巴里克黃金 (GOLD) 2014 Q4 法說會逐字稿

Welcome to the Barrick Gold Q4 results conference call.

(Operator Instructions)

As a reminder, this conference is being recorded on February 19, 2015.

I'll now turn the call over to Amy Schwalm, Vice President, Investor Relations.

Please go ahead.

Thank you, operator, and good morning, 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 AIF filing.

With that, I would like to turn it over it our Co-President, Kelvin Dushnisky.

Thank you, Amy, and good morning to everyone on the call.

Thank you for joining us.

I'm here today with our Chairman, John Thornton; Jim Gowans, Co-President; Shaun Usmar, Senior Executive Vice President and CFO; as well as other members of the management team who will be available to answer your questions at the end of the call.

As you can see from the agenda, we have a lot to cover this morning.

First, John will make some opening remarks, then Jim and I will take you through our results, our three-year outlook and how we intend to begin restoring a strong balance sheet.

Then we will review some exiting growth opportunities we have in the Americas and end with an update on our reserves and resources as well as our outlook for exploration.

So without further delay, let me turn it over to our Chairman, John Thornton.

Thank you, Kelvin, and good morning, everyone.

Thank you for joining us.

I'm going to speak briefly, probably around five minutes, and I hope succinctly, about essentially three topics.

The first is how we are thinking about Barrick today and going forward.

The second is the vital topic of capital allocation.

And the third is the topic of talent management.

You may have been reading that we have been talking a lot about Barrick going back to the future.

So let me explain what we mean by that.

Our thesis is that when companies falter, it is usually because they have forgotten their original DNA.

That is to say, what it is that made them distinctive and gave them their purpose and their values and made them successful.

We believe the only way to recapture that is to consciously go back to the future and understand who we were, what made us distinctive, what gave us our purpose and our values and reinterpret that for the twenty-first century.

And so, we are determined to return Barrick to the model and mindset that enabled us to grow from a tiny start-up to the leading gold company in the world in 20 years.

So what is Barrick's core DNA?

The Company's purpose is the generation of wealth through responsible mining.

Wealth for our owners, wealth for our people, and wealth for the countries and communities with which we partner.

This purpose, in turn, contains within it our core value, partnership.

In Barrick's early years, Peter Monk led a small team of exceptional people who worked together as a team.

They knew each other intimately, they trusted each other unreservedly.

And they shared responsibility and accountability for the Company's success and its setbacks.

Their personal wealth was tied to the Company's fortunes, so they had every incentive to work together as efficiently and effectively as possible.

The head office limited its role to the allocation of capital, money and people.

Everything else they delegated to the people who ran the mines.

The people who ran the mines were free from the needless constraints of bureaucracy and middle management.

And as a result, they could run their businesses to generate maximum free cash flow.

The head office could then focus on taking that cash and reinvesting it to generate maximum value per share for the Company's owners.

It is this model that accounts for Barrick's early success, and it is this model that we are returning.

We have reduced our head office by almost 50% and we have eliminated all management layers between Toronto and our mines.

Free from bureaucracy and middle management, our operational leaders are now focused on maximizing free cash flow per share.

And the head office is focused on allocating that cash flow to maximize shareholder returns on a per-share basis.

As mentioned earlier, capital allocation is one of the central functions of the leaders of the Company.

So let me tell you how we are thinking about it.

First and foremost, our focus is gold.

We have no plans to diversify into other metals, and we have no plans to add to our existing copper position.

Going forward, we will focus our investments in our core regions.

This means high-quality, long-life assets in attractive jurisdictions.

We expect our portfolio to deliver a 10% to 15% return on invested capital through the metal price cycle.

And as such, any individual project we will look at, and assess it against a hurdle rate of 15%.

We will defer, cancel or sell projects that cannot achieve this target.

Of course we recognize that achieving our target hurdle rates will require relentless outstanding execution.

As such, we will be applying far more rigor to ensure that we meet our costs and schedule commitments.

And we will conduct post-investment reviews to evaluate how we have lived up to our original investment promises, using what we learned to improve execution on future projects.

When it comes to investing in our existing mines to sustain or expand them, we will not spread our capital evenly across the portfolio.

Our operations must compete for it and we are not going to subsidize loss makers.

In addition, we are not going to invest in a high-return project at a mine that is otherwise failing to meet overall expectations for returns on invested capital, or one that does not align with our strategic focus.

Assets that are unable to achieve a 10% to 15% return on invested capital will be sold.

And in the fullness of time, investments in new projects will compete with acquisitions and share buybacks.

The second critical area of focus for our leaders is talent management.

Successful enterprises, as we all know, are obsessive about talent.

We, too, are obsessed.

We are putting greater emphasis on attracting and developing the industry's best talent.

That is why we elevated our human resources function from what was essentially a staff support role to a central place in our executive team with the promotion of Darian Rich to Executive Vice President for Talent Management.

Over the last six months we have attracted 12 new leaders to Barrick who personify the Company's original values and bring vital skills and experience that support our business objectives such as strengthening the balance sheet, fixing Pascua-Lama, improving efficiency and productivity and building partnerships in China and various other jurisdictions.

