Gold.com, Inc. Q2 FY2022 Earnings Call

Ladies and gentlemen, thank you for standing by. This is the conference operator. Welcome to the Barrick 2022 Second Quarter Results Conference Call. During the presentation, all participants will be in listen-only mode and the conference is being recorded. Following the presentation, we will conduct a question-and-answer session. As a reminder, this conference call is being recorded, and a replay will be available on Barrick's website later today, August 8, 2022. I would now like to turn the conference over to Mark Bristow, Chief Executive Officer. Please go ahead, sir.

Thank you very much and good morning, and good afternoon, ladies and gentlemen. And welcome to our quarter two results update. At the halfway mark of the year, Barrick's performance and prospects continue to show the steady progress we envisaged at the time of the strategic merger, when we radically changed its trajectory and started the journey towards a future-forward business. We have built a team and a structure capable of dealing with a range of global economic, social, and political challenges that are getting increasingly complex. We drove ownership of our orebodies at the mine site and rationalized our portfolio to focus on world-class assets. We've shaken off the debt burden, strengthened the balance sheet, and introduced a dividend policy supported by our sustainably profitable strategy. Our exploration teams continue to replenish reserves depleted by mining and in pursuit of our new Tier 1 discoveries and our growth opportunities. We've expanded our footprint across nearly all the world's major gold and copper regions. On every front, we're closing in on our goal of becoming the world's most valued mining company. At this point, I draw your attention to the usual cautionary statement shown here and as is also available on our website. And now we can get on to the results for the quarter. In a testing operating environment, the team produced a stronger performance across the portfolio to keep us on track to meet our production guidance for the year. At the same time, we've made significant progress in advancing our major capital projects, notably the massive expansion of Pueblo Viejo in the Dominican Republic, and the start of the public comment stage on the Goldrush development in Nevada. The prospectivity of our copper portfolio is growing and our energized brownfields and greenfields exploration continue to deliver results. Earnings were ahead of market consensus and we maintained the quarterly dividend. Operationally, there were improvements across the board and particularly at Carlin and Turquoise Ridge in Nevada, Veladero in Argentina, Bulyanhulu and North Mara in Tanzania, and Lumwana in Zambia. With strong gold production expected from Cortez in quarter four, and copper production likely to be slightly up in the second half, we are still forecasting to be within annual production guidance. Due to higher energy prices, which flowed through to the cost of consumables and global supply challenges, both provoked by the crisis in Ukraine, costs are expected to be at or above the top end of our guidance, depending on how energy prices play out in the second half of the year. We're also now anticipating some slight project development delays of up to three months at Pueblo Viejo, and up to six months at Goldrush versus previous market guidance, which I'll discuss later in my presentation. These are the numbers and as you can see, healthy cash flows and a solid net cash position continue to support a robust return to shareholders. We've repurchased $182 million worth of shares under our $1 billion share buyback program. And we've paid out Kibali’s remaining cash surplus from the Democratic Republic of Congo. It's worth noting that Q2 is traditionally our highest tax payment quarter as well as when we make most of our semiannual interest payments on our bonds. Sustainability remains a key focus in every aspect of our business. And to support our drive to net zero emissions, we have quantified our Scope 3 emissions, those produced by our value chain to get a full picture of our carbon footprint. This exercise has shown that Scope 3 emissions from our Tier 1 assets account for some 40% of the Group's total greenhouse gas emissions, mainly from purchased goods and services, capital goods, fuel and energy use and transport and distribution. We are now engaging with all our suppliers to help them set and achieve their own reduction targets. On the health and safety front, the Latin America and Asia Pacific region has maintained its impressive record, reducing its total recordable injury rate for the year-to-date by 41% compared to the same period of 2021. And this, I might add, at a time when we have 3,500 contractors added to Pueblo Viejo's permanent workforce of 2,700 employees as part of our expansion project. Africa and the Middle East achieved a comparable reduction, but North America still needs to improve and we continue to work on this. Despite the delay in energizing the Veladero power line, which will plug the mine into neighboring Chile’s greener grid, we maintained our carbon dioxide equivalent emissions at the quarter one level. Average water use efficiency was again at 83%, ahead of the 80% target. We invested $7.5 million in community projects through the mine's community development committees, bringing our year-to-date spend to almost $12.5 million. We also completed the public caring engagements for Pueblo Viejo's new tailings storage facility, and Nevada Gold Mines renewed its partnership with Discovery Education and the State’s Department of Education. Moving on to the operational section. We start our operational review in North America, where the management team has been strengthened by the appointments of Christine Keener as the region's Chief Operating Officer and Peter Richardson as the Incoming Executive Managing Director of Nevada Gold Mines. A new North American organizational structure incorporating Nevada Gold Mines has been designed to integrate operational and project leadership to drive continued performance improvements and regional growth, beyond Nevada and Hemlo. Nevada Gold Mines had a good second quarter and is set up for further improvements in quarter three and