巴里克黃金 (GOLD) 2017 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by.

This is the conference operator.

Welcome to the Barrick 2017 Fourth 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 February 15, 2018.

I'll now like to turn the conference over to Kelvin Dushnisky.

Please go ahead.

Good morning and thank you for joining us.

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

This slide includes a summary of the significant risks and other 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 Vice President of Reserves and Resources, Rick Sims.

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.

I would also like to note that next week on February 22, we'll hosting a webcast Investor Day, where we plan to provide detailed updates on our operations, projects and strategic priorities.

At the start of 2017 as we did the year prior and the year before that, we identified a clear set of priorities and we committed to stay focused on them.

Our first priority was to maximize free cash flow.

In 2017, our operations generated over $2 billion of operating cash flow and nearly $670 million of free cash flow.

This allowed us to increase reinvestment in the future of our business during the year.

While doing so, we maintained our focus on capital discipline as we advance our pipeline of low risk, organic projects.

These projects have the potential to contribute more than 1 million ounces to our production profile at cost well below our current portfolio average.

During the year, we forged a new strategic partnership with Shandong Gold at Veladero.

This is an important relationship.

It has the potential to create long-term value for our owners, as well as our community and government partners in Argentina and potentially beyond.

In 2017, we reclassified 40 million ounces of Pascua-Lama's proven and probable gold reserves to measured and indicated resources.

At the same time, our track record of adding reserves and resources through investment and exploration was evident last year, as we added more than 8 million ounces of proven and probable reserves through drilling at our existing operations and the Goldrush project, more than replacing the ounces depleted through processing.

Achieving and maintaining a strong balance sheet has been and remains a top priority.

In 2017, we reduced our total debt by over $1.5 billion, exceeding our original target for the year, and our liquidity also continues to improve.

We now have less than $100 million of debt due before 2020, and the majority of our debt, in fact, more than 75% of it is due post 2032.

Our capital allocation goals are centered on restoring our balance sheet to withstand gold price volatility, investing to improve the quality of our asset base and rewarding shareholders with reliable dividends.

During the year, we returned more capital to shareholders with a 50% increase in our quarterly dividend to $0.03 per share.

Our operations produced a little more than 5.3 million ounces of gold in 2017 and cash cost of $526 per ounce and all-in sustaining costs at $750 an ounce, in line with our revised full-year guidance.

This production reflects the mid-year sale of 50% of Veladero to Shandong, and the all-in sustaining cost reflects a planned increase in mine site sustaining capital.

At the same time, we were able to reduce our cash cost by $20 an ounce, which reflects our ongoing drive to improve productivity, along with the higher contribution from lower cost operations.

As part of the effort to improve our cost structure, we continue to advance our digital program in Nevada which started last year at Cortez .Our final and maybe most important objective is to focus on talent, and we're putting in place the programs needed to develop the next generation of Barrick leaders.

So we're pleased with the company's performance last year, but it was not without challenges, 2 are notable.

In March, a pipe burst at our Veladero leach pad resulting in the temporary suspension of operations.

The mine returned to normal operations in July, and we're pleased that Veladero continues to have local community and government support.

As many of you know, challenges of Acacia were also in the headlines last year, and we're hopeful that a proposal agreeable to all parties will be reached by mid-year.

So to summarize 2017, we set ambitious targets and despite the challenges, I just discussed, we met them and we're on solid footing heading into this year.

Our priorities for 2018 remain consistent.

We will continue to progress toward building a business that can generate free cash flow and gold price of $1,000 an ounce on a sustainable basis.

We will drive our miners to achieve greater levels of productivity pushing down unit costs and increasing throughput.

We'll maintain capital discipline and continue to strengthen the balance sheet.

By the end of 2018, we intend to reduce our total debt to about $5 billion and as we have for the past 3 years, we will achieve this through a combination of cash on hand, cash flow from operations and potential divestments.

We will also invest capital back into the business and progress our project pipeline.

Exploration has been one of Barrick's primary value drivers for a long time, and we will continue an exploration focus in our existing core districts.

In addition to advancing the various organic opportunities here in the portfolio, we'll continue to evaluate external opportunities but will only proceed if we are confident if they would increase the long-term value of the business.

And finally, we will attract top talent and develop our teams to succeed in our decentralized operating model.

Before I turn things over to Richard, I want to acknowledge the exceptional efforts and dedication of the entire Barrick team in delivering our 2017 results.

I know, they're enthusiastic to continue to perform this year.

