巴里克黃金 (GOLD) 2016 Q3 法說會逐字稿

Ladies and gentlemen, thank you for standing by.

This is a conference operator.

Welcome, to the Barrick third quarter results conference call.

(Operator Instructions)

I would now like to turn the conference over to Kelvin Dushnisky, President.

Good morning, and thank you for joining us in what I know is a busy day for earnings call's.

Before we begin, I would like to highlight that during this presentation we will be making forward looking statements.

This slide includes a summary of the significant risks and factors that could affect Barrick's future performance and our ability to deliver on these forward-looking statements.

A review of our most recent AIF will provide you with more complete discussion.

I'm here today with their Chief Financial Officer, Catherine Roth, our Chief Operating Officer, Richard Williams and our Senior Vice President of Business Innovation, Michelle Ash.

Participating on the line are Bill MacNevin, GM of GoldStrike, Matt Gili, EGM of Cortez District, Jim Whittaker, GM of Lagunas Norte, Nigel Bain, GM of Turquoise Ridge, Greg Walker, as the recently appointed, EGM of Pueblo Viejo.

Many of you will recall, that Greg was previously the Executive Managing Director of the Porgera JV mine in Papua New Guinea, where he has a proven track record of delivering best in class improvement, training and mentoring local workforces and engaging exceptionally well with government partners.

We're confident that he will apply all the same talents at Pueblo Viejo.

Greg takes over for Etienne Munch.

Etienne, helped drive the construction of the Pueblo Viejo mine, then as a mine GM, successfully led the project to ramp up to its current operating stage.

In his new role, Etienne returns to project management, where his initial area of focus will include, As has become our practice in our other general managers will also be available for questions following the formal portion of the call.

Now, before getting into this specific third quarter highlights, I want to start by reiterating the strategic goals that we outlined earlier in the year and how they reflect in our results.

The first goal is building meaningful partnerships.

You'll announce the strategic collaboration with Cisco during the third quarter to the digital reinvention of our business.

This will start with a flagship digital operation at Cortez and Michelle and Matt will speak to this in detail later in the call.

Our second goal is to produce industry leading margins in support of our ultimate objective of growing free cash flow for share.

We set a target this year to be free cash flow break-even at a gold price of $1000 per ounce after paying a dividend.

We're on track to achieve that goal with free cash flow break-even of less than $1000 per ounce in the third quarter.

Our final goal is superior portfolio management.

In this context we further strengthen our capital allocation process and we continue to maintain a 15% hurdle rate for new investments using a $1200 an ounce gold price.

By turning to the highlights of the third quarter and how we're tracking our gains priorities.

Our operations generated adjusted earnings, per share of $0.24 per the quarter, almost $1 billion in operating cash flow and approximately $675 million in free cash flow.

The strong cash flow generation enabled us to repay almost $0.5 billion in debt during the quarter.

And we're tracking well to our $2 billion debt reduction target for the year with $1.4 billion repaid year to date.

In addition to a strengthened balance sheet our liquidity also continues to improve.

We now have less than $200 million of debt due before 2019 and at the end of the third quarter $2.6 billion in cash along with our undrawn $4 billion credit facility.

I'm also pleased that Moody's and S&P have improved their outlook and our investment grade credit rating.

In the third quarter, we produced almost 1.4 million ounces of gold, at very low all in sustaining cost of $704 per ounce.

Our lowest cost quarter of the year.

And we've increased our gold production guidance range to 5.25 to 5.55 million ounces and reduce our all in sustaining cost guidance to $740 - $775 per ounce, marking three consecutive quarters of improved cost guidance.

As we continue to apply the best in class principals to capital expenditures, we've identified another $75 million in potential savings and deferrals for 2016 and have adjusted our capital guidance accordingly.

In summary, it was a strong quarter and we're tracking well to achieve our guidance and long-term goal to enhance shareholder value.

As an organization are aim is to deliver low risk, profitable, and sustainable growth.

Barrick has industry's largest gold reserves and resources and high-quality project pipeline.

With the benefit of an improved balance sheet, we can withstand gold price volatility, we have greater flexibility to invest in sustaining, and growing the business into the future.

In that context the return of Cabaret of Mark Hill and his appointment as companies Chief Investment Officer will bring additional consistency and rigor to the capital allocation decision making process.

And he'll assist in evaluating growth opportunities, capable of delivering long-term value.

We also announced the appointment of George B, Senior Vice President, for Lama and District Development.

George's immediate focus is to advance the evaluation of a starter project option on the lama side.

And Richard's going to speak to this in fuller detail later in the presentation.

On a personal level I couldn't be more pleased to welcome George back to Barrick's.

His experience in the Company dates back to being an early GM at GoldStrike, and includes key development and operating roles period.

Purina, Lagunas Norte, Veladero where I worked closely with George and I watch him perform at very high level technically, and also importantly, in terms of developing strong relationships in the local community.

We're excited about our prospects and look forward to continued to report on progress across business.

With that I would like to ask Catherine, to provide more detail on the financial results for the quarter

Thanks, Kelvin.

