Barrick Gold Corporation
Q4 2020 Earnings Call Transcript

Published: 18 Feb 2021

[Operator:]

Thank you for standing by. This is the conference operator. Welcome to the Barrick 2020 Fourth Quarter Results Conference Call. During the presentation, all participants are in listen-only mode. Following the presentation, we will conduct a question-and-answer session. As a reminder, this conference call is being recorded and a replay will be available on Barrick's website later today February 18, 2021. I would now like to turn you over to Mark Bristow, Chief Executive Officer. Please, go ahead, sir.

[Mark Bristow:]

Thank you very much. And good morning and good afternoon ladies and gentlemen and welcome again to our presentation of Barrick 2020 and Q4 results. The past year has been one of delivery and developed in the face of unprecedented challenges, we delivered on our production guidance and at the same time we continued to our key projects amongst the Pueblo Viejo expansion plan, the Turquoise Ridge , the Goldrush exploration declines and the underground mine at Gounkoto.

[Operator:]

Thank you. We’ll now begin the question-and-answer session. Our first question comes from Josh Wolfson of RBC Capital Markets. Please go ahead.

[Josh Wolfson:]

Good morning. Mark, I noticed there are a couple of headlines today on the topic of M&A and consolidation and the company sort of reiterating its interest in being part of those discussions as well as some views on copper. Could you sort of I guess, update us with what the views are more specifically I guess in terms of Barrick's own copper portfolio, and then maybe how you look at these opportunities in the context of the market today with there being a pretty material difference in how copper prices have performed versus gold?

[Mark Bristow:]

Hi, Josh. So I think the best way for me to answer that question, which is pretty broad is to take you back to 2008, 2009, 2010 and 2011. We're in a very similar place today and it was a transformational period for Randgold Resources at that time, an increasing gold price. Notwithstanding that we did do a very critical deal right in the middle of a big bull market in acquiring Moto and ultimately that led to the Kibali mine of today. At the same time, we had a big capital program. We were building out on Tongon as well. And so we used that opportunity, not only to expand our business but also to pay down our debt. And you've seen the same focus this time around. We've brought the debt down. We have no net debt now. And we've started a dividend policy already before the gold price started moving. This has allowed us to return more to our shareholders as we did in the 2009, 2010; in fact it started in 2008, a 13-year successive increase in the dividends we paid, despite the ups and downs of the gold price. And Barrick is at that point. We've got -- we have committed to returning about a 3.6% yield on the share price of a couple of days ago with the proposed $750 million capital return that we shared with you today. And at the same time, we're not putting the company into any sort of debt, the net debt. We've got lots of liquidity. We've built out our exploration teams in all three regions, very solid leadership. I think we've demonstrated that our mineral resource management and our planning capabilities are now well entrenched. And our executive teams led by Catherine Mark and Willem, certainly can all take on an extra asset or in the case of Latin and Asia Pacific probably more than one, Mark would say. So, we're well positioned. We've got the strongest balance sheet in the industry. It's still growing. And so now it's about making sure that we deliver it -- deliver that value to our shareholders in a proper and considered basis. And again, the question I would ask is, in this bull market that we find ourselves in and everyone's baying for more and more money to be returned to the shareholders, very few people investing in their own future, everyone harvesting. And this is a cyclical business. We're up there near the top of the cycle and managing this requires some conservatism and considered decisions. And we think that we've certainly experienced in this. We've got good memories, particularly Graham and I and the other executives in my team. And so, now -- and there are lots of, lots of -- as you know Josh, there are lots and lots of businesses whether that's copper or gold that just three years ago certainly were on the watch list. And suddenly they are -- there's no risk and stress anymore. And so with that comes opportunity. As you know, the discussions between Barrick and Randgold started in late 2015 and took some time to find a deal which really delivered real benefits for all the owners of both companies. And so, we are not -- everyone -- as you see in the market today, everyone -- every time you wake up there's a different opinion that's considered to be the only opinion on where the markets are going to go and what's going to happen to gold and where you should be putting your money. And we're back in the great financial crisis as well. We believe that the short or near-term to mid-term outlook on global markets are not clear. We believe that the technical support for a stronger gold price is still very well embedded in the market and we certainly haven't seen the consequence of this unprecedented quantitative easing that we've witnessed in the last nine months, orders of magnitude of what we saw over the five-year plan. So, that's first of all the way we frame our business. Now you look at how you grow. The best way to grow in times like this, of course, is organically. And one of the things that I hope I shared with you through this presentation is every single core asset in Barrick has real upside that you can demonstrate both -- and in particular most of them new discoveries, as well as brownfields extensions. So that's the core component of our business. And of course there are and going to be further consolidation opportunities. And we believe that the challenge of doing those transactions is going to not only be commercial, but also the ability to be able to deliver a more aligned, more modern comfort to the owners the long-term owners of these companies. And so again, I started out with the sharing of our ESG strategy which I believe that ultimately is going to become a key driver in one's ability to transact going forward. I mean to your -- so that's gold side and that's our core business. On the copper side again we've demonstrated that we're capable of managing and delivering real value in the copper space. Lumwana has got a long history of poor performance. We've been able to rebuild it and position it. And we've always said our focus on copper is first prize, if copper comes with gold and younger gold/copper geological terrains; and secondly that we would pursue copper assets where they are located in countries where we have and can demonstrate a competitive advantage over the traditional copper mines. And we believe that sort of central African copper province offers that opportunity for us. At the same time down in South America there's lots of copper potential that comes with gold in the gold/copper porphyries. And again our exploration teams out into the Asia Pacific are also pursuing opportunities where again that geological association is clear. So we're not -- I think the market responds as though -- just because we talk about growth and we talk about the importance and significance of -- for Barrick to remain relevant in the industry it needs to broaden into copper as being that we're going to sort of go out there and just buy the first copper asset or company regardless of the opportunity to deliver value to both the target owners as well as our own. So we're not going to do that. You've walked this path with me for a long time Josh. We've got too many checks and balances in my executive team to go out there and do something stupid. So watch the space give us time. We'll keep building our business in a considered way.

