巴里克黃金 (GOLD) 2017 Q2 法說會逐字稿

Ladies and gentlemen, thank you for standing by.

This is the conference operator.

Welcome to the Barrick's 2017 Second Quarter Results Conference Call.

(Operator Instructions) As a reminder, this conference call is being recorded, and a replay will be available on Barrick's website tonight July 27, 2017.

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

Thank you, operator.

Good morning, everyone, and thank you for joining us.

Before we begin, I'd like to highlight that during this presentation, we'll be making forward-looking statements.

This slide includes the 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 a more complete discussion.

I'm here today with our Chief Financial Officer, Catherine Raw; our Chief Operating Officer, Richard Williams; and our Executive Vice President of Exploration and Growth, Rob Krcmarov.

Also on the call is, Bill MacNevin CEO of Barrick, Nevada; Henri Gonin, General Manager of Turquoise Ridge; Greg Walker, Executive General Manager of Pueblo Viejo; and Jim Whittaker, who has recently been appointed as Chief Executive Officer and General Manager of Minera Argentina Gold, a joint venture with Shandong Gold.

Jim will be running Veladero and Richard will speak more about this recent change during his presentation.

And as has become our practice, our other General Managers and members of the Barrick team will also be available for questions following the formal portion of the call.

But before we get into the specific second quarter results, I'd like to start by providing an update on our progress so far this year and how we're tracking against our 2017 priorities.

Over the first half of the year, our operations have generated almost $950 million of operating cash flow and more than $200 million of free cash flow, based on the production of 2.74 million ounces at a low all-in sustaining cost of $739 per ounce.

We're targeting free cash flow generation at $1000 per ounce again this year, and we're making good progress towards this target.

We're maintaining discipline as we prudently invest capital in the business and continue to optimize the long-term value of the portfolio.

The creation of new partnerships and joint ventures is a core element to this approach, and during the year, we finalized a number of agreements, including the formation of our important strategic partnership of Minera Argentina with Shandong Gold Group.

On June 30, we completed the sale of 50% of Veladero to Shandong for $960 million.

And the integration with Shandong heavy operation is proceeding exceptionally well.

Richard will touch more on that.

Also in keeping with our agreement, we have formed a working group with Shandong to explore the joint development at Pascua-Lama, and together, we'll evaluate additional investment opportunities along the El Indio Belt.

In the second quarter, we completed the sale of 25% of Cerro Casale to Goldcorp, resulting in the formation of a 50-50 joint venture.

Goldcorp has agreed to funding commitments to advance the evaluation of options for the potential developments at Cerro Casale.

Also in the quarter, we completed the acquisition of the Robertson property near Cortez in Nevada from Coral Gold.

Achieving and maintaining a strong balance sheet also remains a top priority.

We intend to reduce our total debt from $7.9 billion at the start of the year to $5 billion by the end of 2018, at least half of which we're targeting this year.

We reduced our total debt by $487 million year-to-date.

Additionally, the $960 million in proceeds from the 50% sale of Veladero will be used for further debt reduction, so achieving our target for the year is well within reach.

Another priority is to continue our commitment to operational excellence by maximizing the productivity and efficiency of our operations.

Starting at Veladero, I'm pleased to say that normal leaching operations, including the addition of cyanide have resumed after completing a series of upgrades to the heap leach facility, strengthening the environmental safeguards and sustainability of the mine.

Richard will speak to you in more detail on the upgraded leach pad systems during his presentation.

We've completed the unification of our Cortez and Goldstrike operations, and we're accelerating the implementation of our digital transformation in Nevada, which will support unit cost improvements, increased throughput, and expanding margins.

We were pleased to be able to demonstrate some of our digital progress during our recent Barrick Nevada site tour and Richard and Bill MacNevin will provide a further update a little later in the presentation.

And in additional to the Nevada site tour, some of you also had a chance to participate in our first ever Sustainability Briefing for investors on May 9. More than a 100 people participated in person or by tuning in to hear the presentations from mine site and functional leaders, as well as one of the members of our Board of Directors, Nancy Lockhart who chairs our Corporate Responsibility Committee.

For those who are interested, the full presentation is available on our website.

Finally, we continue with our intensive focus on talent development.

Our goal is to recruit, manage and motivate exceptional people and we have put a number of tools in place, including Barrick's Learning Academy to help train and upgrade talent to develop the next generation of Barrick leaders.

So with that, I'd like to hand it over to Catherine to take you through the second quarter financial results.

Thank you, Kelvin.

In the second quarter, we delivered earnings of $1.084 billion or $0.93 per share; largely due to a gain of $689 million on the sale of 50% of Veladero as well as $193 million pretax gain on the sale of Cerro Casale.

Adjusted earnings were $260 million or $0.22 per share, an increase of 57% from the same period in the previous year, which was driven by higher gold sales volumes and lower cash sales costs, partially offset by an increase in tax expense, high depreciation, and higher exploration and project costs.

Our operating cash flow came in at $448 million, down 15% year-on-year, despite the stronger operating performance.

This is mostly the result of an increase in cash taxes paid, particularly at Pueblo Viejo, as well as lower sales from Acacia as a result of the export ban, and a build in working capital compared to the prior year quarter.

I'll go through this in more detail on the following slide.

Our free cash flow defined as operating cash flow less CapEx of $43 million was 84% lower than the same period in the prior year, owing to the aforementioned reduction in operating cash flow, as well as forecast high CapEx spend as we increased our sustaining and project CapEx, mainly in Barrick Nevada.