quarter four. The complex is a core part of our portfolio. And following its creation three years ago, has produced 10.4 million ounces of gold and increased its pre-merger life substantially through an increased understanding of the orebodies. It has also distributed $6.5 billion to its joint venture partners. For the quarter, Nevada Gold Mines posted an improved operational performance at all its sites apart from Cortez, which is transitioning from pipeline, that's the open-cast pipeline project to the next phase of Crossroads, and is expected to start contributing its high-grade oxide ore in quarter four. The notice of availability for the Goldrush project, as I indicated earlier, was published at the end of the quarter, which triggered the public comment period. But given the delay, we now expect the record of decision in the first half of 2023. We are working on the impact of this delay and we will update you when we release our 2023 guidance. Brownfields exploration is rapidly replacing reserves depleted by mining as well as identifying new targets. As you can see on this map, we have a wealth of quality prospects in Nevada. So let's take a look at just two of them by example. A 700,000 ounce maiden inferred resource has been identified at North Leeville. And both there and at the nearby North Turf, there's a high potential for further resource additions. North Turf continues to expand towards North Leeville with multiple high-grade intercepts. Underground drilling from exploration declines is expected to reach North Leeville late this year when the two projects should be able to be combined. Staying on the Carlin trend, the REN project is showing resource growth as well, where we have identified a new Western mineralized corridor, Corona, just 250 meters from the existing infrastructure. This new corridor, together with the joint venture corridor, will drive resource additions to REN's maiden inferred resource of 1.2 million ounces, allowing us to advance this particular project to feasibility. I've indicated before that we want to expand our presence in both the United States and in particular, Canada. Canada, which is in addition to being Barrick's home is a highly prospective region with a mining-friendly jurisdiction. We've established a strong new business team there, which has been evaluating multiple M&A and earn-in exploration opportunities to expand our portfolio. Four projects are already under option. Hemlo, our Canadian operation, which was badly hit by the pandemic, has received significant attention as we work to rescope it. We have been completely remodeling the mine. And as part of this, are considering a restart of the open pit. Down South, the Latin America and Asia Pacific region had a very busy quarter with the expansion of Pueblo Viejo and an intensified exploration drive, led by a new team around our existing sites and well beyond them in new destinations. And then there's Reko Diq in Pakistan, which is a very exciting project that I'll tell you more about later. In Papua New Guinea, Porgera's progress towards reopening has been delayed by the country's election. However, we are optimistic that we can get operations restarted by the end of this year. Pueblo Viejo had a good quarter and is well positioned to achieve its production guidance. Meanwhile, its conversion into a long-life mine is progressing and the location of a new tailings facility site has now been settled. Detailed engineering and updated costing of the new tailings storage facility should be completed in the second half of the year. As you may recall, the mine was heading for closure because its vast resources could not be converted to reserves due to limitations on its tailings storage capacity. The plant expansion and new tailings facility will extend its life to 2040 and beyond with an average annual production forecast at above 800,000 ounces. Running a big mine while developing the massive expansion project is another demonstration of our various management's ability to handle complex challenges. That said, the global supply chain constraints have impacted the timing of delivery of some key components, which is putting pressure on the completion date. We now expect to be substantially complete by the end of this year, with commissioning commencing early into the new year. At the same time, Barrick's exploration team is looking for growth opportunities within the permit and the surrounding concessions along with a full revaluation of the district, drilling programs to test both the Arroyo del Rey and Zambrana Norte targets are being finalized, and will evaluate their potential to provide high-grade ore to the mine plan. As you know, Argentina has been going through some tough times, but Veladero, nevertheless, continues to improve its performance. With its fourth quarter traditionally a good one, the mine is still positioned to achieve its annual production guidance, although there are risks. Construction of the first stage of its Phase 7 heap leach treatment facility has been completed and construction of the final stage of Phase 7 is expected to start towards the end of the year. And exploration across the Latin America region is now being driven by one of three new exploration managers in the group, who is working closely with a dedicated growth manager to evaluate opportunities. While the Latin America exploration programs and priorities are being refreshed, work continued across the continent with encouraging results this quarter from Veladero, where the team is developing several early-stage near-mine targets. The Latin America region is prospective for world-class copper and gold discoveries. And we certainly have the teams with the required skills and experience to deliver them. Turning now to Reko Diq, which is one of the world's largest undeveloped copper-gold deposits. In terms of the framework agreement between Barrick and the Government of Pakistan, the project, which has been on hold since 2011, will be reconstituted and restarted. The mine will be operated by Barrick. And in line with our philosophy of partnering with our host countries, it will be owned 50% by Barrick, 25% by the Balochistan provincial government, and 25% by Pakistan state-owned enterprises. This is an exciting opportunity for Barrick