[Josh Wolfson:]

Great. Thank you very much.

[Operator:]

Our next question comes from Mike Parkin of National Bank. Please go ahead.

[Mike Parkin:]

Hey guys, thanks for taking my question. One I had was -- we're seeing quite a cold snap come down through the U.S. And I was wondering if there's been any negative impact to the Nevada gold mines operations due to that cold? Or is it anything that you would expect to maybe drive a bit of a soft Q1? Or it's something that would probably bounce back with the resumption of kind of normal temperatures?

[Mark Bristow:]

Mike I would just say that where our operations are located in Nevada, it's flipping cold this time of the year, regardless of whether there are cold snaps. We don't notice the cold snap. It was just cold. We look forward to the odd sunny day. So it's a bit like West Africa when you have three months of rain where you get one meter dumped on you. We don't see it appropriate to use weather to explain why we can't run our mines. So our team is well equipped to manage weather in northern Nevada, just like we are in the Andes in South America. So you definitely won't see anyone using it as an excuse cold weather.

[Mike Parkin:]

Okay. And one last question on COVID. Do you see any potential to implement a company kind of sponsored vaccine clinic to get vaccines to your employees at a faster rate than government programs? Or are you looking at it to just leave it with the governments of your respective host countries and go that route?

[Mark Bristow:]

Well what we are able to do is partner with our host countries and in the case of Nevada, our host state on combating COVID and its impact. And by two operations we now have COVID partnership-led PCR laboratories which support our protocols in that we can turn around accurate tests in a couple of hours. And that's been very helpful. We've got two more to really roll out a laboratory in Tanzania which we're working on; and one in Zambia. Now we've just put one into Hemlo as well. So -- or into the town of Marathon. So that's -- and again in all our countries we are very much part of the COVID task force. And our senior executives have now been included in the vaccine logistics and sort of management structures in our various regions and host counties or provinces. Catherine is very much part of that initiative in Canada, as well as in Nevada as is Greg in the immediate part of our Elko, Winnemucca region in Northern Nevada. And in Africa, we're part of the whole African union initiative to source and support the rollout of vaccines. It's a little more complicated there. But there's been some movement recently and we've seen the first Johnson & Johnson vaccines coming into South Africa. And we look forward to be able to manage that into the -- across the nations -- across the countries in which we operate in Africa. South America we were only partners with the Dominican Republic in setting up structures to purchase and order vaccines and get them into the country. We've got a very strong relationship and worked extremely well. It's one of our most responsive COVID initiatives as being -- as you know, Dominican Republic being a holiday destination got hit very hard in the early days of COVID. And then we are working again with the Argentinian government on sourcing vaccines. Again all the emerging and developing world are slightly behind the developed economies as far as rolling out that vaccine. It's absolutely critical for the to manage a global solution on the vaccine rollout. And so we are part of it. At this stage, it is not possible for private enterprises to purchase vaccines themselves, but we are partnering with our host countries. And already -- for instance in Nevada we're talking about rolling out some of the vaccines to the critical support staff within the mining industry as well as other industries. So it's a very collaborative initiative, and we're -- I mean it's been an impressive partnership across all 13 of our host countries. And I'm optimistic of bringing this pandemic under control in the medium-term. It's definitely not going to happen as quickly as everyone would have liked and so it's very important we all continue to exercise discipline and respect the protocols of social distancing et cetera until such time as we get herd immunity entrenched in our populations.

