Barrick Mining Corporation · TSX:ABX
Barrick Mining — Barrick Gold — J.P. Morgan China Conference 2011
62 slides from Barrick Mining's conference presentation, June 2011
Slide 1: Building Value in Everything We Do
Building Value in Everything We Do JP Morgan China Conference June 2011 1
Slide 2: Cautionary Statement on Forward-Looking Information
CAUTIONARY STATEMENT ON FORWARD‐LOOKING INFORMATION Certain information contained in this presentation, including any information as to our strategy, projects, plans or future financial or operating performance and other statements that express management's expectations or estimates of future perfor
Slide 3: Agenda
Agenda Company Overview Gold Market Review Strategy and Progress Summary 3
Slide 4: Global Footprint
Global Footprint 2010 P&P Reserves North America North America 2011E Production 41% Australia Africa 9% Pacific North America 11% 44% South America 39% Africa 7% Australia Pacific South Africa 25% America South 24% America Australia Pacific Mine Project 4
Slide 5: Outlook - Bullish on Gold
Outlook ‐ Bullish on Gold Diversifying Role – up 449% over past 10 yrs (S&P – up 3%)(1) Price supportive macroeconomic environment: – quantitative easing – fiscal policies & sovereign debt concerns – trade & current account imbalances Growth in investment demand Central banks become net buye
Slide 6: Gold and Money Supply
Gold and Money Supply US Monetary Base 2,500 Billions of US$ 2,250 Sept. 2008 2,000 Federal Bailouts 1,750 Begin 1,500 Nixon 9/11 1,250 Eliminates 2001 Fixed 1,000 1929 Gold Price Y2K 750 Stock Market Vietnam 500 Crash WWII War 250 0 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95 00 05 10 Source
Slide 7: Gold and Money Supply
Gold and Money Supply Global Liquidity(1) and Gold Price Trillions of US$ and US$ per ounce 1500 13.5 1350 12.0 1200 10.5 1050 9.0 900 7.5 750 6.0 600 4.5 450 3.0 300 1.5 150 0 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 (1) Global liquidity: FX Reserves + US Monetary Base Sources: Dundee Wealth Ec
Slide 8: Global Imbalances
Global Imbalances Monthly trade balance US$ billions 12-month moving total US$ billions 0 0 -3 US trade with China -30 -6 -60 -9 -90 -12 -120 -15 -150 -18 -180 -21 -210 -24 -240 -27 -270 -30 -300 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 Source: Dundee Wealth Economics 8
Slide 9: US Real Interest Rates
US Real Interest Rates Percent 4 3 2 1 0 -1 -2 -3 -4 -5 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 Source: Dundee Wealth Economics 9
Slide 10: Sovereign Debt Crisis - Europe
Sovereign Debt Crisis ‐ Europe Government Gross Debt Percentage of GDP Greece 140 Italy Ireland 120 Portugal 100 80 Spain 60 40 20 2008 2012 0 Source: Dundee Wealth Economics and European Commission 10
Slide 11: Sovereign Debt Crisis - US
Sovereign Debt Crisis – US Deficit Billions of US$ Percentage of GDP 500 5 Actual Forecast 0 0 -500 -5 -1000 -10 Blue: CBO current law projections, Jan 2011 Red: CBO projections if the income tax, estate tax and gift tax provisions of the 2010 Tax Relief Act are extended combined with the AMT indexe
Slide 12: Net Official Sector Gold Sales
Net Official Sector Gold Sales (tonnes) 663 479 484 365 Net official sector 235 buying for the first time since 1988 34 2004 2005 2006 2007 2008 2009 2010 73 Source: GFMS, WGC 12
Slide 13: Global FX Reserves
Global FX Reserves 2/3 of FX reserves are in US dollars $7.4 trillion FX reserves are exploding held by 19 countries US$ trillions 9 8 China 2.85 7 6 Japan 1.0 5 $6.6 Taiwan 0.4 Russia 0.4 4 trillion increase 3 2002-2010 2 1 0 79 89 99 10 2010 Source: DundeeWealth Economics 13
