巴里克黃金 (GOLD) 2014 Q1 法說會逐字稿

Ladies and gentlemen, thank you for standing by.

Welcome to the Barrick Gold Q1 results conference call.

(Operator Instructions)

As a reminder, this conference is being recorded, today, Wednesday, April 30.

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

Please go ahead.

Thank you, operator, and good afternoon, everyone.

Before we begin I would 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 performance being different from the estimates contained in our forward-looking statements, please refer to our latest year-end report or our most recent AIS filings.

With that, I will hand call over to Jamie.

Thanks, Amy.

Good afternoon and thank you, everyone for joining us on the call.

I'm here today with our Senior EVP Kelvin Dushnisky; our CFO Ammar Al-Joundi; our COO, Jim Gowans; and our Senior Vice President of Global Exploration, Rob Krcmarov.

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.

I would like to start with a couple of important underlying themes.

The first, is that we have been extremely focused on improving and strengthening our business.

I think it's fair to say that Barrick is a considerably different company today than it was a year ago following the comprehensive actions we took in 2013.

It is leaner and stronger and in a much more flexible position.

We are continuing to focus on the assets that have the ability to generate the most attractive risk-adjusted returns and free cash flow for Barrick and its shareholders.

The second theme is how excited we are about our pipeline of opportunities that have the potential to meet or exceed our hurdle rates of return.

We will talk about a few of these later in the presentation.

Turning to our first quarter results, we had a strong start to the year.

Gold production was 1.6 million ounces, which reflected the sale of a number of mines, but the assets that remained delivered a strong performance.

Our all-in sustaining costs were a very low $833 per ounce, $100 per ounce lower than the prior year quarter.

Copper production was 104 million pounds, at C1 cash cost of $2.11 per pound, which is 15% lower than a year ago.

We reported net earnings of $0.08 per share and adjusted earnings of $0.20 per share.

Earnings declined year over year primarily due to the impact of lower metal prices and gold sales volumes.

We generated operating cash flow of $585 million in the quarter.

We are maintaining our production and all in sustaining cost guidance at this points of 6 million to 6.5 million ounces at $920 to $980 per ounce, the lowest cost of our peers.

Our copper production guidance has been revised to 410 million pounds to 440 million pounds to adjust for the conveyor incident at Lumwana.

Copper cost guidance, however, remains unchanged.

We further optimized our portfolio in Q1 through the sale of non-core assets and also reduced our interest in African Barrick Gold, which I will talk more about later.

This quarter, our five core mines produced nearly 1 million ounces or 60% of total production at average all-in sustaining cost of just $672 per ounce, which is more than $600 below the average spot gold price.

This is a set of truly world-class operations which has considerable exploration potential, and there is some exciting growth options, particularly at Cortez and at some of our other Nevada operations.

While we often focus on our five core mines, I want to highlight that we are seeing great results from our entire portfolio.

All of our mines are important contributors.

Our results this quarter reflect some excellent performances across our entire portfolio.

And also, our more simplified operating model has allowed our mine managers to focus all of their attention on the operations.

The North America and Australia Pacific portfolios both had a strong quarter, with some good performances from a number of mines.

At Cortez, production was lower in the first quarter on lower grades and recoveries, which has put us a little behind, but we are comfortable we can make up the shortfall the rest of the year.

Goldstrike had a good quarter on higher than expected grades and tons.

The thiosulfate project at Goldstrike remains on track to produce first gold in the fourth quarter.

Production is anticipated to increase to above 1 million ounces next year, with the benefit of the ounces from this project.

Our newest mine, Pueblo Viejo had a solid quarter and is on schedule to reach full capacity in the first half of 2014.

Veladero benefited from positive grade reconciliations and the devaluation of the Argentinian peso and higher credits from silver sales in the quarter.

Although more ore was placed on the leach pad the Lagunas Norte had lower grades as expected in the mine plan compared to the previous quarter.

And the ramp down at Pascua-Lama is on budget and on schedule for completion by mid-year.

During the quarter, we continued to demobilize the workforce, about 2000 workers, and were pleased with how smooth and orderly a process this was.

Lumwana's performance reflected an extended and heavier than normal wet season in Zambia.

Just recently, part of the main conveyor that feeds pre to the mill collapse.

Current estimates are that repairs will be completed and production will resume by the end of the third quarter.

In the interim, mining will continue.

Stockpiled ore will be processed once the plant restarts.

We do have comprehensive property and business interruption insurance for Lumwana and don't expect this incident to have a material economic impact.