This includes senior leaders such as Kevin Thomson, our Senior Executive Vice President for strategic matters, and Shaun Usmar, our Senior Executive Vice President and CFO.

And it also includes top talent in critical operational roles, including Sergio Fuentes, our new Executive Director for Pascua-Lama; and Melanie Miller, our new Vice President for Supply Chain.

We are making sure we have the most capable and reliable people in key roles.

We are clearly communicating our expectations to our leaders and we are providing them with continuous feedback.

We reward high performers and we address nonperformers.

We are also returning the Company to the model where our leaders are owners.

This, in my mind, is not best understood as aligning the interests of senior management with those of shareholders, rather the goal is for our leaders to be owners.

We are and will, assuming they earn it, significantly increase senior management's ownership interest in the Company, such that the interest of management and the interest of owners are one and the same.

Last year we announced an innovative partnership plan and today we are extending that plan to 35 leaders in the Company, from mine managers and country directors to our head office.

Each year these people will be graded on their collective performance, as measured against a transparent, long-term score card disclosed to shareholders in advance.

A significant portion of their total compensation, if earned, will be long-term in nature, awarded in units that convert into Barrick common shares which cannot be sold until an individual retires or leaves the Company.

In summary, our objective is to grow cash flow per share.

To do that we will carefully allocate our two most precious resources, capital and people.

Capital will go only to high-quality assets in the right places that are capable of delivering on our expected rates of return over the course of the metal price cycle.

This will get Barrick's flywheel turning again by producing a level of cash flow required to reinvest in growth and buybacks when appropriate, and also provide a reliable dividend.

We will only get this done if we have the best people and we put them in positions where they can act intelligently and quickly without encumbrances.

We will be rigorously evaluating developing all to ensure we have the right people in the right places to get the most from our assets and new investments.

Our best people will be owners, thanks to our partnership structure, and over time that will grow to be a significant part of their net worth, fully aligning incentives to grow cash flow per share.

That is the Barrick we are working tirelessly to build and we recognize we are only at the beginning of this journey.

The initiatives we are outlining today are foundational.

In many ways the real work begins now, but we see enormous inherit value locked up in this Company and we are determined to realize that potential for our owners.

And with that, I will turn the call back over to Kelvin.

Thank you, John.

Now let's take a look at how we performed in 2014.

Above all, we were sharply focused on maximizing free cash flow and returns through disciplined capital allocation and operational excellence.

We took some critical steps last year which have positioned the Company to deliver in 2015 and beyond.

First and most importantly, we have returned to the lean decentralized operating model and partnership culture that originally made Barrick successful.

This enables our mine and country managers to focus on optimizing their operations and growing free cash flow.

And we have already seen solid progress in this regard.

We recognize that innovation plays a key role in unlocking the cash-generating potential of our assets and realizing their full value.

In 2014, we successfully brought our new thiosulfate processing technology, or TCM, online and began accelerating cash flow at Goldstrike.

2014 was the best safety year in our Company's history, which reflects our commitment to safe and responsible mining.

We were also named the mining industry leader by the Dow Jones Sustainability World Index.

And we're very proud of all of our colleagues across the Company for achieving that great recognition.

To restore our balance sheet to a position of strength is a top priority for us.

We finished the year with strong liquidity, which allows us to tackle our debt in a disciplined manner.

Our current level of debt is higher than we would like and we intend to reduce it significantly in 2015.

I'll go into more detail in this later in the presentation.

As part of the return to our original partnership culture, as John alluded to, we elevated the importance of talent management.

Barrick has always been known for its deep bench strength across all areas of the Company, and that is something we intend to maintain.

Externally, we entered into a joint venture agreement with Ma'aden, the Saudi Arabian state mining company, to advance the Jabal Sayid project, which is expected to begin shipping copper in early 2016.

We remain focused on high-potential assets in the best regions and already have an excellent base.

60% of 2014 production was from our five core mines in the Americas, at very low all-in sustaining costs of $716 per ounce.

Now let's look at our results in a little more detail.

As you can see, we had a great operating year.

I won't take you through every number, but let me hit the highlights.

We met our gold production guidance and all-in sustaining costs and C1 copper costs.

Both came in below the low end of their respective guidance ranges.

We delivered just below our copper production guidance, due to a late year minor equipment issue at Zaldivar, which has since been resolved.

Operating cash flow for the year was $2.3 billion and we expect to generate positive free cash flow in 2015 at current gold prices.

At $2.2 billion, CapEx came in at the low end of the range and we are pleased to show a further drop with this year's guidance.

Earnings per share for the year were $0.68, following adjustment for after-tax impairment charges of $3.4 billion, related mainly to the Cerro Casale project, as it did not adequately achieve our goal to improve the project economics.

And for Lumwana, following the new 20% gross royalty rate in Zambia and in light of current copper prices, which are at five-year lows.

Last night I returned from Zambia after a very candid and constructive meeting with the newly-elected president and his ministers of finance and mines.

I'm encouraged by the progress we made, but there is no definitive solution yet.

We agreed to work expeditiously to arrive at a mutually acceptable outcome that would allow Lumwana to remain in operation.