With that, I'll ask Richard to walk you through our 2017 operating highlights and our outlook for 2018 and beyond.

Thanks, Kelvin.

Our most important operational priority continues to be to ensure the safety of our people and a sustainability of the environment within which we operate.

Over the course of 2017, we improved our safety performance to deliver a total reportable injury frequency rate of 0.35, which for us is the lowest in the history of the company.

And while we're extremely proud of this accomplishment, progressively, it was overshadowed by the tragic deaths of 2 of our team members during the year.

Firstly, Williams Garrido while making improvements on our water management system at Pascua-Lama.

And then secondly, Bot Gutierrez at Hemlo who were struck by a piece of mobile equipment working underground.

Our thoughts now and will continue to be so with their families, their teammates and their friends, while we work towards every person at Barrick going home safe and healthy every day.

Consistent and moving on from this -- consistent with our overall improvement trends in safety.

We achieved a 38% reduction in reportable environment incidents at our operations last year.

Another large milestone.

And we also introduced furthering this by climate change strategy, which targets the 30% reduction in carbon emissions by 2030.

As Kelvin mentioned, our digital transformation continue to progress.

We laid the foundation last year through a series of pilot projects at Cortez and we'll continue to build on this in 2018 with this primary focus remaining in Barrick Nevada.

As part of this and essential underpinning of it, we're going to complete version one of the Barrick Data Fabric.

This Data Fabric is an enterprise-grade big data analytics platform, that provides a unified data environment for the company.

We will also on that basis accelerate the implementation of digital projects across other operations, including expanded use of automated processing systems, short interval control, digital work management and automation.

And more of this will follow in detail at our upcoming Investor Day on February 22.

Now on to our year-end operating results.

Annual gold production was at 5.32 million ounces in line with the adjusted annual guidance of 5.3 million ounces to 5.5 million ounces.

All-in sustaining cost increased by 3% year-on-year primarily reflecting an increase in minesite sustaining CapEx.

And we reduced our cash cost by almost 4% from $546 an ounce in '16 to $526 an ounce in '17.

Reflecting our ongoing focus on driving productivity and efficiency improvements across our portfolio.

On the copper site, annual copper production was 413 million pounds at an all-in sustaining cost of $2.34 per pound.

On to 2018 gold production.

This is estimated to be between 4.5 million ounces to 5 million ounces at a cost of sales in the range of $810 to $850 an ounce.

And all-in sustaining cost of $765 to $815 an ounce.

The higher cost guidance, that's cash cost and capital -- sustaining capital for 2018 primarily reflects lower anticipated production from Barrick Nevada, PV and Veladero, and increased processing of higher-cost inventory and higher cost at Acacia.

In terms of timing, 2018 production is expected to be weighted towards the second half of the year.

And the other point to note is in the first quarter, largely owing to lower grade expected in Barrick Nevada coupled with the timing of maintenance at PV.

We expect production of around 1 million ounces at higher cost will be anticipate for the remainder of the year.

As Kelvin mentioned, we are increasing our investment into the future of the business.

Full year CapEx for 2018 is expected to be in the range of $1.4 billion to $1.6 billion, including project CapEx of $450 million to $550 million, which is a significant increase in capital expenditures around $270 million as compared to last year.

On to copper, we anticipate production in the order of 385 to 450 million pounds.

The expected cost of sales to be $1.80 to $2.10 with an AISC of $2.30 to $2.40.

Now looking further ahead and to provide more clarity on our future production, and cost and capital profile.

We're providing longer-term directional guidance for 2019 to 2022.

We expect gold production to average between 4.2 million to 4.6 million ounces with average cost of sales between $850 to $980 and an average all-in sustaining cost of between $750 to $875 per ounce.

As you'll remember in 2016, we set ourselves the ambitious aspiration of achieving an all-in sustaining cost of under $700 an ounce.

We focused our efforts on ensuring that our core assets were capable of maintaining that cost structure over the long-term.

And we made significant strides towards driving costs out of our business.

However, not sufficient to offset the change in production profile.

In addition, as you can see from our presentation today, we are making deliberate decisions to invest in our assets.

In order to deliver high quality, higher margin ounces for the future.

For example, through the MinEx and our digital program.

And this is meant, we've had to adjust our expectations around costs in the near term.

So at this time, we're expecting cost in 2019 and 2020 to be towards the upper end of guidance.

However, given our current focus on optimizing our planning process and delivering further cost improvements, our intention will be to drive towards the lower end of guidance range by 2021.