In light of this event, though, we've revised our 2014 copper guidance to 410 million pounds to 440 million pounds from the previous 470 million pounds to 500 million pounds, but our cost guidance remains unchanged at $1.90 to $2.10 per pound.

The lower production from Lumwana was partially offset by stronger performance from Zaldivar.

Zaldivar continues to generate significant free cash flow year after year.

This mine is a tremendous contributor to our portfolio.

And encouragingly, we have a number of opportunities to add value, here.

We're looking at processing some stockpiled material and have options to improve recoveries.

At higher copper prices, there's also the potential to develop the large primary sulfide deposit beneath the open pit.

It would require additional processing capacity but could represent a significant extension to the mine life.

Stage 1 of the pre-feasability study was completed in December of 2013.

I will now turn it over to our COO, Jim Gowans to take a moment to give you some additional comments including some of his initial impressions of Barrick after being here for a few months.

Thank you, Jamie.

Good afternoon, everyone.

I thought I'd take a couple minutes just to give you an idea of what I've been doing for the last three and a few -- I've got three month and a few days.

I've gone to most of the operations, a little over half of the operations on all three continents, and what I've done, is being an operating type of guy, I've tended to dig in and spend a couple of days, two or three days at the bigger operations, to get an understanding of the processes, how the operation is running, as well as getting a better understanding of our people.

So, it's taken a little bit longer to get to every one of the operations, but I feel pretty comfortable with my progress to date.

I should be -- should be pretty well through all the operations by about mid year.

I thought I'd give a few of my first impressions, and I have to admit, they are pretty positive.

Some of the aspects that I've been very impressed with, the first one is the technical expertise.

I thought I had a pretty good idea of this coming from the Placer Dome organization a dozen years ago.

I thought that they would -- as that got integrated into Barrick it would be pretty good.

My impression, is that the Barrick expertise is actually more extensive.

When I look at the autoclaving and roasters, and now we are implementing a new thiosulfate technology at Goldstrike.

So, what I'm impressed with is the ability to take a look at all sorts of complex gold ores and being able to develop a flow sheet.

I think that's a great strength for future growth.

And same in the mining side.

Our mining technology and our mineral resource management are very strong.

Some of our people, in spending time with the operations, I've been working with the team.

I see a very dedicated, very high skilled group.

I've managed to get to quite a few of the regional areas for their offices.

I see the technical backup, and I've been very impressed with what I've seen so far.

I don't see any real weaknesses.

So, that's pretty helpful.

When I look at some of the operations, Pueblo Viejo is an example.

I was involved with some of the initial work on that when I was first in Placer.

What I see now, is light years ahead.

The cleanup, amazing cleanup of the site, very, very impressive flow sheet complex, but they are getting their head around on the startup and, in fact, talking to the operations people there, last week, we've actually started -- we've been operating for over a week now with even the copper circuit coming up with biotechnologies.

So, that bodes well.

Overall, I'm extremely happy with the progress on that site.

I even went to spend some time at Pascua-Lama a couple of days there.

It's a very incredible site.

I guess one of the things that surprised me, was how far along that was when I see the process plant, it's almost 60% built.

That's an opportunity, if the prices and some of the other challenges we have on the project come around.

I look at that and I look at the proximity of Veladero and I see Veladero is being the perfect training area for the developing for the long term and Pascua-Lama.

So, I think there's lots of synergies to be done there at some point.

One of the other things that I liked about coming into the Barrick was seeing that we have kind of a mix of the big mines, but we also have some really nice small mines that are very strong contributors to our bottom line.

I think having that blend is very beneficial, because it gives us a great, excellent training ground for developing our people.

The smaller operations, anybody that's been to them, you know that you end up doing a lot more things, wearing a lot more hats, and I think that's a good way to develop experience before we put some of those skilled people into the larger operations.

I look at some of the opportunities.

I think there are opportunities.

That was what was exciting to me, is I think they've done a great job over the last year in terms of improving their cost and driving their production.

But, I think -- I still see that there are some opportunities on that.

Some of the areas like in our asset management and maintenance management and integration, regional integration with supply chain is some areas where we are starting to focus in on.

Overall, I'm very pleased.

It's exciting to be in this organization, and, it has lots of potential.

Thanks, Jamie.

Thanks, Jim.

We've done a significant amount in the past few years to recalibrate the Company.

I think it's important to take a moment, now, to focus on the future.

While we've reset the direction of the Company, we are wanting to talk about all of the great opportunities that we have ahead of ourselves.

Importantly, one of the things we're looking at in a completely new way, is project evaluation and development.

In the past, gold companies looked at new opportunities with a focus on maximizing production and NPV.

