Barrick Gold Corporation
Q3 2018 Earnings Call Transcript

Published: 7 Nov 2018

[Operator:]

Ladies and gentlemen, welcome to Randgold Quarter Three Conference Call. I will now hand over to Mr. Mark Bristow, CEO. Sir, please go ahead sir.

[Dennis Bristow:]

Hello, everyone. Good afternoon here in the U.K., and across in South Africa and also to those in the Americas. As you know, today was one of those special days for Randgold Resources. We meet, for all intents and purposes, for the last time on a quarterly presentation. With the pending votes from our shareholders to approve the deal scheduled for tomorrow, and subject to that outcome, therefore, they'll trigger the combination, and we won't be having these meetings again. So a bit of a bittersweet moment when we look back over the last 23 years, when we incorporated Randgold Resources as a private company then, and then continued to migrate it to the main London Stock Exchange. And then, really, a long unbroken record of successful endeavors, including a run of profits over the past 16 years and a dividend stream that has grown annually for the past 12. And I'm pleased to say that we were able to present a quality set of results again this quarter despite the lockout at Tongon. As usual, I'll start it with just an update on our health and safety record. And again, we showed improvements. And I will just point out that we have a real commitment to the welfare of our employees and communities. And this is not a product of governor's box ticking, but really it's a deeply embedded management philosophy, both with respect to our communities who are our employees or the other way around and as well towards the environment where, as you know, Randgold has been a constituent of the FTSE4Good Index for the past four years. We're pleased to inform everyone that, during the past quarter, we have also been included in the Dow Jones Sustainability Index, which is fitting for our migration up to the New York Stock Exchange with Barrick. Moving, then, to the operations. We covered the highlights for the quarter. A much improved one for Randgold but not, as I indicated at the introduction, without its challenges, that being that Tongon strike that cost much of the planned output for the quarter. We had nearly a full September, and the team did really well to perform and get the mine up to run rate during that time. Another record quarter from Kibali and a solid performance from Loulo-Gounkoto kept the group production in line with last quarter. And more importantly, we had a very good performance on total cash cost per ounce, coming down by 16%, profit increasing by 25%. And as is always the case with Randgold, an improved - when you get those sort of movements, you get an improved net cash position with cash up 8% or to more than $650 million. We made good progress with Massawa and also our exploration progress across our portfolio. These are the numbers. And as you'll recall, we had a slow start to the year with the pushback for Gounkoto super pit impacting production during the first two quarters. But this set of numbers shows that, as we forecast, there was a big improvement on the back of grade, both with - driven by Kibali's underground performance and also Loulo getting back to mining closer to its reserved grade. Talking about Loulo, this is the update for the Loulo-Gounkoto complex. Back to normal with the run rate and production up 16%, total cash cost down by the same margin and profit from mining increased by 19%. And Brownfields exploration continued to confirm the potential to replace the ounces that we have been mining this year. Operating results show the head grade milled was back at the reserved grade target of 4.6 grams as a combination, as a complex. Although this was weighted towards the underground mines while Gounkoto was still on its way to returning to its full capacity. Loulo standalone. The underground mines at Loulo delivered across-the-board improvements, and we continue to work on further efficiencies. And these are the results of the Loulo standalone operation. And again, you'll see grade is up and the throughput was back down. And that is really because, if you recall last quarter and the first two quarters as we processed a lot of Baboto open pit ore as we managed the scheduling of Gounkoto. That's now stopped and we're back to full-grade ore from underground. On the exploration side, Yalea, good results from the extension and base of the Purple Patch, adding some 460,000 ounces at 11 grams a tonne to the mine plan. And similarly, ongoing work at Gara has confirmed that the main mineral system remains open in all directions. And then Loulo 3, we progressed that too, and completed our preliminary economic assessment, which really points to the potential for an open pit resource of 300,000 ounces and an additional 500,000 ounces if the underground operation is included. At Gounkoto, the establishment of the super pit has delivered significant performance and production was up 39%, total cash cost per ounce down by 26%. And with this operation, I've settled the relative contributions from Loulo and Gounkoto have returned to their targets of 60

[Operator:]

[Operator Instructions]. Our first question comes from Josh Wolfson with Desjardins.

