENTS
10 > INVENTORIES
- --------------------------------------------------------------------------------
At Sept.30, At Dec.31,
2005 2004
- --------------------------------------------------------------------------------
Inventories
Gold in process and ore in stockpiles $ 506 $ 198
Mine operating supplies 116 82
- --------------------------------------------------------------------------------
622 280
Non-current ore in stockpiles(1) (261) (65)
- --------------------------------------------------------------------------------
$ 361 $ 215
- --------------------------------------------------------------------------------
1 One that we do not expect to process in the next 12 months is classified in
other assets. On adoption of EITF 04-6 in second quarter 2005, amounts totaling
$232 million were reclassified from capitalized mining costs to ore in
stockpiles (see note 2b).
11 > INVESTMENTS
A Available-for-sale securities
- -------------------------------------------------------------------------------
At Sept.30, 2005 At Dec.31, 2004
- -------------------------------------------------------------------------------
Gains Gains
Fair (Losses) Fair (Losses)
value in OCI value in OCI
- -------------------------------------------------------------------------------
Securities in an unrealized
gain position
Benefit plans:(1)
Fixed-income securities $ 4 $ - $ 11 $ -
Equity securities 16 1 19 10
Strategic investments:
Equity securities 38 24 24 13
- --------------------------------------------------------------------------------
$ 58 $ 25 $ 54 $ 23
- --------------------------------------------------------------------------------
Securities in an unrealized loss
position
Strategic investments:
Equity securities(2) $ 13 $ (12) $ 5 $ (2)
- --------------------------------------------------------------------------------
$ 71 $ 13 $ 59 $ 21
- -------------------------------------------------------------------------------
1 Under various benefit plans for certain former Homestake executives, a
portfolio of marketable fixed-income and equity securities are held in a rabbi
trust that is used to fund obligations under the plans.
2 Includes an investment in the ordinary shares of Celtic Resources (fair value
of $13 million at September 30, 2005), which has been in a continuous loss
position for less than three months.
Strategic equity investments in an unrealized loss position comprise a company
that operates in the gold mining industry, and whose market share price is
impacted by the price of gold. In evaluating whether the impairment at September
30, 2005 was "other than temporary", we took into consideration the decline in
value occurred in the third quarter 2005, our positive outlook for the price of
gold, and the prospective nature and value of its interests in mineral
properties. We concluded that the impairment at September 30, 2005 was
temporary.
Investment in Celtic Resources Holdings PLC ("Celtic")
On January 5, 2005 we completed a subscription for 3,688,191 units of Celtic for
a price of $7.562 per unit for a total cost of $30 million. Each unit consisted
of one ordinary share of Celtic and one-half of one share purchase warrant. We
have allocated $25 million to the ordinary shares and $5 million to the share
purchase warrants based on their relative fair values. On completion, we held a
9% direct and indirect interest in Celtic's outstanding common shares. On June
1, 2005, the number of warrants held increased under the terms of the
subscription agreement by 922,048 warrants to 2,766,143 warrants based on their
relative fair values at acquisition. Each whole warrant entitles us to acquire
one ordinary share of Celtic for $7.562, expiring on December 31, 2007. We
determined that the share purchase warrants are derivative instruments as
defined by FAS 133. The warrants are classified as non-hedge derivatives in the
balance sheet with changes in fair value subsequent to acquisition recorded in
earnings.
Celtic has granted us the right to acquire 50% of any interest in any mineral
property in Kazakhstan that Celtic acquires for a period of 12 months after any
such acquisition for an amount equal to 50% of the cost to Celtic of its
interest in the mineral property.
B Equity Method Investments
- -------------------------------------------------------------------------------
At Sept.30, 2005 At Dec.31, 2004
- -------------------------------------------------------------------------------
Fair Carrying Fair Carrying
value(1) amount value(1) amount
- -------------------------------------------------------------------------------
Highland Gold Mining PLC $ 124 $ 136 $ 75 $ 88
Diamondex Resources
Limited 8 8 - -
- -------------------------------------------------------------------------------
$ 132 $ 144 $ 75 $ 88
- -------------------------------------------------------------------------------
1 Based on the closing market stock price.
Highland Gold Mining PLC ("Highland")
On May 6, 2005, we purchased 11 million common shares of Highland for cash
consideration of $50 million, increasing our equity ownership to 20%. Following
this increase in ownership we re-evaluated the accounting method used for this
investment and concluded that the equity method is the most appropriate
accounting treatment for this investment. Under the equity method we record our
share of income or loss of Highland each period based on our actual ownership
interest in each period from fourth quarter 2003, when we first purchased an
equity interest in Highland. On transition to equity accounting, US GAAP
requires financial statements for prior periods to be revised to reflect the new
accounting treatment.
The difference between the cost of our investment in Highland and the underlying
net assets of Highland was $76 million at September 30, 2005. We are in the
process of determining whether mineralized material at mining properties owned
by Highland meets the definition of a reserve for US reporting purposes and also
finalizing valuations for the assets and liabilities of Highland to allocate the
cost of the purchase, with any
BARRICK THIRD QUARTER 2005 32 NOTES TO FINANCIAL STATEMENTS
residual unallocated amount representing goodwill. Once this process is
complete, we will evaluate the need for any revisions to the equity pick up to
reflect the results of Highland on a US GAAP basis.
Diamondex Resources Limited ("Diamondex")
We completed a subscription for 7,550,000 units of Diamondex for $5 million on
May 18, 2005 and a further 3,561,111 units on July 4, 2005 for $3 million. Each
unit consists of one ordinary share of Diamondex and one share purchase warrant.