Before I go through the slides I would like to address up front, the extra disclosure that we provided in our MD&A this quarter.

In the connection with the continued disclosure reviewed by the securities commission, we've included additional disclosure for the third quarter but also for Q1 and Q2.

So as to provide greater prominence to gap measures, but onto the slides.

Our objectives is to deliver free cash flow to share and we aim to grow that over time.

To do this on a sustainable basis, we're seeking to manage all the drivers of that free cash flow be it production, costs, working capital and capital expenditures.

Our third-quarter results, I believe, is how far we've come on the journey.

In the third quarter we generated $951 million of operating cash flow.

Year to date we've made $1.93 billion.

At 674 million we generated more free cash flow in the third quarter than we did for the whole of 2015 after adjusting for the Pueblo Viejo transaction.

Year to date this number is now over $1.1 billion.

By focusing on the quality of our ounces, and through streamlining the portfolio, implementing best in class, we been able to expand our margins and grow free cash flow in two ways.

First and foremost we delivered leverage to the rising gold price.

Secondly we've driven down our costs.

Excluding the impact of the streaming transaction our free cash flow increased by $418 million versus third quarter last year, even despite the reduction in operating cash flow from the sale of assets.

This wonderful chart, explains how we have been able to achieve this.

With regards to what we can control, at Barrick, lower CapEx year on year, improvements in operating costs, larger volumes, and reduced interest expense contributed $114 million in free cash flow.

Another $117 million came from the reduction in project cost year on year, as well as expiration in corporate development costs.

This was offset by changes in working capital as a result of unfavorable movement in accounts receivable and inventory, but that partially offset by favorable movements in other current liabilities.

High gold prices, offset by lower copper prices, increase our cash flow by over $280 million year on year.

Our free cash flow break-even at the end of the quarter was less than $1000 an ounce.

And is Kelvin pointed to trending favorably to a full-year target of less than $1000 including a dividend.

This strong free cash flow has allowed us to reduce our debt.

Paying down $461 million of debt in the third quarter.

Year to date we've now repaid over $1.4 billion at a cost of $70 million.

And total debt now stands at $8.54 billion.

The result of this debt reduction have been to reduce our interest costs on an annualized basis by approximately $75 million.

I think, what I want to make the market aware, of is our bonds are trading above par now.

So we are very cognizant of the cost of return our debt has increased, and we do this knowing full well that we need to balance shareholder value with reducing risk of our balance sheet over the long-term.

As Kelvin mentioned we remain on track to achieve our $2 billion debt reduction target for the year.

The result of this debt reduction has meant we now have significantly a more robust balance sheet.

With roughly $2.6 billion of cash, less than $200 million of debt, due before the end of 2018 and a $4 billion fully undrawn revolving credit facility.

Our liquidity or near-term liquidity in particular is very strong.

The combination of our debt reduction efforts in the rising gold price have led to both Moody's and S&P upgrading our outlook.

Moody's, now have us BAA stable, formally having been a negative outlook and S&P now has us at BBB minus positive, formally having us just at stable outlook.

We updated our guidelines that Kelvin went through, and I will not go and spend too long on this.

But this is to reflect the positive impact of our business increasing efforts as well our increasing confidence as we near the end of the year.

Gold production guidance is now up in the top of the range, lifted slightly to 5.25 to 5.55 million ounces, and Rich will talk more about this.

We are now providing cost of sales per ounce guidance.

This is the GAAP cost of sales measure applicable to gold per attributable ounce.

This is $800 to $850 per ounce.

We've lowered our top end of our cash cost guidance, to $540 to $565 an ounce and married and dropped the bottom of our guidance to $740 to $775 an ounce.

Guidance remain the same at 380 million to 430 million pounds cost of sales per attributable pound is 1.35 to 1.55 per pound and we've narrowed vnvnvn guidance.

We now expect, as Kelvin outlined, our CapEx for the are to be between $1.2 billion to $1.3 billion.

With that I would like to handed over to Richard to provide more details on the operation.

Thanks Catherine.

First, I want to talk about keeping people safe.

We use the industry indicator reportable injury frequency rate.

This year with set a tolerance limit of 0.4 at all of our operations.

That's the number of reportable injuries times 200,000 hours divided by the total number of hours worked as you know.

This effort required a significant improvement to some of our operations over time.

Year to date we are at 0.41.

This represents the lowest in Barrick's history.

And it's commendable given the effort on the ground.

While we continue to focus on the safety and well-being of our people, it's with deep regret however, that have to inform you that, one of our teammates, Maxim a coal truck operator Lanquana mine passed away during the quarter as a result of a truck fire.

Mine operations were halted their and all fire suppression systems were inspected prior to restarting operations.

Our thoughts with Maxum family in this deeply sad time.

A tragic loss of their feeling and his colleagues is immense and we offer them our heartfelt condolences.

Moving on to environment.

While our progress on environmental compliance has been strong against our metrics we have an environmental instance to our Veladero mines in September.

That led to a short suspension of activity there.