but equally for the country and the province. And we've been received with great enthusiasm and support from all the local stakeholders. This is Reko Diq's anticipated timeline. Pakistan has an efficient administration, and we're currently working with all parties to finalize the underlying definitive agreements. There is also a legislative process to be completed. Once all of this is done, we will update the existing feasibility study currently scheduled for completion in 2024. Production could start in 2027 or 2028. With its unique combination of large-scale, low strip and good grades, Reko Diq will be a multigenerational mine with a life of at least 40 years. Turning now to Africa and the Middle East. The region continues to excel on all fronts with a standout performance from the Tanzanian mines. Virtually at a standstill when we took over their management three years ago, they have been completely redesigned and reengineered, creating what are, in fact, two completely new mines with the potential as a combined complex to achieve Tier 1 status in the Barrick portfolio. In Mali, Loulo-Gounkoto delivered its usual strong performance and is firmly on track to achieve its annual production guidance. Of all our operations, this complex is the most exposed to higher fuel prices, but we're in the process of trebling its solar power plant capacity which will improve its energy source profile. On the exploration front, the Loulo District in Mali and across the river in Senegal is the gift that keeps giving. Brownfields exploration is likely to replace Loulo-Gounkoto's depleted ounces against this year. Just across the border in Senegal, our Bambadji and Dalema permits host multiple targets with standalone potential. And in Central Africa, Kibali boosted production in quarter two, with throughput rising after the first quarter's planned mill maintenance. We now expect the replacement of the shaft winder in quarter four, which may impact slightly on production, but the mine remains on track to achieve production within guidance. Kibali is Barrick's leader in renewable energy, thanks to its three hydropower stations, which are shielding it from the full effect of higher fuel prices, and exploration continues to replenish the reserve base while also looking for new discoveries. In Tanzania, as I pointed out in the intro to our Africa Middle East section, both mines hit their steady-state run rate in quarter two, with North Mara increasing production by 18% and Bulyanhulu posting a 20% improvement. Bulyanhulu now has a life of more than 20 years, and continues to deliver significant growth in reserves. Development of its new Deep West extension is scheduled to start this quarter. North Mara's Rama open pit has been successfully ramped up, and the new Gena pushback is scheduled for the second half of this year. While continuing to replace resources depleted by mining, we are also targeting new opportunities within the North Mara District. We've expanded our footprint around Bulyanhulu through the acquisition of six highly prospective licenses, and we are also updating our geological models and generating targets, as I pointed out in the North Mara region. Turning now to our copper operations. In Zambia, Lumwana increased its Q2 production by 32%, thanks to higher grades and improved mill availability. Jabal Sayid in Saudi Arabia produced a consistent production performance and in line with Barrick’s policy of recruiting host country nationals has appointed its first Saudi General Manager. Production at Zaldívar in Chile was also consistent. Strong exploration results at Jabal Sayid have identified multiple growth opportunities with orebody expansion potential, both at depth and along strike, adding significantly to the life of mine. Major intersects shown here include one with an eye-watering 54 meters at over 15% copper. In Zambia, Lumwana has been targeting near-surface satellite deposits to support the conceptual pushback for the Chimi superpit, which will unlock the operation's full potential and extend its life to beyond 2060. We are working on this and expect to commence a pre-feasibility study next year. Ladies and gentlemen, that covers my review of the operations. Now I want to go back to the dividend to demonstrate Barrick's commitment to shareholder returns. The $0.20 dividend comprises a $0.10 base dividend and a $0.10 performance dividend governed by the amount of cash net of debt on our balance sheet at the end of each quarter. On an annualized basis, this equates to a peer-leading dividend yield of approximately 5%. Not only does our dividend framework deliver enhanced returns to our shareholders, it also provides them with flexibility and predictability throughout the financial cycle and to be used opportunistically when our shares do not reflect the value of our assets and prospects. We, as I pointed out earlier, introduced a $1 billion share buyback program, which we utilized for the first time this past quarter. And to finish my presentation, I thought it would be useful to wrap up the previous slides and summarize how this is creating value for our investors. We have the industry's largest portfolio of world-class gold and copper assets, and it's still growing. All our mines have reality-based tenure business plans, in some cases being rolled out to 15 years and beyond, with no significant production dips. We do not need to call our new projects to maintain our 10-year plans. New projects, on the other hand, build on that solid production foundation we already have. In fact, our growth projects such as Pueblo Viejo and Reko Diq will boost our current long-term sustainability. Future growth is supported by Barrick's substantial project portfolio, which includes Donlin and Pascua-Lama, our growing near-mine opportunities that I've touched on in this presentation, along with a strong record of exploration success and reserve replenishment. Our sustainability policies and practices ingrained in Barrick's long before ESG became a thing deliver measurable results that benefit all our stakeholders. And all of this is underpinned by disciplined shareholder returns. So let me end with this question. Where can you find a better investment case? Thank you for your attention, and we are available to take answers.