As guided to at the start of the year, we are reinvesting in our business to sustain strong free cash flows in the future.

We expect our free cash flow to improve in the second half of the year, even with roughly the same CapEx spend in H2 versus H1, assuming no change in gold price, as the bulk of our tax comp and other annual payments occur in the first half.

Now looking at our cash flow variance year-on-year in more detail, the largest contributor to free cash flow were lower cash costs followed by higher sales volume.

This was driven primarily by the strong performance of Barrick Nevada, which Bill MacNevin will talk to in more detail.

Higher Copper prices also helped.

Cash taxes were the largest detractor, at a $178 million higher than the previous year.

As I mentioned earlier, the bulk of which was driven by PV, whose cash tax payments were over $110 million higher than last year.

This is because the final 2016 tax true-up payment was significantly larger than the previous year, due to high gold prices and stronger operational performance in 2016 versus 2015.

And so it's the first -- and so also it's the first tax payment for 2017 covering the first quarter, which is based on the prior quarter's amount.

Given our current estimates, we expect only nominal tax payments of PV for the remainder of the year.

The second largest detractor was an increase in CapEx.

In the second quarter of 2017, capital expenditures on a cash basis was $405 million compared to $253 million in the second quarter of 2016.

This increase of a $152 million was driven by planned increase in mine site sustaining CapEx at Barrick Nevada, relating to higher stripping costs and a greater number of mine site sustaining projects, an increasing spend at Veladero relating to phase 4B and 5B at the leach pad expansion as well as equipment purchases.

And on the projects front, the increase in CapEx was primarily at Barrick Nevada related to the Robertson acquisition, development of Crossroads, and the Cortez Hills Lower Zone as well as the Goldrush project.

We start build in working capital relative to last year, mainly due to high leach pad inventories at Veladero, as a result of the incident, as well as the increase in concentrate inventories of Buzwagi and Bulyanhulu, owing to the concentrate export ban.

Other detractors were a $39 million increase in exploration and project expense, increased VAT balances at Veladero and Lumwana, as well as negative free cash flow from our minority interest at (inaudible).

And now on to the balance sheet.

We ended the quarter with $7.44 billion of debt, down from $7.93 billion at the beginning of the year.

We paid down $309 million of debt over the quarter, totaling nearly $500 million year-to-date or 34% of our $1.45 billion target for the year.

Annualized savings on debt repayments since 2015 now total nearly $260 million.

The sale of 50% of Veladero closed on June 30 and the $960 million of proceeds from the sale will be used to reduce debt, helping us to achieve our target of $5 billion by the end of 2018.

Achieving this target will, of course, depend on gold prices and the potential for further asset sales or partnerships and we'll likely do so if it makes sense to the business.

I think the phrase we use is, on terms we consider favorable to our shareholders, but the actions to-date have significantly reduced the risk of the business.

We now have less than $200 million of debt before 2020, and the majority of our debt is due post 2032.

With that, I'll hand over to Richard.

Thanks, Catherine.

On to the second quarter operating highlight.

Our second quarter gold production is up, as you can see, from the previous quarter and from previous year's quarter and it's in line with our plan at 1,432,000 ounces.

In line with our continued effort that we've repeated over the quarters to relentlessly pursue operational optimization and cost reduction, you see a year-on-year reduction in all-in sustaining cost on the slide in front of you.

The reduction in the underlying cash cost is a result of that best-in-class optimization efforts, closing the technical limits, the effective investment in step changes such as digitization and more.

But there is also a positive impact right now from higher production from our lower cost Nevada operations and you'll hear more about that from Bill, which offsets lower production from our higher cost operations at Veladero.

Copper production for the second quarter is stable, having increased 1 million pounds or about 1% compared to the same period last year, with a slight increase due primarily to higher production at Jabal Sayid, as the sites ramps up production in the comparative prior year period.

Copper all-in sustaining costs were 11% higher in the second quarter when compared to the year before.

And this primarily reflects high depreciation expense and an increase in power to offset Lumwana, combined with higher mine sites sustaining capital expenditures at Jabal Sayid, which you will realize only began incurring such expenditures upon entering commercial production in July 2016.

Regarding guidance for the remainder of the year, gold production is expected to be weighted towards Q4.

Based on sales mix and our current expectations for the timing of capital expenditures, we expect cash costs and AISC to be higher in the third quarter than now.

We expect full year CapEx to be relatively evenly divided between first half and second half of the year, and full year gold and copper production and cost guidance remain unchanged.

But as one said at the Technical Day and at the visits to Nevada and before, our operational leadership will continue to push hard to reduce costs, and increase productivity relative to their [plan], and so one is expecting improvements.

One of which, which those of you who visited would have seen is our continued focus on digital transformation, as part of our innovation agenda, which takes us as we've spoken about to moving forward, as a leading 21st century company.

For those who visited and those who didn't, we highlight again the effect of our Nevada code mine [effectively] a group of software engineers teamed with our mining professionals designing bespoke in-house solutions to deliver digital effect which multiplies that which can be done by simply closing the technical limits and are already, as those of you have seen, making a big difference.

But that big difference is really only a small portion of the true potential and Bill will highlight some of this during this presentation.

With that and that shares a good segue, I'll now hand over to Bill to discuss Barrick Nevada.

Thanks, Richard.

As Kelvin mentioned, in June, we hosted an Investors and Analyst Day at Barrick Nevada.

We're excited to share the results of the efforts we shared during the visit.

