巴里克黃金 (GOLD) 2017 Q3 法說會逐字稿

Ladies and gentlemen, thank you for standing by.

This is the conference operator.

Welcome to the Barrick 2017 Third 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, October 26, 2017.

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

Good morning.

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 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 a more complete discussion.

I'm here today with our Chief Financial Officer, Catherine Raw; our Chief Operating Officer, Richard Williams; and our CEO of Barrick Nevada, Bill MacNevin.

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.

As we indicated on our second quarter results call, production levels were expected to be lower and costs higher in the third quarter relative to what we expect in Q4.

In the third quarter, our operations delivered production of 1.24 million ounces of gold and [all] sustaining costs of $772 per ounce.

As our full year anticipated performance has become more clear, we've narrowed our gold production and cost guidance ranges to reflect our latest expectations for 2017.

Catherine will speak to these updates in more detail.

During the quarter, we generated operating cash flow of $532 million and free cash flow of $225 million.

Our free cash flow break even for the quarter is $1,037 an ounce.

Strong cash flow generation has allowed us to increase reinvestment back into the business.

During the quarter, we continued to progress our pipeline of low risk, organic expansion and extension projects located at or near our core operations.

They continue to advance according to schedule and within initial capital estimates.

These four projects, Lagunas Norte, Turquoise Ridge, Goldrush, and Cortez Hills Deep South have the potential to contribute more than 1 million low cost ounces of production to our portfolio beginning in 2020.

In addition, we've made significant progress on the pre-feasibility study for the possible development for an underground blockading operation in Pascua-Lama and Richard will discuss our progress on this in a few minutes.

Achieving and maintaining a strong balance sheet continues to be a top priority.

During the quarter, we reduced our total debt by almost $1 billion.

So far, in 2017, we reduced our total debt by nearly $1.5 billion, already exceeding our target of $1.45 billion for the year.

Our commitment to operational excellence and maximizing the productivity of our operations has not changed.

As part of this effort, we continue to advance the implementation of our digital transformation in Nevada, which started last year.

Richard and Bill will cover the progress we've made in more detail.

And finally, we continue with our intensive focus on talent development.

From Barrick's own leadership academy, through a partnership with the Cisco networking program, our goal is to continuously train and upgrade talent to develop the next generation of Barrick leaders.

Now, before turning to Catherine, as you know, last week, Barrick reached an agreement on a framework for a new partnership between Acacia and the Tanzanian government.

Richard has been leading the discussions with the Tanzanian government and he'll provide an update during his remarks.

With that, I'd like to hand it over to Catherine to provide more detail on our financial results for the quarter.

Thank you, Kevin.

In the third quarter, we reported a net loss of $11 million or $0.01 per share and adjusted earnings of $186 million or $0.16 per share.

Net earnings were impacted by the tax provision of $172 million related to the proposed framework for Acacia's operations in Tanzania that Richard will cover more of in his remarks.

Adjusted earnings for the quarter allowed in the prior year period primarily due to metal gold production, metal gold prices, as well as the impact of Tanzania's concentration on Acacia.

As Kelvin mentioned, our operations generated operating cash flow of $532 million and free cash flow of $225 million.

Operating cash flow came in lower than the prior year primarily because of lower gold sales, higher cash taxes paid this quarter given the benefit of an income tax refund in Q3 2016 and higher operating costs.

Our lower free cash flow year-on-year defined as operating cash flow less CapEx was also impacted by higher capital spend during the quarter as we continue to reinvest in the business.

We allocated more capital to our pipeline of projects, mainly at Nevada, where we increased our project CapEx relating to the development of Crossroads (inaudible) Pit, Cortez Hills, Lower Zone, and the Goldrush project.

And now to the balance sheet.

As Kelvin mentioned, during the quarter we exceeded our debt reduction target for the year.

We used the [Meikle Provision] to fully repurchase approximately $731 million of 2023 notes and we fully repaid the amount outstanding on our Pueblo Viejo project financing facility, approximately $267 million.

We incurred a debt reduction total loss of $101 million in the third quarter and that takes us to a total of $127 million for the full year.

Annualized saving on debt repayments since 2015 has now totaled to about $300 million per annum.

At the end of Q3, we had $2 billion in cash and a fully undrawn $4 billion credit facility.

We have $66 million of debt due before 2020, including capital leases.

And as you can see, the majority of our debt is due post-2032.

And this reinforces that the actions we've taken to date have significantly reduced the risk to the business.

And we're now in good shape to deliver on our projects whilst weathering any future gold price volatility.

As Kelvin mentioned, we updated our 2017 outlook by narrowing our production cost guidance ranges, mainly to reflect our increasing confidence in our full year results as we near the end of the year.

Gold production guidance has narrowed and the top of the range has lowered slightly to 5.3 million to 5.5 million ounces.

