巴里克黃金 (GOLD) 2013 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to the Barrick Gold Q4 results conference call.

(Operator Instructions)

As a reminder, this conference call is being recorded on Thursday, February 13, 2014.

I will now turn the conference over to Ms. Amy Schwalm, Vice President, Investor Relations.

Please go ahead.

Thank you, operator, and good morning, everyone.

Before we begin, I'd like to point out 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 performancing difference in the estimates contained in our forward-looking statements, please refer to our latest year-end report for our most recent AIS filing.

With that, I will hand of the call over to Jamie.

Thanks, Amy.

Good morning, and thank you to everyone for joining us on this call.

I am here today with our CFO, Ammar Al-Joundi; and our Senior Vice President of Global Exploration, Rob Krcmarov.

And I'd like to take the opportunity to introduce and welcome Jim Gowans, who joined Barrick in late January as our Chief Operating Officer.

Jim has extensive operating background, with four decades of global mining experience, most recently as Managing Director of Debswana.

He's got significant experience in the gold sector, having worked for eight years at Placer Dome, which culminated in his role as Executive Vice President of Canadian Operations.

And also held senior operating positions at Inco, including Chief Operating Officer.

So we are very pleased to welcome Jim to the Barrick team.

In addition to this group, there are other members of senior management with us, all of whom will be available to answer questions after the presentation.

Before we go over our results, I'd like to talk about how Barrick has changed in the last year and how we feel we've been able to reshape the Company's direction.

We have been intensely focused on managing the things which we can control.

And during 2013, we made significant progress in reducing costs by cutting G&A.

Cutting, suspending or deferring lower-return capital investments, improving our balance sheet, delivering on our operating targets and optimizing our asset portfolio in order to maximize free cash flow.

As a result, I believe we are transforming into a leaner, more agile organization, one that is focused on assets which hold longer-term shareholder value and on getting higher returns on our investments.

Almost two years ago, well before gold prices declined, we led the way in changing our business quite dramatically to focus on risk-adjusted returns and free cash flow under our disciplined capital allocation framework.

Returns driving production rather than production driving returns, has been the basis for every decision we've made since.

While we certainly continue to be bullish on metal prices long-term, the reality is that our industry is cyclical, and we need to provide returns in any price environment.

And with this strategic shift, we feel we got a significant head start in being prepared for and adapting to these lower gold prices.

I would characterize 2013 as a year of re-calibration, a year in which we implemented a comprehensive plan to reshape and strengthen the Company.

This involves some decisions which were not easy, such as the temporary suspension of Pascua-Lama, cutting the dividend and exchanging ounces for cash flow by removing them, both from production and reserves.

Ounces which did not meet our return hurdles at a more conservative gold price.

But having done the equity issue last fall, we now have a stronger balance sheet.

And with our high-quality assets and a cost structure that is among the lowest in the industry, we are much better protected against further price downside.

And importantly, more strongly positioned to take advantage of opportunities and benefits when metal prices recover.

Last year, we outlined a number of key priorities for 2013.

I'm very pleased to say that we have largely executed on them, and as well as carrying out other initiatives.

So let's review how we did against those priorities.

First, our goal is the highest level of operating excellence.

Our operations are delivering well, and we met or exceeded our operating guidance for the year.

But of course, there's always room to improve, and the more streamlined reporting structure we introduced late last year is designed to get us there.

This has eliminated several layers and it brings our mines, particularly our largest mines -- which are the main long-term value-drivers -- closer to Senior Management.

Importantly, it allows our mine managers to focus solely on the core business of operations.

And it will drive our cost-reduction efforts through increased productivity and efficiencies, which, in turn, will increase returns and free cash flow.

As you've seen, we've also have been working hard on improving Lumwana's performance.

And I'm really pleased to say the changes our copper team have brought about have definitely allowed that operation to turn the corner.

A bit more on that later.

We have significantly more financial flexibility than we did a year ago, which is key in today's environment.

Earlier this year, we termed out $3 billion in debt to extend our debt maturity schedule.

The $3 billion equity offering, combined with $2 billion of reductions to budgeted capital and cost, and the decision to temporarily suspend Pascua-Lama, has substantially improved our liquidity and near-term cash flow.

And we've made very good progress in optimizing our portfolio.

We've run our new mine plans and calculated our reserves at $1,100 per ounce, so that we can focus on the highest-margin ounces, while still preserving as much optionality as possible for when gold prices recover.

We sold several non-core assets for total consideration of almost $1 billion.

So there's been quite of bit of progress, but there's still more we can do.

Our fourth-quarter results demonstrate that our operations continue to deliver very well.

We've produced 1.7 million ounces at all-in sustaining costs of $899 per ounce in the fourth quarter.

And 139 million pounds of copper at C1 cash costs of $1.81 per pound.

These strong operating results drove adjusted net earnings of $406 million or $0.37 per share.

Disappointingly, we also recorded impairment charges of $2.8 billion, which resulted in a net loss of $2.61 per share.

And Ammar will speak about that later in more detail.

Our adjusted operating cash flow was $1.1 billion, and that reflects the underlying strength and quality of our operations, even at these lower gold prices.

Our year-end 2013 gold reserves were 104 million ounces, which is 26% lower than last year.

But about one-half of this decline is due to using a more conservative gold price assumption of $1,100 per ounce.

Last year at this time, we said that a $300 decline in gold price would impact reserves by under 10%.

We've reduced our reserve assumption this year by a further $100 to $400 per ounce, and that has reduced our reserves by 13%.

The overall decline of 26% also reflects reductions due to our commitment to focus only on ounces that generate free cash flow and appropriate returns.

As well is a reduction from the ounces that we mined and processed during the year, and the ounces that were sold in 2013, as well.