Now, often to achieve that, the solution was to achieve economies of scale by building massive projects with large CapEx budgets.

That was being done in an environment of continually escalating costs but with an expectation that the rising gold price would provide an offsetting reason to justify building large projects to generate more and more production and then more and more cash flow, which worked as long as the gold price was going up.

As you know, even before the gold price fell; however, we recognized the need for change.

We adopted a more disciplined approach to capital allocation focused on risk-adjusted returns and free cash flow.

And a key element of this framework is how we are now going to evaluate and develop projects.

So, now, when we look at investment opportunities, we look at de-risking them through a series of achievable milestones and incremental expansions.

We will start smaller and build in stages using existing cash flow to fund the next stage.

This approach allows a better synchronization of spend with things like permit approvals, and provides time for value optimization.

It also gives us more leverage and flexibility in contracting with suppliers, contractors and governments.

It's critical to maintain this flexibility in order to help mitigate the impact of cost escalation and also commodity price risk.

Importantly, we won't proceed with the next phase until we are satisfied that we have more complete information and clarity at each stage gates and in turn, higher confidence in risk-adjusted returns.

So, this approach will allow for better planning, execution and capital deployment as well as improved cost control.

We are also much more creative in how we are looking at our opportunities, and some of the questions we are going to ask ourselves are, is there a way to reduce infrastructure or reduce the environmental footprint by scaling the project?

Can we reduce our political risk by building a smaller project first and then using the project cash flows to build the next stages?

That would put less capital at risk in more challenging countries and also provide us more leverage as we look to expand the project in the future.

Can we simplify the mineral processing flow sheet or perhaps contemplate off-site processing?

And just to be clear, we are prepared to accept a slightly lower NPV to build it in a more prudent way and to achieve or exceed our target risk-adjusted returns.

I want to underscore that this is a real [sea] change in our approach.

We have a deep project pipeline with excellent potential to meet or exceed our return hurdles that we've developed by taking this different approach I just described.

Potential opportunities range from greenfield prospects to mine expansions, and another strategy is looking at third party opportunities which could take the form of JVs, earn ins or acquisitions, to further de-risk certain projects.

And each of these projects would have to compete for capital.

Our emphasis is on the prolific belts in North America and South America, but we remain heavily focused on Nevada, where we retain significant optionality and have a proven track record of developing projects.

It's our goal to reflect the fact that we do have these growth opportunities which I think are being under recognized in the market.

I will now turn it over to Rob to provide more detail on a few of these specific opportunities.

Thanks, Jamie.

More than 50% of our 2014 exploration budget is allocated to North America with the majority targeted to Nevada.

Largely for our Goldrush project which as you know is located only 6 kilometers from Cortez Hills as shown in the top left.

We announced this discovery in 2011, and since then we've doubled the deposit twice.

It now stands at about 15.5 million ounces.

The pre-feasibility study is well under way, and it is scheduled for completion in mid-2015.

While a number of development options are big considered including underground mining or a combination of both underground and open pit mining, under any development scenario, we are increasingly confident that there will be an underground mining component.

Thus, subject to regulatory approvals, we intend to start underground exploration development while we continue to advance our feasibility studies.

As this schematic shows, the preferred option is to develop a portal in the north and access the northern extended mineralization.

I think it's worth noting that had some very high grade drilled intercepts at significant depth in this area, and the mineralization remains completely open to the north.

We intend using the underground development as a platform to drill out the area, and we are optimistic that we will find further extensions to high grade mineralization along the way.

Our exploration team is excited, because the pink rock you see in the lower left part of the slide is an intrusive rock, and the biggest ore bodies in Nevada are often located when perspective rocks shown here in blue near a major fault are right next to intrusive rocks.

And Goldstrike, Cortez Hills, Turquoise Ridge they are all examples of where that occurs, sp very similar geometry.

Here you can see the conceptual exploration decline with respect to the location of currently known mineralization.

And to the right of this decline on the slide, the currently defined resources are progressing through a pre-feasibility study.

The results from the exploration work, in addition to the results of the economic studies, will provide the basis for considering a staged development option which is entirely consistent with what Jamie just articulated a moment ago.

Cortez has been a tremendous core asset for Barrick.

I think it's worth noting that in 2014, 40% of our production will be sourced from the underground at Cortez Hills and there's still great upside potential here.

Drilling in the lower is in the final stages of a successful multi-year program to upgrade and expand reserves and resources, and we still haven't fully delineated the full extent of the system.