We've narrowed our cost of sales guidance to $790 to $810 per ounce, our cash cost and AISC guidance by slightly raising the bottom end of the ranges to $520 to $535 an ounce and $740 to $770 an ounce respectively.

Copper production guidance we've narrowed to 420 million to 440 million pounds.

Cost of sales per pound and [C1] cash costs were raised to 1.70 to 1.85 per pound and 1.60 to 1.75 per pound respectively, and mainly this is a result of higher costs from (inaudible) and Zambia.

More detail specifically on the changes of site guidance are outlined in the MD&A.

We also now expect capital expense to be between $1.35 billion to $1.5 billion after narrowing the range from $1.3 billion to $1.5 billion and that's really just based on our spend year to date.

With that, I would like to hand over to Richard to provide more detail on operations.

Thanks, Catherine.

Just before we get into the operational updates, I wanted to touch on the proposed framework between Acacia and Tanzania.

As you know, Barrick and the government of Tanzania have agreed on a framework for a new partnership between Acacia and the Tanzanian government whereby economic benefits generated by Acacia's operations will be split for Tanzania on a 50/50 basis going forward delivered in the form of royalties, taxes, and a 16% free carried interest in Acacia's Tanzanian operations, in line with the country's new mining law.

The proposed framework, if adopted, would fundamentally redefine Acacia's relationship with Tanzania for the long-term, delivered by radical transparency, which then over time builds exceptional trust.

The proposed framework also calls for $300 million to be paid towards the resolution of outstanding tax disputes.

The payments will be made over time and applied towards any ultimate resolution of the tax claims.

A joint working group of governed officials and company representatives are working to establish the final resolution of these tax disputes.

There is also a working group to establish protocols that will facilitate the lifting of the concentrate export ban, such when this includes verification of ship and process metal contents.

We believe that the proposed framework represents the optimal path for the resolution of outstanding disputes between Acacia and the government of Tanzania and for the resumption of normal operations.

Barrick has provided the proposed framework to the independent directors of Acacia.

We now intend to work with the government of Tanzania to completed detailed documentation and final agreements.

These final documents will be provided to Acacia for review and their approval.

Our understanding is that a shareholder vote will be required and Barrick intends to exercise its voting rights in that process.

We believe that this whole process will be completed sometime in the first half of 2018.

Now, onto third quarter operating highlights.

As Catherine has outlined and I will repeat here, our Q3 gold production was 1.24 million ounces at an AISC of 7.72 per ounce.

Production during the quarter was impacted by lower planned ore grades mainly at PV and Lagunas Norte, and the increase in AISC reflected the impact of fewer ounces sold combined with higher direct mining costs and higher depreciation, mainly at Veladero.

As we had previously indicated, production levels were expected to be lowest in the third quarter and we continue to expect production and lower costs in the fourth quarter as Kelvin outlined.

We are on plan.

Copper production for the third quarter increased by 15% year-over-year primarily due to higher production at Lumwana as a result of operational initiatives to reduce downtime combined with higher production at Jabal Sayid as the site was ramping up production.

Copper all-in sustaining costs were 11% higher in quarter-over-quarter primarily reflecting higher depreciation expense and an increase in power, freight, and maintenance costs at Lumwana.

Now, our vision, as you know, is to be a leading 21st century company where we continue to relentlessly pursue asset optimization and cost reduction.

As our mines continue to evolve and our oil types change, and license to operate costs increase, our focus on innovation and digital transformation is critical to maintaining this long-term and sustainable vision.

As you know, Cortez has been the pilot site to test our digital transformation in the field.

During this, we've been very agile in our approach and capturing wins along the way.

Our short interval control products, designed by ourselves, is providing significant benefit and it's now a product that is scalable to all of our underground mines.

We are concurrently with designing and rolling out these projects, rigorously tracking the benefits of each.

As an example, the underground short interval control at Cortez delivered an incremental 360 tons per day in September alone.

And this is accomplished, if you'd like the detail, through increasing effective ship duration and reducing delays in the oiling cycle for trucks and the mining cycle for other pieces of equipment.

Along with this, our test of an (inaudible) to make underground [jumbos] has also been successful.

The autonomous jumbos provide a reduced over break and drill bit consumption along with the ability to drill through shift change.

The underground semiautonomous load out is another example that continued to show excellent results.

And in September, the load had moved an incremental 187 tons a day.

We're designing the mine now to capture the full benefit of this machine and its ability to run autonomously from the face.

We recently moved to a mature product project full work management app, which we branded The Forge.

This is Barrick coded app that takes the paperwork orders and standard job plans and digitizes them for use in the field and those that visited us in Nevada in June saw some of the early concepts.