And Rob will give you a bit more color on this in a moment.

With the cost reductions and operating efficiencies we implemented last year, we improved guidance for both gold and copper during the year, and we met or exceeded all of these targets.

Our 2013 gold production of 7.2 million ounces was within our original guidance range of 7 million to 7.4 million ounces, and represents the 11th year in a row we have met our gold production guidance.

During the first half of the year, we reduced our all-in sustaining cost guidance twice from original guidance of $1,000 to $1,100, down to $900 to $975 per ounce.

Our full-year all-in sustaining cost results of $915 per ounce was very near the lower-end of this improved range.

Adjusted operating costs were $566 per ounce.

And those were well-below our original guidance range of $610 to $660 per ounce, and also came in below our lower-revised range of $575 to $600 per ounce.

The improvements at Lumwana enabled us to increase our copper production guidance from the original range of 480 million to 540 million pounds, to 520 million to 550 million pounds.

And our actual production of 539 million pounds was within this recent guidance range.

This also allowed us to lower our C1 cash cost guidance range significantly during the year, to $1.90 to $2 per pound, from the original guidance of $2.10 to $2.30 per pound.

And our C1 cash costs came in again at the bottom-end of their lowered range at $1.92 per pound.

And our C3 fully allocated costs of $2.42 were very near the bottom of the revised range of $2.40 to $2.60 per pound.

So again, we had lowered during the year from an original range of $2.60 to $2.85.

We had another quarter of solid results at Lumwana in the fourth quarter, and we expect to sustain or improve on these levels in 2014.

This has been quite a dramatic turnaround, and is a major accomplishment for the copper leadership team.

It demonstrates clearly that Barrick can take on a significant operating challenge and turn it around.

And you can see from this chart how production, shown as the red line, has increased.

And costs, shown as the green line, have declined quite substantially since we appointed the team at the end of 2012.

The copper group assessed many different opportunities to reduce cost and improve cash flow at the mine, and ultimately decided to implement a new mine plan.

This enabled us to do a number of things, like eliminate our large mining contractor, and also eliminate a maintenance contractor cost by bringing maintenance in-house.

And that's resulted in improved productivity of the fleet, and lower costs and better production.

And those are just a few examples of the improvements we've made.

So we are pleased with the progress so far.

But the team remains confident and excited that there's still many other opportunities at Lumwana.

It may take a bit of time to realize the full potential.

But after all, this is a mine that will operate for decades to come.

We've also made significant progress in optimizing our portfolio this year.

Ongoing portfolio management is fundamental to our business model.

And our ultimate objective is to retain only those assets which can generate attractive returns and free cash flow over the long-term.

The outcome of these efforts is a reduction of the number of mines in our portfolio by 8, to 19 by mid-2014, from 27 in 2013 -- a significant reduction in the number of mines in our portfolio.

But this isn't just about divesting non-core assets to get cash.

It's about making sure we are focused on the right assets, the ones that can best deliver long-term value to bear in our shareholders.

As part of this strategy, we also shelved projects which did not meet our risk-adjusted rates of return even before the gold price decline.

Portfolio optimization also involves improving capital and operating efficiencies at our existing assets.

And in some cases, this involves a significant change to the mine plan.

An example of this is Bald Mountain, where we have reduced of the number of pits to focus only on the most profitable ones.

So we are now a smaller Company in terms of production than we were a year ago.

But we are more focused, more agile, leaner and better-positioned to be a more profitable one, in alignment with our disciplined capital allocation framework.

It's also important to note though that while we've been very busy managing short-term imperatives, it really is essential to maintain an unwavering commitment to investing in the future.

And positioning the Company to deliver leverage and excel on the upside.

Our award-winning exploration team, which will be presented with the Thayer Lindsley Award at PDAC for Goldrush -- which is an award for a recent significant international discovery -- has delivered tremendous value to Barrick over the years.

And congratulations, Rob, to you and your team, for this well-deserved honor.

Both in terms of new discoveries leading to new mines such as Lagunas Norte and other exploration finds, the exploration team has discovered a number of projects like Lagunas Norte, which was actually discovered early last decade when the gold price was around $300 per ounce.

As well as major additions at existing mines, such as Cortez.

We see that as a distinct competitive advantage for Barrick.

So we remain committed to funding exploration.

And with that, I will hand it over to Rob to talk about reserves, exploration funding and our exploration strategy.

Thanks, Jamie.

In 2013, we decided to use a much lower and more conservative gold price of $1,100 to calculate the 2013 reserves.

And that's compared to last year's assumption of $1,500.

We had signaled that reserves would drop by more than 10%, previously indicated for a $300 drop.

While this price is well-below current spot prices and below our long-term yield for gold price, it reflects our unrelenting commitment to focus on the most profitable ounces which generate the highest risk-adjusted returns and free cash flow.

With that said, as we have been signaling, our prudent and probable reserves have declined 26% to about 104 million ounces.

Importantly, all of the reserve declines, excluding mining and production depletion and divestitures in 2013, transferred to resources, reserving our option to mine this metal at high gold prices in the future.

So to be clear, these haven't gone away, they've simply been reclassified into M&R resources for now.

Moreover -- and this is an important point -- which leave all of the reserve ounces that were reclassified to resource, were scheduled to be mined and produced well after 2020.

And in some places after 2024.

These ounces could return back to reserves in future.

While we reduced our reserves, measured and indicated resources increased from 83 million ounces to 99.4 million ounces, based on a gold price assumption that was reduced from $1,650 to $1,500 per ounce.

Inferred resources decreased slightly to 33 million ounces compared to 36 million ounces in 2012.

This represents over 130 million ounces in resources, a tremendous amount of optionality for the future, at high gold prices.

Let me walk you through the changes in our gold reserve portfolio.