[Mike Parkin:]

Thanks, Mark. And all the best in the negotiations with Porgera.

[Mark Bristow:]

Thanks, Mike.

[Operator:]

Our next question comes from Danielle Chigumira of Bernstein. Please go ahead.

[Danielle Chigumira:]

Right. Thank you. My first question is on your climate targets. So they seem significantly more ambitious than those set at the Investor Day. And so could you give us any color on specific projects or specific actions that you're planning, which will lead to those higher reductions in greenhouse gases?

[Mark Bristow:]

So Danielle, we are ambitious. I mean, we are very clear that our target is to achieve a 30% reduction by 2030. And I think the net zero target out to 2050 is a bit academic at the moment because I don't think it's -- I know there's no gold mining company that goes to 2050 in the current plans. But important is that we, I and my team, my enlarged team now have always been absolutely clear that we manage our business on tangible plans. So there's a target. Everyone's been under pressure to accept that they're targeting X, Y and Z. That doesn't mean anything if you don't have a real plan against, which you can measure yourself. And so we started out with a plan to deliver a 10% reduction last year in our 2019 sustainability report. We've now increased that to 15% reduction. We've got a serious plan. Every single one of our operations has got a very specific greenhouse gas strategy whether it's Veladero where we're rolling out the connection with the -- to the Chilean power grid, which is the -- has more sustainable power component to it than any other power and so that really does take away significant emissions and also drops our costs materially in Veladero. In Dominican Republic, we are the leader in that country with the conversion from heavy fuel to natural gas driving big turbines very efficient, very low emissions and not only for our PV, but also for the nation. In Nevada, we bought with the joint venture the Newmont coal power station. We're already well down the road on converting that to natural gas. And also we are busy permitting a 200-megawatt solar power station, which will be linked to that natural gas power facility. And we've got a second one as well. In Kibali, which is our youngest mine in the group that we built on the back of hydropower installations and recently as I mentioned in my speech, we've added a big battery to that. And we've learned so much about how to form a grid a mini grid in a remote place like the jungle in DRC. And that battery technology has proved to be invaluable and we're now looking at changing around the whole construction of our grid and using the battery as the formation -- to form the grid and the power -- the hydropower to actually keep the batteries charged. And Kibali is unique in that, it's got a big hoist and it's constantly drawing large amounts of power from the grid. But what we've learned there, we've just commissioned a 20-megawatt solar power station in Morila in Western Mali. And we know that there's an opportunity to install similar battery technology in -- sorry not Morila, in Loulo-Gounkoto and be able to form the grid and use the solar to keep those batteries powered and therefore do away with a lot more of the diesel and heavy fuel power component of our power station there. And then the opportunities in -- Porgera has natural gas power and there's more and more opportunities now as people start investing in hydro in Papua New Guinea, which has got some very exciting potential sites for hydropower, particularly in our -- up in the highlands. So, when you walk through our portfolio, I've just given you a quick brush of what -- and what was -- you can't just say, I'm going to reduce power. You've got to be able to plan to do it. And one of the things that Barrick is investing in is, that technology to ensure that the next new mine we build has even more efficiency built into it as far as generation goes compared to, for instance, Kibali. So we're learning every day. And I believe that if we continue with that focus then every single general manager, senior executive in Barrick is an owner of this commitment to our stakeholders. I hope that answers your question.

[Danielle Chigumira:]

Yes. That's very useful color. Thank you. Just one more for me. On Tanzania you talked about making North Mara plus Buly a tier 1 mine and I'm trying to conceptualize how that happens. Is it the case that some of the geological upside results in a different way of operating those mines, like in a broader complex? How should I be thinking about that?

[Mark Bristow:]

The 300,000 ounces out of North Mara and more than -- about 250,000 ounces out of Bulyanhulu, you add them together, that's 550,000 ounces. And if North Mara is a moderate-grade mine, Buly is a high-grade mine. We drive the cost down to the bottom half of the cost curve and you've got a tier 1 complex combined in the country. And they both have more than 10 years life, substantially more than 10 years life. So that's really our focus. And what -- North Mara has got a bit of a way to get to that low end of the cost curve, but we'll get it there because it's got so much upside. We've still got to lift the production. Buly is helped significantly by the grade of that ore.