We're now rolling that out and it's currently in use as our Cortez Mill and Cortez Open Pit and enables us to complete our maintenance tasks with higher quality and in less time.

It ultimately increases effective wrench time, allowing for more maintenance activities to be completed.

Our Nevada sites have tested these and other digital products and they are creating now implementation plans that will be included in their life of mine plans.

Our aspiration if these digital products to enable our people to unlock their full potential through real time database decisions.

We are very pleased with the progress thus far and look forward to deploying digital solutions across the existing business and within all of our future projects, dramatically changing the value proposition.

As both Kelvin and Catherine have mentioned, our focus on cash flow generation has allowed us to increase reinvestment back to the business, vital, and during the quarter, we continued to invest in our pipeline of projects.

Feasibility level projects at Cortez Deep South, Goldrush, Turquoise Ridge, and Lagunas Norte continue to advance on schedule and within budget, and we continue to advance a pre-feasibility study for the development of an underground blockading operations at Pascua-Lama.

Regarding our four organic projects, Bill MacNevin will provide you with an update on Cortez Deep South and Goldrush during his remarks, but I wanted to briefly touch on the status of the third shaft construction at Turquoise Ridge and the phased approach we're taking to extending the life of mine at Lagunas Norte.

So at Turquoise Ridge during the quarter, surface preparation work began, including earth works, setting up storm water diversion infrastructure, and extending utilities to the shaft site.

Contracts and materials that support electrical distribution, water handling and sewage have been purchased and a tender process is now open for the shaft's sinking contract.

Subject to funding approval, construction on the third shaft can begin in the second half of 2018, with initial project production being from 2021 to 2022.

Now, onto Lagunas.

We're advancing a phased approach to extending the life of mine but optimizing the recovery of [carbinatious] oxide ore followed by mining and processing of the refractory material, as we have told you.

The first component of the project will involve the construction of a grinding and carbon leach processing circuit that would treat remaining carbinatious oxide material at Lagunas.

Environmental permits for these facilities are already in hand.

Subject to completion is the feasibility study and a positive investment decision, and the receipt of construction permits, work on these facilities could begin in late 2018 with first production in 2020.

Construction of the flotation and pressure oxidation circuits would follow this, subject to environmental impact assessment approval and approval by the investment committee.

Work this year has been mainly focused on completing a feasibility study, including additional drilling to improve all body knowledge and further metallurgical testing.

Let me also take a moment to comment on Pascua-Lama, We have made significant progress on the feasibility study for the development of an underground block caving operation at Pascua-Lama.

In order to complete this, we're undertaking a number of optimization studies along with a focused drilling campaign during the 2017 and 2018 summer season ongoing.

The previous drilling on the deposit was primarily undertaken in support of open pit mining plans.

Therefore, this campaign will focus on improving ore body knowledge on the Argentinian side of the deposit with further data as needed to validate underground development plans and metallurgy.

As we have said in the past, we will only proceed if we have a high degree of confidence that the project meets our investment criteria.

With that, I'd like to hand over to Bill MacNevin to discuss our Barrick Nevada organic growth projects and the results for the quarter.

Thanks, Richard.

Starting with Cortez Hills Lower Zone, we've completed the feasibility study and have submitted it for internal review.

The range front declines are progressing well with the project standing at 44% complete overall.

The east decline is 62% completed 4,900 feet and the west decline is 21% completed, 1,500 feet.

Mass excavation of major construction work will commence, including oil handling, shotcrete, and a fuel bay.

Contractors have been selected to support further construction work and additional mass excavations.

We are utilizing the road header to complete this work and have been pleased with the advanced rate as well as the limited (inaudible) break using this machine.

At Goldrush, site preparation has been completed and portal pad construction has commenced for the exploration decline.

As shown in the pictures, significant progress has been made.

The exploration decline will provide access to the oil body at depth, which will enable further exploration drilling.

This decline can be converted to a full production decline in the future.

During the fourth quarter, we'll be focused on advancing the (inaudible) construction and selection of a contractor for the decline development, which is scheduled to commence in early 2018.

Now, on the results for the quarter.

Barrick Nevada had a strong third quarter.

Q3 production of 520,000 ounces are 5% lower than the same quarter a year ago.

This is a result of processing lower grade Goldstrike average pit stockpiles at the Roaster.

Year to date gold production of 1.782 million ounces is 15% higher than a year ago.

Cost of sales was $762 per ounce with an AISC of $597 per ounce, which is 2% lower than Q3 or 2016.

As a result of increased confidence in our full year results, we approach the end of the year we have narrowed our production guidance to 2.28 million ounces to 2.32 million ounces and cost of sales of $790 to $830 per ounce and a narrowed AISC of $620 to $650 per ounce.

With that, I'd like to hand back to Kelvin for some closing remarks.

Thanks, Bill.