Barrick Nevada is achieving strong operational results, after unifying Cortez and Goldstrike.

Q2 gold production of 741,000 ounces is 45% higher than the same quarter a year ago.

This result was achieved by higher ore tonnes and grades from Cortez Hills open pit, higher upside mill, and [rose] the throughput, and higher ore tonnes being planned at Cortez underground.

Cost of sales was $723 golds per ounce with an all-in sustaining cost of $541 per ounce, which is 17% lower than Q2 of 2016.

Autoclave recovery is in line with expectations, with Q2 TCM recovery rate of 77%.

As a result of that strong performance year-to-date, we're improving our production guidance, 2.27 million to 2.35 million ounces at a cost of sales of $790 to $830 per ounce with an all-in sustaining cost of $630 to $680 per ounce.

The 2 significant growth projects are continuing to progress.

Cortez Deep South underground has achieved completion of permit scoping and is in the process of preparing a draft environmental impact statement.

The feasibility study is on track for Q3 2017 completion.

Our range front declines are progressing on schedule using a roadheader to minimize overbreaks and drive compliance to design.

The east decline is nearly 50% complete at 3,650 feet and the west decline is progressing well; 1,197 feet.

The Goldrush project is also progressing well.

Portal pad construction has commenced and the feasibility study is on track for completion this year.

We continue our Red Hill exploration and we are achieving favorable results.

With the acquisition of Robertson project on June 7, we're moving ahead to bring this project into resource and provide optionality for Cortez open pit mining and processing operation in the second half of the 2020.

And digital transformation continues as we drove solution developments through to implementation.

We're committed to measuring our KPIs to ensure we return on our digital investment.

Underground automation includes, automated, semi-automated drills on a 9 yard marker, jumbo long-hole drill and a [hole driver].

We're designing our mines to maximize the benefit of these technologies and we have achieved additional tonnes from the pilot equipment in Q2.

Short interval control is focused on extending effective shift duration and reducing delays in the process.

This project is showing promising results as that pilot project moves from a viable to a material solution.

We expect to capture additional tonnes through shift efficiency across the mine.

Digital work management is bringing our work orders and schedule maintenance into the 21st century.

We've completed 2 schedule mill downs with this technology and have found benefit in schedule compliance.

This project will continue to add value as we work through the iterations to achieve the material project.

Digital processing is the automation we've built into our heap leach plants.

Area 34, which processes Cortez Hill’s open pit leach ore is operating in an automated mode 99% of the time now.

This enables maximum efficiency and recovery.

So we are committed to implementing digital technologies when and where they make sense to maximize return and ensure the sustainability and growth of Barrick Nevada as a core asset for Barrick.

Thank you.

Henri, will now present Turquoise Ridge.

Thanks, Bill.

Total tonnes mined for the quarter was on par with the corresponding quarter in 2016 and year-on-year we are higher by 6% for H1.

We have our operational control center and short-interval control system now up and running and deployed in the mine.

As a result of the higher organic carbon in the ore, we amended the terms of our toll milling agreement with Twin Creeks and for the remainder of 2017, we expect an increased processing cost of $8 per tonne.

This has resulted in us reversing 17,000 ounces of production, which is now being shipped to Barrick Nevada and will be recognized there as production.

This change also negatively impacted the timing of our shipments to Twin Creeks.

The lower sales volumes drives our cost of sales and all-in sustaining cost per ounce sold up by 55% over Q2 of 2016.

We are awarding contracts for the surface preparation work at the 3rd Shaft and this work is now starting.

We have our optimization studies continuing well and we are on track to complete them in time.

We are also expecting delivery of our roadheader at the end of August, which is 2 months early and we will be deploying the system in the mine as of October.

We are lowering our guidance to between 230,000 and 250,000 ounces at a cost of sales range of $700 to $750 per ounce and an all-in sustaining costs of $750 to $830 per ounce.

The lower production reflects the ounces shipped to Barrick Nevada, as I've mentioned.

With that I'd like to hand over to Greg Walker at Pueblo Viejo.

Thanks, Henri.

During the second quarter, gold production at Pueblo Viejo was 14% higher than the same period last year.

This was primarily due to increased throughput combined with a high gold recovery.

This was partially offset by lower ore grades in fleet.

As an example of that continuous improvement program, during the quarter, we changed the Pueblo Viejo operations group that carried out the de-scale work in the Autoclave.

This work enabled the crew to finish 4 hours earlier than planned, and as a result, the annual benefit is $5 million through increased throughput and cost reduction.

Working through our business in optimization process we've identified 2 growth opportunities which will add significant value to our company.

Two major projects which we plan to move into product stage are pre-oxidation of the all 3 bio-leach and flotation -- pre-concentration throughput flotation.

These 2 exciting projects will be developed over the coming months and they will support and enhance our current projects -- growth projects which are underway.

On the government relations front, PVDC launched its partnership program, which aims to align Pueblo Viejo's initiatives with the Dominican Republic government's National Development Strategy 2030.

This program is being well accepted by the government and is going well.

In closing, operation guidance for PV remains unchanged from quarter one release, producing 625,000 to 650,000 ounces at an all-in sustaining cost of $540 to $570 per ounce.

Thank you.

I'll now hand over to Richard.

Thanks, Greg.

Lots of news from Veladero.

Okay, firstly, completing the strategic partnership with Shandong is very exciting for our future, joint future there in Argentina for all parties.