The lower zone can be described in two parts above and below the 3800 foot level, and this was an arbitrary level when Cortez Hills was permitted, as we thought that was basically the extent of the ore body.

Since that we've discovered that the Lower Zone extends significantly below this point.

Above 3800-foot we have reserves of 1.57 million ounces grading 0.36 ounces per ton, which are both oxides and refractory sulfide.

Completed feasibility work estimates modest development CapEx for these reserves with well below industry average all-in sustaining costs.

Below this level, there's nearly 2 million ounces in resources which is mostly oxide and higher grade than the zones above.

So a key point here to emphasize is that this could favorably impact the economics.

To develop this high-grade oxide mineralization we'd be looking at an incremental extension to the existing underground development and since it's predominantly oxide, processing costs are likely significantly lower.

Infill drilling this year will test the known extents of the Lower Zone along 1200 feet of strike length, and that's shown for the lines in green.

Finally, mineralization has not been closed off by drilling, and it could be expanded considerably, which is the target of step out drilling shown in red.

This drilling will be incorporated in our pre-feasibility study on extending mining beneath the 3800-foot level, and that's expected to be completed in late 2015.

Turquoise Ridge currently contains over 6.7 million ounces in reserve at a little over half an ounce.

The represents the highest reserve grade deposit in the Company's operating portfolio.

We now have a 30-year mine life and significant resource upside.

This exceptional base provides excellent optionality.

However, production is currently restricted by haulage and ventilation constraints.

The major new development here is that we are contemplating adding an additional shaft, and this new shaft could increase production by 75%.

It will also bring 2 million ounces of gold forward in the mine life.

Additionally, the capital efficiency is excellent, and it's highly likely that underground resource additions will be delineated as indicated by some of the drilling of sections in the north zone shown here, resulting in even better project economics.

I think that gives you a flavor of some of the exciting prospects that we have in our pipeline.

We also have a number of other projects and opportunities under consideration in Nevada, which we consider one of the best regions to develop and operate a mine.

We hold a large land position on the most prolific and prospective mineral trends in the state, the Carlin, Battle Mountain, Eureka and Cortez trends, and we have a proven ability to develop reserves in this region.

Additional opportunities include a sulfide leaching concept at Hilltop near Cortez.

There is potential there for something like 150,000 to 200,000 ounces per year.

The Mineral Point open pit expansion at Ruby Hill, the Bonnie project that Golden Sunlight -- it could at three to four years of life, and the potential to develop pits around about 11 miles south of Bald Mountain.

And that's within the existing plan of operations.

These are currently in the scoping study stage and could add 100,000 to 200,000 ounces per year of production.

We are also finalizing a feasibility study at South Arturo near Goldstrike at the Spring Valley JV with recently earned 70% interest, and this project has advanced to the pre-feasibility stage.

Very close to Cortez we have the option to earn into a 75% interest in the earlier stage Gold Ridge project.

Elsewhere in South America and Australia we have other projects at various study stages.

I think the key point to underscore here, that Jamie highlighted earlier is that we really do have many projects advancing through the various study phases which have the potential to exceed our risk adjusted return hurdles and replenish our production base in the years to come.

With that, I will hand it over to Ammar.

Thanks, Rob.

We continue to make good headway on our portfolio optimization and our ongoing efforts to lower costs.

Since July, 2013, we have divested a number of non-core assets for total consideration of over $1 billion, $360 million realized in 2014.

As a result of this focus on the best assets, the number of mines in our portfolio has been reduced to 19 from 27 last year.

In the first quarter, we completed the sale of Plutonic and Kanowna and reduced our equity interest in African Barrick by 10% to 64%.

And subsequent to quarter end, we finalized the sale of our minority interest in Marigold.

With respect to African Barrick this was an opportunity to capitalize on the substantial improvement in ABG's share price this year.

Furthermore, the transaction will widen the investor base and increase liquidity in the shares, which benefits both ABG and its shareholders.

We continue to support ABG's new management and their efforts to improve operations, which have already had significant tangible positive results.

At our existing assets, we continue to work to improve capital and operating efficiencies.

For 2014, most of you know we set an aggressive target of a further $500 million of cost reductions.

We have made excellent progress towards this goal in the first quarter, and have already implemented actions that we expect will deliver over 60% of this target.

We remain confident that we will realize this $500 million annual savings target by year-end.

These are real, tangible improvements, ranging from renegotiating purchase contracts to improving maintenance programs, to optimizing equipment utilization.

This program is a great example of a successful shared initiative under the new operating model, which has enabled increased accountability, increased transparency and the ability to better leverage global scale and expertise across sites.