As it turns out, the incident had no measurable environmental impact and our enhanced monitoring program detected no ground watering impacts These events as we all know however small are not acceptable.

We fixed the immediate issue at Veladero and will continue our focus on achieving best in class standards in an environment in compliance there and elsewhere across the portfolio.

On production, the year on year decline is primarily a result of asset divestitures the operations performs strongly in executing their production plans and that's reflected in the increase in production guidance for 2016.

Our ongoing focus on delivering best in class initiatives, and delivered results, and driving down costs and increasing productivity.

Our Q3 all in sustaining costs result was $704 an ounce is evidence of the success of the work of the guys on the ground.

A combination of positive gold prices and our continued and intense focus on reducing costs and increasing productivity has created a significant improvement in our margin on year-by-year basis, as Catherine has alluded to.

In summary, our ongoing operational excellence work is delivering results, over the expected timetable.

And there's more to come yet.

With that, I would like to handed over to Bill MacNevin, GM of our GoldStrike mine.

Thanks, Richard.

Q3 has been a strong quarter with improvements in operation performance across the site.

Best in class discipline through focused project execution as part of our operating system is how this is achieved.

The points of significance for this quarter are, until we reach commercial production for the first processing bolt, ATM recoveries now in line with predictions, focus in the circuit is now on increasing tonnage rate and circuit up top.

And improvements in underground production tonnage and decreasing unit cost.

The focus continues on prioritization and implementation of best in class projects to improve our margin and grow the mine.

Thanks, I would now handed over to Matt.

Cortez, continues to deliver outstanding results in the third quarter.

With production at 254,000 ounces the cost of sales of $874 an ounce and all in sustaining costs of $531 per ounce.

These better-than-expected results are attributed best in class improvements in all divisions.

First, in the open pit, we're reducing direct operating costs while producing ore tons just to match the plant capacity and outbuilding stock piles.

Second, both the underground process divisions we are increasing production while holding cost study.

The best way for best in class initiatives, for Cortez, is focused on digitization.

We will discuss in more detail later in the presentation.

Regarding growth, development of the front Range declines commenced or in the third quarter.

Declines are being excavated using road headed technology and they will ultimately be considered with a conveyor system for more efficient transportation in the deeper portions of the Cortez underground.

The result of these improvements is now being approve for your guidance between 1.0 and 1.05 million ounces and cost of sales between $880 and $920 per ounce and a lower all in sustaining costs of between $510 and $530 per ounce.

Thanks, for this and I will now hand it over to Greg Walker executive General manager at Pueblo Viejo.

Thank you, Matt.

Before I talk about the third-quarter results at Pueblo Viejo, I want to comment on the first couple of weeks here.

As Kelvin said in the beginning, I took over for Etienne Munch last month.

I would like to say arriving at PVC you find a very impressive mine site well sit up, and will operated and significant ore body and great opportunity for me forward.

I'm very excited about being, taking up the leadership role in the Dominican Republic and I look forward to working with the government, community and employees to deliver increased value for our owners and all other stakeholders within the Dominican Republic.

Under the site, Pueblo Viejo had a very strong quarter across the board.

They are was driven by improved oil grade, strong recoveries, and lower operating costs during the quarter.

For the quarter we diluted to Barrick 189,000 ounces at an all in sustaining cost of $425 per ounce.

This was a significant improvement over the budget that we had in place.

We achieve this result through our focus best in class program which continues to drive value in all areas of the operation.

In particular the process optimization projects which has seen his improved gold covers and achieve improvements in the availability of the autoclave circuit.

The availabilities increase from 84% up to 86.5% this improvement set us up to deliver an increase process comes into quarter for and into the future mine.

-- that improved outlook has allowed us to increase our guidance at PV for 2016 from 670,000 ounces to 700,000 ounces.

Also, during the quarter silver recoveries continue to improve.

Primarily as a result of increased preheater's performance and a strong operational focus in the short-term minimal controls.

Also, notably in Q3, our cost reductions, these were driven by the decreased consumable expenditures and the results of our cost driving initiatives along with lower fuel prices and lower energy costs.

Thank you very much, and I would like to handed over to James Whitaker general manager.

Thanks, Greg.

Lagunas Norte had a solid quarter of performance in all areas health and safety, environmental compliance, production, cost and project development.

The best in class program continues to add value and cost savings and we are now planning the second wave of projects into the 2017 year.

Our current focus is maximizing throughput to the heat peet pads by increasing equipment utilization.

The PMR mind life extension project is on track and we're completing the first phase of feasibility engineering and focused on delivering a permit document to the approving authorities.

As we move forward into the fourth-quarter, we are estimating to be within 2016 guidance having narrowed the production guidance range from between 425 to 450,000 ounces at a cost of sale of $680 to $720 per ounce, in an improved all in sustaining costs guidance $560 to $590 per ounce.

Thanks, I will now hand it over to Nigel Bain.

Thank you, Jim.

Good morning, everybody.

Turquoise Ridge, has become a great example of our best in class efforts to improve.