So in closing, I'm pleased that at the end of the third quarter, we're tracking as expected toward our full year target.

We continue to focus on delivering positive free cash flow and with our debt reduction on track, we are well positioned to advance our opportunities to sustain and grow the business into the future.

Thank you and now, I'd like to open the call for questions.

(Operator Instructions) The first question comes from Chris Terry with Deutsche Bank.

Just in terms of your overall cost trajectory, just interest in some comments on where you think you're at versus where you'd like to be.

I know going towards $700 an ounce AISC longer-term.

Is that still on track?

Are you seeing more opportunities than what you would have originally saw on the technology side?

Just broadly costs within the industry and what were you seeing from an inflationary point of view and further opportunities?

Thanks, Chris.

We'll turn that to Richard Williams.

Thanks very much, Chris.

First, you're absolutely right.

There has been cost inflation from the supplier side and we're going to be seeking to push that down over this period.

My view on cost inflation is based around the fact that suppliers have looked forward at the gold price and realized it's flattening whereas a couple of years ago, there was a potential it was falling down.

But that's their view and as a result of that, they are pushing up the cost of the supplies, which is squeezing our margin.

The opportunity there for us through next year is based on a project where we're going to be integrating across the organization supply chain and maintenance planning.

We can see considerable benefit through 2018 and 2019 for doing that.

We're going to be exercising all our purchasing power strength to drive those prices down so that's one lever.

The second point on technology.

Technology clearly, and the forward path that I referred to during my brief, indicates just one way in which (inaudible) can induce the precision associated with just-in-time supply for key consumables to activities such as maintenance.

And we would see considerable benefits for that over the next two years.

Now, on technology and the digital piece in general, it is moving as fast as we can but with respect to how I thought it would work a year ago, it's working slower than I would like.

And so really, when one is looking at transforming an operation like Barrick Nevada from where it has been to a fully digital operation, the (inaudible) that you should expect real delivery of the significant adjustments is a three-year timeframe, not a one year timeframe.

We've been learning this through this year because it's actually relatively straightforward to develop component applications for something like digital work management but to actually roll them out to ensure that labor practices is standardized across all the operations and that they are optimized and then upgraded is not a two-month game.

It's at least a two-year game.

So with respect to the delivery of $700 all in sustaining costs, what I have learned, what we have learned is that just adjusting work practices and driving around input costs is making a significant difference.

But what will deliver the step change that is required to get down to $700 all in sustaining costs where we're actually reducing the cost of sustaining capital, developing, stripping, as well as internal operational costs that you all are aware of, is a longer process than we'd originally envisaged because it requires investment in designs, investment in training, and investment in scaling and rollout.

But I'm very pleased with the progress to date, exceptionally pleased from what we saw in June, (inaudible) visited us in June.

We've moved it on further.

So I would say in terms of trajectory, the thing that you should be looking for on a quarter-on-quarter basis is real evidence of the digital returns -- forgive me, returns on the digital investment that we're making particularly in Barrick Nevada, and how we're rolling that out to other operations.

Chris, I hope that answered your question.

You covered most of what I was after there, Richard.

The last question I had and it's probably for you as well, just on Tanzania and the steps you've taken and appreciate the framework you've provided.

Generally, these things can be a bit of an overhang on the stocks.

So just trying to think about, even though it's a small part of the business, just trying to think about the earliest and maybe the latest time frame where you'd expect to get resolution from here.

Thanks, Chris, and again, we're well aware that -- and I'm answering on this for obvious reasons, and we're well aware of the interest in this because it's critical to a number of things.

You talked about stock overhang but it's critical to our position as a good partner around the world.

What one put in one's remarks is we believe that this will be completed through the first half of 2018 and this is a process that is underway.

As I outlined in our remarks, there is a tax working group that will be reviewing the outstanding claims one by one over time and there are a considerable number of these, and these will take -- you can judge how long that would be.

Secondly, with respect to the concentrate, a ban that we're all keen to get lifted, both us and the Tanzanian government, there's some protocols that need to be affirmed.

There's some studies that need to be completed and there's some testing systems that need to be rolled out.

Our team is there right now and will be engaging with the Tanzanian government on this, and we expect that in terms of timetable to be relatively soon.

But it would be irresponsible of me to give you any indication as to what relatively soon means because we're in discussions with our Tanzanian partners right now.

The other point on timetable -- that just gives you two of the levers.

The other points on timetable it's worth mentioning too is as has been outlined in the proposal is the formation of the operating company within Tanzania and the modalities of that with (inaudible) shareholder agreements and all the other associated documentation also need to be confirmed, confirmed in ways that are then submitted to the Acacia independent directors for their approval and any other subsequent voted shareholder level.