On completion, we held a 14% interest in the outstanding common shares of
Diamondex (25% assuming exercise of the share purchase warrants). $7 million was
allocated to the ordinary shares and $1 million to the share purchase warrants.
12 > PROPERTY, PLANT AND EQUIPMENT The following assets were not being
amortized.
- --------------------------------------------------------------------------------
Carrying Carrying Targeted
amount at amount at timing of
Sept.30, December 31, production
2005 2004 start-up
- --------------------------------------------------------------------------------
Development projects
Veladero $ 578 $ 349 Q4, 2005
Cowal 324 128 2006
Ruby Hill project 27 - 2007
Pascua-Lama 308 243 2009
Buzwagi exploration project 102 102 -
Nevada Power Plant 81 18 Q4, 2005
- ------------------------------------------------------------------------------
Total $ 1,420 $ 840
- ------------------------------------------------------------------------------
In 2005, amortization of property, plant and equipment at the Tulawaka and
Lagunas Norte mines began after the mines moved from construction into the
production phase.
Capital commitments
In addition to entering into various operational commitments in the normal
course of business, we had commitments of approximately $80 million at September
30, 2005 for construction activities at our development projects and for
construction of a power plant in Nevada to supply the Goldstrike mine.
13 > OTHER ASSETS
- --------------------------------------------------------------------------------
At Sept.30, At Dec.31,
2005 2004
- --------------------------------------------------------------------------------
Ore in stockpiles $ 261 $ 65
Derivative assets 249 257
Other 243 244
- --------------------------------------------------------------------------------
$ 753 $ 566
- --------------------------------------------------------------------------------
14 > FINANCIAL INSTRUMENTS
A Long-term debt
Interest expense
- --------------------------------------------------------------------------------
Three months ended Nine months ended
September 30 September 30
- --------------------------------------------------------------------------------
2005 2004 2005 2004
- --------------------------------------------------------------------------------
Interest incurred $33 $13 $ 92 $ 36
Less: capitalized (33) (7) (91) (18)
- --------------------------------------------------------------------------------
Interest expense $ - $ 6 $ 1 $ 18
- --------------------------------------------------------------------------------
Proceeds
- --------------------------------------------------------------------------------
Three months ended Nine months ended
September 30 September 30
- --------------------------------------------------------------------------------
2005 2004 2005 2004
- --------------------------------------------------------------------------------
Veladero financing(1) $ - $ 167 $ 35 $ 167
Peru lease facilities
First facility(2) 23 - 73 -
Second facility(3) 9 - 12 -
Peruvian bonds4 - - 50 -
- --------------------------------------------------------------------------------
Total $ 32 $ 167 $ 170 $ 167
- --------------------------------------------------------------------------------
1 A total amount of $233 million was outstanding under the facility at September
30, 2005.
2 By September 30, 2005, a total of $103 million had been drawn down under a
$110 million build to suit lease facility held by one of our wholly owned
subsidiaries, Minera Barrick Misquichilca (MBM). We repaid $23 million in
September 2005, with the remaining $80 million repayable in 20 equal quarterly
installments commencing in fourth quarter 2005. The lease facility has an
interest rate of Libor plus 2.5% for the first 12 installments and Libor plus
2.6% for the last 8 installments.
3 In second quarter 2005, MBM finalized a second build to suit lease facility
for $20 million, which is being used to finance the extension of the leach pad
at the Lagunas Norte project. Since the end of the third quarter, we have
secured an expansion of the facility to a total facility of $30 million.
4 In second quarter 2005, MBM issued $50 million of debt securities in the
Peruvian capital markets. The net proceeds have been used to partially fund
the construction of the Lagunas Norte project. The securities bear interest at
Libor plus 1.72%, and mature in 2013.
Bulyanhulu project financing
In second quarter 2005, the terms of our Bulyanhulu financing were amended, with
the lender having recourse to Barrick going forward in return for a reduction in
the credit spread over Libor on the financing, from Libor plus 1.5% to Libor
plus 0.35%. The covenants governing the financing have also been simplified.
Kahama Mining Corporation Ltd., a subsidiary that owns Bulyanhulu, had a
variable-rate recourse amortizing loan for $136 million at September 30, 2005.
Corporate loan facility
In third quarter 2005, we extended our $1 billion Corporate loan facility by two
years from April 2008 to April 2010.
BARRICK THIRD QUARTER 2005 33 NOTES TO FINANCIAL STATEMENTS
B Derivative instruments ("derivatives")
Summary of derivatives at September 30, 2005 (1)
- --------------------------------------------------------------------------------------------------------------------------
Notional Amount by Accounting Classification by Fair
Term to Maturity Notional Amount Value
------------------------------ ---------------------------------- ---------
Fair
Within 2 to 5 Cash flow value Non-
1 year years Total hedge hedge Hedge
- -------------------------------------------------------------------------- ---------------------------------- --------
US dollar interest rate contracts
Receive-fixed swaps (millions) $ - $ 1,100 $ 1,100 $ 550 $500 $ 50 $ (20)
Pay-fixed swaps (millions) - 261 261 136 - 125 (15)
- -------------------------------------------------------------------------- ----------------------------------------------
Net notional position $ - $ 839 $ 839 $ 414 $ 500 $ (75) $ (35)
- -------------------------------------------------------------------------- ----------------------------------------------
Currency contract
C$:US$ contracts (C$ millions) C$ 263 C$ 550 C$ 813 C$ 813 - -(3) $ 89
A$:US$ contracts (A$ millions) A$ 607 A$ 1,499 A$ 2,106 A$ 2,101 - A$ 5 $ 131
(euro):US$ contracts ((euro) millions) (euro) 10 - (euro) 10 (euro) 10 - - $ (1)
ARS:US$ contracts (ARS millions) 36 9 45 45 - - -
- -------------------------------------------------------------------------- ----------------------------------------------
Commodity contracts
Fuel contracts (thousands of
barrels)(2) 693 1,557 2,250 2,157 - 93 $ 50
Propane contracts (millions of
gallons) 16 5 21 21 - - $ 8
- --------------------------------------------------------------------------------------------------------------------------
1 Excludes gold sales contracts (see note 4), gold lease rate swaps (see note 4)
and Celtic share purchase warrants (see note 4).