Slide 14: Global Gold Reserve Ratios
Global Gold Reserve Ratios Gold at Current Prices as a Percentage of FX reserves and gold reserves 70 60 50 40 30 20 10 0 1950 1960 1970 1980 1990 2000 2010 Source: DundeeWealth Economics 14
Slide 15: Gold ETF Demand at Record Level
Gold ETF Demand at Record Level Gold Price (US$/oz) ETF Holdings (Moz) 1700 70 1500 60 1300 50 1100 40 900 30 700 20 500 10 300 0 Aug Nov Feb May Aug Nov Feb May Aug Nov Feb May Aug Nov Feb May Aug Nov Feb May Aug Nov Feb May 05 05 06 06 06 06 07 07 07 07 08 08 08 08 09 09 09 09 10 10 10 10 11 11 So
Slide 16: Global Mine Supply
Global Mine Supply Gold (US$ per ounce) Mine production (tonnes) 1400 2800 1200 2400 1000 2000 800 1600 600 1200 400 800 200 400 0 0 70 80 90 00 10 Sources: Dundee Wealth Economics, GFMS 16
Slide 17: Total Bar & Coin Demand by Region
Total Bar & Coin Demand by Region tonnes Total bar and coin 1,000 demand was up 34% in +136% 2010 750 China and India account All Other* –9% for 40% of bar & coin 500 Europe & ex CIS demand –8% +34% Strong growth also seen USA +88% in Middle East and 250 emerging markets such Middle East Great
Slide 18: Jewellery Demand by Region
Jewellery Demand by Region tonnes Total jewellery demand 2,000 –3% increased 17% in 2010 India and China account 1,500 All Other* –14% for 57% of jewellery –7% demand USA 1,000 Middle East +14% Both countries had record imports in 2010 Greater China +69% – India: 730 tonnes 500 India – China:
Slide 19: Global Retail Demand
Global Retail Demand Retail Demand plus ETF Demand tonnes 1600 1400 1200 1000 800 600 400 200 0 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 Source: DundeeWealth Economics 19
Slide 20: Gold is Not in a Bubble
Gold is Not in a Bubble 2000 Gold’s rise since 2001 has been modest compared to historic bubbles 1500 GOLD PRICE 1971‐1982 1000 500 NASDAQ GOLD PRICE 1990‐2002 2001‐2011 Indexed to 100 0 0 1 2 3 4 5 6 7 8 9 10 11 Years Source: DundeeWealth Economics 20
Slide 21: The Real Price of Gold
The Real Price of Gold US$ per ounce (quarterly averages) 2000 1800 1600 In 2011-Q1 dollars gold has yet to surpass its 1980 high 1400 1200 1000 Inflation-adjusted 800 600 400 Not inflation-adjusted 200 0 70 80 90 00 10 Source: DundeeWealth Economics 21
Slide 22: Gold vs S&P 500 Ratio
Gold vs S&P 500 Ratio Recession 1973-1975: 25 Gold price “cut loose” in 1971, 5 years after peak 20 Depression 1930-1933 Gold revalued to $35 in 1934, 15 5 years after peak 10 5 Current 1871 = 1.00 0 1870 1880 1890 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 With gold at $1420, then
Slide 23: Gold vs Copper Ratio
Gold vs Copper Ratio Pounds of copper / ounce of gold 800 700 600 500 400 average since 1970: 343 300 200 100 0 70 75 80 85 90 95 00 05 10 Source: DundeeWealth Economics 23
Slide 24: Gold vs Oil Ratio
Gold vs Oil Ratio Barrels of oil / ounce of gold 35 30 25 average since 1970: 15 20 15 10 5 70 75 80 85 90 95 00 05 10 Source: DundeeWealth Economics 24
Slide 25: Scarcity Value
Scarcity Value US$ trillions 60 Global Financial Assets 60 total $117 trillion 50 50 Private Equities Debt declined by 40 40 45% in 2008 Managed Assets 30 Equities $40 trillion 30 Govt. Debt 20 20 10 Gold Equities 10 & Gold ETFs ~$0.4 trillion(1) 0 0 Sources: McKinsey & Company, IMF, Barclays, Bloom
Slide 26: Outlook - Bullish on Gold