That is our hope, but if we cannot reach an acceptable solution, as we indicated earlier, we will commence suspension in March.

And we would expect to be fully ramped down to a state of care and maintenance by June of this year.

We would only resume mining when we are comfortable that the metal price environment and taxation regime will sustain profitable operations.

As I mentioned, 2014 all-in sustaining costs beat our guidance at $864 per ounce.

Costs have declined by 15% from $1,014 per ounce in 2012.

Our 2014 all-in sustaining costs were about $116 per ounce below the peer average, and $400 per ounce below the average spot gold price last year.

This is a reflection of the success of ongoing efforts to reduce costs across the Company.

Now let's turn to our outlook the next three years.

In 2015, we expect annual gold production from our current portfolio to be between 6.2 million and 6.6 million ounces, and to remain above 6 million ounces in 2016 and 2017.

We anticipate 2015 all-in sustaining costs to be in the range of $860 to $895 per ounce, which would make us the lowest-cost senior producer again this year.

Looking out to 2017, our costs are expected to decline even below 2015 levels.

We expect to produce between 310 million and 340 million pounds of copper this year at C1 cash costs in the range of $1.75 to $2 per pound.

This outlook assumes the Lumwana suspension.

Looking to 2015 and beyond, we have set clear goals and guidelines to maximize free cash flow and deliver superior returns.

We have implemented a lean decentralized operating model and eliminated all management layers between Toronto and the mines.

We now have a small head office, which is focused on defining strategy and allocating capital.

As a result, we expect to realize $30 million of G&A savings in 2015, growing to $70 million in annualized savings starting in 2016.

We intend to reduce our net debt this year by at least $3 billion through a combination of positive free cash flow, disciplined non-core asset sales, joint ventures and strategic partnerships.

Our capital allocation approach will ensure that all new investments align with our strategic focus and maximize free cash flow and shareholder returns throughout the metal price cycle, as John described.

We expect our portfolio to deliver a 10% to 15% return on invested capital through price cycles.

As such, new projects will be assessed against the high end of the range at a hurdle rate of 15%.

Existing mines will also have to compete for capital.

Those that are unable to meet our capital allocation objectives over time will be sold.

This year we are also taking steps to improve the efficiency of our procurement and supply chain practices, which will free up working capital by reducing inventories.

We also expect to generate additional cash flow over the next year through improved integration of site maintenance programs and our global procurement and logistics system.

Jim will speak more to this in a few minutes.

We are extending our innovative partnership plan initially to 35 leaders across the Company.

The plan fosters an emotional and financial investment in the business.

Out leaders become owners.

We remain focused on operating the best assets in regions that are core to us and pursuing disciplined new growth in these areas.

Similar to 2014, 60% of our 2015 production will be generated from our five core mines in the Americas.

Their average expected all-in sustaining costs of $725 to $775 per ounce this year are significantly below average industry costs and current gold prices.

In 2015 we are prioritizing growth opportunities at or near existing operations in Nevada.

We plan to complete four prefeasibility studies by the end of this year.

Jim will provide more details on this later, as well.

No priority is more important to us than restoring a strong balance sheet.

Our debt reduction levers include: One, maximizing free cash flow through the lean, decentralized operating model with more efficient capital spending, lower G&A and profitable growth.

Two, disciplined non-core asset sales, starting with Porgera and Cowal.

We recognize this is a challenging market to sell assets, but we have had a number of strong, unsolicited expressions of interest and we expect that to continue.

And three, entering into joint ventures and strategic partnerships, if and where they make sense.

We will only complete transactions on terms we consider favorable to shareholders.

We do not have to sell any asset if the price is not right.

As we consider asset sales, we will take into account certain aspects in addition to price.

For example, if we sold Porgera and Cowal, only the KCGM joint venture would remain in the Australia-Pacific region, and our partner is the operator.

Selling these assets would allow us to further reduce regional G&A and overhead costs and free up more time for management to focus on our core suite of assets.

As we indicated earlier, we are very comfortable with our strong liquidity position which allows us to tackle debt reduction in a disciplined way.

At the end of 2014 we had $2.7 billion of cash and an additional $4 billion available on our fully undrawn credit facility.

And as the chart also shows, our debt repayment schedule is modest, with less than $1 billion due through 2017.

As John discussed, our early success was underpinned by a partnership culture and a simple but powerful operating model.

We are returning to this successful formula.

This will enable our mine managers and country managers to focus on continually improving their operations to maximize free cash flow across the business.

The head office can then focus on allocating these profits to maximize shareholder returns.

As part of the transformation, we reduced our head office by close to half, from 260 positions in 2014 to 140 positions in 2015.

These reductions are expected to drive material savings, as shown on the next slide.

As I mentioned earlier, we expect to realize $30 million in G&A and overhead savings in 2015, increasing to $70 million in annualized savings in 2016.

We have eliminated all management layers between the head office and the mines.

What remains are shared services in the field that provide direct support to our mines and projects.

These costs are no longer reported as G&A.

They are allocated directly to the relevant operation as operating costs.

This incentivizes managers to use only the services they truly need.

If there are services that are not required, they will be eliminated, which should drive further savings.

