"We were keen on a number of assets, but saw them become too expensive so their value eroded. Considering this context, we decided that if we cannot find mines to buy that fit our criteria, let’s build mines ourselves."

Mark Bristow

PRESIDENT AND CEO, BARRICK GOLD

December 07, 2021

What did Barrick’s Q3 2021 results show you about progress made since the Randgold merger?

A lot has happened since January 2019. After the Barrick/Randgold merger, Nevada Gold Mines (NGM) was established, we took Acacia private, and sold Sabodala to Teranga (before the Endeavour merger). From the initial discussions with John Thornton in 2015 we had a strategic plan based upon flattening the structure and focusing on the Randgold model whereby the operations own the orebodies, have a responsibility to unlock their value, and importantly, are able to respond quickly to changes.

Barrick’s Q3 results show that we have been able to deliver on our strategy of focusing on the best assets, fixing the balance sheet and ensuring our social license to operate, even though the environment changed around us. I honestly believe we are going into an unprecedented and critical time for the global economy. Michelle Wucker’s book, The Gray Rhino, draws attention to obvious risks that are neglected such as the ’87 and ’99 market crashes, the 2008 property crisis, and now our current situation. If we have a challenging next seven years, like we had from 1992 to 1999, Barrick will still do well because we are fundamentally profitable. We run our business on US$1,200/oz gold and have a significant amount of net cash. This makes us independent of the market, and means the responsibility of creating value sits with management.

Another key aspect highlighted in Q3 was Barrick’s focus on exploration. We replaced more than 70% of the gold we have mined in the last two years, and in 2021 we will replace all the gold we mined. Our pipeline, whether it’s the work we are doing in the Veladero Pascua-Lama region, advancing Donlin Gold in Alaska, or the various frontiers that we have opened such as Egypt, Japan and Guyana, means the company’s future is in good shape.

How has the Nevada Gold Mines (NGM) joint venture between Barrick and Newmont developed?

The trajectory was downwards for both companies in Nevada before the merger. Newmont had very little resource potential left, but had infrastructure which was significant for Barrick because it was geographically in the right place. Barrick had high quality assets, but infrastructure in the wrong place. By establishing NGM, we turned it into a genuine, long term, value creating mining enterprise. It is a sustainably profitable business that has become Barrick’s value foundation.

One thing that Nevada didn’t lack was asset quality. Carlin, the biggest gold mining operation in the world at around 1.7 million ounces per year (Moz/y), has measured resources of over 9 million ounces, or 25 million tonnes at 7.5 to 12 g/t. The North Leeville area is showing great exploration potential, up towards Goldstrike. We are upgrading the Gold Quarry roaster, we have invigorated Robertson, and we have linked the future of Cortez with Goldrush and Fourmile. We also had another look at some of the other assets, such as Turquoise Ridge, which was previously constrained as a high-grade mine with a contractual bottleneck dictating what it could feed the processing facility. Before the JV, it was mining small volumes at high cost, but now we are seeing the benefit of removing the boundaries and unleashing the mine’s potential. Seeing this transformation brought home to me the mindless egos that stop the ability to unlock value in the mining industry, and is a clear example of why the sector needs consolidation.

Which educational initiatives has Barrick established in Nevada to increase participation in the sector?

I am a great believer in recognizing your host country as your core stakeholder, and investing in a young, local workforce is a big part of Barrick’s strategy. When we created NGM, one of the first things we noted was the wrong age profile of the workforce. We had also noticed a big gap for reaching the children who wanted to have technical careers. At the start of the Covid pandemic, we started a program to teach every single teacher in Nevada to teach virtually, and sponsored an educational program with the Discovery Channel for schools in the state. We are now working with the College of Southern Nevada and Great Basin College in Elko, linking the technical colleges from the last two years of high school to the beginning of university. Barrick was the only mining company in the US that continued its student programs throughout Covid.

What is the status of the transition to underground mining at Hemlo?

Hemlo has very high grades and is a mine that made money in spite of what people did with it. It was one of our assets that needed the most fixing, and one that got impacted the most be Covid. We decided to close the pit and bring in Australian contractors to retrain the workforce, but lockdowns in Canada and Australia have delayed this process. However, we have not stopped drilling to increase reserves and resources.

You have been outspoken about Barrick’s intention to increase its portfolio in Canada. What type of asset are you looking for?

We look to consolidate significant land packages which we can put geological models to, and then commit to investing in exploration. As we saw in Australia after the turn of the century, new waves of exploration can transform regions, but Canada has been lacking this. Canadian schools produce terrific engineers and geologists, but many of them leave, and Canada’s domestic mining industry is left to be run by promoters. However, I have no doubt that Canada has the potential to still deliver significant discoveries.