This is what -- all of these things that need to be done one says that you should expect this to be completed through the first half of 2018, which gives both the Tanzanian government, ourselves, and really importantly, the independent committee of the Acacia Board and shareholders to reflect on the opportunity for the risks that this situation proposes.

The next question comes from David Haughton with CIBC.

Just having a look at Pascua, I know you got some additional drilling underway this summer but what sort of timeline should we be thinking about for news flow out of Pascua and your thinking about moving into the next step of the study?

I'll start maybe and Richard can (inaudible).

The drilling will be done this -- the (inaudible) summer as indicated.

From that, as we're getting the information, our intent will be to continue to update as we move along and as we have things that are meaningful.

So give you a sense, in our estimation would be to probably buy our summer next year we'll have more information to report based on that drilling and as we move from Q2 to Q3.

Richard?

Kelvin, you've covered it and David, thanks very much for the question.

And again, I think we sort of detailed it in our remarks and you understand why we need to do some more drilling.

And as you know, the drilling season, as Kelvin had said, is around about March.

We'll get the conclusion for that, which will then factor in to the mine design.

But it's not just the mine design too, David, because as you know, going into the underground where before it was an (inaudible) moving to the upside ore, giving us time to adjust the processing system to deal with the deeper refractory.

We're going right into the mix so consequently, the metallurgical data that's coming out from that drilling results will also factor into the design of the plan.

And so we're not being soft on our time line.

We're being realistic on the fact that we're expecting this data to come through in March that will allow us to work through, as Kelvin outlined, our summer to the end to be able to complete the pre-feasibility study through that timeline.

Clearly, mining an ore body from the bottom up as proposed is very different from the top down especially when you go through different metallurgical actions there.

And I guess part of my thinking is that at one stage you had mentioned that the first stage of the plant more for the non-refractory material was like 95% complete but a lot further behind on the second phase for refractory plant.

Do you have the components for the Phase 2 of the plant available to you or is that additional CapEx?

Just a point of clarification, I think as far as the 95% that was in respect to the tailing facility that we talked (inaudible).

That wasn't on the processing plant.

That was more I think we talked about it being a third -- 15% complete on the processing line.

And again, David, you remember the history of the project is that a lot of the facilities were built for the large [bid] operation and then as Kelvin outlined, the tailing sort of view is, shall we say, in terms of scale, it's slightly over-engineered to what we anticipate a pretty large underground operation will be.

The main civil works for the plant clearly all have been completed, all the concrete, steel, and so on and so forth.

And that provides us considerable jump out in terms of investment that's already put in there.

But with respect to actually the metallurgical design, forgive me, the metallurgical element of the processing plant that can deal with the complex, this is still being refined at the moment.

And again, the more data we get, the more precise that refining will be, and clearly built to the normal pre-feasibility study conclusion through next year.

Okay, just moving down the road a little bit, Veladero, it's the first time I guess we've seen the cost on the G&A as a 50/50.

The cost was substantially higher than previous.

I saw on the text that there's a shopping list of reasons for the OpEx to go up and I'm just wondering is that sort of the new normal now for the operating costs and for the depreciation?

Let me turn it over to the GM for Veladero, Jim Whittaker, on the line.

Jim, do you want to respond?

Yes, good morning.

Hi, Kevin.

Thank you.

I'm calling here from the Veladero site.

I hope you can hear me okay.

If I could take a brief moment, I think first of all, it's very important to say that the Veladero, our key focuses are going to be on safety, environment, and alliances and after that, we'll get in discussions of obviously production costs and positioning.

Two of the things that we're doing right now, as you know, we've had a tough time on the environmental side.

We've done some good work to sort those issues out and we're moving forward.

But one of the key things that we're doing right now is an overall risk review of the entire operation and the other thing that we're also triggering is kind of a holistic review of what we can do to reposition Veladero at a slightly lower point on the cost curve.

That will take some time.

That's going to be about 6 to 8 months of work with the line supervision and with the people here at the site.

Our intention is to get a lot of that $800 to $900 all in sustaining cost and bring that down a little bit lower because that will guarantee our future with respect to a long-term good cost producer.

Okay, so still a work in process I guess is really what you're saying.

Absolutely.

And David, maybe I can just comment on the depreciation.

So what we've seen is that depreciation expenses increased as a result of fair valuing Veladero for the sale.

So effectively, as that price went up, we now have a higher depreciation expense to our (inaudible) time.

So that really explains why you've seen that jump on the (inaudible).

Catherine, then $550 per ounce G&A is the kind of go-forward level we should be thinking about?

I think for the moment, yes, and if it does change, we'll indicate that.

The next comes from Anita Soni with Credit Suisse.

My question is with regard to PV and the sulfur content that you encountered that impacted the throughput.

Could you give me an idea how long you expect to persist and the main issue there?

I'm going to turn that to Greg Walker, the executive GM for PV.