2 Includes WTI, Mean of Platts Singapore (MOPS) and US Waterborne contracts.
3 $62 million of non-hedge currency contracts were economically closed out by
entering into offsetting positions albeit with differing counterparties.
US dollar interest rate contracts
Cash flow hedges - cash balances
Receive-fixed swaps have been designated against the first $550 million of our
cash balances as a hedge of the variability of forecasted interest receipts on
the balances caused by changes in Libor.
Cash flow hedges - Bulyanhulu financing
Pay-fixed swaps totaling $136 million have been designated against the
Bulyanhulu financing as a hedge of the variability in forecasted interest
payments caused by changes in Libor.
Fair value hedges
Receive-fixed swaps totaling $500 million have been designated against the
7 1/2% debentures as a hedge of the variability in the fair value of the
debentures caused by changes in Libor.
Non-hedge contracts
We use gold lease rate swaps to achieve a more economically optimal term
structure for gold lease rates implicit in fixed-price gold sales contracts (see
note 4). The valuation of gold lease rate swaps is impacted by market US dollar
interest rates. Our non-hedge pay-fixed swap position largely mitigates the
impact of changes in US dollar interest rates on the valuation of gold lease
rate swaps.
Currency contracts
Cash flow hedges
Currency contracts totaling C$813 million, A$2,101 million, (euro)10 million and
ARS 45 million have been designated against forecasted local currency
denominated expenditures as a hedge of the variability of the US dollar amount
of those expenditures caused by changes in currency exchange rates.
Commodity contracts
Cash flow hedges
Commodity contracts totaling 2,157 thousand barrels of crude oil and 21 million
gallons of propane have been designated against forecasted purchases of the
commodities for expected consumption at our mining operations.
Non-hedge contracts
Non-hedge fuel contracts are used to mitigate the risk of oil price changes on
consumption at the Lagunas Norte mine. On completion of regression analysis, we
concluded that the contracts do not meet the "highly effective" criterion in FAS
133 due to currency and basis differences between contract prices and the prices
charged to the mines by oil suppliers. Despite not qualifying as an accounting
hedge, the contracts protect the Company to a significant extent from the
effects of oil price changes.
BARRICK THIRD QUARTER 2005 34 NOTES TO FINANCIAL STATEMENTS
Non-hedge derivative gains (losses)(1)
- ----------------------------------------------------------------------------------------------------------------
Three months ended September 30 Nine months ended September 30
2005 2004 2005 2004
- ----------------------------------------------------------------------------------------------------------------
Non-hedge derivatives
Commodity contracts $ 1 $ 2 $ 7 $ (7)
Currency contracts - 3 1 (7)
Interest rate contracts (1) 3 - 11
Share purchase warrants (4) - (4) -
- ----------------------------------------------------------------------------------------------------------------
(4) 8 4 (3)
Hedge ineffectiveness
Ongoing hedge inefficiency 2 - 2 -
Due to changes in timing of hedged items - - 1 2
- ----------------------------------------------------------------------------------------------------------------
$ (2) $ 8 $ 7 $ (1)
- ----------------------------------------------------------------------------------------------------------------
1 Non-hedge derivative gains (losses) are classified as a component of other
expense.
Cash Flow Hedge Gains (Losses) in OCI
Commodity
price
hedges Currency hedges Interest rate hedges
---------- ------------------------------------ ----------------------
Operating Administration Capital Cash Long-term
Fuel costs costs expenditures balances debt Total
- -------------------------------------------------------------------------------------------------------------------
At Dec.31, 2004 $ 2 $ 240 $ 33 $ 48 $ 3 $ (25) $ 301
Effective portion of change in fair 53 4 13 (1) 1 5 75
value of hedging instruments
Transfers to earnings:
On recording (7) (76) (11) (3) (4) 1 (100)
hedged items in earnings
Hedge ineffectiveness due to changes - - - (1) - - (1)
in timing of hedged items
- -------------------------------------------------------------------------------------------------------------------
At September 30, 2005 $48 $ 168 $ 35 $ 43 $ - $ (19) $ 275
- -------------------------------------------------------------------------------------------------------------------
Hedge gains/losses classified within Cost of Cost of Administration Amortization Interest Interest
sales sales income cost
- -------------------------------------------------------------------------------------------------------------------
Portion of hedge gain (loss)
expected to affect earnings in
the next twelve months (1) $ 21 $ 89 $ 16 $ 2 $ (1) $ (1) $ 126
- -------------------------------------------------------------------------------------------------------------------
1 Based on the fair value of hedge contracts at September 30, 2005.
15 > OTHER LONG-TERM OBLIGATIONS
A Asset Retirement Obligations (AROs)
- --------------------------------------------------------------------------------
At January 1, 2005 $ 367
AROs incurred in the period 27
Impact of revisions to expected cash flows
Adjustments to carrying amount of assets 20
Charged to earnings (note 2d) 13
Settlements
Cash payments (20)
Settlement gains (2)
Accretion 16
- --------------------------------------------------------------------------------
At September 30, 2005 421
Current part (33)
- --------------------------------------------------------------------------------
$ 388
- --------------------------------------------------------------------------------
16 > CAPITAL STOCK
A Common Shares
In the three month period ended June 30, 2005, we declared and paid dividends in
US dollars totaling $0.11 per share (three months ended June 30, 2004: $0.11 per
share).