Capital expenditures are expected to be in the range of $1.1 billion to $1.5 billion for 2019 through 2022 roughly 30% of which will be for [growing] capital.

It's expected that going forward, further capital to be deployed on additional projects to our gold sites.

We're developing concepts for such opportunities in Nevada and in PV now.

We'll be going into more detail on this during our Investor Day, which as you know is the afternoon of February 22.

Please join us for our webcast and the details can be found on our website.

I will now pass the call over to Catherine to go through the financials.

Thanks, Richard.

Net earnings for the year were $1.44 billion or $1.23 per share.

Adjusted net earnings increased to $876 million or $0.75 per share compared to $0.70 last year.

And this was mainly due to higher metal prices combined with lower direct mining costs.

A lower relative sales contribution from higher cost operations such as Acacia and lower inventory write-downs compared to 2016.

Our operating cash flow was over $2 billion in 2017.

Lower than 2016, mainly due to buildup of metals inventory at Pueblo Viejo, Lagunas Norte, and of course Acacia impacting working capital as well as lower gold sales driven by the 50% sale of Veladero, as well as the impact of the concentrate ban affecting Acacia's operations.

Free cash flow for the year was $669 million, equivalent to a gold price breakeven at the $1,096 an ounce.

Our lower year-over-year free cash flow reflects the lower operating cash flow combined with higher capital expenditures, as we continue to reinvest in the business.

On to the balance sheet.

As Kelvin mentioned, we exceeded our 2017 debt repayment targets achieving a total debt reduction of $1.51 billion.

Our goal remains to reduce our total debt to around $5 billion by the end of this year.

However, with our bonds now trading at between 108% and 125% premium to par, we will only take those actions where the risk-reward trade-off makes sense.

We'll keep you updated as to progress over the course of the year.

At the end of 2017, we had $2.2 billion in cash and cash equivalents and remain fully undrawn on our $4 billion credit facility.

And as you can see from this slide, the majority of our debt is due up to 2032 with under $100 million of debt due before 2020.

This derisk profile allows us to progress our project pipeline without worrying about future gold price volatility.

Following on from Richard's 2018 guidance, I just wanted to provide a bit more detail on some of the other guidance items which can also be found in detail in our MD&A.

Our effective tax rate is expected between -- to be between 41% and 43% based on current stock prices.

2018 finance costs are expected to be lower than last year given our debt reductions to-date at a range of between $500 million and $550 million.

We expect to incur between $185 million and $225 million of exploration and evaluation expenditures, mainly focused on greenfield exploration and brownfield projects in the Americas.

We expect to incur between $140 million and $180 million of project expenses consisting mainly of care and maintenance costs and preparation work to tonnage and underground mine at Pascua-Lama.

And finally, we anticipate G&A to be high year-on-year with corporate, administration cost of approximately $275 million.

And as Rich has already alluded to this includes investments and improving our enterprise-wide processes and systems or otherwise known as the Barrick Data Fabric.

So moving on to tax reform.

I just wanted to cover this in a bit more detail here to address any questions that may arise.

In late 2017, tax reform was enacted in the U.S. and included a reduction of the corporate income tax rate from 35% to 21%, a repeal of the corporate AMT and a mandatory repatriation of earnings and profits from foreign corporations.

We've reviewed all of the provisions impacted by the reform and the result was a net positive adjustment to Barrick of approximately $200 million.

I'd now like to hand it over to Rick Sims to take us through our 2017 year-end results of [Barrick].

Thanks, Catherine.

The reserves I'm going to talk about today are based on a constant price of $1200 per ounce.

This differs from last year where we used a price of $1,000 for the first 5 years of our mine lives.

As Kelvin told you in 2017, we added 8 million ounces of new reserves replacing 1.3 x our production depletion, much of this was a direct result of our successful MinEx drilling programs.

The underground mines were key in our production replacement, particularly the Nevada mines, Turquoise Ridge and Barrick Nevada.

In fact, Turquoise Ridge, Goldstrike, Cortez and Hemlo combined to add 4.3 million ounces of new underground reserves, replacing over 4x their combined production depletion.

Also Goldrush added 1.5 million ounces of new underground reserves.

The increase in high-grade underground reserves and the divestment of 25% of Cerro Casale and 50% of Veladero has increased our reserve gold, gold grade, from 1.33 to 1.55 grams per tonne, an increase of 17%.

And by the way, that 8 million ounces of new reserves had an average grade of over 3.5 grams per tonne.