The impact of adopting a conservative gold price and reducing it by 27% to seek higher returns reduced our reserves by 13%.

About 4% is for ounces we removed from the mine plans because they did not meet our hurdle returns after additional capital investment.

Even though there were actually economic at $1,100 and met the regulatory requirements to classify as reserves.

And I want to take a moment to talk about this.

Because this is an example of how Barrick has changed, and how we think the industry needs to change.

It's another good example of the progress that we've made in our pursuit of maximizing profit over ounces.

To add an ounce of reserves, there's no requirement to make any sort of reasonable return on invested capital.

If it cost $100 of capital to make $101, then it meets the economic test and can be counted in reserves.

In the past, with an emphasis on maximizing reserves and production, those ounces would've been included.

But we are taking those ounces out of our mine plans and out of reserves.

Because while they make some money, they do not make enough to meet our risk-adjusted hurdle rates.

So for example, at Pueblo Viejo, we made the decision not to spend capital building a tailing storage facility that wasn't needed until late next decade and which provided marginal return on invested capital.

Instead, we cut the spending, and are searching for better, cheaper ways of building this tailing storage facility in the future, closer to when we need it.

Our aim is not only to reduce costs and improve returns, but also to tie spending to conditions closer to when the gold is available, which also reduces our risk on this capital.

This decision moved ounces from reserves to resources, but that's okay.

This is the right risk-adjusted economic decision.

At Bald Mountain we made a decision not to spend in excess of $500 million over the life of mine, developing six additional open pits that did not generate a suitable risk-adjusted return on invested capital.

This could result in the life of mine being shortened by 12 years, from 2034 to 2022.

However, we maintain the option to develop these pits in the future should the conditions change and gold prices increase.

A further 2% of ounces were removed from reserves, as they are no longer economic, due to the increased costs at certain of our mines.

And 2% was removed due to the 2013 sale of non-core high-cost assets.

Another 6% is related to ounces mined and processed from reserves.

We did have about 2 million ounces in additions to reserves from drilling at some perspective properties in Nevada.

Including ounces [entered] at Cortez in the lower zone, and at Turquoise Ridge in the north zone.

Additionally, drilling added 3.4 million ounces to measured and indicated resources.

At Goldrush, tick was reached in KCGM.

It is important to note that, as I mentioned, the reserve reductions -- excluding ounces mined and processed, and divestitures, of course -- they all transferred to resources.

And this largely preserves the option to access these ounces in the future at higher gold prices.

So these ounces obviously haven't been eliminated.

Although we've narrowed our expiration focus, as Jamie said, we are still bullish on the future.

Exploration has been a key contributor to the success of the Company.

And the Company continues to recognize the excellent value proposition investing in it.

Since 1990, we've spent around $3.2 billion on exploration, for an overall finding cost of around $24 per ounce.

That's about half the industry average.

During that time, we've mined 135 million ounces of gold, we've acquired 110 million ounces and found 131 million ounces of gold through exploration.

Our total 2014 exploration budget of $200 million to $240 million is a further reduction from last year's expenditure.

And continues to be focused on high-priority, quality projects, while maintaining a balance at earliest-stage exploration.

A decrease in our exploration budget relative to two years ago is unlikely to affect our ability to discover the next new economic gold deposit.

We decided to cease exploration in several regions where either the industry in general wasn't being successful, or the risks were too high.

In fact, the absolute spend on our projects and mines in the Americas has actually increased slightly.

More than 50% of our budget is allocated to North America, at which the majority is targeted for Nevada, largely for the Goldrush project, which is close to our Cortez mine.

Infill drilling at Goldrush last year added another 1.6 million ounces, for a total 10 million ounces in the measured and indicated category.

And there is also another 5.6 million ounces in the inferred category, for a total resource of about 15.5 million ounces.

Our pre-feasibility study is on track for completion in mid-2015, and is considering a number of options, including open pit mining, underground mining or a combination of both.

Drilling is currently focused on establishing confidence in the continuity of the high-grade portions of the deposit, in support of the underground development option.

The Cortez district is a cornerstone of Barrick's current and future success, and is located in an area well-provided with significant mining infrastructure and expertise.

I will now hand it over to Ammar.

Thanks, Rob.

I really do believe our portfolio of mines is the best in the business.

We had strong results from our operations, anchored by our five core mines: Cortez, Goldstrike, Lagunas Norte, Veladero and Pueblo Viejo -- all of which performed well in 2013.

Together they contributed 55% of our overall production, or nearly 4 million ounces at average all-in sustaining costs of less than $700 an ounce.

For 2014, we expect these mines to continue to perform well, contributing approximately 60% of the Company's total production at average all-in sustaining costs of between $750 and $800 per ounce.

Cortez had another great year, producing 1.3 million ounces, much better than we were anticipating.

While the mine will transition to lower grades and production in 2014, we still expect it to produce between 925,000 and 975,000 ounces at all-in sustaining costs of between $750 and $800 per ounce.

Still an excellent result, with an exceptional mine, with many more years of significant production.

And importantly, with tremendous upside potential.

At Goldstrike, the autoclaves are undergoing modifications to treat about 4 million stockpiled ounces that otherwise could have only been processed through the roster towards the end of the mine life.

That's going to allow us to accelerate the cash flow from these ounces, keep the autoclaves working and allow us to get longer-term use out of them.

We will be spending about $250 million this year to complete this work, with first production from these modified autoclaves anticipated in the fourth quarter.

The project is expected to contribute average annual production of between 350,000 to 450,000 ounces in the first full five years -- per year, in the first full five years.

Total Goldstrike production is expected to be 865,000 to 915,000 ounces in 2014, similar to 2013, at all-in sustaining costs of between $920 and $950 per ounce.