During the three month period ended March 31, 2004, we repurchased 4.47 million
common shares for $95 million, at an average cost of $21.20 per share. This
resulted in a reduction of common share capital by $35 million and a $60 million
charge (being the difference between the repurchase cost and the average
historic book value of shares repurchased) to retained earnings.
B Exchangeable Shares
In connection with a 1998 acquisition, Barrick Gold Inc. ("BGI") issued 11.1
million BGI exchangeable shares, which are each exchangeable for 0.53 of a
Barrick common share at any time at the option of the holder, and have
essentially the same voting, dividend (payable in Canadian dollars), and other
rights as 0.53 of a Barrick common share. BGI is a subsidiary that holds our
interest in the Hemlo and Eskay Creek Mines.
At September 30, 2005, 1.4 million BGI exchangeable shares were outstanding,
which are equivalent to 0.7 million Barrick common shares (2004 - 0.7 million
BARRICK THIRD QUARTER 2005 35 NOTES TO FINANCIAL STATEMENTS
common shares). While there are exchangeable shares outstanding, we are required
to present summary consolidated financial information relating to BGI.
Summarized financial information for BGI
- ---------------------------------------------------------------------------------------------------------
Three months ended September 30 Nine months ended September 30
2005 2004 2005 2004
- ---------------------------------------------------------------------------------------------------------
Total revenues and other income $ 46 $ 46 $ 144 $ 158
Less: costs and expenses (58) (65) (134) (149)
- ---------------------------------------------------------------------------------------------------------
Income (loss) before taxes $ (12) $ (19) $ 10 $ 9
- ---------------------------------------------------------------------------------------------------------
Net income (loss) $ (3) $ (22) $ 17 $ 1
- ---------------------------------------------------------------------------------------------------------
At September 30, 2005 At Dec.31, 2004
- -------------------------------------------------------------------------------
Assets
Current assets $ 95 $ 67
Non-current assets 88 119
- -----------------------------------------------------------------------------
$ 183 $ 186
- -----------------------------------------------------------------------------
Liabilities and shareholders' equity
Other current liabilities 16 24
Intercompany notes payable 393 395
Other long-term liabilities 34 36
Deferred income taxes 19 20
Deficit (279) (289)
- ------------------------------------------------------------------------------
$ 183 $ 186
- -----------------------------------------------------------------------------
17 > STOCK-BASED COMPENSATION
We record compensation cost for stock options based on the excess of the market
price of the stock at the grant date of an award over the exercise price.
Historically, the exercise price for stock options has equaled the market price
of stock at the grant date, resulting in no compensation cost. We provide
information in the following table to illustrate the pro forma effect of
following an accounting policy of expensing the fair value of stock options.
Stock option expense
Three months ended Nine months ended
($ millions, except per share September 30 September 30
amounts in dollars) 2005 2004 2005 2004
- --------------------------------------------------------------------------------
Pro forma effects
Net income, as reported $ 113 $ 32 $ 226 $ 92
Stock-option expense (9) (8) (24) (22)
- --------------------------------------------------------------------------------
Pro forma net income $ 104 $ 24 $ 202 $ 70
- --------------------------------------------------------------------------------
Net income per share:
As reported(1) $ 0.21 $ 0.06 $ 0.42 $ 0.17
Pro forma1 $ 0.19 $ 0.04 $ 0.38 $ 0.13
- --------------------------------------------------------------------------------
1 Basic and diluted.
BARRICK THIRD QUARTER 2005 36 NOTES TO FINANCIAL STATEMENTS
18 > OTHER COMPREHENSIVE INCOME (LOSS) ("OCI")
- ------------------------------------------------------------------------------------------------------------
Three months ended Nine months ended
September 30 September 30
2005 2004 2005 2004
- ------------------------------------------------------------------------------------------------------------
Accumulated OCI at beginning of period
Cash flow hedge gains, net of tax of $83, $49, $95, $99 $ 180 $ 98 $ 206 $ 189
Investments, net of tax of $nil, $nil, $nil, $nil 10 14 21 25
Currency translation adjustments, net of tax of $nil, (146) (147) (146) (147)
$nil, $nil, $nil
Additional pension liability, net of tax of $nil, $nil, (12) (7) (12) (7)
$nil, $nil
- ------------------------------------------------------------------------------------------------------------
$ 32 $ (42) $ 69 $ 60
- ------------------------------------------------------------------------------------------------------------
Other comprehensive income (loss) for the period:
Changes in fair value of cash flow hedges 49 76 75 (8)
Changes in fair value of investments - 1 (2) (8)
Less: reclassification adjustments for gains/losses
recorded in earnings:
Transfers of cash flow hedge gains to earnings:
On recording hedged items in earnings (37) (30) (100) (85)
Hedge ineffectiveness due to changes in timing of hedged - - (1) (2)
items
Investments:
Other than temporary impairment charges 3 - 3 1
Gains realized on sale - - (9) (3)
- ------------------------------------------------------------------------------------------------------------
Other comprehensive income (loss), before tax 15 47 (34) (105)
Income tax recovery (expense) related to OCI (6) (17) 6 33