Also shown here in the slide is a reduction of 9.2 million ounces associated with the divestments of 25% of Cerro Casale and 50% of Veladero as well as the reclassification of the 14 million ounces of Pascua-Lama reserves to resources as Kelvin mentioned.

Our M&I and inferred resources used a gold price of [$1,500] per ounce, and in 2017, the acquisition of 50% of Caspiche added 11.6 million ounces to our M&I resources.

This was offset by 3.4 million ounces divested at Cerro Casale and Veladero.

The underground reserve additions we just spoke about at Turquoise Ridge made the TR open-pit resource uneconomic at the $1500 gold price.

So after equity changes, Pascua-Lama reclassifications and the TR open-pit removal, our M&I resource was slightly lower than last year, but in that removals totaled 3 million ounces while open-pit additions totaled 2.4 million ounces and underground additions totaled 6.4 million ounces.

On inferred, after equity and TR open-pit adjustments, we added 9.1 million ounces, again, largely the result of our MinEx programs.

Many of these resources are ready to go into reserve with additional minex drilling.

And the detail we removed about 2.5 million ounces, while open-pit additions were 4.5 million ounces, and underground additions totaled 7 million ounces.

We'll talk a little bit about copper.

And for the copper reserves, we used a constant price of $2.75 a pound and this differs also from last year where we had a $2.25 price for the first 5 years.

And the copper portfolio was significantly strengthened this year as Lumwana added over 2 billion pounds of reserves, directly the result of really good work done by the Lumwana team and lowering their open-pit mining costs.

Now, I'd like to hand it back to Kelvin for some closing remarks.

Thanks, Rick.

Well that concludes the presentation.

Just before we open the call to questions, I want to mention an organizational change.

We're separating the Investor Relations and governance functions which are presently combined in [one row].

Daniel Oh will continue his governance engagement responsibilities and Deni Nicoski will lead the IR function, as Senior Vice President, Investor Relations.

Deni will be known to many of you and we're confident that his deep understanding of the business will make for a very seamless transition.

So thank you, Daniel and welcome, Deni.

Now, let's open the line for questions, please.

Thank you.

We will now begin the question-and-answer session.

(Operator Instructions) The first question comes from John Bridges of JP Morgan

I just wondered you've been paying down debt and you did that again this year.

Looking forward, I'm guessing that with costs rising, you're going to be so flip into more neutral position.

And then as you start to build mines, you're going to be pulling into that credit facility and whatever.

When do you expect that sort of flipover from paying down debt to --

to spending money on new projects to occur.

That's my first question.

As we indicated, we intend next year to continue to working down the debt and we -- [usually] our target.

As far as, flipping into the credit facility that isn't the intention but Catherine, maybe you could respond (inaudible).

We've been very clear in terms of that long-term target of $5 million and really there are 2 reasons around that.

One is that debt really is due post 2032, so the liquidity pressure and the risk associated with net liquidity in a volatile gold prices is much less.

And the second thing is around our credit rating and wanting to just be sure that we have a solid investment grade credit rating again, in a volatile gold price environment.

When you look at our current plans, in terms of our 3 Nevada projects and Lagunas Norte, those would be funded out of $1200 gold price assumptions through our free cash flow.

So at this point in time, there is no intention to do anything with our -- [gas] in terms of increasing and I would say, our ambition still is to have a conservative robust balance sheet at the time.

And then just a follow-up on DR. I see you would be building a coal-fired power plant, they were plans originally, I think that when something like that happened you may access that potentially cheaper power.

Would you be able to get to that?

Is there an agreement in place to access lower cost power?

We have Greg Walker here [who is the] GM at PV.

So Greg, maybe you can respond to that.

Thank you, Kelvin.

John, we don't [own] any power station in PV and generator line powder supply the minesite.

In fact we generate surplus power or we had the capacity to generate surplus power.

And we will actually be delivering power into the grid at a revenue stream and would be also looking at converting that power station to a LNG gas power station which will help drive our operating cost down.

Those strategies are all built into our (inaudible) plant called PV.

The answer is no.

We don't -- we won't draw from the coal-fired plant [as mentioned]

The next question comes from Andrew Kaip whose with BMO.

Look, I've got a couple of questions, maybe to Richard and Catherine.

Regarding the additional capital that you've forecasted for this year, the approximately $270 million of additional capital.

Can you give us a bit of visibility on where that capital is being spent?

So, Andrew, I'll answer this question.

We actually give you a sort of brief overview of that in the MD&A.

So the additional $270 million is on gross capital specifically, and it's really focused at our Nevada operations, so it's on our Cortez Hills underground or [Caspiche] the Range Front Declines, the underground development, the Goldrush declines and as well as some minor growth capital elsewhere in the portfolio.