The criticism I have of the current breed of fund managers is they keep forcing the gold industry into short-term trading. They do not work with the industry to consolidate good assets under quality management. You have too many managers managing too few assets. Most assets are rarely high quality when they get discovered or announced, and are forced into deals at inappropriate times, after the heart of the deposit has been mined out. As a result, mines get taken out at the top of the market because of necessity, at a higher price than they’re worth. We were keen on a number of assets, but saw them become too expensive so their value eroded. Considering this context, we decided that if we cannot find mines to buy that fit our criteria, let’s build mines ourselves.

What have been the main highlights from Barrick’s West African operations?

West Africa has been the most prolific contributor to new gold in the last two decades. In Mali, Loulo-Gounkoto is a fantastic story. When I first looked at the project, it was part owned by Robert de Crespigny’s Normandy Mining, but couldn’t pass our filter of 20% at US$1,000/oz. In 2003, I said to our geologists that we have to be brave and drill deep, which helped us extend the deposit considerably. The 75 km of strike kept producing, and now we are moving into the ramp-up phase of a new underground mine  at Gounkoto. The complex already produces around 650,000 Au oz/y and has over 13 years of life yet, with tremendous opportunity for further discoveries.

Another important aspect of Loulo-Gounkoto is the fact it is Malian run, and has become a mining school for our African business. For example, we just moved our head of underground mining, Cheick Sangare, to help our Bulyanhulu mine in Tanzania. Mali is also the first place where we have worked in Africa where refuse and waste disposal is commercially viable, run by village NGOs.

In Côte d'Ivoire, we built Tongon during the civil war between the north and the south, but no one ever interfered with the operation. It is a very well built mine with low sustaining costs, and has played an amazing role in the country’s northern economy. Through exploration success we have been able to extend mine life to 2024. The marginal costs of finding new deposits and adding them are very real, and Côte d'Ivoire can be a frustratingly bureaucratic place to operate, but we firmly believe in the prospectivity of the region.

How have innovations at Barrick’s Kibali mine in the DRC improved operational performance?

Kibali is a project with a lot of character. I actually bought Kibali from the back of my motorbike riding from Cape Town to Cairo with my children. It is a proper tier-one asset, producing over 800,000 Au oz/y, which puts it up there with Pueblo Viejo and the big Nevada mines. We recognized early on that to really get the best out of Kibali we had to get low-cost power, so we built three hydropower stations. The mine has a very low carbon footprint, and the local community gets hydropower as well.

Kibali is Barrick’s flagship mine when it comes to innovation, integration and automation. Because the age of the average miner in the DRC is lower, you don’t get the same resistance to new technologies as you do in jurisdictions with older workforces. Kibali was our first African operation to introduce battery power, an energy storage facility with a baseload from which you can maximize hydro-power generation. We built special roadways to be able to introduce high-speed, automated hauling underground, and the crushing and material handling at the bottom of the mine are now fully automated. A new integrated data system was rolled out across all Barrick operations, and now we are starting to see the benefits of real-time data.

On the topic of ESG, what benefits have you seen when empowering local workforces?

I grew up in South Africa under apartheid, and know that you cannot put a value on the liberation of people. People speak about the “E” component until they are blue in the face, but I call the S in ESG “the silent S” because no one talks about it. When you build a mine you do not really own it, you are renting a national asset – the natural resource endowment of a country. If you cannot create value out of it, then you shouldn’t develop it, because that’s theft. If you can create value, that value should be part of a pie that is shared with local communities and the people of the host country. As a public company, your responsibility to the silent S is enormous.

When you build a business, of course you should reward the people that take the risk in the initial investment, and you should pay tax, because that’s how you reward the population of your host country. You also need to benefit all the stakeholders. The mining industry used to arrive, put up a fence, employ foreign contractors, pay tax and one day disappear – no wonder the sector has a bad name. We built the first hydropower station in Kibali with South African engineering firms but Congolese sub-contractors. The second power station had more Congolese sub-contractors. For the third one, the principal engineer was one of our local contractors from the DRC, who built the whole thing. Today, our Congolese contractors have their own social programs, likewise in the Dominican Republic and Argentina.

There are a lot of benefits to building a senior executive national workforce. First of all, the top 50 people in a mine earn 40% of the salary, so the value you create can stay inside the country. Secondly, it is a natural DNA enforcer, because you have host-country nationals overseeing your investment. Finally, by understanding the culture your ability to develop communities is so much more effective. That is how Randgold became successful, and it is the model we have replicated at Barrick.

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