- ------------------------------------------------------------------------------------------------------------
Other comprehensive income (loss), net of tax $ 9 $ 30 $ (28) $ (72)
- ------------------------------------------------------------------------------------------------------------
Accumulated OCI at September 30
Cash flow hedge gains, net of tax of $89, $66, $89, $66 186 127 186 127
Investments, net of tax of $nil, $nil, $nil, $nil 13 15 13 15
Currency translation adjustments, net of tax of $nil, (146) (147) (146) (147)
$nil, $nil, $nil
Additional pension liability, net of tax of $nil, $nil, (12) (7) (12) (7)
$nil, $nil
- ------------------------------------------------------------------------------------------------------------
$ 41 $ (12) $ 41 $ (12)
- ------------------------------------------------------------------------------------------------------------
19 > CONTINGENCIES
Blanchard complaint
On January 7, 2003, we were served with a Complaint for Injunctive Relief by
Blanchard and Company, Inc. ("Blanchard"), and Herbert Davies ("Davies"). The
complaint, which is pending in the U.S. District Court for the Eastern District
of Louisiana, also names J.P. Morgan Chase & Company ("J.P. Morgan") as a
defendant, along with an unspecified number of additional defendants to be named
later. The complaint, which has been amended several times, alleges that we and
bullion banks with whom we entered into spot deferred gold sales contracts have
manipulated the price of gold, in violation of U.S. anti-trust laws and the
Louisiana Unfair Trade Practices and Consumer Protection Law. Blanchard and
Davies both allege that they have been injured as a seller of gold due to
reduced interest in gold as an investment. The complaint seeks damages and an
injunction terminating certain of our trading agreements with J.P. Morgan and
other bullion banks. In September 2003, the Court issued an Order granting in
part and denying in part Barrick's motions to dismiss this action. In February
2005, the Court granted Blanchard's motion to amend their complaint to add an
allegation of a violation of the Commodity Exchange Act and amend its allegation
of Barrick's violation of anti-trust laws. Discovery has commenced in the case
and a trial date has been tentatively set for January 2006. We have and will
continue to vigorously defend the action.
McKenzie complaint
On September 21, 2004, a putative class action complaint was filed in the U.S.
District Court for the Eastern District of Louisiana against Barrick and J.P.
Morgan. The plaintiffs, Dr. Gregg McKenzie and others are alleged purchasers of
gold and gold derivatives. The complaint alleges violations of the U.S.
anti-trust laws and also of the Commodity Exchange Act, based upon the same
conduct as alleged in the Blanchard complaint. The complaint seeks damages and
an injunction terminating certain of our trading agreements with J.P. Morgan. On
December 17, 2004, a second and substantially identical complaint was filed in
the same court against the same defendants. We have and will continue to
vigorously defend both actions.
Wagner complaint
On June 12, 2003, a complaint was filed against Barrick and several of its
current or former officers in the U.S. District Court for the Southern District
of New York. The complaint is on behalf of Barrick shareholders who
BARRICK THIRD QUARTER 2005 37 NOTES TO FINANCIAL STATEMENTS
purchased Barrick shares between February 14, 2002 and September 26, 2002. It
alleges that Barrick and the individual defendants violated U.S. securities laws
by making false and misleading statements concerning Barrick's projected
operating results and earnings in 2002. The complaint seeks an unspecified
amount of damages. Other parties on behalf of the same proposed class of Barrick
shareholders filed several other complaints, making the same basic allegations
against the same defendants. In September 2003, the cases were consolidated into
a single action in the Southern District of New York. The Plaintiffs filed a
Consolidated and/or Amended Complaint on November 5, 2003. On January 14, 2004,
Barrick filed a motion to dismiss the complaint. On September 29, 2004, the
Court issued an order granting in part and denying in part Barrick's motion to
dismiss the action. The Plaintiffs filed a Second Amended Complaint on October
20, 2004. The Plaintiffs filed a Third Amended Complaint on January 6, 2005. On
May 23, 2005, Barrick filed a motion to dismiss the Third Amended Complaint. On
July 5, 2005, the Plaintiffs filed their opposition to Barrick's motion to
dismiss, and Barrick filed its response to the Plaintiffs' Opposition on August
2, 2005. The Court has not yet ruled on the motion to dismiss the Third Amended
Complaint. We have and will continue to vigorously defend the action.
Wilcox complaint
On September 8, 2004, two of our U.S. subsidiaries, Homestake Mining Company of
California ("Homestake California") and Homestake Mining Company ("Homestake")
were served with a First Amended Complaint by persons alleging to be current or
former residents of a rural area near the former Grants Uranium Mill. The
Complaint, which was filed in the U.S. District Court for the District of New
Mexico, identifies 26 plaintiffs. Homestake and Homestake California, along with
an unspecified number of unidentified defendants, are named as defendants. The
plaintiffs allege that they have suffered a variety of physical, emotional and
financial injuries as a result of exposure to radioactive and other hazardous
substances. The Complaint seeks an unspecified amount of damages. A motion to
dismiss the claim was filed with the Court, but the Court has not yet ruled on
the motion. We have and will continue to vigorously defend the action.