In the third quarter, Turquoise Ridge had a strong performance for significant increases in coal produced combined with reduced cash and all in sustaining costs.

Goal production was 72,000 ounces in the quarter and continues a strong production year.

Cost of sales was $563 per ounce.

Cash cost were $460 per ounce.

And all in sustaining costs was $583 per ounce continuing a downward trend of cost reductions.

You will recall earlier in the year we outlined our focus for best in class and they included improvements on capital, label and planning of efficiencies.

In the third quarter a number of these initiatives were delivered at Turquoise Ridge, and these are, increased number of mechanized top cuts which has resulted in more consistent ore flow from the mine month-to-month.

Also, our shift change process to increase face time, improved maintenance practices, increasing equipment utilization, and finally optimize development plan and reduced waste value and leveraging improved ore geometry.

Thank you.

I will now turn it back over to Richard Williams to cover the Veladero mine.

Thank you, Nigel.

At Veladero, Q3 production was negatively impacted by weather and related issues and two week suspension of operations.

2016 was year of high snowfall and this resulted in 42 days of loss production.

It's higher than anticipated snow also created challenges with managing the leach pad water balance within permits during the snow melt.

In order to counter this or deal with this lower grade mine material was stacked in order to have a sponge effect on excess process solution in addition to other mitigating measures.

The excess water in the system has been manage successfully today and we expect that to continue to be the case on a going-forward basis.

The operations was suspended from September 15 until October 4 after falling ice damaged a pipe carrying process solutions on the leach pad area.

This led to a on pad flow that pushed some material to leave the leach pad over the containment.

This material was primarily crushed or saturated with some process solution.

And was contained in the displacement within meters of the incident side.

And was quickly returned to the leach pad.

Extensive water monitoring in the area confirmed the incident did not have measurable environment impacts.

The Company immediately completed a series of remedial works required by the provincial authorities, which included increasing the height of the perimeter burms that surrounding each pad to prevent such an incident from occurring again.

In addition to these works and keeping with our vision we're making Veladero a trial site one part habitual technology that will enhance our environmental and water monitoring activities the Monroe Operating Center 200 km away.

With the additional advantage of providing greater transparency to authorities and stakeholders at the site.

The 2016 guidance is being reduced to 530,000 to 580,000 ounces of gold at the cost of sale of it a $820 to $900 an ounce and an all sustaining of $870 an ounce.

We're also very pleased to announce, that the new leader of Veladero mine, the Executive General Manager's Jorge Thomas will rejoin Barrick.

He was originally from San Juan province and he brings with him within 20 years of mining experience Latin America.

Including six years at Veladero as a process superintendent from 2000 to 2006.

Has a track record of operational excellence and assorted execution.

Has consistently demonstrated an ability to mentor and inspires his employees while driving employment and efficiencies.

Productivity, environmental Management and safety.

All the leadership group here is truly exciting to have an Argentinian mining champion leading its most important Barrick Argentina.

I will now move briefly to touch on our copper operation.

Copper continues to have a steady performance and remains on track to meet our production and cost guidance ranges.

The copper C-1 cost and all in sustaining costs ranges having been married during the quarter.

Copper production in the third quarter was 100 million pounds and cost of sales attributable to copper $1.47 per pound and an all in sustaining cost of $2.02 per pound.

We announced the Jabal Sayid mine reached commercial production in 1 July 2016.

I was at that mine two weeks ago, and was very impressed by the high quality of this asset and meaningful partnership and shear quality and energy and commitment of the Saudi workforce there.

The mine continues to demonstrate marked improvements under sam Ashes leadership as general manager.

They've worked diligently to reduce their all in sustaining costs just over $2 a pound for 2016, and we continue to be impressed on high quality of the Zambian workforce, and the relationships with the Zambian authorities.

And how hard everyone is working to continue the progress.

As we remain below copper pricing environment we continue to demonstrate that we can deliver cash from these assets.

Moving on to Pasqualina, this project located on the border between Chile and Argentina remains as one of the world's largest attractive and undeveloped gold project, with the potential to generate significant free cash flow over the long mine life.

The focus of the industry veteran, George B, is to evaluate the scalable starter project using under ground mining methods at, Llama the Argentinian side, of the whole project.

If successful, this could represent the first stage of phased development plan for the Pasqualina project on both sides of the border.

George and his team, are now advancing a study on the Llama starter project, and when ready our investment can make you scrutinize proposal with a degree of consistency and riggger, that we have become used to from that committee.

Whether existing operations, developing projects, expression, potential acquisition and divestments, before further review by the executive committee and the board.

The passport team in Chile will continue to focus on optimizing the Chilean component of the project, while working to address outstanding legal, regulatory, and permitting matters.

With that I would like to hand it over to Michelle Ash, our SVP of business innovation to discuss our recently announced digitization initiative as part of our best in class program.

Thanks, Richard.

As part of best in class we've done a great job making business improvement and driving optimization.

Some of which the GMs of mentioned.

Resulting in Turquoise Ridge, for example, from moving from 1650 tons a day to 2150 tons a day underground.