Thank you. Our first question comes from Greg Barnes of TD Securities.

Mark, a couple of questions. First on Goldrush's contribution over the next several years to Cortez. We only have, I guess, consolidated guidance for Cortez and we don't know how much Goldrush contributes to that in 2023, 2024. Can you give us some idea of what the amount is?

So Greg, we haven't really given much detail on that guidance, except that it really does take Cortez as a complex over 1 million ounces. And that will come as we define the project and conclude the feasibility study, then we'll be able to update that. We did give you a heads up last year, and I think that stands at this stage. And you've got a 5-year and 10-year profile. It's an integral part of the Cortez project.

A second question then on Pueblo Viejo. You've picked a new TSF site for it. Has the government signed off on that as well? Do you have buy-in from them for that new site?

Yes, absolutely, Greg. The government has released a press release confirming that. It's all subject, of course, to the environmental license being awarded. But we're comfortable. We've got the terms of reference agreed with the government, and we're busy with that. We expect to lodge that application towards the end of this quarter.

I believe, Mark, the government had a third-party review of independent experts reviewing these sites. They've signed off on all the two assets, given what you just said.

Yes. We've been working closely with the government. As you know, we started off with some challenges, but we've certainly found an agreeable way forward, acceptable way forward. And in fact, you want to see in the releases today that we've completed the public participation and consultation process as part of that. And I would just add, Greg, that were successfully completed.

Our next question comes from Anita Soni of CIBC World Markets.

Just a couple of operations that I've mentioned, which you may have read about, are expected to improve in the second half of the year. I wanted to touch upon Cortez and also Turquoise Ridge, and I believe it was...

Anita, you’re correct. The two main improvements are taking place at Turquoise Ridge, which is performing well, especially the underground operations. We are facing challenges with throughput and the processing facility, as well as with the grade of some open pit material at Twin Creeks. However, we are confident that Turquoise Ridge is ramping up according to plan, particularly with the underground aspect of the business. As we bring Shaft 3 into production, we are also developing towards what we refer to as the BBT target near the old Getchell pit, which is an underground target. We expect to continue increasing our underground operations there. The main focus is on Cortez, where we have been processing lower grade open-pit ore from Pipeline, and we are actively transitioning to the next phase of Crossroads. There is a high-grade oxide portion of Crossroads included in this year's mining plan, which we will access at the start of the fourth quarter, marking a significant improvement. This will not affect the throughput as we are using the oxide mill, which has available capacity. It’s primarily about grade, and we have dedicated significant effort to focusing on the reserve model and grade. We are optimistic that if we maintain the current mining rate, we will gain access to that material, and it will become evident towards the end of the year. These are the two main improvements year-on-year. PV remains on track, maintaining a steady pace similar to the second quarter. Veladero is in the same position. Loulo-Gounkoto is also meeting the expected run rate, and Kibali is projected to see a slight increase in production in both the third and fourth quarters. North Mara and Bulyanhulu are performing at their expected run rates as well.

Yes. I guess my second question was going to be on Veladero. It's running under. But you had a slight improvement over the course of the year.

Yes. We're beginning to understand the leach dynamics at Veladero, which haven't been the focus previously. We've been developing the next leach infrastructure, and now that Phase 6 is operational and we’re transitioning to Phase 7, our main goal is to comprehend the leach dynamics and manage effectively during the winter months. We anticipate an improvement in leach kinetics as we enter summer, and we're projecting better performance in the final quarter of this year as summer approaches.