It also includes some capital on the Norte Abierto joint venture.

Now remember that that capital is funded by Goldcorp.

The other question I have is just about the higher G&A, particularly related to the digital integration and upgrading of your digital capacity within your operations.

I presume that CapEx -- that additional spending is going to be around for a couple of years, and I'm just wondering if you can give us a sense of how we should be thinking about that post 2018, should we be looking at more capital in 2018.

And when can we expect that to begin to decline or will it decline, I guess is my question.

It's great question, Andrew.

We have Shaun here as well.

You may come in at the back, but let's -- where we are Andrew on the investments in the Barrick Data Fabric is, I just got to go back 1 step.

We took the decision this year to integrate our digital team with the previous [IMG] or IT team because there were opportunities to rationalize that organization in the normal good sense of business.

But there was also an opportunity to bring in new ideas from our digital team is to how we can build, what we call the data fabric, that is much more efficient than anything we've had up to now.

So it's our expectation that the investments in the Barrick Data Fabric will over time improve the efficiency of that system, which by definition will include reducing its running costs, and increasing its output.

But version one of the Barrick Data Fabric is going to be built through this year, and we have an aggressive timetable for that.

So by the second half of the year, we're expecting to see it working.

The functionality from that will improve our ability at what we call corporate or portfolio level, so you gather data, manage money flows and predict high forecast, but also down at the minesite level will allow us to manage all the insight we need to make the type of rapid decisions that improve productivity by which [I am ensuring] full control.

So to answer your question is, do we expect the increased G&A coming in addition to be a fixed costs that rolls on that number year on year on year?

No, it's our expectation that we're going to be investing in systems that will reduce the running costs, not just of the central component, but the elements down at the minesite as well over time.

But you'll recognize Andrew, and you heard this before, this is an intuitive process and this is why we are doing it in tranches, and we are being very disciplined about it.

But Andrew, just on to your question briefly to your model, I would assume that we are spending at these rates probably for another couple of years.

When you look at the upgrade systems, when you look at the investments we need to make in our ERP, we will see offsetting savings coming through from the underlying operations.

But ultimately, some of these things, and it's the reason we put it in G&A are really just a fact of needing to invest and upgrade the systems that we currently own, and I'll let Shaun, ask him to finish off that talk.

So good morning, everyone.

That's exactly right, we're on an aggressive [3] year acceleration plan.

So as Catherine mentioned, and Richard, we're driving a lot of productivity and again here really is over the next few years that it would pay for itself, and we'll see the efficiency throughout our operations.

So it's productivity, safety, it's all the things that you would expect, it's really about modernizing our systems and setting up for the growth of [inspection of the mine].

The next question comes from David Haughton who is with CIBC.

Just further to Andrew's question about the CapEx breakdown, can we expect to see a more itemized breakdown of the [$450 million to $500 million] for 2018 on the Investor Day?

Yes, maybe, you will.

Okay because the kind of guidance that we had before was sort of not sufficient to be able to input into our models.

The other question, I've got is looking at the exploration budget.

So in Richard's discussion, he was talking about a greater focus there, but when I have a look at the budget for 2018, that's similar to 2017.

Just wondering if there is a change in mix here or whether you've been listening to Krcmarov about specific targets, perhaps you could talk about where you see that exploration dollar being spent?

David, normally we have Rob Krcmarov respond to that.

He's traveling to one of the sites as we speak today, but we have [Sharron Mackrey] who works with Rob, and maybe we will asl [Sharron] to comment on that.

So the exploration guidance for 2018 brings in MinEx plus Globalex.

The balance of our spending is of course in the Americas with the weighted towards our brownfields at Barrick Nevada, our formal project and of course Alturas and greenfield.

So just a sort of draw on that.

What you're not seeing in that Globalex number is that increase in MinEx spending.

So Goldrush for example now sits in MinEx rather than Globalex.

So when you look at the overall amount of exploration drilling that we are doing as a company, we are seeing a significant increase, it's just a split between what we would describe as brownfield versus greenfield, it means -- it looks like how Globalex is not changing.

The next question comes from Tom Hall who is with BlackRock.

First one's quite a simple.

Just what drove the decision to go to the flat gold price assumption and flat copper price assumption and reserves, and what is the sensitivity of reserves, if you went back to the old assumption of [$1,000] for a few years and $2.25.