We are planning some step changes such as day south where we will transition mining business from cut and fill to long-haul reducing the mining costs by $30 a ton.

And mechanical cutting with red hitters at TR and Cortez also reducing costs.

Innovations were brought to the operations such as TCM as you heard from Bill is now operating as expected.

Digitization of our operations will allow us to make additional step changes and move innovation to deliver greater efficiency.

We are going to be different to other mining companies, as we will be using the power of computers to augment our peoples capabilities and change fundamentally our processes across our whole business, not just in pieces.

Across all of our business, we will be implementing a centralized data platform that will allow everyone,, anywhere, on any device, to access data and make decisions with predictive and cognitive analytics.

We should be able to access data in minutes not days.

To compare and contrast our performance and operations, solve problems, and identify performance.

That speed inside and level of transparency is unparalleled in our industry.

The ability to use the information proactively rather than respond reactively is not how the mining industry has worked before.

We're also working on integrating our planning and breaking down the silos, as manufacturing has done, to optimize our business and understand the portfolio, risk and options across all of our planning horizons.

Matt Gili from Cortez, will give specific examples of how digitizer nation can improve our process at site.

Thanks, Michelle.

Cortez is the digital flagship to Barrick, On the one hand, there is a great deal of into enthusiasm and energy that come with being a pilot site.

On the other hand, there is a very healthy appreciation to just how much Cortez will change as we implement these digital images and embed them in the mine.

Whatever key a value has increased and undergone production and this division as well represented with two specific digital projects, short interval control and implementation of teller remote and autonomist equipment across the entire organization, and the digital maintenance project to simplify and increase the efficiency of this work.

Think of it as the removal of paper systems, instead using a digital platform to transfer data and task assignments in real time.

In the process division, we will begin by automating certain assets in the main facility as well as a full automation of the satellite areas such as our tubes and breached plant facilities.

Lastly, will build a common platform which provides real-time data, for real-time decision-making.

I look forward to keeping you updated as we progress on our digital journey.

I will now hand it back to Kelvin, to summarize and wrap up.

Thanks, Matt.

In closing, I'm pleased that at the end of Q3 we're tracking very well to our full-year targets which have continued to improve quarter over quarter.

Our best in class program continues to allow us to reduce costs and optimize our capital spending.

We're spear heading our digitization strategy to drive further value across the business with Cortez leaving the ways, as you have just heard from Matt and Michelle.

We continue to deliver strong free cash flow which remains our key focus.

And with combined success of debt reduction and improved operational performance.

We are now even better positioned to advance our project pipeline.

So thank you, now I would like to open up the call for questions.

(Operator Instructions)

First question today is from Andrew Quail, Goldman Sachs.

Morning Kelvin and team, thanks so much for the update and congratulations on a strong quarter.

It's encouraging to hear all the other accents on the call.

I've got a couple questions.

First, on the digitalization and maybe Matt can jump in here with Richard, do you guys think you'll get to a point in 2017 where you guys can quantify this on a per ounce basis at the operations?

I mean we wouldn't be doing our job as an analyst if we didn't ask the question.

Andrew, that's a good question.

Let me ask Michelle to start and then you can turn it over to Matt if that's helpful to you as well.

Andrew, the simplest answer is yes.

We're working very hard at the moment, not only to work through the details of the projects and start some implementation, but also specifically work through with the Cortez team what it will mean in 2017 for them [potentially] the GoldStrike team and, of course, across the business.

Absolutely.

Awesome.

Second one is on growth projects.

You guys obviously have one that you've invested [at a] (inaudible) brownfield projects that we were going to receive updates in 2016.

Just sort of wondering if, maybe Nigel can jump in here on Turquoise Ridge, is there anything holding up any of the approvals of any of these four projects?

Let me start Andrew, and turn it over to Nigel specifically on Turquoise.

The answer is, for all four of the organic projects there tracking on schedule and as we outlined earlier in the year, no surprises there.

Will give an update on all of the projects with the year end results as well.

In terms of turquoise specifically let me turn it over to Nigel.

Thank you Kelvin.

For Turquoise Ridge we are working and continue working on the projects, the ventilation shaft, we've already increased the interim step the ventilation.

But we've got to get approval for the investment from the owners.

Got it.

Lastly, one to Catherine, I think.

Obviously talked you pretty much you prepared most of the balance sheet and you've given long-term goal of $5 billion debt.

You obviously highlighted about your debt trading above par now.

Is there something, obviously some of your peers are talking about increasing dividends, is this something that in 2017 you guys are considering from a board perspective or from a safe high prospective too?

The reason I'm flagging this is really to make sure that you understand the full processes going on internally about how we allocate capital.

If you think about it there are three choices we have: debt reduction, dividends, and investing back in the business.

So I will let Kelvin answer specifically the dividend question but I think it's clear that we have to reassess given the changing cost of debt, but also the general view that we still need to reduce our direct debt further what exactly the right balance would be in 2017.

Thanks, Catherine.

I don't think I get say much more than that.

I think it was a complete answer other than, it's considered at every board meeting including this meeting.