BARRICK THIRD QUARTER 2005 38 NOTES TO FINANCIAL STATEMENTS
Mine Statistics
UNITED STATES
----------------------------------------------------------------------------
Open Pit Underground Goldstrike Total Round Mountain
Three months ended September 30, 2005 2004 2005 2004 2005 2004 2005 2004
- ----------------------------------------------------------- -------------- ----------------- -----------------
Tons mined (thousands) 32,668 34,432 316 365 32,984 34,797 3,802 4,925
Tons processed (thousands) 2,692 2,697 311 378 3,003 3,075 7,508 8,910
Average grade (ounces per ton) 0.203 0.153 0.375 0.412 0.221 0.185 0.014 0.014
Recovery rate (percent) 87.0% 86.7% 89.4% 90.0% 87.5% 87.4% n/a n/a
- ---------------------------------------------------------- -------------- ----------------- ------------------
Production (thousands of ounces) 475 356 104 140 579 496 97 106
Production costs per ounce
Cash operating costs $ 174 $ 229 $ 332 $ 257 $ 204 $ 236 $ 195 $ 178
Royalties and production taxes 23 18 17 22 21 19 36 23
Accretion expense 1 2 1 - 1 1 4 4
- ----------------------------------------------------------- -------------- ----------------- -----------------
Total cash costs(1) 198 249 350 279 226 256 235 205
Amortization 53 60 132 134 68 80 46 52
- ----------------------------------------------------------- -------------- ----------------- -----------------
Total production costs $ 251 $ 309 $ 482 $ 413 $ 294 $ 336 $ 281 $ 257
- ----------------------------------------------------------- -------------- ----------------- -----------------
Capital expenditures (US$ millions) $ 50 $ 2 $ 7 $ 8 $ 57 $ 10 $ - 2
- ----------------------------------------------------------- -------------- ----------------- -----------------
Nine months ended September 30, 2005 2004 2005 2004 2005 2004 2005 2004
- ----------------------------------------------------------- -------------- ----------------- -----------------
Tons mined (thousands) 98,634 104,266 1,081 1,200 99,715 105,466 12,403 15,007
Tons processed (thousands) 7,584 8,109 1,106 1,221 8,690 9,330 25,359 28,059
Average grade (ounces per ton) 0.158 0.147 0.385 0.392 0.187 0.179 0.014 0.015
Recovery rate (percent) 84.8% 84.6% 90.1% 89.3% 86.2% 85.2% n/a n/a
- ----------------------------------------------------------- -------------- ----------------- -----------------
Production (thousands of ounces) 1,019 1,009 383 427 1,402 1,436 290 297
Production costs per ounce
Cash operating costs $ 226 $ 237 $ 281 $ 242 $ 242 $ 239 $ 193 $ 179
Royalties and production taxes 17 17 23 22 18 18 35 28
Accretion expense 2 2 - 1 1 1 4 4
- ----------------------------------------------------------- -------------- ----------------- -----------------
Total cash costs (1) 245 256 304 265 261 258 232 211
Amortization 62 61 119 129 79 81 45 56
- ----------------------------------------------------------- -------------- ----------------- -----------------
Total production costs $ 307 $ 317 $ 423 $ 394 $ 340 $ 339 $ 277 $ 267
- ----------------------------------------------------------- -------------- ----------------- -----------------
Capital expenditures (US$ millions) $ 95 $ 19 $ 22 $ 20 $ 117 $ 39 1 $ 4
- -------------------------------------------------------------------------------------------------------------------
1 Total cash costs per ounce statistics for 2005 and 2004 are not comparable due to the change in accounting for
deferred stripping costs.
BARRICK THIRD QUARTER 2005 39 MINE STATISTICS
Mine Statistics
AUSTRALIA
----------------------------------------------------------------------------
Plutonic Darlot Lawlers Kalgoorlie
Three months ended September 30, 2005 2004 2005 2004 2005 2004 2005 2004
- ------------------------------------------------------------ -------------- ---------------- -----------------
Tons mined (thousands) 362 4,227 188 241 207 904 9,944 10,549
Tons processed (thousands) 434 596 229 226 223 229 1,819 1,839
Average grade (ounces per ton) 0.153 0.130 0.184 0.197 0.149 0.132 0.064 0.079
Recovery rate (percent) 90.2% 90.2% 96.2% 94.6% 96.9% 95.2% 85.5% 88.2%
- ------------------------------------------------------------ -------------- ---------------- -----------------
Production (thousands of ounces) 60 72 41 42 32 29 99 129
Production costs per ounce
Cash operating costs $ 229 $ 212 $ 229 $ 185 $ 294 $ 240 $ 220 $ 216
Royalties and production taxes 10 9 8 8 7 7 9 8
Accretion expense - 2 - 1 1 2 2 9
- ------------------------------------------------------------ -------------- ---------------- -----------------
Total cash costs (1) 239 223 237 194 302 249 231 233
Amortization 42 34 66 49 53 42 56 51
- ------------------------------------------------------------ -------------- ---------------- -----------------
Total production costs $ 281 $ 257 $ 303 $ 243 $ 355 $ 291 $ 287 $ 284
- ------------------------------------------------------------ -------------- ---------------- -----------------
Capital expenditures (US$ millions) $ 6 $ 3 $ 3 $ 1 $ 2 $ - $ 6 $ 2
- ------------------------------------------------------------ -------------- ---------------- -----------------
Nine months ended September 30, 2005 2004 2005 2004 2005 2004 2005 2004
- ------------------------------------------------------------ -------------- ---------------- -----------------
Tons mined (thousands) 3,296 10,155 570 679 565 3,115 31,629 34,028
Tons processed (thousands) 1,595 2,018 628 646 653 649 5,545 5,272
Average grade (ounces per ton) 0.136 0.127 0.159 0.181 0.147 0.131 0.070 0.073
Recovery rate (percent) 89.3% 89.9% 95.9% 96.1% 96.3% 96.2% 86.6% 86.9%
- ------------------------------------------------------------ -------------- ---------------- -----------------
Production (thousands of ounces) 194 231 96 112 93 82 336 334
Production costs per ounce
Cash operating costs $ 242 $ 206 $ 260 $ 191 $ 278 $ 238 $ 207 $ 220
Royalties and production taxes 11 8 8 8 8 7 10 8
Accretion expense - 1 - 1 1 1 2 4
- ------------------------------------------------------------ -------------- ---------------- -----------------
Total cash costs1 253 215 268 200 287 246 219 232
Amortization 36 32 68 50 53 48 48 45
- ------------------------------------------------------------ -------------- ---------------- -----------------
Total production costs $ 289 $ 247 $ 336 $ 250 $ 340 $ 294 $ 267 $ 277
- ------------------------------------------------------------ -------------- ---------------- -----------------
Capital expenditures (US$ millions) $ 13 $ 11 $ 8 $ 6 $ 5 $ 2 $ 9 $ 7
- ------------------------------------------------------------ -------------- ---------------- -----------------
- -------------------------------------------------------------------------------------------------------------------
1 Total cash costs per ounce statistics for 2005 and 2004 are not comparable due
to the change in accounting for deferred stripping costs.