Our costs for the quarter are already reflecting this progress on cost control with all in sustaining costs $100 per ounce below the same quarter last year.

We held the line on adjusted operating costs, which reflects the quality of our assets and our focused on cost management.

We spent substantially less capital in the first quarter, though at this point, we are not changing our full-year all-in sustaining cost guidance.

However, in today's environment, cost-cutting is not enough.

We need to take a hard look at all of our mines and ask the tough questions about what we need to do to operate differently in different price environments.

And we need to do that work proactively, so that we have a well-thought-out plan in place.

At Barrick, we have done most of this work, and we are completing an extensive scenario planning exercise that will enable us to respond more quickly in any price environment.

These efforts are expected to result in a much more nimble portfolio that is as profitable as possible at a lower price environment and will position us to capitalize on the strength of our asset base in the event of a price recovery.

This is a huge initiative across the Company.

As I am sure you can appreciate, it involves virtually all of the disciplines, but much of it starts with the mine managers, themselves.

The general managers at each mine have performed an analysis at prices as low as $900 per ounce gold and $2.75 per pound copper and have devised specific detailed plans to respond to maximize cash flow.

The GMs submitted their results and, along with the senior leadership of the Company, the entire team has had extensive planning discussions around these results.

The plans generally include changes to mine plans, which could involve deferred stripping, raising cut off grades, et cetera, deferring or eliminating capital expenditures and reducing operating costs further.

We highlight some of these examples in the options identified on the table of this slide.

The mine planning analysis and various price scenarios is a complex portion of this analysis.

But finance, HR and legal disciplines across the company are also completing plans to ensure they understand their roles towards maximizing the flexibility and profitability of the Company in different price environments.

With this extensive initiative well under way, I feel even more confident about Barrick's position in a weaker gold price environment and also extremely pleased with the amount of upside we could realize when prices recover.

Turning to our balance sheet, we are in a stronger position and have significantly more financial flexibility than we did last year.

Following the actions we took to term out and repays short and medium-term debt in 2013, we have only $300 million of debt to repay over the next two years, which equates to roughly half of the nearly $600 million of operating cash flow we generated in the first quarter.

At the end of the first quarter, we have $2.7 billion of cash and equivalents and $4 billion available under our undrawn credit facility, which has been extended to January 2019.

I will now turn it over to Jamie to wrap up.

Thanks, Ammar.

As you can see, we've been working very hard and continue to work to strengthen and reshape the Company's prospects.

We've made significant strides in reducing costs, cutting, suspending or deferring lower return capital investments and optimizing our industry-leading asset portfolio in order to maximize free cash flow.

As a result, we are well along the path of transforming into a leaner, more agile organization and one that's focused on assets which hold longer-term shareholder value.

As you can see, many of the projects represent tremendous optionality to scale up or do incremental expansions in the future.

There is a robust financial rationale.

We have great opportunities in front of us, and I do think that the market is under appreciating how many opportunities we have in the future, particularly in Nevada.

After a tough 2013, a stronger more financially flexible Barrick with one of the industry's best portfolios and growth opportunities in some of the world best mining jurisdictions is well-positioned in the event of a lower price environment and has the ability to realize tremendous upside at higher prices.

Lastly, I will just make another comment.

Clearly, at Barrick, we are always open to opportunities that generate shareholder value.

And while there has been much recent speculation on Barrick's terminated talks with Newmont and the unique opportunities this combination would have provided to accelerate our current strategic plan, we remain entirely confident with Barrick's standalone strategy, the strength of our underlying business and our future prospects.

I am not going to comment beyond what has been discussed this morning at our annual meeting, and in our most recent press releases on this call.

I would like to focus on questions on our first quarter results and disclosure.

Thank you.

I will now open it up to questions.

(Operator Instructions)

Andrew Quail at Goldman Sachs.

Thank you guys for the updates and congratulations on a pretty strong quarter.

I would just like to start at Cortez.

Obviously, you talked about an improvement going through 2014.

Is that driven by grade?

Because we actually had something less than what you guys came out with.

Is that going to improve what we saw in Q4 last year?

I will ask Jim to respond to that.

I think in 2014 and 2015, we do have an -- there is an aspect of grade that we have in drop grade that is lower than.

In terms of our first quarter shortage, we've had a couple of issues.

On the grade, where our models aren't -- we are in a new area and in the underground, and we are getting some differentiation between what our models are saying and what we're actually getting on our production.

We've got to do some work on that.

So, throughput would remain pretty consistent, but improving grade?

Yes.

Okay.

Just turning to copper.