Now let's look at our high-quality core mines and the additional opportunities we see in them.

These five operations in the Americas provide us with an unparalleled platform to generate returns for our shareholders.

They are arguably the most attractive assets in the entire gold industry, generating strong operating cash flow even in today's gold price environment, while offering exceptional leverage to higher gold prices.

We have the right people and exceptional mine managers at these sites, which is integral to their success.

As well-run as they are, each of them still has substantial opportunity for improvement, which Jim will discuss shortly.

These mines produce 60% of our total gold production at an all-in sustaining cost of just $716 per ounce in 2014.

Their strong performance continues to position Barrick extremely well in terms of both costs and production.

As this slide indicates, they underpin our low cost base and these five core mines alone produced almost 4 million ounces of gold in 2014.

Turning now to our reserves.

As the chart shows, our average reserve grade for 2014 was 1.37 grams per tonne.

This is significantly higher than the senior producer average of 0.9 grams per tonne.

Looking at just our core mines, they have an even stronger average grade profile of 2 grams per tonne, more than double the senior producer average.

Now let me turn it over to Jim to discuss some of the exciting opportunities we have to extend the mine life and improve returns of our core assets.

Jim?

Thanks, Kelvin.

Good morning.

Kelvin has just talked about the superior quality of our portfolio, driven by our core mines in the Americas.

And these mines keep on giving.

We have identified a number of tremendous opportunities at these assets where we can improve the economics and extend the mine lives.

And we are underway on executing on a number of these opportunities.

Let me take you through a few of them.

At Cortez, we will be completing a prefeasibility study later this year on the deeper part of the Cortez Hills lower zone.

I will go into this detail in a moment.

At Goldstrike, we produced first gold from the thiosulfate circuits in November of last year.

The TCM process, as we refer to it, is a very innovative and proprietary technology that doesn't use cyanide.

It significantly improves the economics at Goldstrike because it allows us to bring about 4 million ounces forward in the mine plan.

In speaking to our team there this week, the recoveries are aligning with our expectations and the new circuit has met our production and cost expectations since it started up.

Our ramp up will continue.

At Goldstrike's satellite deposit, South Arturo, initial development will be on the higher-grade portion at modest CapEx of approximately $35 million.

It will produce about 400,000 ounces in total, on a 100% basis, just as this initial phase in 2015 to 2017.

At Pueblo Viejo, we are looking at increasing plant throughput by optimizing our ore blending and autoclave availability.

We also have good potential to reduce costs by improving maintenance programs there.

Longer term at PV, there are significant reserves and resources that could potentially extend the mine's life.

At Lagunas Norte we are evaluating a plan to significantly extend its life by mining the refractory ore below the current oxide ore body.

We looked at this potential a few years ago, concluding that it was uneconomic at higher gold prices than today even.

However this new project contemplates a significantly reduced pit to mine only the higher grades and require less initial capital, and only needs a smaller and more simple plant which could leverage on-site infrastructure.

This is not currently reflected in our resources for Lagunas, so we would see it as upside.

And finally, at Veladero, we are working to reduce costs by improving the efficiency and effectiveness of our inventory management and maintenance systems, and improving productivity and equipment availability and utilization.

Beyond these opportunities, we have exciting potential at or near our existing mines in Nevada.

In fact, we will complete four prefeasibility studies on projects in Nevada by the end of this year.

These projects represent an attractive pipeline.

There is strong potential for us to upgrade a significant portion of their resources to reserves over the next two years.

We expect some to begin contributing new production within the next five to six years.

We have one prefeasibility study already completed, at Turquoise Ridge, which I will discuss next.

And I look forward to updating you on the rest throughout the year as they come through.

Turquoise Ridge is one of our most exciting opportunities.

Production is currently limited by haulage and ventilation constraints.

We have completed a prefeasibility study on installing an additional shaft, which could bring forward more than 1 million ounces of production, roughly doubling output to an average of 500,000 ounces per year at an all-in sustaining cost of about $625 to $675 an ounce, what I would consider the makings of a core mine in a great region.

Preliminary estimates indicate the CapEx to be approximately $300 million to $325 million, an attractive payback period of 2.5 years, assuming a gold price of $1,300 per ounce.

We expect permit approval by the third quarter of this year.

And pending a go-ahead decision by our joint venture partners, construction would begin as early as Q4 this year, with initial production in 2019.

Turquoise Ridge's reserve grades of 17 grams per tonne are considerably higher than the average grade of our portfolio, and notably that of our peers as illustrated in this slide.

Drilling at the northern extension of the deposit continues to exceed expectations, and is confirming that the ore body is larger than previously known, even with higher grades.

2014 drilling added about 400,000 ounces to the north zone resources, a 10% increase from the prior year.

In 2015, we plan to add to the extensions drilled in 2014, and test the limits of the north zone even further north, and at depth.

And for those of you who know some of the asset's history, our advance ground support technology and improved reinforcement techniques have, in fact, mitigated the ground stability issues that have challenged the previous mining operations at this site.

In fact, Turquoise Ridge in 2014 won our safety award for the safest small mine in our organization.

So congratulations to them.