[Danielle Chigumira:]

Great. That's useful. Thank you.

[Operator:]

Our next question comes from Mike Jalonen of Bank of America.

[Mike Jalonen:]

Hi, Mike. I hope all as well and you're not facing a cold snap in Port Moresby. Just moving to -- I have a question on Hemlo. The -- intrigued by the steady state 1.9 million tonnes per annum production. What are the -- how much tonnes will come from each of the mining fronts to get to that production level? And what will that mean to the mine production? Thanks.

[Mark Bristow:]

Right now, Mike, there's again no chance of a cold snap here in Port Moresby, I can assure you; buckets of water, yes. About the coldest you get is when you turn the air conditioner down to about 16 centigrade. The Hemlo is -- our outlook this year is about 210,000 ounces and the plan is to get it up to about 250,000 ounces from underground. And that's why we need that extra access in the upper C Zone which we're developing now. And, I mean, you can do the math just work it back. But it's really -- it's a two -- I mean our first prize would be to get it up to 250,000 ounces. As we improve the infrastructure, the hoisting, the ventilation, one of the big challenges is getting a lot of the waste out of the mine to improve our logistics and ore movement. Right now, all that is constraining. We've still got to develop more long-haul open-stope opportunities. We've got to improve our backfill and we've still got quite a bit of remnant mining that we're doing in this next year and perhaps the year, call it, to 2022. And at the same time we're drilling and building that reserve base to support a plus 10-year plus 250,000 ounce producer, which makes it a substantial Canadian gold mine.

[Mike Jalonen:]

Okay. Well, thank you and good luck there.

[Mark Bristow:]

You know that mine well, don't you Mike?

[Mike Jalonen:]

Saw it in 1980 -- no 1988 with Corona.

[Mark Bristow:]

That's it. And it's still got legs.

[Mike Jalonen:]

Yes, it does.

[Operator:]

Our next question comes from Anita Soni of CIBC World Markets. Please go ahead.

[Anita Soni:]

Good morning. So my question is with regards to reserve replacement. So I saw some strong reserve replacement at pretty good grades. But I'm going to ask you about the question -- the areas that lagged a little bit, particularly at Nevada Gold Mines. And you guys have mentioned that, it's going to take a few years to fully see the results to get it up to where you are in Africa in terms of reserve replacement. So can you give us a little bit of color on the plan forward in the next year or two in terms of getting that -- those grades and those ounces back up?

[Mark Bristow:]

Yes. So, Anita, just trying to explain -- I'm not sure about what you're talking about there because the -- if you look at North America, we went from 31 million ounces in 2019 this is reserves at 2.68 grams a tonne to 29 million ounces at 2.8 grams a tonne. So the -- if you look at Africa of course, we've grown certainly on the back of the Loulo-Gounkoto and Kibali and North Mara replacements. Tongon is a tougher nut to crack because it is in decline. And Bulyanhulu, the big growth will come as we complete the underground feasibility study. So -- and North America is in good shape. It's -- first of all you've got to build the resource profile and we're very disciplined on the grade. And so we've done that. And hopefully Anita you would have seen in my presentation me pointing to further resource expansion. And you've got to build that front ahead of the mining phases in this -- in inventory first then in inferred. Ultimately it gets into measured and indicated which results in reserve. And it's going to take some time. But 76% replacement right now with more than 100% replacement on the resource category bodes well for us to get all our assets delivering reserve replacement over time. And I'll just take you through it. As I pointed out PV is a simple case of significant reserve growth. Veladero we didn't get the drilling done, we wanted to in 2020 because of the restrictions of COVID. So a lot of that drilling has been rolled over to this year. And again, we expect to make significant progress in the skinners, the four quarters expansion of the current Veladero pit. And then we've pointed to North Leeville some significant upside potential. Rita K we're busy drilling out. We've got the lower part of Rita K now coming into the mine plan and reserve conversion. In the upper part, we're still dealing with the water table and making sure that it's accessible which means you can bank it. Ren we've got some into our mine plan in reserves but still quite a lot more outstanding. There's still work to do in both Turquoise Ridge underground as well as Twin Creeks. And then Cortez as we develop and deliver on the feasibility study for Goldrush, you'll see some significant ounces flowing into that complex. So I'm really very comfortable about where we are as far as understanding our geology and being able to with some -- when I go to the mines now just like I go -- get in Kibali and Loulo the MRM team have a plan to convert so it's part of our business. And I mean we even added ounces in Porgera just before this close. So -- and that's got some significant upside and that's what comes with tier 1 assets. So I hope that gives you some comfort. That -- and the most important thing is that the quality of our resource/reserve is still intact. We haven't allowed anything to deteriorate on the back of a higher gold price. We've kept the $1,200 discipline.