The actual Veladero mine is operating very well indeed, with mining and stacking well ahead of plan and other improvement activities throughout the year in terms of operational improvements have been tracking in line with everything we're finding across the business.

We now have a focused leadership team and on track to deliver the 2017 production forecast.

The team down there has returned Veladero to the safe and sustainable production position, given the cyanide addition was -- forgive me, the ban on cyanide addition was lifted on June 15.

After we made several critical improvements such as the heap leach facility.

Included in that is new solid HDPE piping, a drop box that better distribute flow evenly through the piping system, a new pipeline corridor further away from the pad parameter, the construction of a secondary channels to control flow, and then finally, the construction of the tertiary containment within an additional outer berm.

The work done to get this asset back to normal operations with a new and improved pregnant solution return system that set this operation up for success.

As Kelvin highlighted at the start, we're also pleased to announce that Jim Whittaker has been appointed as the Chief Executive Officer of the operation down there, which is best describe as our new joint venture operating company with Shandong Gold.

Our goal is to continue to develop Veladero standards with particular focus clearly on safety, environment and delivered by innovation.

And after having implemented these recent upgrades and improvements and completing the formation of the joint venture, we do feel it's set up very well for the next phase of its development and growth.

Now on to personalities and you'll hear more of him for him in a minute.

Just to remind you, Jim has served as General Manager of Lagunas Norte since 2015 and Lagunas Norte shares many of the same characteristics as Veladero.

And under his remarkable leadership it continued to develop its potential and its operating performance ahead of that which we expected, a lot of that's down to him.

He's therefore ideally suited to lead Veladero through this next phase of growth.

But one man is not everything.

He'll work closely with, as is our system, the Executive Director down there, the excellent Fernando Giannoni who is our Argentinean dealing with all of the license to operate and wider issues, which are being challenging for us.

He's well placed to do that and his relationship both with the Argentinean authorities, the community, as well as our Shandong partners is first class.

We also want to thank, at this moment, clearly Jorge Palmes for his contributions to the company for up to now, he has overseen successful completion of these technical upgrades and improvements, and thereby has made a huge difference to laying the foundation for the long-term success.

Now backfilling Jim over at Lagunas, we promote Rodolfo Najar -- we transferred Rodolfo Najar, forgive me, from operating our closure site very successfully in Peru to now moving to Lagunas Norte.

And now, briefly returning to the Veladero results for the quarter.

Gold production and costs were both impacted clearly by restrictions in the leach pad operation after that incident in March 28.

But as mentioned, normal leaching operations at Veladero, including the addition of cyanide resumed in mid-July and we're continuing to expect full year production to be in the range of 630,000 to 730,000 on a 100% basis.

Therefore, Barrick's share of full year production reflecting that 50% ownership is expected to be between 430,000 to 480,000 ounces of gold.

Just want to double up on something that Kelvin said at the start, the partnership with Shandong Gold is based on a joint vision for developing the mines and the prosperity in the region in an environmentally and socially responsible manner, and we're very enthusiastic about how we've come together and how things are operating well already.

The integration, which we all know, was a challenge, is well ahead of what we expected and going well.

Shandong employees have begun on job training at Veladero and Albardon and Shandong is in the process of setting up an office and residence in San Juan.

And as you'd expect, weekly meetings between Veladero's senior management, Shandong and Barrick are now routine.

During the course of the approval for leach pad expansion for phases 6 to 9 was confirmed by the San Juan Minister of Mining.

And with Jim and his team on the ground, we'll continue to optimize and harness the value of that plan in the Veladero mine, thereby contributing to the value proposition for our owners, the government, and the community.

Going to other matters and as Alturas is in the vicinity of Veladero all in the Frontera district, I like to hand over to Rob Krcmarov to provide an update on the status of its scoping study.

Thanks, Richard.

In Q2, we completed the scoping study and as part of that improved project governance, we had to do an extensive and thorough peer review.

Incidentally, that was delayed because Veladero became (inaudible) priority, but nevertheless the peer review highlights some risks and opportunities that need to be addressed before we decide whether to proceed to a peer test.

With the assumptions we made, the scoping study fell just short of our investment hurdle.

Bear in mind, it's an early stage project and we see some real opportunities to improve the returns.

Incidentally, I should note that the Gold rush didn't meet our [driving] business hurdles at its scoping study, but through some good work, additional drilling and value engineering, we have a project today that will exceed that hurdles and we really just can't with that.

But back to Alturas, the immediate opportunities that we're investigating are whether we can add more mineralization closer to surface and whether there is an opportunity to convert waste into ore in some of the sparsely drilled areas.

In addition, all of our drilling to-date or almost all of our drilling to-date has been core drilling, so why is this significant?

Well I've experienced in other high sulphidation epithermal deposits, such as Pierina, Veladero and Lagunas, we have found a substantial increase in grade, when we drill with RC which is wider diameter drilling (inaudible).

In addition, reconciliations to the reserve is also being higher.

So really the big question here is, will we see this increasing grade phenomena at Alturas?

Right now, we don't have the data to make that judgment, but that will be the focus of the next phase of drilling.

However I note that last season's infill drilling did increase the grade at Alturas and that's still using core.

The other key area is to implement digitization and innovation or automation into that conceptual plan.

Right now, we have a clean slate to do something different and completely innovative from the get go.

And so, one track we're investigating is in-situ leeching, zero waste, but much more work needs to be done on that front.

I think the key points illustrated here is that Barrick is changed.

We're patient, measured and disciplined.