At Goldrush, which in my view is one of the most exciting discoveries in the last decade, we expect to share prefeasibility findings in our third-quarter results.

Infill drilling in 2014 continued to demonstrate high-grade continuity.

Nearly 70% of the overall resource now sits in the measured and indicated category.

This has increased our confidence in the continuity of the mineralization here.

Application for twin exploration declines was submitted in Q2 of last year.

This will allow us to further define and identify the northern limits of this known deposit.

Over at Cortez, prefeasibility study for expanded underground mining just below the existing permitted levels will be completed in late 2015.

Drilling indicates that this zone is primarily oxide and higher grade compared to the areas of current underground mining.

This should benefit processing costs.

What I'm most excited about is this.

The limits of the lower zone have yet not been defined and drilling suggests the potential for new targets at depth, like the Renegade Zone and even deeper stratographic horizons.

There is also good potential to the south, and we have extended the exploration drift.

This allows for additional step-out drilling, which should begin in June.

Drill results to date include 36.6 meters at 31 grams per tonne and 27.4 meters at 20.9 grams per tonne, both oxide in nature, which compares favorably with the average grade of 13.8 grams per tonne in refractory ore above the 3,800-foot level.

Over in the west, in Spring Valley, which is 70% owned by Barrick and located about 75 miles west of Cortez, is a low capital cost heap leach project with excellent potential to become another standalone mine in Nevada.

We expect the prefeasibility study for this project to be completed in late 2015.

In addition to these near mine opportunities, we have a number of the world's greatest or largest undeveloped gold deposits.

This includes Pascua-Lama, of course.

The mine has potential to generate significant free cash flow over a 25-plus-year mine life.

But make no mistake, we are well aware of its unique challenges and have acknowledged the issues that have led to its suspension.

The question before us now is whether economics going forward would justify resuming its development.

To that end we recently hired a new project Executive Director, Sergio Fuentes.

Sergio reports directly to Kelvin and I. He has nearly 30 years of experience managing complex construction projects in Chile, including those at high altitudes.

While the mine remains on care and maintenance, he and the local team are working to address outstanding legal and regulatory issues in Chile as expeditiously as possible, and are completing a robust new execution plan to optimize remaining construction activities.

If the plan aligns with our objectives and has a minimum ROIC of 15%, we will evaluate moving forward, but not before.

In any scenario, we must permit and construct a new water management system in Chile.

We will submit our application for a new system by June, with permitting to take about two years.

In the meantime, we are working to minimize the cost of holding this asset.

I will wrap up with a brief discussion on our reserves and exploration focus.

We recently reported 2014 reserves of 93 million ounces with an average reserve grade of 1.37 grams per tonne.

As you can see from this slide, the quantity and quality of our reserves comfortably exceed that of our senior peers.

Approximately 65% of the reduction in reserves from 104 million ounces at the end of 2013 was due to ounces mined and processed in the last year, 2014, with the balance largely reflecting asset sales.

We continue to use conservative gold price assumptions of $1,100 an ounce, unchanged from 2013.

While this may well be below our gold price outlook and current spot prices, it reflects our emphasis on pursuing profitable ounces.

Our pursuit will be focused on our best regions.

Regions that have proven gold-rich districts where we have a competitive advantage through our experience and expertise, as well as established partnerships with governments and communities.

And where there is existing infrastructure, supplier relationships and all the key components that help build a critical mass.

These are Nevada and the Andean regions.

About 85% of our budget is allocated to the Americas, and about half of the budget will be directed to Nevada.

Thank you, I will now turn it over to Kelvin for closing remarks.

Thank you, Jim.

To conclude, we would like to leave you with three key messages.

First, looking to the future, our assets continue to perform exceptionally well.

We have a highly attractive project pipeline in Nevada, which aligns with our regional focus and has excellent potential to meet or exceed our target rate of return on invested capital.

Second, we are serious about significantly reducing our debt in 2015.

Our strong liquidity position means that we can do this in a disciplined way.

And finally, we are well on our way to returning to the simple and powerful model that made Barrick successful in the past.

Lean, nimble, decentralized and committed to maximizing free cash flow and generating superior returns for our shareholders.

We look forward to updating you on our progress throughout the year.

Before I finish, I want to take this opportunity to acknowledge the departure of Ammar Al-Joundi.

Ammar has made significant contributions to Barrick over the years and we all wish him lots of success in his future endeavors.

With that, I would like to turn it over to Q&A.

Operator, may we have the first question, please?

(Operator Instructions) Andrew Quail, Goldman Sachs.

Good morning, John, Kelvin and Jim.

Thank you for the upside and congratulations on another strong quarter.

Appreciate the very solid release going forward.

Just have one question.

Reading through this statement, it says nothing about some potential acquisitions.

I think that last year, there was obviously some noise around a Company transforming potential transaction.

I was just wondering where does that sit now?

Is there any horizon where that makes sense?

And can you give some color maybe, John, on what you are thinking about moving back to the Americas and maybe not even looking at acquisitions outside in the Asia or even African regions?

Andrew, thanks for the questions, it's Kelvin, maybe I can answer that.

I think first and foremost, as we have indicated, our driving priority is fixing the balance sheet.