Production is anticipated to increase to above 1 million ounces in 2015, with a full year of operations from the modified autoclaves.

Pueblo Viejo continues to ramp up to full capacity, expected in the first half of this year.

Our share of production in 2014 is anticipated to increase to 600,000 to 700,000 ounces, from about 490,000 ounces last year.

At all-in sustaining costs of between $510 and $610 per ounce, compared to $735 an ounce in 2013.

The Lagunas Norte mine is expected to produce 570,000 to 610,000 ounces in 2014 at all-in sustaining costs of $640 to $680 an ounce.

Production at Veladero is anticipated to be between 650,000 to 700,000 ounces this year at all-in sustaining costs of between $940 and $990 per ounce.

While these are our core mines, I want to stress that virtually all of our mines performed very well this year.

Our ability to cut all-in sustaining cost guidance twice, and then come in near the bottom-end of that range, is a testament to the strength of our operations.

We are looking forward to further -- we're looking forward to continued operational excellence and further improvements now that Jim Gowans, with over 40 years of experience, is on board as our new Chief Operating Officer.

The quality of our assets is well illustrated on this slide.

Our five core low-cost, long-life mines are among the best in the world.

And as I mentioned, are forecast to generate about 60% of our production in 2014 at all-in sustaining costs of between $750 and $800 per ounce.

Another six of our mines, representing 20% of production, are expected to have average all-in sustaining costs of between $900 and $950 per ounce.

These six mines are also very solid producers.

These superior assets position Barrick extremely well amongst our peers, even if gold prices remain at these levels or decline further.

However, even though these are some of the best, lowest-cost mines in the world, even at these mines, we continue to focus on high-margin, high-return ounces.

For every one of these mines, we have run the mines at $1,100 per ounce.

And as Rob mentioned in his discussion on reserves, we have taken out of the plant higher-cost, lower-margin ounces.

For each of the six mines with average-expected 2014 all-in sustaining costs above $1,100 per ounce, we will either optimize or change mine plans further.

Suspend, close or divest these operations to improve cash flow and the overall quality of our portfolio.

We will continue to work to shrink the 20% in grade which represents these higher-cost mines.

Turning to Pascua-Lama, I would like to provide an update since we announced our decision to temporarily suspend the project during the fourth quarter.

While this was not an easy decision by any means, it was the right thing to do, particularly in the current price environment, and has materially improved our near-term cash flow.

More importantly, however, this suspension will allow us to catch our breath, regroup and rethink how to better develop the project.

The ramp-down is progressing on schedule for completion by mid-2014, and will be largely complete at the end of the first quarter.

We expect to incur costs of about $300 million this year for suspension-related activities, of which approximately 25% will be capitalized.

That compares to over $2 billion in 2013, so it's a significant reduction.

A decision to restart development will depend on improved project economics and reduced uncertainty related to legal and regulatory requirements.

Subject to these improved conditions, the remaining development will proceed in distinct stages, each with specific work programs and budgets, in order to facilitate better execution and improved cost control.

In the interim, we will continue to explore opportunities to improve the project's risk-adjusted returns, including strategic partnerships or royalty agreements.

We are applying discipline across all of our businesses, and Pascua-Lama is no exception.

Although the decision to suspend construction was difficult, it with the right decision to make, and is being done in such a way as to preserve the option to resume development of this world-class resource.

Turning to our fourth-quarter results in a little more detail, gold production was 1.71 million ounces, and copper production was 139 million pounds.

You can see on the chart that our efforts to drive costs down continued, and have had a measurable impact.

Our all-in sustaining costs of $899 per ounce for the quarter was nearly 15% lower than the comparable quarter last year.

C1 costs for copper are down over 5% from last year's level, with the improved performance at Lumwana.

On an adjusted basis, net earnings were $406 million or $0.37 per share.

This compares to adjusted net earnings of about $1.2 billion in the prior-year quarter.

The net loss in the quarter of $2.83 billion reflects after-tax impairment charges of $2.82 billion.

Operating cash flow of $1 billion and adjusted operating cash flow of about $1.09 billion for the quarter, compared to $1.8 billion and $1.9 billion, respectively, in the prior-year quarter.

In the fourth quarter, with the suspension of Pascua-Lama, we stopped capitalizing interest on the project, which had an impact of about $0.05 on our fourth-quarter earnings.

In 2014, we won't be capitalizing interest on Pascua-Lama.

And as a result -- and as outlined in our 2014 guidance -- we are forecasting finance expense increasing by about $300 million in 2014 versus 2013.

Note this is not a cash item, it is simply a change in accounting from capital to expense.

As a result of mine plan changes, the lower reserve price assumption and the decision to temporarily suspend Pascua-Lama, we incurred impairment charges in the fourth quarter.

The major components of the $2.8 billion of charges are comprised of: approximately $900 million for Pascua-Lama, as we rolled down capital invested since the end of June and reduced the carrying value by $300 million, primarily as a result of the temporary suspension.

About $600 million for Porgera.

This reflects the new mine plan, which is focused on the higher-grade underground mine and excludes further significant investment for the open pit, as it does not meet our return thresholds.

As a result, the mine life was shortened.

About $300 million for Veladero relating to lower gold price assumptions and the impact of sustained inflationary pressures in Argentina on operating and capital costs.

Which led to a reduction of reserves and life-of-mine production.

About $300 million for Jabal Sayid, reflecting a decrease in the NPV in the updated life-of-mine plan.

Jabal's fair value is also negatively impacted by the delay in achieving first production.

We also recognized about $550 million in goodwill impairments related to the Australia Pacific gold segment, primarily related to the lower-estimated fair value at Porgera.

We fully expect our assets will generate substantially more economic benefits over time for our shareholders than these current valuation levels imply.