We're not going to rush into a pre-feasibility study, we're going to make some objective specs, wise decisions to ensure that we maximize returns for our shareholders.

Alturas is at an early stage and so, as we advance it, we'll continue to derisk the project and try to capitalize on the opportunities we have in place to improved returns.

So continuing with our mine site update, I'd like to turn it over to Jim Whittaker to review the Lagunas Norte results.

Thanks, Rob.

It's an honor to be appointed as CEO of Minera Argentina Gold and I look forward to the opportunity to work with our Shandong Gold partners, my Veladero colleagues, and the Argentinean community.

At Lagunas Norte, second quarter gold production finished lower-than-budget due to head grade and heap leach recovery, but overall free cash flow was bolstered by metal prices, as well as reduced CapEx and working capital requirements.

Guidance for production remains at 380,000 ounces to 4 20,000 ounces for year and we expect an annual all-in sustaining cost of $490 to $550 per ounce due to re-planning of capital expenditures.

Sustaining project development maintained its focus on solution injection and carbonaceous ore separation projects.

Solution injection will enter plant production this year and the carbonaceous ore project construction will be moved early 2019 due to changes in technology, which will improve carbon separation prior to heap leaching.

It is very important to note that the first phase of the future plant expansion project, which will employ milling and CIL processes now has construction permits in place and the request for project investment funding is still planned for Q4 upon conclusion of feasibility engineering.

Infill drilling on the Northwest walls of pit is also underway, targeting leachable materials to increase current mine life.

Also, mineralized sectors in the Southeast quadrant are being planned for infill drilling during this year.

Both targets will assist in closing the gap to expansion in this transitional phase of the mine's life.

Thanks and I will now pass the discussion back to Kelvin

Thanks Jim.

So in closing, I'm pleased that halfway through the year, we're tracking very well against our full-year priorities.

Our portfolio delivered higher production at lower costs compared to the second quarter of 2016.

Veladero has resumed normal leaching operations with improved heap leach facility infrastructure.

We completed the formation of our new partnership with Shandong Gold and our teams are already integrating very well.

We completed the Cerro Casale transaction and established our 50-50 joint venture with Goldcorp, as well as the acquisition of the Robertson property in Nevada, both of which provide great optionality.

Our debt reduction strategy is well on track.

We completed the unification of Barrick Nevada, and we're accelerating its digital transformation and as part of our ongoing efforts to increase transparency and strengthen our disclosure, beginning in the third quarter of 2017, we intend to pre-release production and sales figures ahead of our quarterly earnings release.

So with that, let's open the call to Q&A.

Thank you.

(Operator Instructions) First question is from Chris Terry of Deutsche Bank.

A couple from me, just on the shorter and then longer term.

I know you touched on the Tanzania situation a little bit, but can you just provide a bit more color on your plan there to potentially discussing separately, I guess, from what I can understand from the release?

Chris, as we indicated in the release, discussions with the government of Tanzania are getting underway, so there isn't anything further the company can say at this point.

Any proposed agreement will be subject to the acceptance for Acacia [management].

So they'll update market accordingly.

That's really all I can say at this point.

And in terms of your overall costs, I guess the guidance this year, the $720 to $770, longer term you're aiming towards $700.

Given you're at $710 during the quarter, do you think you can go well below the $700 when you incorporate everything that you're doing now on the technology side or where are the costs trending in the next few years?

The long-term cost position that we're trending towards in terms of our cash costs continuing to move down.

So I want to be realistic about this, what we've been able to do over the last few years is continually optimize, just in the same way every other mining company does, like closing to our technical limits to our existing equipment.

We managed to do quite well with that, and we're very proud of it and each of the General Managers will talk to that.

We actually continue that trend forward on the assumption that there is no change to other variables such as grade and infrastructure and so on.

There is a requirement for investments in step change technology.

And so therefore what we've started in digitization, because you know for those who came to visit, it's roundabout $52 million worth of budget this year and we're coming in around about $8 million under that.

It's effectively investment in a multiplier onto that process, which will mean we end up with better data, which allows us to make better decisions in terms of continual optimization.

But that's just one step change, because just as you've watched us change the mining method at Cortez over 3 years or so.

So we'll be seeking to do across each opportunity that we find in front of us to bring in new technology and new systems to really allow us to jump down the cost curve in an enduring way relative to what the ore bodies and infrastructure will stand.

And then right now in front of that of course, we got the work being done by Michelle Ash in terms of innovation and research, which is looking at completely different ways of doing things.

And so, my long-winded answer and I'm very grateful for your question.

My long-winded answer to the question is underlying cash costs are trending down but there will be a requirement to invest in systems to allow us to keep it there and so therefore the amount of capital we have to deploy to do that depended upon all feasibility studies and acceptance in the investment community, the 15% returns will be going up and down as is demanded.

I hope that answers your question.

Just like to add one comment which is just to -- for everyone to pay attention to our sales mix, how that changes over time.

So the second quarter production has really benefited from the sales mix.

We had very strong production from Barrick Nevada, which is our lowest cost site and the one that's making the greatest inroads in terms of digitization as well benefiting from high grades.

So when we look into the future, we both are going to consider how that sales mix changes.

So while all the mine sites makes progress, if that sales mix moves, then clearly our average cost moves as well.

So, I'll reiterate Richard's comments but also remember the sales mix as we move forward.

The next question is from David Haughton of CIBC.

Kelvin, just on Tanzania, can you tell us who from the Barrick side is representing the firm and who is on the team?