As we indicated, that is going to be priority one, and we are going to be laser-focused on that.

Obviously to do that, we are going to be driving free cash flow from the operations and continuing to focus in that respect.

In terms of transformational acquisitions, at this point that is really not an area of focus.

Can you guys think or do you believe there are synergies in Nevada if there was anything like that?

Or can you comment?

Well, we're focusing -- we couldn't be more laser-focused than on our operations in Nevada and on our project pipeline.

Prefeasibility studies being done this year with great growth with our portfolio in Nevada.

We just see Nevada as core to us on a going-forward basis and that is certainly going to continue.

Okay, thanks very much, Kelvin.

You're welcome, thanks, Andrew.

Stephen Walker, RBC Capital Markets.

Great, thank you very much.

Just a couple of questions.

First of all, a little bit of outlook for the balance sheet, debt to total capital now is about 50%.

If the $3 billion is applied to the debt, debt to total capital by year-end will be 40% to 44%, in that range.

I guess the question is, is there a longer-term goal that you have in a debt to total capital?

Or in a ratio with respect to the balance sheet?

And then is it safe to assume that the $1.7 billion that comes to maturity in 2015 to 2018 will be paid down with cash on the balance sheet?

Thank you, Stephen.

I think to start, as we indicated before, net debt of $7 billion is certainly a target that we are aiming for and are comfortable with.

But let me ask Shaun if he wants to comment any further in terms of the remaining question.

Thanks, Kelvin, and good morning, Stephen.

I think to direct you to the question, our focus is on getting the runs on the board.

We have come out with a very clear statement of intent on the $3 billion, with obviously the focus on trying to move beyond that.

It's important for us to maintain our investment-grade rating on our debt.

Directly to your second question, yes, the intention would be to continue to focus on our existing portfolio in order to satisfy debt requirements.

And to do smart transactions along the way, as we have clearly outlined in this call.

And just if I may, by way of follow-up, talking about sale of assets, obviously Cowal and Porgera, relatively low cost, relatively high-cost assets, respectively.

You mentioned that there have been a lot of unsolicited inquiries about some of the other assets within the portfolio.

My question is, when you look at Acacia, your holding there, when you look at other assets such as Zaldivar and some of the non-North American assets, what do you consider core and non-core?

And to what extent could you be looking at other asset sales, whether it is copper asset sales or the precious metals outside of the core regions in North America that have been identified?

What assets could potentially be considered for liquidation or sale?

Or joint venture?

Okay, Steve, it's Kelvin again.

That's quite a question, you touched on a number of points, Steve.

But first and foremost, as we have always said, nothing is sacred.

We look at the entire portfolio.

Having said that, the five core assets that we've already spoke about, as Jim said, Turquoise looks like it's about to become a core asset.

Then others in the portfolio you touched on, on Acacia and Zaldivar.

Start with Acacia.

We have been very clear and John's mentioned this a number of times as well, that we are extremely happy with the way the management team is continuing to perform.

We are seeing that in the Acacia share price.

We think there is more value to be unlocked in Acacia, so at this point we are very pleased to continue to hold it.

The question's asked, could there be a point in the future when you'd consider divesting?

Of course, you never say never, but at this point we're really pleased with what we're seeing and we think there is just more room to go.

Zaldivar, you asked.

Zaldivar is copper but it is also in a core region.

It is a fantastic asset.

All we said before, there is nothing that's off the table.

For assets like Zaldivar there, those are ones you have to look at that they are very hard to replace, and therefore we've placed a very high premium on them.

Otherwise, as you look across the portfolio, we spent a lot of time, Jim and his team in particular, at looking at each of the assets and identifying where we can unlock further value from them.

We have already been putting those measures in place.

It's put us in a position to really understand the assets well as we move toward considering them for sale.

Nothing is off the table, but we definitely will not be selling anything that isn't for full value.

And because of our strong liquidity position, we are in a fortunate position that we can be disciplined.

Great, thank you for that, Kelvin, and thank you Shaun.

Greg Barnes, TD Securities.

Yes, thank you.

Shaun or Kelvin, I just want to gauge how committed you are to the net $3 billion debt reduction.

In a $1,200 gold price scenario, like we are now, free cash flow isn't going to be as strong as it would be at $1,300.

And selling the assets like Cowal, Porgera and possibly Acacia, would still leave you with a bit of a gap on our numbers.

Would you issue equity during the year to make sure you hit that $3 billion net debt reduction target?

Greg, it's Kelvin.

Look, we just think that the other three levers that we mentioned, one of which you touched on, the free cash flow, as well as the asset sales, possible joint ventures and partnerships, those are really the three areas we are going to be focusing on.

And we are confident that we can achieve our $3 billion target with that.

Equity is something that would be a very distant fourth lever and it's not something that we are focusing on right now.

Greg, I just want to add to that.

Kelvin's referenced it earlier.

There is a significant effort underway with Jim's technical teams in particular, to look at that intrinsic value of these assets.

And I think that is really where we are focusing our time, effort and energy right now.

We are not focusing on the easy options, we're looking at all the levers.