Outlook ‐ Bullish on Gold Diversifying Role – up 449% over past 10 yrs (S&P – up 3%)(1) Price supportive macroeconomic environment: – quantitative easing – fiscal policies & sovereign debt concerns – trade & current account imbalances Growth in investment demand Central banks become net buye
Slide 27: Barrick's Strategy
Barrick’s Strategy Focus on adding value… Meet operational and financial targets to maximize benefits of rising metal prices Increase gold and copper reserves through exploration and selective acquisitions Invest in and develop high return projects Maximize the value of existing mines and pr
Slide 28: 2010 Operating Results
2010 Operating Results Gold Total Net Production Cash Costs(1) Cash Costs(1) Moz $US/oz 2% $US/oz 7.77 464 7.40 5% 464 457 457 5% 360 341 5 300 300 H1 09 H1 10 2009 2010 2009 2010 2009 2010 (1) See final slide #1 28
Slide 29: 2010 Financial Results
2010 Financial Results Realized Gold Gold Margin(1) Gold Margin(1) Price(1) Total Cash Cost Basis Net Cash Cost Basis Moz 1,228 $US/oz $US/oz 887 886 985 25% 771 771 5% 42% 625 625 48% 521 521 2009 2010 2009 2009 2010 2010 2009 2009 2010 2010 (1) See final slide #1 29
Slide 30: 2010 Record Financial Results
2010 Record Financial Results Net Earnings Adjusted Adjusted Operating US$M Net Earnings(1) Cash Flow(1) US$M US$M 4,783 4783 65% 3,274 3,279 2,899 2899 81% 1,810 2009 2010 2009 2010 2009 Q2 09 2010 Q2 10 -4,274 Hedge Book Elimination (1) See final slide #1 30
Slide 31: Margin Expansion
Margin Expansion ~1,500 Total Cash Margins(1) ~1,500 Net Cash Margins(1) US$/oz OVER US$/oz OVER Avg. Realized Price(1) 1,228 1000 Avg. Realized Price(1) 1,228 1100 771 887 985 985 872 521 872 625 429 535 443 464 457 450-480 Total 360 340-380 Cash 337 341 Costs(1) Net Cash Costs(1) 2008 2008 2009 20
Slide 32: Leverage to Gold
Leverage to Gold 800% Barrick EPS & CFPS vs Gold Returns (US$) 700% Barrick’s adjusted 600% net earnings and ( = adjusted) cash flow growth 500% has significantly 400% outpaced the rise in gold prices(1) 300% 200% 100% (1) See final slide #1. All EPS figures are adjusted except Dec ‘04 is US GAAP
Slide 33: Return on Shareholders' Equity
Return on Shareholders’ Equity(1) ~20 19 Return on Capturing the Shareholders’ Equity(1) benefit of margin Percent expansion and 11 12 strong operating performance 7 2007 2008 2009 2010 2011E (1) See final slide #1. 2011E based on IFRS; 2007-2010 based on US GAAP 33
Slide 34: Q1 2011 Strong Financial Results
Q1 2011 STRONG FINANCIAL RESULTS Gold Realized Gold Gold Margin(1) Gold Margin(1) Production Price(1) Total Cash Cost Basis Net Cash Cost Basis Moz $US/oz $US/oz $US/oz 1,389 1389 1,081 2.06 1.96 1081 952 952 1,114 1114 25% 821 821 32% 722 722 32% 2009 2010 Q1 10 Q1 11 Q1 10 Q1 11 Q1 10 2009 Q1 11 2
Slide 35: Q1 2011 Strong Financial Results
Q1 2011 STRONG FINANCIAL RESULTS Net Adjusted Operating Earnings Net Earnings(1) Cash Flow US$M US$M US$M 1,435 1435 1,130 1130 27% 1,001 1001 1,004 1004 820 820 763 763 32% 22% Q1 10 Q1 11 Q1 10 Q1 11 Q1 10 Q1 11 (1) See final slide #1 35
Slide 36: Barrick's Strategy
Barrick’s Strategy Focus on adding value… Meet operational and financial targets to maximize benefits of rising metal prices Increase gold and copper reserves through exploration and selective acquisitions Invest in and develop high return projects Maximize the value of existing mines and pr
Slide 37: History of Gold Reserve Growth