Yes, you know what David, at this point we really aren't in a position to discuss it any further than we've already done in the release.

So we just ask you to kind of stay tuned and go from there.

But there is nothing more we can say at this point.

I'm sorry for that.

Okay, I appreciate, it's sensitive.

Over to PV, if I may then.

Record throughput but it looks to me and record recovery maintenance and ore type responsible for that, by the looks.

But perhaps Greg can give us an outlook, is this kind of throughput and recovery sustainable?

Thanks, David.

Yes, we've been working really hard over the last 12 months to improve throughput and recovery.

And the simple answer is yes, the throughput and the recovery are sustainable and we'll be building that into our plans going forward.

So in the upcoming life of mine plan will include those throughput and recovery improvements.

We're also looking at other opportunities to improve the (inaudible) profile over the life of mine.

As I said earlier in the brief, we're looking at a couple of other step changes to the processing of the operations.

So simple answer is, yes and stay tuned, we'll be doing more good things at PV.

And just further on that, I mean, you spoke about the bio-leach and the flotation to enhance some of those outputs.

Are these relatively low CapEx items and relatively easy to implement or are they somewhat more complex?

Relatively easy.

The technology is tried and proved technology, it's not -- we're not innovating greatly there.

It's just the way we're applying it to the operation, which is innovative.

Capital at this point in time, it's a bit early to say exactly what the capital spend will be, but the flotation will include a grinding upgrades, so there will be significant capital there.

But the dollars, we don't have at the moment.

We're really in early stages of the test working the trial.

But the idea is to improve the performance of the operation for the low grade ore treatment in the outer years of the life of mine.

Yes, okay.

So it's for the low grade stuff in future.

It also benefits the current grade, but it will take us a couple years if we're successful and if everything goes well, it take us a couple of years to get it up and running.

But it will extremely -- it will benefit the lower grade in the future and bring the all-in sustaining cost down for the future out.

And David, I'm glad Greg made that point because actually these step changes, as you know, take a couple years to flush through in terms of -- really to benefit and we're at early stage of studying this and then moving it through, but, yes good one.

We guided -- we're trying to put (inaudible) in the next 12 months, which will give us some benefit, but the full benefit will be in 2021, at that area.

Okay, thank you for that kind of guidance.

Just Turquoise, I'll make this my last.

I saw that you've got carbonaceous material coming in, you've got changes to your tolling and where the material is getting tolled, either at Twin Creeks or at Goldstrike.

Is this just a short-term kind of phase or is it something that we should be thinking about as a longer-term consideration for Turquoise?

As I said, we amended the milling agreement to the end of the year and I think this was mostly short term.

We are in the process of engaging with Newmont in the expansion of the toll milling agreement for treatment at Twin Creeks.

Yes setting aside that where it gets treated, I'm thinking here about the carbonaceous material, because if it does -- if it has that high content, then it's not really amenable to increase anyhow and I'm just trying to think is that ore type just a phase or is it going into the longer term?

It is -- the ore type is changing, but we are applying methods in the mine in managing the carbonaceous content of the lots of ore that we produce every month as we bring above the surface.

Okay, so that the kind of behavior -- the ore that the pattern that we'd seen in this current quarter could extend for a number of future quarters?

I think that we will see an increase in the carbon contents of the ore lots over the next couple of quarters, but not necessarily as significant as it was early [understood].

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

Just some follow-up questions on Veladero for Jim and Richard.

Jim, just on the technical side, when you look at the leach curves and how the production flows through once you start reapplying the cyanide solution, can you give us your level of confidence that you're going to see the adjusted guidance, actually the 430,000 to 480,000 ounces.

When do you expect to see the bulk of that production as a cyanide pregnant solutions sort of accumulate.

Is it going to be later in the third quarter or it's just going to be a fourth quarter event.

And then maybe stepping back, Richard, can you talk a little bit about the relationship with the Argentina governments, both locally and at the federal level and whether there was a change here after various incidents over the last 2 years?

And just, I don't know Catherine, if there is going to be a working capital adjustment in the third quarter, around the Veladero restart in that quarter?

I'll leave it there, Jim.

So maybe, Richard could start and then shift over to Jim and then pass on Richard (inaudible).

Yes, thanks very much for the question.

Just to remind you on Veladero what's been going on the share point as the night before.

It is as you know, we've been mining and stacking throughout all of this and actually been ahead of plan and grade has been marginally above what we thought.

So in terms of actually the mining and stacking phase everything is -- it moved very well indeed and the guys have done well there.

In terms of what you're talking about in terms of the actual production pace.

In terms of daily production of gold, we're ahead of what our ramp up target is right now, which gives us confidence in what we see as our target for the year.

(inaudible) efficiency which we budgeted at say 97% is currently running at 100% efficiency.

So there's a lot of good things in place to give me the confidence to say that the annual production is looking solid.

Jim, of course has literally just arrived on site and is tasked by us all to review this performance and projections.

I'm interested in his view.

Jim, how do you feel it's going and then we'll return back to the Argentinean piece as we go on?

Yes, thanks, Richard.

As you know, I've been up at the sites since last Friday meeting with a lot of the guys and talking to people in the technical area there.

The key concern obviously is the ramp-up.

Right now, I think, as Richard said, we're ahead in the stacking plan right now, the trick is to get the flow up.

The total flow through the pile is higher than what we had planned, so that's going very well and we have confidence that we'll be able to meet our guidance for the year on a 100% basis, and obviously the percentage basis to bear.

Yes, which is good.