There will be a point in time where we look to increase the dividend but the focus clearly has been, particularly this year, getting the $2 billion out of the way first, Andrew.

Something that will be considered on a going forward basis.

Before you let you go, Andrew, I'll completely answer on Turquoise you asked about approvals, I think Nigel answered correctly in term of the partners, but in terms of regulatory approval all of those are in hand at Turquoise as well.

Thanks, guys.

Thank you.

The next question is from John Bridges, JPMorgan.

Good morning Kelvin, Catherine, and Richard.

I think my question is similar to Andrew's.

Catherine, [in Denver] you mentioned the idea of perhaps using some EMP financing methods to finance for your expansions perhaps into the next decade.

Could you elaborate a little bit on that?

I think you've interpreted that rather specifically, John.

But I think what we talked about was partnership.

I was thinking MLPs.

No.

Nothing quite so sophisticated as that.

The cash flow nature of mining is very different to pipelines, et cetera.

So I wouldn't want to go down that route quite yet.

I think really what we meant is that we're not just going to look at project finance issuing equity in order to build on new projects, but really focusing on strategic partnerships, just as we demonstrated in some of our joint ventures that we have already transacted on.

Okay.

For Richard a question.

The examples of digitization that you give, are similar to some that we've seen from other mining companies.

How would you differentiate what you are doing compared to other (inaudible) including the stories we are hearing from West Australia from very amazing developments there?

I'm going to hand it over to Michelle for detail.

Upfront John, obviously, what we're seeking to do is get at the front end of what digital technology can offer.

We're learning a lot from what other people are doing.

And in the areas that makes sense for our mines we're picking that up and bringing it in.

We do it in a stage process what we call, digital 1.0 to 2.0 to 3.0 and on.

The great thing about the digital age is, you can observe what other people are doing, pick it up, adapt it to what you need to do.

The important thing as we are doing that we're also looking across the whole portfolio.

Michelle, perhaps you can add to that answer, please.

Just quickly because there are a number of fundamental differences.

We've had opportunity to look at not only what other mining companies have done over almost a decade and also what manufacturing and aeronautical industries and other industries have done.

I think there's sort of the five keys.

One is the extent which we are intending to take the digitalization.

Many mining companies have done it in piece meal, but may have automated an operation but not all of their operations.

They may have a number of databases but not a centralized platform.

We are lucky that this computing has now advanced cognitive analytics are quite available technology as well as predictive analytics.

The concept of the right which we're going to do this and -- of the transformation, I think is also different and the extent at which we're looking at, not just the technology but what's the actual behavioral on business outcome that we want.

In fact that's actually more important than the technology.

We're relatively technology agnostic and I think that's fundamentally different with some of our peers where they focus on the technology rather than what they're trying to achieve with the technology.

The other one, the fifth one, just to touch on it quickly is also the agile and customer centric approach that we are taking.

Rather than developing something outside of the end-users and then spending a lot of time making end-users use it, we're actually developing it with end-users which is much more like a iPhone, it's very intuitive and user-friendly as distinct from other systems which require almost six manuals to establish a pattern to navigate through one screen and the other.

They're trying to avoid the, I'm from the head office and I'm here to help you, syndrome.

I'm desperately trying to avoid that.

Well done, guys.

Thanks a lot.

Good luck.

Thanks, John.

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

Thanks very much.

I want to follow up on the question from the last quarter where we discussed a little bit about the break down in the sustaining capital cost savings at the mines.

I'm wondering if you could elaborate, now that you are further into the year, and further into the process, the 6% reduction in sustaining capital cost, can you break down for us what is a sustainable cost savings and sustaining capital to your best in class practices or other practices and what is actually potentially deferred into 2017 or into later years?

Sure.

Steven, maybe Catherine you can start a Richard you can supplement it, if it's helpful.

We've analyzed this ourselves because we need to properly understand what is sustainable.

And what we've identified off the cuff cost savings that we've been able to achieve and we plan to achieve for the full-year, which relate to our adjusted CapEx guidance and specifically relating to sustaining CapEx.

Just over half of that is effectively to do with adjusting the plan.

Either because we've changed our maintenance schedules to improve sustaining CapEx over the life of mine, or because we've decided that it did not need to be done this year.

Like I say, it's literally just over half, around 55% of that is what you could describe as deferrals.

The rest is sustainable reductions.

Either it's because we've taken things out of scope that we just did not need to do or it's because we've improved our assumptions and improved the scope and improve the efficiencies through, for example, improvements in capitalized stripping and those I would describe as sustainable.

That gives you as transparent an answer as we can because we've wanted to understand this for ourselves.

You covered it very well.

Thank you for that, Catherine.

Maybe just one other follow-up question.

The cost of sales, the COS number that's now provided in the disclosure and in the quarterly release, what's the rationale for adding another cost of -- cost item in the disclosure in the documents?

Steven, Catherine was just hoping you would ask that question.

So, Catherine?

As I referenced, we've been working with the entire Securities Commission to ensure that while we provide extra information to our investors, using non-GAAP measures, we are also making sure that we provide greater prominence to GAAP measures.