Although we do not rely on higher prices to drive our business plans, we do remain positive on long-term price fundamentals for gold and copper.

With higher prices in the future, we would re-assess the fair value of our high-quality, long-life assets such as Pascua-Lama, and could potentially reverse some of the impairment charges recorded.

The financial position and liquidity of the Company has been a focus over the last year, and I would like to spend a little bit of time on the improvements we've made to the balance sheet.

First, I would like to reiterate that our underlying business is very strong.

We generated operating cash flow $4.2 billion in 2013 -- a great result in a year where gold prices declined some $500 an ounce.

In addition to the actions we took to reduce costs and improve near-term cash flow last year, we also extended our undrawn $4 billion facility out to 2019.

And termed out $3 billion in debt, to lengthen the maturity schedule to improve our short- and medium-term liquidity.

We've ended the $3 billion equity issue.

We felt it was prudent to issue additional equity to improve our capital structure and de-lever the balance sheet.

Importantly, this was not done in isolation.

It was done as part of the holistic, larger strategy Jamie referred to earlier.

And followed the preceding actions, including a $2 billion cut to budgeted costs in order to provide even more financial flexibility to the Company.

But as I've said before, the foundation for financial strength is a strong and profitable underlying business.

By focusing on profitable ounces and a disciplined focus on capital return, we continue to strengthen our business.

And directly, as a result, we improve our financial strength.

The equity issuance was done for the sole purpose of strengthening the balance sheet.

And the proceeds from the equity offering have largely been used to pay down debt -- near-term debt -- eliminating about $2.5 billion of debt repayments over the next five years.

Our net debt was reduced by about 21% as a result, and there has been a significant improvement in our credit metrics.

In the next two years, we now have only $300 million of debt to repay.

In the next four years, we have only $1 billion of debt to repay.

Remember, we had $4.2 billion of operating cash flow this last year alone.

I will now turn it over to Jamie to discuss our outlook for 2014, and to wrap up.

Thanks, Ammar.

For 2014, we expect gold production of between 6 million and 6.5 million ounces.

And much of that lower-expected production this year compared to last year is the result of decisions we've made to prioritize profitable production and maximize near-term free cash flow.

I think that signals that we're making good headway on our plans to put cash flow and returns before just ounces.

About 750,000 ounces of the decrease is related to the sale of the non-core mines.

Our decision to close Pierina accounts for another 100,000 ounces, which is what it produced in 2013.

A further decline is for the Cortez mine, which is anticipated to produce about 350,000 to 400,000 ounces less this year as part of the mine plan.

But it's still a fantastic mine, producing just under 1 million ounces at low costs in 2013.

The decline at Cortez and the sale of the mines is partially offset by Pueblo Viejo, with higher production of between 100,000 and 200,000 ounces expected in 2014, as it completes the ramp-up in the first half of this year.

And about another 100,000 to 200,000 ounces of increases at a number of other mines.

Our 2004 all-in sustaining costs and adjusted operating cost guidance of between $920 and $980 per ounce and $590 and $640 per ounce continue to be the lowest among our peer group.

Copper production in 2014 is expected to decrease slightly -- about 10% -- to 470 million to 500 million pounds.

Due to lower-anticipated production from Zaldivar, where we expect lower tons mined and processed, and lower recoveries.

Our C1 cash costs are expected to be in the range of between $1.90 to $2.10 per pound as a result primarily of the impact of lower production on unit costs.

I will make just a couple of general comments on cost.

While the underlying commodity prices have been firming, based on expectations of economic recovery in 2014, most of the products used in mining continue to be soft.

And we are working to drive our prices down against the targeted plan to reduce procurement costs.

We are seeing reductions in some inputs: heavy equipment, labor rates, labor, less turnover, lower wage increases, lower delivery times for equipment, and many other savings that we are still hopeful to capture.

Turning to a more detailed look at our 2004 outlook, 2013 was a big year for us in terms of CapEx.

But in 2014, we expect to spend about $2.5 billion less than last year, or about a 50% reduction.

That decrease primarily relates to lower project capital expenditures, primarily as a result of our decision to temporarily suspend Pascua-Lama.

But it also represents lower-sustaining and expansion CapEx throughout the Company.

The lower-sustaining CapEx is due to our completion of significant waste-stripping activities at certain sites in 2013, and also to the asset sales we made.

Our 2014 expansion CapEx is for remaining construction of the Goldstrike bio sulfate project, the CIL plant at Bulyanhulu and work on the Cortez Hills lower-zone expansion.

Which is expected to extend the mine life by up to seven years.

I'd like to highlight just a couple of items that will impact our earnings this year.

As Ammar already discussed, we anticipate higher finance costs of $800 million to $825 million a year going through the income statement, as a result of our decision to temporarily suspend Pascua-Lama and cease capitalizing interest.

So more through the income statement, less being capitalized.

We will be expensing $400 million to $500 million in costs associated with care and maintenance activities for Pascua-Lama and Jabal Sayid, as well as for expenses required to ramp down mining in the open pit at Porgera.

So more expense in that category where some of those expenditures might have been capitalized in the past.

Our effective income tax rate in 2014 is expected to be about 50%, based on a gold price of $1,300 per ounce, which would increase at lower gold prices.

Just let me break this down a bit more to show that 2014 is a bit of a unique year for a couple of reasons.

And the effective tax rate should come down in the future.

First, Pueblo Viejo represents a more significant portion of our overall taxable income this year.

And Pueblo Viejo's tax rate is expected to be just over 50%, following amendments to the special lease agreement.

That compares to an average rate of about 35% for our other mines.

So that grinds our overall tax rate up.

The $400 million to $500 million in expenses this year that I mentioned for Pascua-Lama, Jabal Sayid and Porgera have no offsetting tax deductions.