And so, with regard to the wider question of the relationship between us and the Argentine government, locally at a provincial level as well as at national level, I'm through this combined challenge that we've all had, the greatest challenge the Argentine government has had, be it provincially or nationally and ourselves, and the challenge really is phased-in mining in the high Andes.

We've worked very well together to come to a common solutions.

We haven't found the Argentinean government to be adversarial to any of the discussions we've had, be it at a provincial level or at a national level.

And they welcomed actually, I mean, open arms is sort of cliché, they've really welcomed the fact that Shandong partner is coming and with their approach to sustainable development has meant that actually sort of even reinforcing the good work that has gone on through this process.

Notwithstanding how much we regret what has happened and how much work we have to put in, my report to you would be the relationship with the Provincial Governor who is excellent and with the national government institutions has been reinforced and it will become progressively more solid.

I don't know Kelvin, if you (inaudible).

I just think the last part of that is senior advisors from local communities had been seeing a market improvement to that as well.

I mean they've always been very supportive through the years and into our challenging period, but as I say that we're seeing very strong hints or just add one thing to what Richard said as well towards Shandong.

They send a senior delegation down, just recently in the last year or so who met with the provincial authorities, communities, as well as several authorities and to Richard's point, very, very well received.

That integration, I don't think it should go much better.

That's right.

And it sounds that local employments, either we are ensuring that our employments at Veladero is truly representative across all the districts in the province, with a particular focus, but not exclusively on (inaudible), bearing in mind the actual [scientist office] in the Glacier province and this has been well received, and there is more.

Recently we held hackathon.

Our digital team down there held a hackathon, which is basically bringing in new ideas from outside our existing operation from entrepreneurs and digital innovators, which is being very well received and is part of our intention to develop our digital capability in Argentina, absolutely in line with what we've done in Nevada, which again is being very well received in terms of modernizing our position.

So Stephen, the last thing you had asked is the working capital and I'll ask Catherine to respond to that.

So Stephen, I'll be quick there.

Three comments on it.

One is the Veladero transaction with Shandong still subject to working capital adjustments.

So at the moment, as of the end of Q2 we've got 100% of the Veladero leach pad inventory is sitting on our balance sheet.

The second comment to make is, as Jim said, the ramp up of production over the course of the second half, we would expect drawdown in leach pad inventories over the second half.

And the third comment really is just the nature of the ramp up, partly explains, as Richard guided to, the higher production in Q4 versus Q3.

So hopefully, that gives you an answer to all of the questions.

Next question is from Greg Barnes of TD Securities.

Rob, I just wanted to revisit Altarus, what is the particular issue there?

It looks like the strip ratio might be causing some problems, but what else is a challenge there?

I think rather than the challenge, I think the opportunity here is to increase the grade.

So, we did limited RC drilling last year and because we weren't able to suppress the dust using water and because of the high winds, our sample recovery unit wasn't working and so we lost a lot of fines and so it may well need that we might have to engineer solutions to capture that.

So hopefully that is a big opportunity actually.

The rest of it is just standard project economics.

I think we were successful in finding some additional near-surface mineralization and I think there's probably more to come.

There are areas on the [fences]of pit that are currently classified as waste and the drilling there is really quite fast.

So the opportunity there is to -- as we infill that might pick up additional ones.

But really no showstoppers as far as I could see, do you have any comments Matt.

No, I believe Robert, everything seems to be on track and generally progressing well.

It's about bringing up our (inaudible) in this process.

So how long do you think this next stage of the process is going to take, how long before you can move into PSS or determine what you have to do to get the grade up?

I think it will take a little bit of drilling next drill season and that will start probably in November, and so, if we're at the end of drill season, we get a much better idea.

So does like PSS, if you get there would start second half of next year or end of 2018 then?

Again, we'd run it through full project governance process and if the group agreed, at that point we will be probably consider triggering a PSS, yes.

Like chance for that would be second half of next year, could -- depending if everything works according to plan Greg.

Next question is from Tanya Jakusconek with Scotia Bank.

Just have some technical questions on some of the assets if I could.

Maybe just coming back to the Turquoise Ridge and I know that David asked about this carbenaceous ore at that you've encountered there, were expecting this carbenaceous ore?

Yes, we have always had carbenaceous ore as the orebody extends to the north eastern (inaudible) concentration of the carbon is slightly higher than what we had before.

We are managing it through various options of blending with mined material out of the mine, is what we're doing.

Yes, I appreciate that.

Is there a restriction on carbon in terms of what can go to the Autoclave and what needs to go to the Roaster.

Is there a certain amount in your tolling agreement that new model will take into the Autoclaves then the remainder has to go to the Roaster, is there a maximum?

In the existing toll milling agreement, there is a limit of 0.6% and it's around that limit that we amended the agreement to the end of this year.

Okay.

And then how many ounces production-wise is going to now go to Goldstrike for the remaining part of the year of this carbenaceous material?

Right now, it's the 17,000 ounces like we have stated before and there is no plan to send anymore.

Okay.

So that's the only thing going this year.

Okay, thank you very much for that.

And then, maybe just moving onto Lagunas Norte, this season was a bit lower than what we were expecting on production on the lower grade recovery and obviously there is older stock or we've made some changes you've mentioned to the mine plan, is there any change beyond 2017?

Because I think at the Investor Day, in 2018 and in 2019, we were seeing production fall to 160 and then down to 130.

Are we looking at adjusting this with this new mine plant that you're talking about?