Is that -- with Lumwana, when you talk about the interruption, when would you expect to see some of that come through, Jim?

Andrew, it's Ammar, here.

We have insurance for both the physical assets and the business interruption.

And the business interruption covers lost profits as well as fixed cost.

I've been through this before.

It takes a little bit of time, but we are quite comfortable with the insurance that we've got.

Speaking of coverage, can you guys make a comment on Jabal Sayid and where you are with that process?

Sure, Andrew.

We are still in discussions to resolve some of the issues that we have there, to enable the mine to get into production.

I think we're making progress there.

We're looking at a number of options, and we are optimistic that we are going to be able to resolve that situation in the near future and get that mine in production.

Thanks, Jamie.

Last one on Pascua Lama.

Can you guys comment on what you've seen in trends of strategic partnerships and royalty streams and what the developments have been there?

Sure.

Well I think it's still early days on a number of those discussions, Andrew.

We've -- we continue to have some discussions that our investigative, in terms of whether there are some things that we can do, whether it's in strategic partnerships, joint ventures, royalties or streaming.

Those discussions are ongoing, but it's still too early to really say that anything has got any traction and ultimately that we'd be able to do something more serious.

But, continuing to look of that, and we are very open to the prospect of those types of partnerships.

Thanks very much, guys.

Thank you, Andrew.

The next question is from Stephen Walker at RBC Capital Markets.

Just to follow-up on Andrew's question at Lumwana.

You are maintaining the cost guidance at Lumwana, or a cost guidance for the copper assets even though Lumwana is obviously going to be producing much lower levels from stockpile.

Ammar, are you assuming that the cost are being deferred by the business disruption insurance, and you are applying that to the -- to make up the difference for many of the operating cost increases at Lumwana?

No.

We are not doing that.

So, it's a relatively high-cost mine.

But, the team has already put a good plan in place to mitigate the economic impact.

So, the current plan is to continue to mine, and we do actually have excess capacity in the mill at Lumwana.

We built stockpiles.

Those stockpiles will be capitalized, and the good thing about Lumwana, is that it does have excess processing plant capacity.

So, all of this will come in over time.

It won't all come in this year, obviously, but it will all come in over time.

And your comment was it take some time it to get the insurance?

Are we looking at early 2015?

We shouldn't assume anything in 2014?

Or will it be at some point this year?

The best way for me to answer that is my previous experience.

Because, this takes a little bit -- it's an art as much as a science when you are dealing with these sorts of things.

Typically, what will happen -- we don't expect that there's going to be any issue with regards to us getting the insurance.

But, it's a complex process, particularly business interruption insurance.

And typically, what they will do, the insurance companies, is they will make partial payments through the process.

I do expect we're going to get some this year.

But, it's just a complicated process but normal.

Thank you for that.

Just to change gears a little bit on Veladero.

You made the observation that you've received the approval, the fourth update of the environmental impact study.

But, it --incorporated in the number of conditions that are being reviewed by Barrick and are maybe some implications for the existing 650,000 to 700,000 ounce guidance for 2014.

What are the implications?

What is the background behind that?

Stephen, it's Kelvin here.

I can respond to that.

The approval received first of all, the important part is it gave us the ability to revert the amount of water, freshwater, we need for makeup and pump back.

That was the key aspect of it.

It also had conditions related to monitoring.

On a going forward basis, we're are working through what that means, in terms of monitoring the performance of the existing pattern, and there maybe some requirements for separation of that.

At this point, we don't see it having an impact, and we are just preceding as usual.

When would there be a point in time when you know that there might be a problem or might be a need to revise guidance?

Is it just -- you are just being cautious in the wording at this point?

Correct.

We receive the approval.

Like they typically do, there's conditions that we're going to the wording on language.

The discussions have been extremely positive.

The government is very supportive of keeping the project on track and at full production.

We are comfortable with that.

Great.

Thank you very much for that, gentlemen.

Due to the large number of callers who have a question, we are being to be asked to restrict future callers to one question and one follow-up question.

We do apologize for the inconvenience.

The next question is from Anita Soni at Credit Suisse.

Congratulations on a strong cash flow quarter.

My question is with regards to the $500 million in cost savings and your sustaining capital spend so far this year.

I think it's $344 million in the first quarter.

That annualizes to less than the $2 billion to $2.2 billion.

First, is that $500 million baked into that $2 billion to $2.2 billion?

Is that $344 million that you spent is that reflected from under spend in that $500 million cost savings?

Anita, it's Ammar.

The $500 million is in our budget and guidance, which is a reflection of how confident we are that we are going to get it, which is confident.