And so therefore, they increase our effective tax rate.

But those expenditures should decline significantly beyond 2014.

And we expect to be able to offset these amounts against future taxable income.

As I alluded to in my opening remarks, I think you can see that the actions we've taken during the last couple of years have been consistent with our strategy that we adopted almost two years ago.

That's a strategy of disciplined capital allocation which emphasizes financial discipline, returns over production, cost reduction and control, and free cash flow to further strengthen the Company.

And importantly, position it for the future.

Some of the decisions we have had to make were tough.

And they've resulted in less ounces.

But if we are firmly committed to higher returns and profitable production, one of the results of that has been to lower ounces from both production and reserves this year.

And we are okay with that, because it is the right thing to do.

Operationally, our mines had a great year, and almost all reached their targets.

We've strengthened our balance sheet with a successful equity issuance against the backdrop of a tough market.

We cut costs, and suspended, deferred or cut lower return investments.

And we sold numerous non-core assets.

I think we've come along way.

But there's even more value to pursue.

I think we are making a cultural change throughout the organization.

And our employees have embraced that, and identified numerous additional areas where we can not only cut costs for deferred projects, but improve efficiencies.

And we will be working hard to implement these during the coming year.

Part of that involves running scenario-planning analysis at various prices to identify the strategic options to either down-size, up-size, accelerate, close or preserve cash -- in whatever price environment we are in.

To become a more agile Company.

As part of this process, we are investing in and upgrading our business planning with additional people, and ensuring we have the right people in the right places.

And our new organizational structure provides effective support to allow us to do this.

I really do believe that we have the best assets in the gold industry, which form a solid production platform of long life and low-cost assets, as well as a portfolio of potential development opportunities.

And as Ammar has pointed out, our core assets will produce almost 4 million ounces at an industry-leading all-in sustaining cost of only $750 to $800 per ounce this year.

So I look forward with a sense of optimism as we continue to transform Barrick into a stronger but leaner and more agile Company.

One that can respond nimbly in any price environment, and one that generates superior returns.

With that, operator, I will now take questions.

Thank you.

(Operator Instructions)

John Bridges with JPMorgan.

Thanks for the strong results.

I was just trying to dig down your answers on the call, the impact of the lower gold price on the reserves.

You said that it affects largely ounces, which are way out to the production schedule.

But to the extent that you hit material that used to be in the reserves, at $1,500, that falls out to the $1,100 end-pits that you are currently mining.

Then presumably, you are still going to treat that.

So it's not going to have a huge impact on the grade that you are mining, and your margins.

Well, thanks, John.

I think that's an important point, that while we run the mine plans at $1,100 and are doing the reserves at $1,100, we've preserved a huge amount of optionality.

And it doesn't mean we are sterilizing a significant amount of ounces, or really any ounces at this point.

As the gold price hopefully goes back up, ultimately, we mine to make money.

And we will mine to the price that allows us to make money.

So if the gold price goes back up to $1,500 per ounce, there will be ounces that we can identify as we are mining that will generate a high amount of free cash flow and returns.

We are doing our scenario planning, as I mentioned, to allow us to be more nimble and more agile to take advantage of different price scenarios.

So yes, ultimately, as the price goes up, we may go back and take an ounce that might be at a lower grade.

But the key thing is, if that's going to make money and it's going to provide a high enough rate of return, we are going to do that.

And I think we are going to be more flexible and be able to create more value as the price rises.

Okay, thanks, Jamie.

And then maybe an exploration question.

Good to hear you are still spending on Goldrush.

It sounds as if that's going to be -- looks most likely to be an underground mine at this stage.

I recognize it's very early stage.

But can you draft out what you think it could turn into?

Rob, I will ask you to answer that, please.

Sure.

At this point, I can't really give you a meaningful update until we really start getting a bit more project definition.

And really, that will happen as we approach the completion of the pre-feasibility study, which will be completed in mid-2015.

What I can say is that we've been largely doing infill drilling in support of that pre-feasibility study.

And particularly the high-grade zones, where underground mining may be feasible.

So we are definitely having a close look at underground mining.

And what we found so far through the infill program is that the high-grade mineralization appears continuous, and we are very encouraged by that.

In addition, we've done some additional drilling near the edges of the mine resource.

Some of it is deeper, and we've have intersected some very high grades.

And we are optimistic that, that will continue beyond the limits.

So I would say there will almost certainly be -- this is my guess, John -- there's almost certainly going to be an underground component to it.

Whether there is an open pit or not, we will know as we approach the completion of the trade-off studies and the pre-feasibility study.

Thanks for the comments.

Best of luck, guys.

Thanks, John.

Stephen Walker with RBC Capital Markets.

Just two questions.

First of all, to follow up on John's original question on the -- and again, congratulations on looking at the reserves based on economic returns.

Can you give us a sense of the range of the risk-adjusted hurdle rates that Rob made mention to, on an ROIC basis?

Thanks Stephen.

In essence, those vary.

But the starting point is definitely a double-digit rate of return.

So something above 10%.

And as we look at the overall risk -- whether that's political, whether it's the capital and the size of capital required, the operational risk -- then that goes up accordingly.

And so a mine in Nevada will have a different risk profile than a mine in a more challenging, difficult place in the world.

We use a double-digit 10 to 12 as a minimum starting point, and then go up from there into the high-teens.

Great, thanks for that.

And just a follow-up question on the costs.

When we look at -- again, you did an excellent job in 2013 driving costs down.

Basic costs of $915 and adjusted operating costs, $566.

Guidance, again, is up 35% -- or, $35 an ounce on the AISC, and $49 an ounce on the adjusted operating cost.

Can you speak a little bit about what you are seeing in the way of -- is it unit cost per ton that could be going up?