BARRICK THIRD QUARTER 2005 40 MINE STATISTICS
Mine Statistics
CANADA
-------------------------------------------------------------------------
Hemlo Eskay Creek Holt-McDermott
Three months ended September 30, 2005 2004 2005 2004 2005 2004
- --------------------------------------------------------------------- ------------------- ---------------------
Tons mined (thousands) 1,037 1,172 48 69 - 106
Tons processed (thousands) 464 520 49 61 - 107
Average grade (ounces per ton) 0.127 0.109 0.967 1.050 - 0.152
Recovery rate (percent) 93.9% 94.0% 86.3% 92.1% - 93.6%
- --------------------------------------------------------------------- ------------------- ---------------------
Production (thousands of ounces) 59 54 41 60 - 15
Production costs per ounce
Cash operating costs $ 270 $ 259 $ 49 $ 57 $ - $ 156
Royalties and production taxes 10 9 6 6 - 1
Accretion expense 1 1 5 1 - -
- --------------------------------------------------------------------- ------------------- ---------------------
Total cash costs (1) 281 269 60 64 - 157
Amortization 59 54 175 220 - 83
- --------------------------------------------------------------------- ------------------- ---------------------
Total production costs $ 340 $ 323 $ 235 $ 284 $ - $ 240
- --------------------------------------------------------------------- ------------------- ---------------------
Capital expenditures (US$ millions) $ 1 $ 2 $ - $ 1 $ - $ -
- --------------------------------------------------------------------- ------------------- ---------------------
Nine months ended September 30, 2005 2004 2005 2004 2005 2004
- --------------------------------------------------------------------- ------------------- ---------------------
Tons mined (thousands) 3,406 3,533 159 201 - 380
Tons processed (thousands) 1,447 1,512 162 193 - 394
Average grade (ounces per ton) 0.124 0.127 0.999 1.194 - 0.149
Recovery rate (percent) 93.8% 94.2% 90.9% 93.0% - 93.1%
- --------------------------------------------------------------------- ------------------- ---------------------
Production (thousands of ounces) 180 181 147 216 - 55
Production costs per ounce
Cash operating costs $ 270 $ 234 $ 44 $ 35 $ - $ 197
Royalties and production taxes 10 9 7 5 - -
Accretion expense 1 1 3 - - 1
- --------------------------------------------------------------------- ------------------- ---------------------
Total cash costs1 281 244 54 41 - 198
Amortization 57 48 140 170 - 114
- --------------------------------------------------------------------- ------------------- ---------------------
Total production costs $ 338 $ 292 $ 194 $ 211 $ - $ 312
- --------------------------------------------------------------------- ------------------- ---------------------
Capital expenditures (US$ millions) $ 4 $ 5 $ 1 $ 5 $ - $ -
- --------------------------------------------------------------------- ------------------- ---------------------
1 Total cash costs per ounce statistics for 2005 and 2004 are not comparable due
to the change in accounting for deferred stripping costs.
BARRICK THIRD QUARTER 2005 41 MINE STATISTICS
Mine Statistics
PERU TANZANIA
------------------------------------------- --------------------------------------
Pierina Lagunas Norte Bulyanhulu Tulawaka
Three months ended September 30, 2005 2004 2005 2004 2005 2004 2005 2004
- ------------------------------------------------------------- ------------------ ------------------ ---------------
Tons mined (thousands) 11,641 9,933 14,410 - 264 292 3,154 -
Tons processed (thousands) 4,151 4,571 4,446 - 265 283 105 -
Average grade (ounces per ton) 0.055 0.029 0.069 - 0.351 0.332 0.279 -
Recovery rate (percent) n/a n/a n/a - 88.7% 88.5% 95.5% -
- ------------------------------------------------------------- ------------------ ------------------ ---------------
Production (thousands of ounces) 153 133 211 - 82 84 27 -
Production costs per ounce
Cash operating costs $ 123 $ 118 $ 106 - $ 315 $ 268 $ 267 $ -
Royalties and production taxes - - 12 - 11 11 15 -
Accretion expense - 6 3 - 1 1 - -
- ------------------------------------------------------------- ------------------ ------------------ ---------------
Total cash costs1 123 124 121 - 327 280 282 -
Amortization 115 165 43 - 103 116 116 -
- ------------------------------------------------------------- ------------------ ------------------ ---------------
Total production costs $ 238 $ 289 $ 164 $ - $ 430 $ 396 $ 398 $ -
- ------------------------------------------------------------- ------------------ ------------------ ---------------
Capital expenditures (US$ millions) $ 5 $ - $ 28 $ 83 $ 10 $ 8 $ - $ 12
- ------------------------------------------------------------- ------------------ ------------------ ---------------
Nine months ended September 30, 2005 2004 2005 2004 2005 2004 2005 2004
- ------------------------------------------------------------- ------------------- -------------------- ---------------
Tons mined (thousands) 34,803 30,568 16,496 - 765 860 5,743 -
Tons processed (thousands) 12,327 12,498 5,902 - 783 849 225 -
Average grade (ounces per ton) 0.042 0.037 0.056 - 0.344 0.348 0.251 -
Recovery rate (percent) n/a n/a n/a - 88.8% 88.4% 95.7% -
- ------------------------------------------------------------- ------------------ -------------------- ---------------
Production (thousands of ounces) 454 552 252 - 239 261 54 -
Production costs per ounce
Cash operating costs $ 123 $ 99 $ 106 - $ 333 $ 258 255 -
Royalties and production taxes - - 12 - 13 12 20 -
Accretion expense 5 5 3 - 1 29 1 -
- ------------------------------------------------------------- --------------- -------------------- ----------------
Total cash costs1 128 104 121 - 347 299 276 -
Amortization 115 165 44 - 112 109 131 -
- ------------------------------------------------------------- --------------- -------------------- ---------------
Total production costs $ 243 $ 269 $ 165 $ - $ 459 $ 408 $ 407 $ -
- ------------------------------------------------------------- --------------- -------------------- ---------------
Capital expenditures (US$ millions) $ 10 $ 2 $ 128 $ 115 $ 26 $ 26 $ 8 $ 27
- ------------------------------------------------------------- --------------- -------------------- ---------------
1 Total cash costs per ounce statistics for 2005 and 2004 are not comparable due
to the change in accounting for deferred stripping costs.