The CapEx in the first quarter, the guys did a great job in controlling costs and in controlling sustaining CapEx.

They're going to continue, I'm sure, to work very hard to control that.

This is part of a major cultural change at Barrick over the last couple of years, where the general managers and their teams at the site are taking full responsibility and full charge of controlling costs, and these are the types of results we are seeing.

But, it's still early in the year.

One quarter does not a year make.

So, we are leaving guidance unchanged right now.

So, if there's going to be somewhat of a ramp up in spending at certain areas or inability -- I mean, to preserve this kind of cost reduction, where would we be looking to ramp up spending?

Which assets would you expect extra spending?

I think almost without exception, every mine in every region did a good job controlling sustaining CapEx.

So, it's not one particular area.

All right.

I will leave it at that.

Thank you.

Patrick Chidley at HSBC.

Good afternoon, everyone.

Just wanted to ask a question about the thiosulfate project.

Just in relation to the current total throughput of process capacity at Goldstrike is right now.

Maybe you can just explain how much extra capacity the thiosulfate project will bring on in terms of actual throughput from where you are at current rates?

I will ask Ivan Mullany to respond to your question.

At Goldstrike, as you know we have two circuits, the roaster circuit and the autoclave circuit.

The roaster circuit can take up to 15,000 tons per day, and the autoclave is 15,000 tons per day.

So, once the thiosulfate is back up we'll get that circuit back running at 15,000 tons a day and then the roaster an additional 15,000 tons a day.

Okay.

Just follow up then if I may.

The autoclave right now is at zero?

They are starting commissioning on the carbon circuit in May, and that will start ramp-up as of next month.

Okay.

Next year is basically, potentially, a doubling of tonnage throughput?

Correct.

Thank you.

It's Ammar, Patrick.

Just to be clear.

We've had this discussion before on calls.

This is, effectively, allowing us to continue to process gold through the autoclaves where we wouldn't have been able to before.

So, you can probably expect us to maintain closer to historic levels.

I wouldn't assume that the 400,000 odd ounces are going to be incremental to historic levels.

The next question is from Greg Barnes at TD Securities.

With the new staged approach to projects going in smaller rather than bigger, and clearly the focus on higher grade in Nevada, are the big low grade open pit [palfrey] type projects done for you?

Thanks, Greg.

I wouldn't say that they would be.

Because, I think there are opportunities to do some things there, as well, on those types of projects.

Maybe a project like a [sara pasaly] or something of that nature could allow for a smaller starter pits and maybe a smaller overall investment to begin with and then look to upsize that or look for different pockets on the overall deposits.

So, this doesn't mean that we can only focus on certain types of deposits.

I think this lends itself to different approaches, many different kinds of deposits.

And that's what we will do.

We will be innovative and flexible on how we approach those things.

Thank you.

Just a follow-up.

Are there any sacred cows in Barrick?

Is a copper business something that you would not sell, for example?

Well, I say that there shouldn't be any sacred cows.

What we've always said is, we are very interested in increasing shareholder value, and if there was something that we felt that we could do through some type of portfolio optimization or some other strategy, I don't think we could say there -- there were any sacred cows.

We do have a number of core assets, though, that are very important and like a Cortez or something of that nature, that would be very difficult for us to consider doing anything with.

Next question is from Pawel Rajszel at Veritas.

Question on the Pascua Lama spending.

Can we expect the Pascua Lama spending to drop down to the roughly $6 million per quarter that you are spending or at least expensing at this point for care and maintenance after this year?

Pawel, it's Jamie.

No.

I think that's a little too optimistic to assume that it would only be $6 million a quarter.

There are ongoing care and maintenance expenses, and we have to run small camps.

There's a lot of things that have to be done in terms of environmental monitoring, et cetera that would increase that cost.

The $300 million that we are talking about this year reflects the fact that we hadn't de-mobilized, fully, in the first quarter, first half of the year.

So, that is more weighted to the first half.

I would say that as we move forward, it could be in the neighborhood of half of that $300 million on an ongoing basis or so.

That's a rough approximation.

So, there are, certainly, additional ongoing costs that are more substantial than $6 million a quarter.

So, I guess you are saying the ramp down is ramping up?

I'm sorry?

In other words, it seems like you are saying the ramp down is ramping up.

I should expect the $6 million that was expensed this quarter to be increasing?

No.

It's Ammar, here.

Some of that, is adjusting for, basically, at year-end reversing some expenses at year-end.

The ramp down is not ramping up.

It's probably going to be about, probably about $10 million a month, based on our current estimates.