And then secondly, I was wondering if you could just reassure Acacia minorities that once an agreement is made in Tanzania that they will get a vote on the resolution that is agreed and that it will be a vote for the minorities, rather than just by Barrick.

Thank you.

On the first question related to reserves, we'll ask Rick Sims to address that.

Please Rick?

Yes, the real reason for going to the $1,200 constant price is for all in -- really the biggest reason is simplicity and the fact of the matter is that as the mines optimize their life of mine plans, the effective price that's used in the early years is typically even less than [$1,000].

So we're working on that sort of an approach even as we speak to really come up with an optimum mix between the 2 sort of end members, but we really do operate in the near-term at much less than $1,200.

Thanks, Tom, it's Richard here.

On the votes and Acacia and so on.

Once an agreement is reached, we're working on that now.

The independent committee of Acacia will review, and make a recommendation to Acacia's board.

Following that, Acacia's board will make a recommendation to Acacia shareholders, and in terms of voting, Barrick intends to exercise its shareholder rights.

The next question is from Kerry Smith of Haywood Securities.

Richard, just in broad terms, there is the same, call it 0.5 million ounce reduction in your average production after 2018.

Where would that come from in broad terms, which operation?

It's kind of across the whole mix Kerry, and again it's, you think about what's happening right now and you were there with us last year, is the open-pit that Cortez is shutting down for the end of the Q. So that's the dominant element, but again across the areas there is reduction.

But if you are looking for the thing that swings it more than anything else, it's the open-pit in Nevada.

Okay, but for the rest, we could just assume 10% reduction let's say per operation.

Well, I think It's variable.

So we got greater than the portfolio.

Turquoise Ridge is a great example of that.

We got steady production.

PV is an example of that going up to 2021.

And -- but yes, the big bulk of that 500,000-ounce reduction, really up to 2021 is the changing profile of Barrick Nevada which is then obviously pick back up again with the investments in Cortez Hills underground and Goldrush.

The next question is from Greg Barnes with TD Securities.

Obviously, the copper price and the copper market looks very strong.

You got a big copper business, does it still fit within Barrick.

Are you looking at options for that?

What's the longer-term view on how copper stays or doesn't stay within Barrick?

We are going to spend quite a big time talking about that next week in fact at our Investor Day.

But we recognize the value of the copper business in the portfolio [in] many respects and under-appreciated, so while you had indicated that copper assets are noncore, we've always said they are very -- high value.

So if you will participate next week, I'm sure you will -- we will spend more time talking about that.

The next question comes from Tanya Jakusconek who is with Scotia Bank.

Maybe I just going to start back on the reserves and I know Tom asked this.

But just an idea, if we had a waterfall chart, the sensitivity from moving from $1,000 to $1,200 long-term, what have been the impact to reserve?

Rick, are you still on the call.

If you can.

You but, Kelvin.

Tanya, we will give you some detail in the Investor Day presentation this next week to address exactly your question.

So if you can wait until then, we will get that to you.

Okay.

And then maybe [perhaps you] on the line.

Can I ask about Turquoise Ridge, I mean the resource did fall by about 6 million ounces.

I think you mentioned that it was a change in the mine plan like the open-pit doesn't make any -- it doesn't make any economic sense.

Is that -- what's happened with the 6 million ounces that just kind of went away?

Yes, that's exactly right.

The total resource drop is actually more like 10 million ounces combined, measured, indicated, and inferred.

And it's directly a result of the fact that we're going to mine those ounces in the next few years as supposed to 20 years from now in an open-pit, but what we've done is we really always do a trade-off between our underground viability and open-pit viability and as we increase the underground reserve we are essentially consuming the open-pit potential resource.

But the good news is that we'll get money out of it much sooner.

Okay.

And maybe just looking at, and I don't know when -- maybe Richard wants to take this question on your long-term outlook.

In there are some projects which I guess we still need board approval for and if I can remember correctly maybe Catherine help on this, Lagunas Norte we were still struggling getting that internal rate of return of 15% at $1,200 gold.

Have we done a lot of work to improve that that Lagunas Norte is in this production forecast?

I am again going to do the usual thing.

Can you wait till next week.

But I think just to give you a brief answer on that.

We talked about moving Lagunas to 2 phases which reduces the sort of upfront capital profile of that project, so we will give you more detail on that phase plan and really Phase 1 versus Phase 2 in next week.

And to be clear, we do now have board approval for Turquoise Ridge third shaft, Goldrush and Cortez Hills underground.

That one I knew.

It was just more than Lagunas because I think the technical study.

If I can remember correctly, did have that internal rate of return at that level.