[Joshua Wolfson:]

Mark, with regards to the DRC. Has there been any updated discussion about some of their qualms that they had highlighted with the transaction? Or any way to get them all on side with the terms that have disclosed to market?

[Dennis Bristow:]

So Josh, the only issue was that press speculation from SOKIMO, which we responded to in the press. That, really that SOKIMO is a 10% shareholder in Kibali, the mine, S.A., Kibali S.A. which is a local company that owns the mining permit and the asset. And it's not - a lot of people, including SOKIMO's CEO, tried to make a comparison between and Tenke Fungurume and some of the Gecamines Glencore sort of scenarios that played themselves out earlier in the year. And it's not the same case. And what's more is we're not selling this asset or moving out. Everyone's the same. There's no change in control, whichever way you cut the agreement. And SOKIMO has no rights other than their 10% shareholding in certain provisions in the joint venture, which gives them access in the normal course of business to the benefits of their investments. So I think there's no preemption that they can exercise at all.

[Joshua Wolfson:]

Alright, that sounds promising. And then, similarly in the DRC, based on the new mining law, I'm just trying to understand how cash flows from Kibali will work going forward? Because I guess - I'm assuming, in protest you'll be effectively accounting for those taxes appropriately, but there's also the VAT balance that will be accounted against that. Is there any sort of perspective you can provide in terms of how we should be looking at taxes or cash taxes, at the very least, for Kibali in the next 12 months, let's call it?

[Dennis Bristow:]

So we've indicated to the market that a lot of those taxes embedded in the 2018 code, we were already paying under duress. And that the net impact of the application of the 2018 code on Kibali is around $10 million. At the same time, the TVA - just to remind you, as I said earlier, we've reached agreement on that. The government has accepted the value in U.S. dollars of the outstanding amount and has committed to a program, an agreement, signed agreement, on allowing us to recover those monies that owed under the TVA reimbursement. And it will start with the government, and they've already paid us the first check. They'll pay us in cash, the $40 million, Willem? Willem's [ph] on the call, so. And then we've got a program of being able to recoup it through offsets as we do in other parts of Africa. And, again, that's a material bit of progress in dealing with these outstanding issues.

[Graham Shuttleworth:]

And just realize the value is in dollars.

[Dennis Bristow:]

And as I've said, the value - the recognition of that outstanding amount is in U.S. dollars.

[Joshua Wolfson:]

Got it. And one last question, sort of related to DRC as well. Unit costs for Kibali looked very good this quarter. Should we assume similar costs going forward, given that the shaft is operating near steady-state?

[Dennis Bristow:]

So we've always guided costs sort around the $500 mark. And we'll, certainly for the next four years or so, we're sitting at between $500 million and $600 million - I mean $500 and $600. As I pointed out in my introduction, I still think there's efficiency improvement opportunities at the mine and that's what Willem and the team are already focused on. But we're comfortable with the numbers more or less around these levels. There will be some variations driven by things like strip ratio and other prices. As you know, unless it's a big pushback, we take it on the nose.

[Operator:]

[Operator Instructions]. Our next question comes from Howie Flinker, Flinker & Co.

[Howard Flinker:]

I didn't hear clearly from you and Graham, what's the total amount that the Malian government owes you?

[Dennis Bristow:]

So you're talking about DRC government. That's what you're referring to, which is about $218 million.

[Howard Flinker:]

$218 million. Oh, I confused them. And is there any settlement with the taxable dispute with the Malian government or not yet?

[Dennis Bristow:]

So we're busy with the facilitation, Howie. And we're in the middle of that process.

[Graham Shuttleworth:]

Howie, the Malian amount is about $200 million as well.

[Operator:]

[Operator Instructions]. We have no further questions. Speakers, back to you for the conclusion.

[Dennis Bristow:]

So thank you, everyone, for making the effort. We see there's a long list of people on the call. And it's encouraging that we managed to get all the numbers out. And it's unique only to have two questions, but thank you. And again, thank you for your support and continued interest in the company and we trust that you will be equally engaging with us as we migrate to the new combination, which we're all very excited about. So again, thank you very much.

[Operator:]

This concludes today's conference call. Thank you for your participation. You may now disconnect.