We are hoping to get that down.

It's still early in this process.

We are hoping to fine tune it.

But, the ramp down is not ramping up again.

The next question is from David Haughton at BMO.

Thank you for the update today and for this morning at the AGM.

I've got a question in the copper space.

Lumwana going to be out of action for a couple of months.

That seems pretty drastic for a conveyor issue.

Can you give us a little bit of insight as to what's happening there?

Sure.

Jim, can you take that?

I can take that.

Thanks.

The challenge we have, is that the section of the conveyor that actually collapsed is the big tower going over the core source stockpile, particularly the last two towers.

So, the big cantilevered part of the structure, as well as the two sections before that have collapsed onto the tower.

So, you have to, basically, clear those off and then rebuild it.

We had some subsidence, some subsidence on the foundations that we've been monitoring that we didn't pick up on the other tower.

And that's what caused the tower to slide off the edge and down.

Okay.

So, it was the faulty foundation that effectively had been the catalyst for that?

Yes.

Okay.

Looking at the Zaldivar, lower recoveries there with the sulfides.

Is that a function of a longer leach curve?

Or is just the metallurgy means that you are not going to get the kind of recoveries?

It will be a function of the longer leach curve on the sulfide compared to the oxide.

Next question is from Kerry Smith at Haywood.

Rob, how long would it take to permit an exploration decline at Goldrush?

I will ask Kelvin to answer that.

It's beyond my area of expertise.

It's not really, but thank you.

I think, Kerry, what we would look at is filing a plan of operations in Q4.

Sorry, Q2, Q3, 2014, so, later this year and probably have approval in place by the end of 2015.

That would give you the approval for the decline itself plus any water disposal plus all the drilling underground?

Is that right?

Correct.

Approval by the end of 2015.

Okay.

Great.

Thank you.

Brian Yu at Citigroup.

First question is on South America.

Both Lagunas Norte and Veladero you had pretty good first quarter results in the back half.

Your guidance essentially suggests that volumes will be up, yet costs will be, too.

Can you elaborate on the divergence in the math trends you typically speak?

Why costs are going up as well as volumes?

Yes.

Hi, Brian, it's Ammar, here.

We do expect volumes to be going up as a function of where we are in the mine plan.

We don't want to -- it's hard to give specific guidance on a quarter-by-quarter basis.

So, a couple of things I would say, is one, we are still maintaining our overall cost guidance for the quarter.

Two, there are some -- in particular with regards to Veladero, the silver credits make a big difference.

Depending on where you are in the ore body, whether it has silver or not, it makes a very big difference.

Then, third, obviously, in general, there are more costs associated than just grade and production, et cetera.

Okay.

The second one on Lumwana.

If there was a discussion there about the potential increase in power rates, and can you give us a sense of this data was fully past through, what does that translate into on a dollar per pound basis?

Well, we are still looking at that.

With regards to whether or not that's going to go through.

I think on a dollar per pound basis, I'm just trying to look at my notes here.

It would be in between $0.05 to $0.10 a pound if that power increase went through.

We have an agreement that goes into the next decade.

So, that wouldn't -- based on that agreement -- wouldn't come into effect until past 2020.

So, our view is that it shouldn't affect us.

But, the impact would be between $0.05 and $0.10 a pound.

John Tumazos at Very Independent Research.

Jamie, the question is about governance.

From time to time, John Thornton makes public comments.

I don't know if they are just his opinion or the board's opinion, or your opinion.

Example, in early December it was attributed to him that he favored hedging.

But of course, the Company did not embark on hedging, and you made later comments expect a much higher gold prices.

There could be other points.

But should we assume that the entire board makes policy and that each individual just speaks their own mind?

Thanks, John.

No.

There are unified discussions about these types of things.

One of the things you referred to was -- wasn't a discussion where there was a definitive strategy, and this is what we are going to do or not.

I think there are discussions that indicate that these are things that anyone, any company, would consider and that you would consider and have discussions on that.

So, there's a -- in terms of these types of things, there is a unified strategy that we do talk about at the board.

These aren't just hit and miss type of things that don't have some fairly significant discussions that are behind them.

Thank you.

There are no further questions.

I would like to turn the conference back over to you, Ms Schwalm.

Thank you, operator.

I think we can conclude the call.

Thank you, everyone, for spending time with us.

That was a long call, and we did talk about a lot of this, as well, in the AGM, and we really appreciate the time you took and the questions and look forward to speaking with you soon.

Thank you.

Ladies and gentlemen, your conference is now ended.

All callers are asked to hang up their lines at this time and thank you for joining today's call.