The operations are a key component to that, but as you heard with John's opening statements, we are looking at our G&A costs in every aspect in our portfolio that we can derive efficiencies and savings and cash generation from.

That is the focus of this management team at this time.

Okay, thanks.

Just to follow-up on that point, Shaun, how do you think production evolves beyond 2017?

With the sale of Cowal and Porgera, you are down to a little over 5 million ounces.

But you do have organic projects.

Do you think you can sustain a 5 million-ounce production level beyond 2017 through into the early 2020s?

Look, Greg, I think the first comment I would have on that is, whereas beforehand we have provided typically a year of guidance, we have sought to provide this additional window which we think is important for the market.

Also to demonstrate that there's additional production, particularly in our core regions.

And we're focused on that and that is part of the work that Jim and his team are doing.

As I mentioned earlier, the teams that we have, these technical teams that are going around, are finding additional value, which we seek to try and capture within these mine plans.

That is work that is ongoing and will continue in the early part of this period.

I think certainly what we are seeing there are certainly growth options which represent relatively low capital additions within this business.

But we are focusing also on the portfolio as a whole.

It is going to be less about ounces and more about value.

Greg, just to finish on that, I think Shaun hit the nail on the head at the end.

The real focus, unlike the past, is going to be on quality of ounces, not quantity.

And delivering cash flow per share, that will be what drives us.

Okay, thank you.

You're welcome.

Tony Lesiak, Canaccord Genuity.

Good morning.

Question on sustaining capital.

Based on the guidance, you are running about $250 an ounce this year, well above historical averages.

Where do you see sustaining capital trending over the next few years?

Thanks, Tony.

Jim or Shaun?

I'll start with it and then Shaun can pitch in.

What I'm looking at right now is that we would be running pretty flat on that.

Obviously it's going to make some differences as we get into some of the additional shaft at Turquoise Ridge and a couple of other expansions of pads.

But it will be pretty flat or improving.

And that would be sustaining because I'd assume the Turquoise Ridge shaft, that would be expansionary?

It is; part of the capital that goes into Turquoise Ridge is sustaining in terms of the development of the ore zones.

Okay.

Any timing for the new Pascua execution plan?

It's Kelvin, Tony.

As indicated, we have hired Sergio Fuentes, who is the new senior project manager.

Very top caliber talent, 30 years of experience developing projects in the Andes.

What he has been focusing on since he started late last year is two things.

One, trying to continue to minimize holding costs on the asset.

And then number two, he is starting to put together his optimization plan, which will include a schedule.

Based on current discussions, we're looking at probably something internally early next year.

We will have numbers firm on that.

But candidly, the next time we come out with a number on Pascua-Lama for the market, we want it to be extremely well-baked, completely scrubbed and it will have an execution plan.

If we decide to go forward with the project, this will be one where we return to how Barrick used to build projects on time and on budget.

Okay.

Finally, on Lumwana, based on the new reserves, where do you see free cash breakeven?

Assuming you can get the old royalty taxation regime back and given current oil prices?

At Lumwana, we would, at current prices under the old regime, we would be breaking even about now.

Okay, and does that factor in the cheaper oil?

It doesn't factor in at Lumwana, no.

Okay.

All right, thanks so much.

You're welcome, thank you.

John Bridges, JPMorgan.

(Operator Instructions)

Can you hear me?

Yes, please go ahead.

Yes, we can hear you, John.

Sorry, I have been problems with my phone all morning.

Thanks, John, Kelvin, Jim, thanks for taking the question.

I was just wondering, you are very specific about the hurdle rates.

What gold price underpins that?

Shaun, do you want to address the --?

Yes.

What we've looked at, at this point is the through-the-cycle returns that we will get on the portfolio.

Currently we've looked at the full suite of new projects and investments from scoping study throughout.

We have a sense of the breakeven gold prices, where those projects would be attractive.

And we tend to focus our limited resources on those options that, firstly, fit, as John had said earlier, with our strategy and then be very judicious as to applying the capital beyond that.

In this gold price environment, we are looking, as we put in the documents from spot up to $1,300, but of course as we move through the cycle, we will continue to look at it through a range of pricing.

We are, I would say, very conservative at this point with our use of capital.

Right, understood.

And then, coming back to basics and back to the old style of Barrick, of course one of the key drivers of the Company was you were sitting on Goldstrike.

To what extent have you considered replacing assets in the success of the new-style Barrick?

It's Kelvin, John.

One thing you can expect to see from us is probably being a little more active and judicious in terms of managing the portfolio.

You hit on Goldstrike.

And clearly for us, it's evident how core Nevada is and will continue to be.

You have heard from Jim the potential we have for ongoing opportunities within the current portfolio and beyond in Nevada.

I think the other thing that you'll expect us to see is, in the past, we probably held on to assets a little too long.

And so not turning the portfolio is something that we would prefer to be a little more active about.

And so rather than waiting 'til every last drop is squeezed, you will expect to see us do more in terms of asset sales.

It is going to be a matter of making sure that we've got the best assets in the portfolio, so you'll see more pruning on a going-forward basis.

John, in terms of adding to the assets and replacing reserves, we have really focused our exploration people on adding both on the brownfields.