Greg?

We may have some communication problem with PV.

Greg was on site here.

We also have Matt Gili here, our Chief Technical Officer.

Matt, can you respond to that?

Yes, I can, Kelvin.

Thank you very much.

So what happened there is more when you see the MD&A, it is much more about we had a lower sulfur content this quarter last year.

So this shows up as a high -- it looks higher this year.

So we are on a path of normal right now just coming off of a very abnormally low quarter (inaudible).

So this throughput level is probably what will persist.

So just moving on, again, on PV as well.

So you're mining about 3.2 gram per ton material.

You're processing 4.7 so obviously you're stockpiling some of that lower grade material.

But the reserve grade is at 1.93.

When do you expect to get to the reverse grade of PV?

That's a good question.

So you know that our mine plan for PV is that we mine considerably more tons than we produce and we do that because what allows us to process the highest grade material (inaudible).

And so I don't have the exact date -- the timeframe we would get down to 1.9 but you will see a gradual decline in the hedge rate process at PV as we go-forward in time.

Now, the counter to that is what Greg and his team are doing at PV and that is about increasing the efficiencies of the autoclave.

Total focus, you heard them mention some of the gross projects at PV.

These are all centered around increasing our ability to process a material through the existing autoclave facility set (inaudible).

My final question is to Richard.

I'm a little confused about what good faith payments means.

So is that your best estimate right now of what the total extent of the back taxes would be or is that a down payment and there's an expectation that that would be increased as a total amount?

The $300 million is best looked at as a down payment but it's our expectation in discussions with the Tanzanian government that the total number of any resolution could be brought into that level.

Now, that's a relatively non-specific answer deliberately because we're in discussion with the Tanzanian government looking at tax disputes it goes many multiples of billions in terms of what is put out there in the public domain.

When having discussions with the Tanzanian government, $300 million appeared at this moment to us both to be a reasonable figure with respect to a down payment on settling those disputes.

The next question comes from Michael Jalonen with Bank of America.

Two questions on JVs changing around a bit.

At Turquoise Ridge, the third shaft project looks quite interesting.

I was just looking at Newmont, the disclosure just came out and they got a long list of projects they're talking about but I don't see that project in there.

So just wondering what Newmont thinks and if they're approvals are required.

Then moving to Cerro Casale, your new partner, Goldcorp has booked 50% of the reserves from Cerro Casale, even though from my vantage point they bought 25% off Kinross, they haven't paid you guys or made property payments of $520 million for that 25% from Barrick.

So I guess just what you think about that and whether Barrick will be booking 50% or 75% of Cerro Casale reserves at year-end 2017.

Thanks.

Two questions, the first one related to Turquoise Ridge, I'm going to turn it over to Henri Gonin, the GM at Turquoise.

Yes, good morning.

The third shaft project is -- we work with the Newmont evaluations team through all phases of the project and final financial approval for the project from the Newmont site is scheduled to be delivered in early January or late January as the latest schedule that we've got from them.

You're fine with that?

That was good.

And Newmont has an investor day in New York in a month so we'll see what they say there.

The second question related to Cerro Casale.

Richard, you're involved in the JV discussions.

Do you want to comment on that?

So the question is about why they book reserves, I'm sorry?

Could you repeat the Cerro Casale question?

Basically, right now, Barrick is booking 75% reserves Cerro Casale and Goldcoast at 50% so I guess it's new value creation in the gold sector 125% but I'm just wondering --

It's a bit of a cheeky question, Michael.

My answer to this is year-end we update our reserves and at year-end, we'll update them appropriately to 50%.

I guess they just haven't paid their money yet so I'm just wondering how they can book it.

But I don't know if it's a (inaudible) question.

As I said, it's a cheeky question, Michael, and it's not one for us to answer.

The next question comes from Kerry Smith with Haywood Securities.

Richard you talked about the vote -- this is on Acacia -- you talked about the vote that will be required by Acacia shareholders.

What is the threshold?

Is it the majority of the disinterested shareholders so you guys -- or do you guys actually get to vote so it's fait accompli.

Our understanding is that we all get to vote.

And then the second is more a comment or maybe I'm looking for your view on it, but the $300 million good faith payment to me it seems like it's something you should not pay until the concentrate ban is lifted because I don't quite understand how that makes any sense to actually make that payment before the export ban is lifted.

But it sounds like from what I've read that that payment would be made before the ban was lifted.

And I'm just curious why that makes economic sense.

I really appreciate the opportunity to clarify that.

The $300 million can't be paid.

The ability to pay it sits within those concentrates that are not being sold right now.

And so the two things are connected.

And I think that's important that everybody understands that.

So thank you very much.

That wasn't clear to me but maybe it was clear to other people.

We did articulate that in the press release, Kerry.