History of Gold Reserve Growth THROUGH ACQUISITION AND EXPLORATION Proven and Probable – millions of ounces of gold ~140 (1) 140 TOTAL EXPLORA- TION 20 21 Moz 1990 109 110 Divestitures 2010 TOTAL TOTAL MINED ACQUIRED (1) See final slide #3 37
Slide 38: Gold Reserves and Resources
Gold Reserves and Resources(1) ounces millions 37.2 Replaced gold 34.8 31.6 Inferred industry’s largest 76.3 reserves for fifth 31.9 65.0 61.8 M&I consecutive year 24.9 50.6 Grew M&I 35.0 resources by 24% 138.5 139.8 139.8 12.4 123.1 124.6 P&P Grew inferred 17.6 resources by 18% 88.6 05 06 07
Slide 39: 2011 Exploration Program
2011 Exploration Program(1) $320-$340M 50% 43% North America African Barrick +other $210M 18% 15% South America Australia Pacific 24% 2011 exploration budget increased to $320-$340 M 2010 2011 reflecting 2010 success (1) See final slide #6 39
Slide 40: Barrick's Strategy
Barrick’s Strategy Focus on adding value… Meet operational and financial targets to maximize benefits of rising metal prices Increase gold and copper reserves through exploration and selective acquisitions Invest in and develop high return projects Maximize the value of existing mines and pr
Slide 41: Cortez Nevada
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Slide 42: Cortez Hills - Exceeds Expectations
Cortez Hills ‐ Exceeds Expectations Cortez Hills built on schedule Exploration Drilling Underground and budget Expanded Cortez operation exceeded 2010 guidance producing 1.14 Moz at total cash costs of $312/oz(1) Q1 2011 production of 366 K oz at total cash costs of $220/oz(1) Record of Deci
Slide 43: Cortez Value Added
Cortez VALUE ADDED 2006 2011 6.3 M oz of reserves (1) 14.5 M oz of reserves (1) 60% interest 100% interest Pipeline: declining, 2011E guidance of higher cost mine 1.30-1.45 Moz at $235-$265/oz (2) FUTURE VALUE CREATION OPPORTUNITIES Cortez Hills Middle and Lower Zone extensions Signi
Slide 44: Pueblo Viejo Dominican Rep.
Pueblo Viejo DOMINICAN REP. 44 44
Slide 45: Pueblo Viejo Project Update
Pueblo Viejo Project Update Autoclave Plant Construction Construction well advanced 625-675 Koz to Barrick at total cash costs of $275-$300/oz(2) +25 year mine life Significant value added since acquisition (1) See final slide #1 and #2 45 45
Slide 46: Pueblo Viejo Value Added
Pueblo Viejo VALUE ADDED 2006 2011 13.4 M oz of reserves (1) 23.7 M oz of reserves (1) Modest economics Robust economics Technical challenges, Improved flowsheet, low recoveries increased recoveries – Au: 92% – Au: 92% – Ag: 5% – Ag: 87% – Cu: 0% – Cu: 79% FUTURE VALUE CREATION OPPORTUNI
Slide 47: Pascua-Lama Chile-Argentina
Pascua‐Lama CHILE‐ARGENTINA Earthworks and Foundations Underway in Argentina 47 47
Slide 48: Pascua-Lama Project Update
Pascua‐Lama Project Update Process Plant Construction Pre-stripping expected to in Argentina commence in Q4 2011 Initial production expected in H1 2013 Pre-production capital expected Tunnel progress to be ~$3.3-$3.6B(1) from Chile – >45% of capital committed 750-800 Koz at total cash costs
Slide 49: Pascua-Lama Value Added
Pascua‐Lama VALUE ADDED 1994 2011 2.3 M oz of reserves(1) 17.8 M oz of reserves(1) Early stage exploration 6.3 M oz of resources(2) project Bi-national tax agreement Project with robust economics in construction FUTURE VALUE CREATION OPPORTUNITIES Resource upside Regional synergies (
Slide 50: Projects: The Next Generation
Projects THE NEXT GENERATION Cerro Casale, Chile (75%) Potential to be 1 M oz producer (100%) Gold Copper Barrick’s share of resources(1) Permitting preparation for EIA submission underway M oz B lbs Project update to be provided with Q2 results 18.9 8.4 Inferred Inferred Donlin Creek, Alaska