BARRICK THIRD QUARTER 2005 42 MINE STATISTICS
CORPORATE OFFICE TRANSFER AGENTS AND REGISTRARS
Barrick Gold Corporation CIBC Mellon Trust Company
BCE Place, Canada Trust Tower, Suite 3700 P.O. Box 7010, Adelaide Street Postal Station
161 Bay Street, P.O. Box 212 Toronto, Ontario M5C 2W9
Toronto, Canada M5J 2S1 Tel: (416) 643-5500
Tel: (416) 861-9911 Fax: (416) 861-0727 Toll-free throughout North America: 1-800-387-0825
Toll-free within Canada and United States: 1-800-720-7415 Fax: (416) 643-5501
Email: investor@barrick.com Email: inquiries@cibcmellon.ca
Website: www.barrick.com Website: www.cibcmellon.com
SHARES LISTED Mellon Investor Services L.L.C.
ABX - The Toronto Stock Exchange 85 Challenger Road, Overpeck Center
The New York Stock Exchange Ridgefield Park, New Jersey 07660
The Swiss Stock Exchange Tel: (201) 329-8660
Euronext - Paris Toll-free within the United States:
BGD - The London Stock Exchange 1-800-589-9836
Website: www.mellon-investor.com
INVESTOR CONTACT MEDIA CONTACT
James Mavor Vincent Borg
Vice President, Investor Relations Vice President, Corporate Communications
Tel: (416) 307-7463 Tel: (416) 307-7477
Email: jmavor@barrick.com Email: vborg@barrick.com
FORWARD-LOOKING INFORMATION
Certain information contained or incorporated by reference in this Third Quarter
Report 2005, including any information as to our future financial or operating
performance, constitutes "forward-looking statements". All statements, other
than statements of historical fact, are forward-looking statements. The words
"believe", "expect", "anticipate", "contemplate", "target", "plan", "intends",
"continue", "budget", "estimate", "may", "will", "schedule" and similar
expressions identify forward-looking statements. Forward-looking statements are
necessarily based upon a number of estimates and assumptions that, while
considered reasonable by us, are inherently subject to significant business,
economic and competitive uncertainties and contingencies. Known and unknown
factors could cause actual results to differ materially from those projected in
the forward-looking statements. Such factors include, but are not limited to:
fluctuations in the currency markets (such as the Canadian and Australian
dollars versus the U.S. dollar); fluctuations in the spot and forward price of
gold or certain other commodities (such as silver, copper, diesel fuel and
electricity); changes in U.S. dollar interest rates or gold lease rates that
could impact the mark to market value of outstanding derivative instruments and
ongoing payments/receipts under interest rate swaps and variable rate debt
obligations; risks arising from holding derivative instruments (such as credit
risk, market liquidity risk and mark to market risk); changes in national and
local government legislation, taxation, controls, regulations and political or
economic developments in Canada, the United States, Australia, Chile, Peru,
Argentina, Tanzania, Russia or Barbados or other countries in which we do or may
carry on business in the future; business opportunities that may be presented
to, or pursued by, us; our ability to successfully integrate acquisitions;
operating or technical difficulties in connection with mining or development
activities; the speculative nature of gold exploration and development,
including the risks of obtaining necessary licenses and permits; diminishing
quantities or grades of reserves; adverse changes in our credit rating; and
contests over title to properties, particularly title to undeveloped properties.
In addition, there are risks and hazards associated with the business of gold
exploration, development and mining, including environmental hazards, industrial
accidents, unusual or unexpected formations, pressures, cave-ins, flooding and
gold bullion losses (and the risk of inadequate insurance, or inability to
obtain insurance, to cover these risks). Many of these uncertainties and
contingencies can affect our actual results and could cause actual results to
differ materially from those expressed or implied in any forward-looking
statements made by, or on behalf of, us. Readers are cautioned that
forward-looking statements are not guarantees of future performance. All of the
forward-looking statements made in this Third Quarter Report 2005 are qualified
by these cautionary statements. Specific reference is made to Barrick's most
recent Form 40-F/Annual Information Form on file with the US Securities and
Exchange Commission and Canadian provincial securities regulatory authorities
for a discussion of some of the factors underlying forward-looking statements.
We disclaim any intention or obligation to update or revise any
forward-looking statements whether as a result of new information, future events
or otherwise.
43