So we tried to clarify.

Okay.

And just in terms of this 50/50 partnership that you talked about forming with the government, am I correct in assuming then that any new project to be developed in Tanzania was something to be developed that Acacia would put up 100% of the capital for 50% of the economics?

Yes.

Kerry, with respect to that, that's a very good point.

So let's just look at the outline in terms of the Tanzanian rule.

The Tanzanian government, under their law, are allocated 16% free carried interest in all mining operations and they'll be held at asset level.

With respect to the distribution of cash flows through royalties, corporation tax, dividend payments, and so on, the Tanzanian government will get $.50 on the dollar and we'll get $0.50 on the dollar.

The capital investment in terms of any new project in Tanzania, the cash flow generated from it will be distributed on that basis.

So really it is, when you're looking at the sale of gold, 50% of the value of their any dollar of gold sold through the distribution of corporation tax, royalties, and so on and so forth will go to the Tanzanian government.

That's the way we look at it.

And again, just to affirm, Kerry, all of these things are proposals and again, it's been very clear to both the Tanzanian government and to ourselves that these proposals need to be worked through and approved by the independent committee of Acacia.

And there's more work to be done yet in terms of confirming the structure of each of those companies in Tanzania to ensure that the shareholder agreements and so on and so forth reflect these proposals in draft for approval by the independent committee of the Acacia Board.

I get that.

So effectively, though, there's no preferential return on capital initially back to the entity that provided the capital to Acacia?

That's right.

How would you think about the hurdle rate for a new project in Tanzania then based on -- presumably it would have to be significantly higher than what you'd normally look for in order to make it make sense I guess.

I'll start off and then I'll hand over to Catherine.

I think in terms of all of the -- management of all of our (inaudible) they need to be risk weighted whether it's in Tanzania or elsewhere and so I've kind of answered the general point on the question, but Catherine, perhaps you or other members of the investment committee might like to expand?

The way I would look at it, you very much look at what the discounted cash proposal feedback to Barrick.

So clearly, when we look at the hurdle rate, we look at the risk adjusted hurdle rate, and we consider what are those cash flows back to Barrick, it's going to be a greater challenge for other jurisdictions with lower all in tax rates.

The next question comes from Steve Butler with GMP Securities.

Question for you guys on -- maybe Catherine -- elaborate on risk adjusted hurdle rates.

Could you describe your view of

Pascua-Lama underground and Lagunas Norte [POCs]?

Would those be a different risk adjusted hurdle rates, maybe if you could specify or not for us the numbers.

I'm not going to give you specific numbers but I think very clearly by the fact that we're continuing to study and we're continuing to do value engineering, continue to phase development in order to mimic capital in the near term illustrates our view on the risk adjusted hurdle rates relative to those that we're accelerating and seeking to develop now.

So it's no coincidence that Nevada is moving forward whilst we are considering a phased development of Lagunas Norte and while we continue to progress on (inaudible) Pascua-Lama.

So I'm not answering your question directly but I hope the answer is implied.

Implied, I guess, yes.

Thanks.

And then on the $300 million good faith payment or payment that's being negotiated or talked around with the Acacia -- the Tanzanian authorities, is that any references -- can you guys give us a sense of what was the basis for $300 million and is it a bit of a catchup on a 50/50 on a backward looking basis?

There's a couple of points that one should say on it is that however many -- quite a few months now, the Barrick tax working group has had the opportunity to review the various claims made by the Tanzanian government against Acacia.

And it's clear that there are many of these areas that still need to be worked through for us to come to a common understanding on the points of fact and a common understanding on the points of law.

That is why the Tanzanian government has said we should extend the process of tax review from now and on for as long as it takes.

The $300 million number was, again, come to on the basis of what -- on the basis of probability.

Both parties agreed that could be the region for settlement.

But again, I think it would premature of anybody to sit and say that is a final position, which is why we refer to it as a down payment and there's more work to be done yet.

Second point on it that's already been made with respect to its tie to the concentrate sale, that's important.

And the third point, it isn't an initial payment.

It isn't a one payment.

Again, in consultation with the Tanzanian government, they recognize that a onetime payment is unsustainable and there's a need to look at this over time.

The next question comes from John Levin with Levin Capital.

You're a 50% owner of NovaGold.

How is that project going in Alaska?

It's going well.

The permitting is continuing.

Right now, the project is still on track for a decision approval in the third quarter of next year.

So that's tracking along well and in the meantime the project team is also looking at optimization studies, the drilling program that's happening this summer as well.

So I would say that it's tracking according to plan.

No tool yards and (inaudible) type problems right?

No, everything is on track.

Our next question comes from Tanya Jakusconek.

I have two clarification questions for Richard if I may, coming back to Tanzania.