Just trying to understand why cost guidance has gone up versus staying flat, or at least continuing with the downward trend.

Sure.

Thanks, Stephen.

One of the biggest factors -- or the biggest factor in the fact that our costs are up slightly from last year, is the fact that Cortez is down by 350,000 to 400,000 ounces.

As you know, that's a very low-cost mine.

So the impact on our overall portfolio of those lower amounts of ounces -- which are also have gone up in terms of their individual all-in sustaining costs -- has an actual impact on our overall portfolio of about $55 per ounce.

Had we not had that impact of this change, our costs would have been down -- would actually have been lower than our cost last year, because of that $55 per ounce.

Thank you very much.

That's very helpful.

You are welcome.

Alec Kodatsky with CIBC.

A couple of questions here.

Just in terms of divestitures, clearly you made a lot of progress.

But there's still targeted assets that were on your original list.

Just conceptually, where do you see yourselves at in terms of the process?

Thanks Alec.

I think we've certainly have made good progress, as we mentioned, and are down by eight mines.

On that pie chart that we show, we've got about 20% and six mines that are higher-costs.

We are going to continue to look at opportunities, not only to potentially optimize the portfolio through a divestment, but we do need to make sure that we look at lowering those overall costs.

So if you take a mine like Bald Mountain which last year had a high all-in sustaining cost, we look out into the future and do things like reduce the number of pits and reduce the capital.

I think there are opportunities to lower those all-in sustaining costs on some of those mines which are high right now, by just running them better or spending less capital and focusing on the returns.

But ultimately, we are going to continue to look at the possibility of monetizing additional assets, if the transaction works for both parties.

I think we are certainly in the sixth or seventh inning of the optimization process.

But we are going to continue to look at a number of ways of dealing with those higher-cost assets.

And one of those could be even closing down the mines, depending on what the gold price is and where they are in the life cycle -- like a Pierina.

That's helpful.

I guess the easiest way to think of it is, some of the assets on the list, you see potentially a work around it.

Just because they are on the list, doesn't necessarily mean they will be sold.

Absolutely.

That's exactly right.

Okay.

If I could, just an update on the procedural situation at Pascua.

You clearly -- you've made a decision, but it was in part related to price, and then part related to the permitting situation.

I haven't heard much coming out of Chile as of late.

But I was just curious if you had any color to update us on the legal or regulatory side.

Essentially, we are proceeding with the demobilization that we talked about.

And you can see by the budget that we have for this year, we are going to spend about $300 million.

A lot of that is actually front-weighted to the first half because we are still demobilizing workforce in Argentina.

So we are continuing to advance the permitting and the engineering for the Phase 2 water management system.

And ultimately, we could see some further progress out in the first half.

There still are a number of legal and regulatory things that ultimately we're awaiting some decisions on.

So I think we will have a better amount -- a higher level of clarity on where we are, with regards to permitting and some of the progress that we've made, some time later this year.

And we are continuing to make progress on that.

Okay.

I appreciate -- (multiple speakers).

Oh, sorry.

I think, Alec -- it's Ammar here.

I think what I would add is, to build on your question and Jamie's response.

The whole point of why we are changing the way we are doing Pascua is to give us the flexibility to take our time and do things in stages, as we get the permits, as these issues are resolved.

And I tell you, it's a lot easier to do that when you've got a handful of people at the site and paying for a handful of people, than it is when you've got several thousand people up there and spending over $100 million a month.

So we are making progress on all fronts, including the permitting and legal.

But most importantly, we have the flexibility now to do that right.

Okay, I appreciate that color.

Thanks very much.

You're welcome.

Kerry Smith with Haywood Securities.

Ammar, you talk about a 50% effective tax rate in 2014.

Can you give me some sense as to what the cash tax rate might be, or what percent that effective tax would be cash tax?

It would be probably in the neighborhood of 30% to 35%.

It's going to vary, Kerry.

But in that range.

Okay.

So 30% to 35% of your tax expense would be cash tax then?

No.

The cash tax rate would be probably 30% to 35%.

Okay, I get you.

And after you get through 2014 at Pascua-Lama -- presumably you've completed the demobe by the end of the year.

What would the care maintenance cost be on the assumption that the project sat dormant through 2015?

How much would it cost you annually to keep it on care maintenance once you completed the demobe?

We are still working on that.

But it's probably -- our estimate right now is about $10 million to $15 million a month.

Per month, okay.

That's great, thanks.

And then, for the -- you talk in the footnotes on one of the guidance tables about the regional office administration costs of $209 million.

Is that cost associated with the actual mine site, where you've taken the G&A at the mine site and you're now allocating that back to corporate?

Or is that the regional offices in the various regions of the world, that you have offices that are separate from the mine sites?

I'm just trying to understand what that $209 million relates to.

It's the regional offices.

Okay.

Just remind me how regional offices you have.

I can't recall.

About 30.

30, okay.

And so they will also charge-out some of their costs to the mines, as well.

So it's not just the actual administration costs of those offices.

There is a bit of a charge-out.

Right.

But the $209 million is the amount that is getting charged back to corporate.

There are actual costs to run those three offices, more than $209 million to some getting charged to the operations, right?

That's right.

Yes.

While 30 offices sounds like a lot, there are a number of very small offices in there that are essentially an exploration office or a reserve office, and such.

The offices that are of any size, essentially, are the ones that are -- the one down in Santiago, we've got an office in San Juan, Salt Lake office, there's office in Elko.

We have a Perth office that has been shrunk very significantly as we've sold some assets.

An office in Dar es Salaam, an office in Usaka.

Those are the main -- and Johannesburg.

Those are the main offices that we have, and then there are numerous smaller satellite offices.