So the cost of sales per ounce applicable to gold on an attributable basis is a GAAP measure.

So it is effectively our cost of sales, divided by applicable to gold, divided by our [typical] ounce.

It includes depreciation it doesn't include by-product credit.

It is a GAAP measure.

That is why we now include it in order for all investors across any industry are able to understand our cost structure.

Thank you very much for that Catherine and thanks, Kelvin.

You're welcome.

The next question is from Greg Barnes, TD Securities.

Catherine, you commented earlier on about looking about strategic partnerships of interesting the context of the stories out recently about potentially selling 50% of Veladero and that being contingent on a partnership in Pascue Lama.

Is that the type of thing you are looking at doing, cause Veladero is one of your core mines and I didn't think you would be willing to sell down?

Maybe Greg, I can just talk to that.

First of all, core mines versus non-core mines.

We have been clear that we've outlined the non-core mines and at some point in time, when it make sense, we get full value, those are certainly targets for investment.

The core mines, we have never said that we would not sell a core mine or part of a core mine.

Clearly, they represent much greater value in almost any instance you would have to foresee the ability to do something in a strategic context as far as that goes.

As a general comment, we have said that partnerships are core to our strategy and you can expect to see more from us in that regard going forward if it makes sense.

And while we don't want to comment specifically in this instance, we have also been clear the entire [Elendeal] belt, when you consider it is a great opportunity for us to look at central partnerships, Greg, for future development of the assets that we know and potentially other deposits will develop over time.

Very consistent with what's on strategy and on message and you should expect to see more from us in that respect in the future.

Secondly then, you've talked over the course of the year as things improve, the balance sheet improves you looking to get a little more on the offense than defense.

Are you pushing harder on that front now on the offense?

We've always been looking.

We have admittedly in the last year or two we were not in a position where if we wanted to move to the offense it would have made sense for us to.

We are certainly looking, Greg, but we're also demonstrating that we're patient and as we indicated, we really want to show that we will be as discerning as potential buyer as we were, and continue to be as sellers.

The right opportunity comes along and if we see particularly an opportunity where by applying our new cost structure for example, which we've now institutionalized, we can see the opportunity to drive value for our shareholders that way it could be interesting.

But at this point we're going to be patient if something good comes along we will look carefully but we really want to be sure that it demonstrates value before we move on anything.

Thanks, Kelvin.

You're welcome.

Thank you.

David Haughten, CIBC.

Good morning Kelvin and team, thank you for fielding this on a busy day.

I would like to revisit the sustaining CapEx question, if I may.

As I understood from the previous call, the third quarter was going to be quite a step up from the second quarter but we did not quite see that.

I understand from Catherine's discussion this is still work in progress.

What you think the chances are that you will actually coming under your guidance, given that there is such a big catch up and the fourth quarter for either further savings, as you are working through that or perhaps deferrals?

I don't want to speculate.

I think again, we've tried to analyze this as carefully as we can and that is why we've adjusted our CapEx guidance to the level it is.

Clearly now, the question is really how much can we do, given that there's only two months left of the year.

But we've looked at what's in the budget, we've analyzed where that spend is going to occur and I think we are comfortable with that range.

And it's really why we've narrowed it to the extent that we have.

It's just that going into the third quarter we were expecting such a pickup.

I'm trying to think if there had been decisions made to divert certain items or to postpone certain items as you went through on the quarter and just how active you are on a day-to-day basis in assisting those expenditures.

This is Richard.

The way I look at it is the way we go forward from sites is the continuation of the work that started in the year in the Best in Class program, [they're scrubbing everything].

As we explained, you said it's not, as Catherine outlined deferrals, as a result of change of maintenance programs.

There are genuine efficiencies come from driving down the cost of doing things that we plan to do and are doing.

Remembering, Best in Class project did not really pick up a lot of wind in its sales until around about the end of Q1.

We kind of expect the main effort to start around now Q3 through to Q4.

It's hard to predict when these things fall which may explain why we weren't able to give such precise guidance going forward.

That's kind of the way; it's bottom-up, really.

And we're watching how they're doing it and that's how I'm seeing it evolve.

The one thing that I would just highlight is that the Veladero did mean that we didn't spend some CapEx that we were expecting to spend in the third quarter.

All right.

Thank you very much.

Thanks, David.

Steven Butler, GMP Securities.

Good morning.

We just finally completed reading the MD&A.

Your free cash flow is nothing short of spectacular.

Congratulations on that.

Can you maybe explain the, perhaps Catherine, the anomaly I saw in the cash taxes where on the MD&A you look at the current taxes $285 million but actually paid in the quarter $56 million, so should we expect a bit of a catch up on cash taxes in the fourth quarter and to linger into early next year?

These things don't all comes smoothly.

I wouldn't expect anything as significant step up in the fourth quarter but I wouldn't expect you to see that unwind over time.

Are we approaching the eighth inning on this asset sale or is there any particular update there, Kelvin, that you could share with us -- timing?

Steven, the process is well underway.