Thank you Tanya, Jim if you can hear, could you respond to that one.

Jim Whittaker, are you on the line still?

Sure, I just picked up that.

What was the question again please?

Just on Lagunas Norte, I am just interested with your new mine plan that you're looking at.

We at the Investor day were given guidance that production really falls off in 2018 and in 2019, down to like 160,000 ounces next year and then 130,000 the year after.

With this new mine plan, are we looking at perhaps not seeing that sort of a decline?

Well, exactly that's what we're trying to do.

I think the guidance is still valid for 2018 and 2019, because of fresh material being mined, fresh oxide and secondary sulfides being mined.

It hasn't really change that much.

What we're doing right now, we have active drilling on one bank of the mine, which is very important because it's mainly are oxidized and when we have that information we will be updating the guidance on that.

So then, would it mean that anything it would impact 2020 onwards?

No, we don't think so, because mostly of the leachable material we'll be mining through 2018 and 2019, and at that time, obviously we'll be -- if the investment is approved, we'll be moving into an expansion phase.

Okay, all right.

Okay, thank you.

And then, one last question if I can.

Just on the Cortez open pit, saw that nice increase in throughput and significant grade increase Q2 over Q1 and obviously going into the remainder of this year.

Is this something that we're going to continue to see into 2018 from the Cortez open pit?

I'll turn that over to Bill MacNevin.

That pit has always performed stellar and in terms -- we did get some [ideal] performance on the grade.

We don't expect that to -- that's in a siege area that's -- it's come well.

We've upgraded our models, but we don't expect to see that continue.

So our forecast probably pretty reflective of what we expect to get.

Okay.

So for 2017 we have the new guidance from this.

But 2018 and beyond, we go back to more normalized grade, is that correct?

Correct.

The next question is from to Anita Soni of Credit Suisse.

Just a couple more follow-ups.

First on Cortez, are you going to be in that top area for the next quarter or 2?

What actually happened with the open pit, we actually pulled a lot of our production forward into the first half of the year.

So whilst we're continuing to mine, we had a high proportion of the ore for the year in the first half of the year.

So, we will still be getting ore, but not as much.

That was a backdrop.

And then secondly just on the Veladero.

I'm a little unclear what Catherine's response about the working capital adjustment in terms of the purchase price.

Is that going to be a negative or positive adjustment to the purchase price?

We expect it to be positive.

But as I said we're still discussing Shandong.

But yes, if we had an increase, then we try to increase this.

So a lot in that respect it's an increase in working capital until we'd expect being positive to Barrick.

But as I said, that's still under negotiation with Shandong.

Thanks, Anita.

I think we have time for one more question.

Next question is from Kerry Smith of Haywood Securities.

Just on Veladero, Catherine, how many ounces did you load on the pad in Q2 and you aren't leaching, I mean there would be a pretty significant working capital build up there with ounces that were not recovered at all.

Yes.

So I don't have that detail off the top of my head, but you're right in terms of increase in inventory and it was of the order of sort of $60 million.

But understand, some of that it is ounces and that is the cost associated with those ounces which were higher to [rehabbing].

So yes, I don't have the actual ounces number off the top of my head.

Okay.

And Rob can you just -- on your comment that with the RC drilling, it does improve the grade in these system (inaudible).

And some of your other projects where you've done that RC drilling, how much drilling did you need to do to get a sense for what the grade and rate would be.

Is it 10% of the drilling or do you have to basically re-drill the deposits?

I'm going to hand that over to Rick, who is a subject matter expert on this.

Yes, what really usually happens is we don't realize that upgrade until we go into production and drill the same up with last holes.

We get a feel for it.

With the RC drilling that we'll see happen at Alturas, we got a feel at [Pueblo Viejo] we got a feel at Veladero.

But the real upgrades, the real sense to this part of the improvement doesn't happen in until you put it in production.

Okay.

So you don't do a lot of extra RC drilling, you just use it to get a sense whenever you go.

I see.

We know it's going to help.

So we have that drilling to help the grade up, but like I said before, it's not until you put those short blast holes in that you really see upgrade.

Right, okay.

And Rob just on your comment on the return on -- you hurdle rate.

Does that mean it didn't make double-digit or didn't get to 15%.

I was confused by that comment.

It didn't quite make 15%.

Sorry, I just wanted to say, just because something meets 15% doesn't necessarily mean we'll develop it.

We obviously have to look at all of the other aspects, the risks and the ranking of projects in our existing portfolio and the pipelines.

So I'll say Alturas in a very early stage and so this is really, it's showing potential and we need to do more work.

Right.

No, I understand that.

It's just -- some of your commentary in the past have been your hurdle rate was double-digit return, and I was wondering if this was middle of the rate or if it was 10% basically?

Yes.

No the hurdle rate, Kerry, clear on that it's 15% using a top (inaudible) gold price, that's firm

Okay, fine.

And Kelvin just one sort of question on Tanzania again.

Was there a request by the Tanzanian government that Barrick be involved in these discussions and why not just let Acacia sort it our itself?

Kerry, again there is really not much more that we can say on that than we've already got in the release, so I apologize that we can't give more clarity at this point.

But stay tuned as thing progress.

All right.

Kerry, thank you very much.

And thanks, everyone, for participating today, we appreciate it.

We hope everyone has a good rest of the summer and we look forward to updating you further with our Q3 results later in year.

So thank you very much.

This concludes today's conference call.

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

You may now disconnect your lines.

Thank you for participating and have a pleasant day.