Slide 51: Equinox Transaction Highlights
Equinox Transaction Highlights Equinox realizes compelling value – support agreement between Barrick and Equinox for C$8.15 per share all-cash recommended offer(1) – unanimously recommended by Equinox’s Board of Directors Support Agreement – non-solicitation covenant – right in favor of Barrick
Slide 52: Overview of Equinox
Overview of Equinox Large copper producer with two major assets JABAL SAYID – 100% owned Lumwana mine in Zambia began operations in 2008 – 100% owned Jabal Sayid development project in Saudi Arabia(1) 323 Mlbs of copper production in 2010(2) 5.7 Blbs of copper reserves(3) LUMWANA 5.5 Blbs of
Slide 53: History of Reserve/Resource Growth
History of Reserve/Resource Growth 50 Reserve/resource ounces added post acquisition or discovery ounces millions 40 ACQUIRED ADDED GRASSROOTS 30 20 10 0 o e tn ro e a q te ll ro k z ej a u ri k am dg Di Hi rte ee in M ul de or Vi tu st Ri er nh Cr ko by ‐L Co sN la ld Ar lo ld Pi ua ise Ve Re Ba Ru
Slide 54: Investment Considerations
Investment Considerations Excellent copper fundamentals Currently producing Large resource with substantial upside in an excellent region Expansion potential Strong financials Available 54
Slide 55: Enhanced Growth Potential
Enhanced Growth Potential Barrick Gold Production Barrick+ Equinox Copper Production (Moz) (Mlbs) +ZALDIVAR SULFIDES 9.0 +CERRO CASALE 9.0 +LUMWANA EXPANSION +JABAL SAYID 8.5 ~323 ~323 LUMWANA LUMWANA 7.8 8.0 7.5 ~318 ~318 ~318 7.0 6.5 6.0 Barrick 2010 Target in 5 Barrick 2010(2) Pro forma Pro forma
Slide 56: Contribution to 2010 Revenue
Contribution to 2010 Revenue(1) Barrick + Equinox Senior Peer Average 82% 81% Gold Gold 19% 18% Copper Copper & Other (1) See final slide #9 56
Slide 57: Barrick's Strategy
Barrick’s Strategy Focus on adding value… Meet operational and financial targets to maximize benefits of rising metal prices Increase gold and copper reserves through exploration and selective acquisitions Invest in and develop high return projects Maximize the value of existing mines and pr
Slide 58: Corporate Social Responsibility
Corporate Social Responsibility First Canadian mining company to join the Voluntary Principles on Security & Human Rights CSR Advisory Board in development Independent director with CSR expertise Dow Jones Sustainability Index - World for 3rd year Nasdaq - world’s top 100 sustainable compa
Slide 59: Investment Case for Barrick
Investment Case for Barrick Capturing benefits of rising gold and copper prices – record 2010 net earnings and cash flow – expanding margins – return on equity of 19%(1) – dividend increased 20%(2) High quality asset base – industry-leading reserves, growing resources – surfacing hidden value at
Slide 60: Investment Case for Barrick
Investment Case for Barrick Excellent project pipeline Acquisition of Equinox will meaningfully contribute to earnings and cash flows Continue commitment to strong CSR practices Compelling valuation 60
Slide 61: Building Value in Everything We Do
Building Value in Everything We Do JP Morgan China Conference June 2011 61
Slide 62: Footnotes
FOOTNOTES Except as otherwise indicated, the information concerning Equinox contained in this presentation has been taken from or is based upon Equinox’s and other publicly available documents and records on file with Canadian securities regulatory authorities and other public sources. Neither Barri