Maybe Richard, can you just clarify, so can maybe the independent Acacia board members must approve any proposed deal and then it goes to vote to all of the shareholders, which you of course are a majority and then we have a majority including yourself as an outcome?

Is that correct?

That's correct.

That's the protocol under the U.K. listing of authority rules and the independent board need to deliberate on and because of the size of the transaction, because of the size of the value transfer, it is a size that needs to go to a shareholder vote by our understanding.

It's a majority of all shareholders.

Yes, that's right.

Which you have 64%.

So the deal is done on your vote.

Again (inaudible).

It depends entirely on whether we think the proposal is what we want to do.

Of course.

And then just coming back to the 50/50 split with the government, can you confirm whether the split 50/50 is equivalent to 50% of revenue or is it 50% of cash flow after operating expenses?

So it's the latter and again, it's been very interesting -- I just want to give you a bit of a feel for the process to and as to how the Tanzanians have been on this.

I want to emphasize that the actual nature of the discussions have been very positive, have been very open, and we spend a long time working through the specifics of all the (inaudible) mine plans and so on and so forth to ensure that when we're looking at a 50/50 distribution before the tax (inaudible) they understand precisely what it means and we understand precisely what it means.

So it hasn't been done in a light way and it has been the focus of what you can imagine, Tanya, to be quite a lot of work in terms of exchange of information and increased transparency, which has actually made a considerable difference to where we've managed to get to.

Okay.

And then I guess my last question getting back to Nevada.

Obviously, your contract with Newmont, with -- using the (inaudible) autoclave is coming up at year-end I think is on the 31st.

Can you just remind us how good negotiations are going?

I can comment on that, Tanya.

Discussions are ongoing and we're hopeful that we'll reach an agreement by the end of the year.

Constructive engagement at this point.

The next question comes from Brian MacArthur with Raymond James.

I apologize to go back to Acacia again, but just so I'm clear, overall it's 50/50 but is the 16% free carry right off the top and then everything else is trued up below the line.

Is that sort of the thinking or what exactly does that mean?

In terms of the distribution of cash flow, the Tanzanian government gets their cash from a number of sources, one of which is royalty, other of which is corporation and other associated tax, and a third of which is dividend payments that have come to them as a result of them being 16% shareholders in (inaudible).

And secondly, and you mentioned the MD&A.

You talked about creating a new operating company for all the three mines.

Is it done on a mine by mine basis or a consolidated basis when you go through this process?

Mine by mine basis.

But it would all be trued up.

So you're making a lot of money in one mine but spending capital in the other, it's not like you do it on a mine, mine, mine basis, and get the money out.

It's sort of all trued up before you split it all up (inaudible) question.

Again, we're slightly into the specifics associated with ongoing proposal development.

But be clear, under the Tanzanian law, which is what we're working towards, and again, in terms of the proposal, the 16% equity is held at the asset level, the operational level, at each of the operations -- Bulyanhulu, North Mara, and Buzwagi.

And so in terms of actually how the operating works, in terms of the allocation of capital to each of those assets, if you imagine the operating company working, you should end up with the Tanzanians and the operating company management and the executives reviewing the operating performance and cash flows from each of those assets.

So then we distribute them across the three of them in terms of investment decisions as necessary.

But again, it's 16% held at each of the asset levels.

Your next question from comes from Emma Townshend with HSBC.

More Tanzanian questions if possible.

One of the big outstanding issues and the potential source of cash is the VAT balances and in terms of the new proposed legislation, the VAT exemption of those costs was changed.

It appears that you seem to be going along with a lot of the proposals in that July legislation.

Has there been a discussion on that exemption going forward because that has a huge impact on cost and profitability?

Yes it does and yes we have.

And with respect to how we manage the 50/50 share going forward, in the proposal, agreed with the Tanzanian government, we're taking account of the VAT receivables.

We're taking account of the net operating losses going forward and that also factors into the 50/50 cash flow valuation in the model.

But you're right to say that there are discussions that need to happen following on this position with the Tanzanian government associated with affirming those in law.

And it would be premature of me to sit here and say that those discussions are complete, which is one of the reasons why we're saying that all of this will continue on its way and not be complete, not just withstanding the corporate legal requirements for independent committee review and shareholder vote, but also discussions within Tanzania as well.

This process is ongoing but what I would say to you is that the way in which this has been reviewed by our [opposite] numbers in Tanzania is with complete transparency to all of these levers and consideration of how they work and apply within the operating model more significantly financial model going forward.

But thanks for your question.

Our next question comes from Anita Soni with Credit Suisse.

I had a follow-up but it was actually asked and answered.

Thanks.

Thank you, Anita and thank you all for your likewise, to everybody who participated on the call today.

We look forward to updating you on our full year 2017 results in the new year and we appreciate everybody's participation.

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.