But we have some exciting developments on the greenfields that we'll work on as well.

Okay, we'll look forward to hearing from them.

Many thanks, guys, best of luck.

Thanks, John.

David Haughton, Bank of Montreal.

Good morning and thank you for the update, John, Kelvin, Jim and Shaun.

I've got a broader question for you.

What role do you see Chinese investment playing in the global gold industry?

And for Barrick specifically, given your commitment to that region, your desire to reduce debt and to form strategic partnerships?

Well, David, we've got the expert right here.

Maybe I'll ask John if he can comment on that.

David, first of all, thank you for your question.

As you can appreciate, it is a rather complicated topic.

So now let me try to deconstruct it carefully so that it's not misunderstood.

I think the first thing to be said is, we feel very strongly, as I hope any Company in the twenty-first century would, that it's absolutely essential that we understand China cold.

And that is the reason we went out and hired somebody to be in charge of trying to forebear.

So at a minimum, we want to be smart about the implications of China in this century in our business.

So that is the minimum standard.

The second thing I want to say is, having had all the experience I have had there, I have a very good sense of the nuances and the complexities and what you might call the good, the bad and the ugly.

So I'm under no illusion as to the level of complexity and sophistication and patience needed to come to a determination about a specific idea, or a specific partnership, or a specific relationship, and what that might or might not do for us over time.

And therefore, we are going about this in a very, very paced manner, in a very in-depth manner, we're in no hurry to do something.

If we do anything at all, we want to do the right thing and take our time to do it.

That probably gives us a bias towards being modest to begin with and build it over time, because we know relationships take time.

As a result, we are spending a good amount of time on a continuing basis with various Chinese counterparts, getting them smarter about us and us smarter about them.

When we come to some kind of particular specific resolution, we will then go ahead and execute.

But I want to emphasize, don't hold your breath for that, because this is going to be a long time in coming.

But, we feel that in the fullness of time, having a distinctive relationship with the Chinese will be good for Barrick and good for our owners and good for everyone.

So that's why we are going to pursue it in a relentless but balanced fashion.

Do you see that you've got a fairly clear run at this, compared to your mining and gold peers around the world?

I guess I would answer it this way.

And this comment, by the way, is not restricted to mining.

I would say just about every serious company in the world, as you well understand, has been looking at China, trying to get involved with China, trying to do something with China, et cetera, et cetera.

And the spectrum of what has been accomplished to date ranges from the god-awful to the reasonably good.

And a lot of it is transaction based, a lot of it is short-term in orientation, even though it is dressed up with other words.

So I think we have a, if I can say so, a distinctive advantage in the depth of understanding that we've got about the level of complexity and our willingness to be disciplined about what we do.

Because we are simply not -- we're well informed about how this might play out.

Yes, the idea of the Chinese investment appears full of promise, but as yet have seen no significant transactions of note.

So I wish you luck on that.

Thank you very much.

Thanks, David.

Harry Mateer, Barclays.

Good morning.

A couple questions.

First, just a bit more on the debt reduction goals.

First, just why specify net debt reduction and not gross debt?

I assume that was intentional.

Is that just a function of not having any pre-payable debt in the near term?

And then second, what led you to put a 2015 deadline on it?

It's certainly an encouraging and aggressive target, but pretty soon.

So should we take that to mean that you have had discussions on a potential JV or strategic partner that are advanced enough to give you confidence that something could get arranged in the next 10 months or so?

Look, I'll start.

It's Kelvin, and then turn it over to Shaun.

I think in terms of, starting on the second part of the question, why on 2015?

We recognize the importance of reducing the debt, and we are going to be tackling it aggressively.

So that is why we put an aggressive schedule in front of us.

We are confident we can get there and we're going to do everything we can to achieve it.

In terms of the first part of the question, maybe, Shaun, you would like to address it.

Harry, thanks for the question.

I'd say, just to add to Kelvin's points on 2015, I think the comments were made up front that we're not going to be irrational around our pursuit of reduction of that debt.

But it is a statement of intent, which we understand will be looked at for the fullness of time with this team.

But there is a very strong focus on execution.

On the first part, it's not as you portrayed.

I think we are focusing on reduction of total debt, and there's just a read-across on the net debt component.

Okay.

And then in terms of -- is there anything you would look to actually pay down from total debt this year?

Could we see a repeat of a couple years ago where you guys actually went into the market and tendered for some bonds?

Yes.

Okay.

And then second, it does sound like this net debt reduction is intended to be a permanent improvement in the capital structure, rather than something where you just take that down now to use up that additional capacity in the future.

Is that how we should think about it, this is intended to be a permanent improvement?

Correct.

That is exactly how you should think about it.

I think it goes to John's earlier point about the Company being conservative in nature by history.

That is exactly what we want to return to.

Okay, thanks very much.

You're welcome, thank you.

Thank you.

That concludes today's question-and-answer session.

I would now like to turn the meeting back over to Mr. Dushnisky.

Thank you, operator, and thank you, everyone, for joining us on the call this morning.

And thank you for your questions.

We hope we have answered them completely and we'll look forward to reporting back to you with our Q1 results.

Thank you very much.

This conference has now ended.

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