So if you look at the number of material offices we have in the Company, it might be about 10.

Okay.

And then just last question on Jabal Sayid.

Do you have any clarity as to how long it's actually going to take to get all the issues with the government sorted out?

Or is it still something that you have an indeterminate timeline on?

I think we would say it's an indeterminate timeline at this point.

We are continuing to have discussions and advancing those discussions.

But I don't think it would be really appropriate to try to put a timeline on that.

Other than we are hopeful that we will be able to resolve this as soon as we can.

All right, okay.

Jamie, would you be disappointed if you didn't get this resolved in 24 months?

Or can you even hazard a guess?

Oh, sure, yes.

I certainly would love to get it resolved this year.

That is certainly a target for us.

If we do get it resolved, there still is a commissioning process that would be required before the mine would start, which is a reasonably lengthy period of time.

So it's unlikely that, that mine would be in production in 2014.

Okay, that's great.

Thanks very much.

You're welcome.

Patrick Chidley with HSBC.

Just a question going back to reserves.

Just on the table, it seems that you still left Cerro Casale on the table, 17 million ounces.

And as we have seen, they are 15% of your total reserves.

And I'm wondering if anything were to have changed, and so, it's not a very large portion of reserves.

Is that not something that should have been really [crossed out] or reduced this time around?

Well, thanks, Patrick.

In terms of that question, it's first -- it's a permitted project with a mine plan.

And second, in recent years, our exploration group has discovered a significant amount of mineralization from a cluster of nearby pore-freeze in the area.

And so we are continuing to drill.

We have drilled between 50 and 60 holes.

And we've got several more targets to test.

We've got a study team on the project looking at phasing and scaling the project, and optimizing the capital efficiency.

So I think it's safe to say that it's basically a work in progress, and we are not done there yet.

It still has a return.

It's a project ultimately with a lot of upside.

And while we have deferred the project, I think it would be premature to take that out of reserves at this point.

Because we are still seeking higher returns and additional higher-grade ore bodies and it still makes money.

So the exploration results that you've had there on the pore freeze are higher grade?

Patrick, it's Rob.

The area is around about five or six kilometers from Cerro Casale.

And the results that we've been getting there have basically have mineralization at surface.

We have basically been doing studies on it.

The grades are comparable to -- and some parts are slightly higher than -- Cerro Casale.

Certainly the deeper parts of Casale are higher than the near-surface mineralization that we've found to date.

But it is a significant amount of mineralization.

So do you think that we could have an update on that sometime during the year?

Is that something that you plan to talk about?

Well, it's something that we will be looking at this year.

And so we will definitely consider when is the appropriate time to update the market.

But this is still a great option for the Company.

It's still a project that -- with a lot of work yet to be done on it.

And I think that's something that makes us comfortable to keep that in reserves.

Okay, thanks, Jamie.

And just a quick question on the [five fell plate] project at the Goldstrike [oash-land].

Is that something that is going to add 400,000 ounces -- or 350,000 to 450,000 ounces -- of production, in addition to existing production?

Or is there a trade-off there?

So should we be looking for the future to be increased then from the current rates?

Or is really replacements, or some production that's coming off?

It's really a replacement.

So don't look at that as being additive to the existing Goldstrike production.

This is bringing ounces forward, as you know, that ultimately are going to maintain their production levels at Goldstrike through a replacement rather than being additive.

Okay, thanks very much.

You are welcome.

Anita Soni with Credit Suisse.

My question is with regards to the calculation of reserves.

What are you including when you are calculating the cut-off, in terms of the cost structure?

Hi, Anita, it's Ammar here.

We do include all of the costs.

So it is fully weighted and including capital.

Including capital.

And do you push any of the corporate G&A, like the head office G&A onto the calculation, as well?

Not at the sites, no.

It would have the relevant cost associated with the G&A to operate the mines.

But not corporate.

Okay.

All right, thank you very much.

Thanks, Anita.

David Haughton with BMO.

A question for you on this effective income tax.

I'm presuming that at PV, you are including the smelter royalty as part of your operating cost, but your quarantines, the net profit interest, as an income tax.

Is that the correct interpretation?

That's right, David.

Okay.

Because it could go a couple of different ways.

The NPI could be considered a royalty.

And given that you've accelerated that payment as part of the agreement with the government, it's an interpretation of it as a royalty rather than a tax.

To me, it's pretty clearly a tax.

It's part of the agreement that we had, and it was adjusted.

It is a tax, but I hear what you are saying.

Okay.

Because it could be in the order of well-over $100 per ounce, for instance, on the operations.

Well, it is tied to profit.

It's related to how much profit we make.

It's actually quite a complicated formula.

We did have a pretty detailed description of it, but it does vary.

Okay, that was it.

Thank you.

Thanks, David.

Andrew from Goldman Sachs.

My question is on copper in Chile.

Just -- obviously, this isn't the mine plan that you guys had lowered there this year.

My question is more, where do see that going 2015, 2016?

Is it coming back to levels of 2013?

The production?

Yes, production.

I think it should be fairly consistent with that.

I would say that Zaldivar has been a mine that's been a pretty consistent producer/performer.

And I think it's reasonable to anticipate that we shouldn't be too far off where we were last year on an ongoing basis, plus or minus.

So the grade is pretty consistent, it's more just tonnage this year?

Yes, that's right.

Okay, thank you very much.

Okay, thank you.

Operator, I think we've kept everyone on the line for a significant amount of time, which we appreciate.

And so I think we should close the call now.

I'd like to thank everyone for participating.

I know it's a busy day.

We look forward to speaking with you again soon, and we really appreciate the time and your questions.

Thank you.

Thank you, Mr. Sokalsky.

The conference call has now ended.

Please disconnect your lines at this time.

Thank you for your participation.