[Anita Soni:]

Yes. No I did notice the grades were maintained or if not improved at most of the assets. I was just drilling into some of the Long Canyon Phoenix Carlin and Turquoise that didn't quite keep pace with the rest of the assets, but thanks for explanation. And then...

[Mark Bristow:]

Okay. If you are worried about Long Canyon remember we've stalled Long Canyon, as we recut our permitting. And so that's looking for the second phase expansion of the life of mine and that would also impact our reserves. At the moment, we don't have a permit so it's not coming into the reserve that part of Long Canyon.

[Anita Soni:]

Okay. And then my second and final question I guess is a long one. But you've talked about industry consolidation in the gold space. And I just wanted to understand what exactly it is that catches your eye so much with the assets that are out there. And if you could give us some parameters on what exactly you're looking for and how that competes with your internal projects.

[Mark Bristow:]

Okay. So I guess the best way is to wind back everything to 2017 early 2018. And you -- and your portfolio of companies you're covering a lot of them were very stressed. And then suddenly everything is utopic with a higher gold price. That doesn't change the long-term profitability of our industry. And then, we've got a couple of single-asset companies that have struggled to deliver against their feasibility study, but being kept alive by a higher gold price. And our industry is right now at a place where it's not worried about its future and I'd point this to both the fund managers who are keeping -- demanding cash returns not worrying about how you package -- use this higher gold price to package -- repackage our industry which is required to create a relevant industry as allocation of capital becomes more -- sort of larger and more clumsy going forward because the funds are just getting bigger and bigger and they need the dollar to be moved more. And so -- and at the same time we've got management teams that are just hanging on to this opportunity using the COVID and the higher gold price to prevent the conversation around consolidation. But it's not going to be like that forever. We've seen the market respond on softening gold price albeit that it's way above the sort of average. And that's why it's important for Barrick to have the strength, financial and management bench strength to be able to force some of these opportunities. On the criteria, we've been very clear. We look at two categories of opportunities

[Anita Soni:]

Okay. Thank you. Just wanted to close up by congratulating you on your cost control. Those are -- that's pretty good results considering the past year and the year going forward. Thank you.

[Mark Bristow:]

Thank you and I appreciate that coming from you.

[Operator:]

Our next question comes from Matthew Murphy of Barclays. Please go ahead.

[Matthew Murphy:]

Hi, there. Just wondering, if you're still expecting to formalize a dividend payout policy this year. I thought it might have come with this quarter. Or is it something you're looking to do early this year?

[Mark Bristow:]

Matt, yes, yes. I think it's important -- and I touched on this in another answer is that a lot of debate at the Board and amongst our executive team on how we manage this. Again if you wind back to 2008, 2009 and 2010, the way we managed that return of capital to shareholders and our dividend strategy they are very similar this time around. We have no visibility of how the short- to medium-term economy or our market looks like. And I think we definitely -- I mean we realized non-core assets, we believe it's important to return -- makes logical sense to return that -- part of that to our shareholders, which I've always done my whole career. We've used the cash generated by our business to bring down our net debt and cover ourselves and so that we are completely independent of the capital markets and are able to run our business without interference. So that's done and I'm very happy with that. We will continue to build the cash portion of our balance sheet through this year, if the gold price stays above $1700. And we believe that this whole unprecedented scenario is unclear and extremely dynamic and I'm pretty confident to be able to bet you that the current analyst outlook on what it's going to look like in 12 months' time is all wrong. And so our Board and debate with our management team have landed on the fact that it's better to return this. It's a significant return. Added to our $0.09 a quarter delivers about a 3.6% yield at current gold -- share prices actually a bit higher than today. And then we'll reassess things next year where I'm sure things will be a lot clearer to everyone.

[Matthew Murphy:]

Okay. Thank you.

[Operator:]

There are no more questions from the conference call. This concludes today's conference.

[Mark Bristow:]

Thank you very much. Sorry, thank you. I'd just like to say to everyone thank you very much for making the time today. Very pleased that we got through this presentation. A lot of people put enormous amount of effort into the communications and everyone was really concerned that we might break our communication through this process. So thanks to everyone that put effort. And again thank you for making the time to join us and we'll speak to you soon.

[Operator:]

This concludes today's conference call. Should you have additional questions, please contact the Barrick Investor Relations department. You may now disconnect your lines. Thank you for participating and have a pleasant day.