Barrick Gold (ABX)

Q3 2011 Earnings Call

October 27, 2011 9:30 am ET

Executives

Ivan Mullany - Senior Vice President of Capital Projects

Kelvin P. M. Dushnisky - Executive Vice President of Corporate and Legal Affairs

Deni Nicoski - Vice President of Investor Relations

Jamie Sokalsky - Chief Financial Officer and Executive Vice President

Robert Krcmarov - Senior Vice President of Global Exploration

Peter J. Kinver - Chief Operating Officer and Executive Vice President

Aaron W. Regent - Chief Executive Officer, President, Director and Member of Environmental, Health & Safety Committee

Analysts

Jorge M. Beristain - Deutsche Bank AG, Research Division

Brian MacArthur - UBS Investment Bank, Research Division

Adam P. Graf - Dahlman Rose & Company, LLC, Research Division

John D. Bridges - JP Morgan Chase & Co, Research Division

Paretosh Misra - Morgan Stanley, Research Division

Greg Barnes - TD Newcrest Capital Inc., Research Division

Pawel Rajszel - Veritas Investment Research Corporation

David Haughton - BMO Capital Markets Canada

Presentation

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the Barrick Gold Q3 2011 Results Conference Call. [Operator Instructions] I would like to remind you, today's call is being recorded, Thursday, October 27, 2011. And now I have the pleasure to turn the call over to Mr. Deni Nicoski, Vice President, Investor Relation at Barrick Gold. Please go ahead, sir.

Deni Nicoski

Thank you, operator, and good morning, everyone. Before we begin, I'll bring to your attention the fact that we will be making forward-looking statements during the course of this presentation. For a complete discussion of the risks, uncertainties and factors which may lead to our actual financial results and performance being different from the estimates contained in our forward-looking statement, please refer to our year end report or our most recent AIF filing. With that, I'll hand it over to Aaron Regent, President and CEO of Barrick.

Aaron W. Regent

Thanks, Deni, and good morning. And thank you for joining our conference call today. I'm joined here today by Jamie Sokalsky, Peter Kinver, Kelvin Dushnisky and Rob Krcmarov. There are also other members of our senior management team on hand as well, who will be available to answer questions later on the call.

I'll start by covering some of the highlights of the quarter and provide an update on our projects. I'll then turn the call over to Rob Krcmarov, our Senior Vice President of Global Exploration, to give you an update on the recently announced Red Hill and Gold Rush discoveries and other high-priority programs. Jamie will take you through our results in a bit more detail and our outlook on the gold market, after which we'd be happy to take any questions that you might have.

Overall, we are pleased with the results in the quarter. Operationally, we met our production and cost targets. Quarter 3 gold production was 1.93 million ounces at total cash cost of $453 per ounce. EBITDA's on track to meet our original guidance for 2011.

We reported a 45% increase in net earnings to a record $1.37 billion, or $1.37 per share. Adjusted net earnings were up 52% to $1.39 billion, or $1.39 per share. This equates to an annualized 25% return on equity, up from 21% in the second quarter. And our operating cash flow increased by 35% to a record $1.9 billion.

Our cash margins continue to expand, reflecting our leverage to the gold price. Cash margins increased by 55% to nearly $1,300 per ounce, and net cash margins were up 51% to over $1,400 per ounce. Our projects in construction remain on track, with production at Pueblo Viejo and Pascua-Lama anticipated in mid-2012 and mid-2013, respectively.

In September, we announced 2 new world-class gold discoveries, Red Hill and Gold Rush, which are close to our Cortez mine in Nevada, and we expect to significantly expand the initial 3.5 million ounce inferred resource. Rob will update you on this in a moment. With the growth in our earnings base and a positive outlook on the gold price, the Barrick Board approved a 25% increase to our quarterly dividend to $0.15 per share. This continues our track record of paying a progressive dividend, which has now increased by over 170% the last 5 years.

Turning to our operating results. The North American region continued to perform well in the third quarter, producing 836,000 ounces at total cash cost of $415 per ounce. The Cortez mine was on plan, producing 353,000 ounces at a total cash cost of $230 per ounce. The Cortez Hills open pit continues to be in a higher waste-stripping phase, which is expected to result in lower production in the fourth quarter before returning to a higher grade area for the pit in the first quarter of 2012. The Goldstrike operation, where the open pit is also in a higher stripping phase, produced 257,000 ounces at a total cash cost of $516 per ounce.

Our South American business unit performed ahead of plan, producing 475,000 ounces at a cash cost of $358 per ounce. The Lagunas Norte mine was ahead of plan, producing 219,000 ounces at cash cost of $260 per ounce. Veladero contributed 220,000 ounces at a cash cost of $300 -- $380 per ounce.

Australia Pacific produced 472,000 ounces at a cash cost of $690 announced in the third quarter, and attributable production from African Barrick Gold was 135,000 ounces at a cash cost of $687 per ounce.

Copper production from Zaldivar was 65 million pounds at a cash cost of $1.67 per pound, and we continue to expect full year copper production from South America to be around 300 million pounds at a cost of around $1.40 to $1.50 per pound.

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