Lots of interest from both inside Australia and outside of Australia.

I can't comment more than that given its underway but I'll just tell you it's a robust exercise.

Lastly, [Lawana] delivering quite well on your C-1 cash cost about $1.32 in the quarter.

Is some of the easier things been implemented at Lawana and or is there still a few more things to work on?

Listen Stephen, we have Sam Ash, the GM with us today so I will refer the question to Sam.

Yes Steven, the team there is really focused on continuing to come down the cost curve with the copper price where it is it's really a requirement.

The team is rallied around continued cost reduction.

We're working hard to continue to push that cost down as far as we can.

Where have you gained some of that easier or better savings, Sam?

Is a broad-based cost reduction through a G&A operating cost.

In some highlights are around the processing costs that have come down nicely and we continue to see some good movement in G&A.

Okay.

Thanks very much.

Thanks Steven, listen just to help you and others we promise we won't write the MD&A in Australian in the next quarter.

Maybe we should.

(laughter)

Chris Terry, Deutsche Bank.

Two quick questions for me.

In terms of Pascua Lama, at this stage, given you're still undergoing a balance sheet transformation, would you say it's entirely dependent on -- the timeline is dependent upon the feasibility on [permanent] type work or is somewhat constrained with where you are trying to take the balance sheet as well?

No, at this point Chris, it's really tied to working through the [scrupling] study on Argentine side first to see if it makes sense to do a scalable kind of build up, and then obviously transition there onto the Chili side.

At the same time, on the Chilean side more particularly, we are continuing to work through the regulatory process.

You know we have the project on our temporary suspension and we been able to ratchet down the holding cost.

The way we are looking at [Pascal] we're optimistic, we're enthusiastic but nothing before it's time.

We're going to make sure customer the proper steps and show make sure the economics work and look forward to update as we go.

Okay.

Thanks.

And any update on [Donlin] or your other potential future Greenfield projects?

Just the same.

The progress we're making and the teams are looking at all the projects in terms of are there opportunities through this capital in particular.

We'll give an update with their year-end results but generally speaking everything is tracking as it should in terms of the various projects either going through permitting or doing the engineering.

We're pleased with the progress.

Okay.

Thanks.

And one last one, in terms of the capital that's been talk about a lot on the call, and where your all in sustaining cost have been able to come down to.

Is there any revision likely to come within the $700 an ounce target in terms of maybe bringing that forward from 2019?

At the end of the year we will look at our guidance for -- we've issued 2017 and 2018, we'll re visit that.

We'll look at 2019,so it's a little early to tell but we put $700 out for 2019 it's a fairly ambitious target.

We always like to beat our aspirations.

We will see.

We don't want to get ahead of ourselves on that.

Thanks, Kelvin.

You're welcome.

Thanks for dialing in.

Kerry Smith, Haywood Securities.

Kelvin, when do you think you'll actually conclude the KCGM sales process?

Kerry, it's too early to tell.

We're just into it and it's going well but I would not want to put a timeline around it.

I can tell you it's a very active process and I can't really say much more than that at this point.

So, as maybe a 2017 event then, I guess.

And on the sustaining CapEx, what Catherine do you think the run rate would be on a go-forward basis for the operations you have today in terms of annual sustaining CapEx?

We gave that guidance, the three-year guidance of the beginning of the year.

And I think that really now we are in the process of planning budgeting and understanding particularly those deferrals that I talked about, how they fit into the 2017, 2018, and 2019 budgets.

I would say at this moment, stick with the numbers we've already provided and clearly as we go in the fourth-quarter results we will update that for the initiatives for the improve efficiencies and for better understanding of the new Barrick.

Okay.

Can you remind me a broad range 2017 and 2018, how much was in those numbers for deferrals that were for catch up, from say deferrals from 2016?

As I said, if we stick with the guidance that we gave in the beginning of the year which was the 2017, that 1.5 to 1.75 for total CapEx and I can't remember that number just off the top of my head, what was split between sustaining and project CapEx was.

If you stick with those numbers at this moment, I'm still of the view that that's accurate.

But we will update you in our fourth-quarter results.

Okay.

And is a G&A guidance that you gave in the Q2 financials was at $145 million at the corporate level?

This quarter's $160 million.

Is that $160 million kind of an expectation on the run rate on a go forward basis?

I think actually $145 million was what it was at the start of the year.

Than in Q2 it adjusted to $165 million and now it sitting at roughly $160 million.

So I know that because I've got it in front of me.

I'm looking at the Q2 MD&A page 24 and it says $145 million for corporate admin.

Okay, so your saying it's roughly flat at $160 million.

Yes.

Great.

Okay, that's it, thank you.

Thanks a lot.

This concludes the question-and-answer session.

I would now like to turn conference over to Kelvin Dushnisky.

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

We appreciate your time and we look forward to updating you our fourth quarter and year-end results on our next call.

Thanks very much.

This concludes today's conference call.

If you have additional questions please contact the Barrick Investor Relations Department.

You may now disconnect your lines.

Thank you for participating.

Have a pleasant day.