So we'll provide you more details.

The phased plan effectively creates a different profile.

Okay.

And then maybe Catherine, can we just chat about the recent tax reforms in the U.S. and Argentina.

Is that 41% to 43% effective tax rate guidance going to be your long-term, incorporating these changes?

Nothing is long-term with tax, Tanya.

The 41% to 43% reflects the U.S. tax reform and so you would expect that reduction in U.S. tax rate to carry on through the rest -- over the long-term.

With regard to Argentina, we have not made any real assumptions around Argentina primarily because there is a requirement in order to take advantage of the lower tax rate, there is a requirement to keep your cash inside of Argentina.

We are not yet in a position to make that judgment.

So we've not assumed anything in terms of changes in tax rate in Argentina.

The next question comes from Brian Macarthur with Raymond James.

This is just following up a little bit on Tanya's question.

The whole repatriation of funds, can I assume is that a financial decision from the point of view, that it's better in the U.S., now or is it a strategic decision more that we're going to redeploy more capital in the U.S. Could you see, that's the best place and there may be regions in the portfolio where you can now get money out efficiently that you are less keen on and if so, I don't know if you be willing to comment on those regions on where the money sits?

Well, I would say, it's a bit of everything.

I wouldn't say the latter is a primary focus of ours.

So I think in terms of being of having sufficient liquidity in the company.

We have no problems moving money around with the exception obviously Acacia, the cash in Acacia is within Acacia and doesn't flow up into the company.

So really it's around the financial benefits of bringing that cash in in terms of the one-time toll charge versus higher rates under the previous legislation, as well as that's really the focus of our investments over the next few years.

If you look at where we are growing our production, where we're investing capital is very much in U.S.

In the U.S. effective tax rate is less than 21%.

The next question comes from Christ Terry of Deutsche Bank.Chris, your line is open.

Just had a question on the cost side with the new [IRSE] guidance, how do you think about the macro environment or what -- can you comment a little bit on the consumables, the general underlying trends on the input side.

And then just, I know you touched on it earlier, but the [$700] goal that you did have, are you still saying that you can get there eventually or you sort of moving away from that.

I just wanted to be a little clear on that?

Thanks.

I will answer that.

On the macro trends in terms of inflation, you have seen it everywhere, there is inflationary trends that didn't exist 3 years ago, be there in fuel, power, consumables, labor cost contracting and the works.

And again this year's cash cost, we are very happy whether it came in because they were working against that type of headwind.

Now we factor that type of headwind being to a degree going forward.

But in reality the way in which we operate, and I will come to the [$700] question in a minute.

If we work on a constant basis to reduce the input costs through our supply chain negotiations and in particularly with respect for supply chain integration with operation, and we found over the last 3 years, we have seen in trend terms, the actual underlying unit costs have dropped relative to where they were.

And that in itself is a trend that we would continue to expect going forward.

But in the face of the macro trend you've got in there, we factored in a conservative position right now to be realistic.

So we're not in the business of distorting expectations.

And that brings us finally, on to the $700 number.

This number has really helped us drive down operating costs and improved production and indirectly and probably more importantly, our safety, health and environment outputs over the last 3 years.

We've been focusing very much in terms of -- for the collective efforts on the core sites and have had considerable progress there, digitization will help.

But as we go forward, as Catherine has outlined, we actually have to invest more in these operations.

MinEx is the one part of this.

And so what you'll see on a year-on-year basis, we have given very realistic guidance right now.

As we expect things, as Catherine -- myself have outlined to this to improve over the period of time.

So it's not with the $700 aspiration.

It is still there and driving the way in which we're operating and thinking.

It's -- we're taking account of all of these factors, the need to inject more capital at older mines and these inflationary headwinds to give more challenges to our operators to yield those productivity advances.

The next question comes from Stephen Walker who's with RBC Capital Markets

I'd like to follow-up on Chris' question and a little more granularity, and maybe this is a question for Greg Walker or Bill MacNevin on the operating side.

If you had to look at your unit cost per tonne for mining and processing.

What percentage increase are you seeing year-over-year on a per tonne basis, if you step back and look at the operations in general, were you talking 5% to 10%, are we talking 10% to 20% ranges?

And again, I don't need specific numbers per asset,s but when you look at the mining portfolio of particularly your 5 big core assets, what would you say the percentage increase in your per tonne unit costs has increased year-over-year?

I will answer that on a specific -- we did this trendline thing.

In terms of open-pit, over the last 3 years have gone up by 4% even though total tonnage has dropped by 85 million tonnes.

In terms of underground mining, they drop in the range of 7% to 8% over those 3 years, which is a pretty remarkable.

Again there has been increased tonnage but been driving down those costs.

In terms of Roaster and autoclave processing, again we've seen reductions over those 3 years and the only area that's gone up has been heap leach which gone up by 11% and that's because of the considerable reduction in the amount of tonnes that we have been processing.

And this is really -- I am really glad of this question because that actually allows us to give you a detailed feel and you get more on the Invester Day, on actually how we have been driving down these costs, even though in some areas, we've been facing those -- facing period inflationary headwinds, but in some areas, we've been reducing the tonnage as well.

Greg, you got any abstract to that

Thanks, Richard.

As you said by site, there is across all bad sites.

Richard's comment about the reduction in the underground particularly in Nevada that done an excellent job in Cortez, in Goldstrike and Turquoise Ridge is driving down their unit costs.

And our unit costs, we may need to drive those down and we need to improve our efficiency because our grand has been going down and that it has been another headwind we work again.

But generally, there the increases are being flat or slightly being flat or its slight reduction.

And looking forward, that's a challenge to maintain that unit rates going forward

And just for everyone's reference, in the press release, we provide our oil price assumption, that we've used both in 2018, but also in 2019, and 2022.

So we have factored in oil prices at $70 a barrel in our assumptions in 2019.

Thank you, thanks for that Catherine.

Greg, if I can follow-up, if you were to rank where you think the greatest cost escalation could occur over the next 3 years, I guess, assuming flat energy.

Is it labor cost, is it mining, is it maintenance.

Can you give us a top to bottom or the highest leverage cost impacts could occur whether it's open-pit or underground, you can kind of lump them altogether.

How do you break that down, just very clearly top to bottom biggest leverage to lowest leverage on cost?

I think you just highlighted the mainstay.

The energy is obviously the biggest one and that's linked to oil.

And Catherine just said the assumption for oil.

Labor -- some of our minesites, you say there for example under lot of pressure there for labor costs, where you have generally pressure across the board in for labor.

We are looking at our labor intensity to try to manage those increased cost by reducing our labor intensity on our operations.

Then as you said, maintenance with also driven by [power] cost and that comes from related to energy input.

So you very basically touched on the main ones.

So energy, labor and consumables and power.

We have a follow-up question from Andrew Kaip of BMO

I'am intrigued in this discussion about Turquoise and the conversion from open-pit resources to underground.

And I'm just wondering of those 10 million ounces that move --

decline in overall resource, how much of that are you expecting to capture over time back into a mine plan from an underground perspective?

You've captured some of it, but are we going to see further gains, I guess is my question.

Kelvin, you want me to take that one.

Yes, Please.

I mean, we have already go in the -- maybe Rich you start this or [if anyone] wants to add anything in the Turquoise, you guys have -- feel free.

I'll just begin by saying that a big chunk of the addition to Turquoise Ridge was in the old underground or open-pit resource.

So we've already taken a big chunk of that, and I think on Rio, probably talk about as we can lower our mining costs and increase our efficiency in mining underground, we will continue to do that.

But we will never get the full 10 million out iin the underground.

So really the driver going forward is going to be cost-related, and can those costs to be driven down sufficiently so that some of that lower grade material ultimately comes into a mine plan.

The thing that actually drove that pit every -- all the time is the high-grade in and around the underground mine.

And as we increase our efficiencies, we decreased the viability of that open-pit resource, but that's actually a good thing as I was saying to Tanya.

But the full 10 million, there's a lot of low-grade stuff out there, that we're just not going to be able to mine efficiently and economically from underground.

Can you give us a sense of what that lower grade material is like, what is that average grade of that low-grade envelope that you're talking about?

It's typically down in the 0.1 range.

And our cut off grades at TR are above 0.2, so it's in that range between 0.1 and 0.2.

You are talking about ounces per tonne.

Sorry ounces, I'm thinking in ounces because we're in the United States, so somewhere between the 3-gram to 6-gram range.

There are no more questions at this time.

This concludes the question-and-answer session.

I would now like to the conference back over to Kelvin Dushnisky for any closing remarks.

Thank you, operator and thanks to all who dialed in today.

I know its been a busy reporting day, so we appreciate all you joining us.

And for those of you who are planning to participate, we look very forward to speaking with you again next week on our Investor Day webcast.

So thank you very much.

This concludes today's conference call.

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

You may now disconnect your lines.

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Have a pleasant day.