Okay. And then my second and last question relates to CapEx. I think you're running a little over 50% for the year. And I'm just wondering if your comments on cost being at or above the high end of the guidance range, does that also apply to the CapEx number? Should we be a little higher on the CapEx numbers…

They're interconnected as you know. It's a significant year for our operations, and with the increase in fuel prices, there’s a possibility that if we complete our full plans, it will depend on fuel prices, which is influencing our overall cost structure. You’ve noticed that sustaining capital affects all-in sustaining costs. We are managing this. The key point I want to emphasize is that these factors are crucial. We have assets that are viable at any gold price. Some of these assets are generating strong cash flow, while others need sustaining capital investments. However, all our assets are designed to endure various gold and copper price scenarios and to operate profitably through market cycles.

Our next question comes from Jackie Przybylowski of BMO Capital Markets.

Maybe I'll ask the first question just to circle back with something you mentioned in the introductory remarks on Canada. Can you give us a little bit more color? I know there have been a number of transactions that have come and gone in Canada, both on M&A and on exploration. What are your current thoughts? Or what are you currently seeing in the landscape out there today in Canada.

Well, Jackie, there are two things. First of all, as I've said on many occasions, we are very disciplined in how we look to grow. And when opportunities come and they are not able to meet our investment criteria, we don't transact. And that's what's happened in Canada recently. That doesn't mean to say that we're not committed to still growing in Canada. And I often say, if we can't buy it, we'll find it. And that's really been our focus overall because otherwise. If you just rearrange the assets in our industry, you don't create any value as we've seen over the years. So that's where our real focus is. We've got a great team in Canada. We are slowly building portfolios. We have four different projects that we're focusing on at the moment. And in the fullness of time, you'll see that. At the same time, in times like this where you get sudden pressure on the industry and particularly the market itself, that puts the junior market under stress. And again, that makes sense for us to exploit, and we do that. I think I would end up with the fact that we've never bought any exploration project at full value, and we don't intend to start.

That's a fair comment. And you guys have definitely been disciplined on that. For my second question, maybe I'll ask you for an update on the process at Porgera. It sounds like you've come to an agreement and you're just going through a public notice process. Can you maybe talk a little bit about how long you expect that might take and when you might be able to put Porgera back into your guidance if you have an idea on that?

Yes. We have been dealing with a situation involving a structure from the old Porgera that held 5% equity for the benefit of the key SML landowners. Those landowners have now agreed to the new transaction, but the management of that vehicle is not following the guidance from their shareholders. We're navigating this process. Meanwhile, the elections have been quite complicated. We are currently in the electioneering phase which should lead to the appointment of a government by the Governor General. We expect to have a clearer understanding of the new government leadership this week. Once that's established, we believe we can proceed to finalize the shareholders' agreement. We already have consensus among primary stakeholders, including landowners and the provincial government of Enga. The next steps involve finalizing the shareholders' agreement for the new Porgera and applying for the SML special mining license, which will allow us to reopen the mine. I visited a couple of weeks ago and met with the Prime Minister at that time. Currently, there is a short interval without a Prime Minister, but we expect the new appointment this week, which will help us move forward with the project.

So sorry, it sounds like there's a lot going on. But do you think that it's reasonable to assume it will restart for 2023?

So one thing I'm becoming used to is that Papua New Guinea does not always work as a reasonable state. So we'll keep working on it. But I think our relationships and our confidence that everyone that is anyone in that process has got to a point where we understand where we want to get to, and it's going through the process. And of course, as you know, we've always respected the various stakeholders in any one of our businesses. And this is another one of those groundbreaking transactions. But the gold is still in the ground. And we're very comfortable that once we get the rules right, the agreements in place, we'll be able to operate comfortably back in Porgera.

Our next question comes from Lawson Winder of Bank of America Securities.

Mark, nice to hear from you. Thank you for the update. I wanted to come back to Pueblo Viejo, the CapEx. So in the MD&A, you guys flagged the potential for a material increase in CapEx depending on various factors. Can you maybe just speak to what are some of the factors driving that potential increase? And to what extent is the delay factoring in?

Yes. So we need to finalize the feasibility study. We had an initial site, which created all the controversy. We have moved that site. And the new site, as we flagged when we moved it and we had different choices, comes. The driver is really volumes. So the volume of the key for the walls of the dam and also the total volume to build the walls. And if you remember, right in the beginning, we talked about the two different sites and the variations regarding being able to build those tailings facilities. At the same time, the new site also comes with more volume. And that's what we're busy doing now. We are well ahead of our program to drill out the foundations to ensure how much we have to excavate and what's the size and components of the key that we have to put in for the wall and then we'll be able to share that with you. But what I can tell you is that the economics are still very robust.

Okay. That's helpful. And maybe just to be a little bit more clear. If I'm hearing you correctly, it sounds like there is going to be some increase from the $1.4 billion estimate and you guys just need time to figure out how large that's going to be or how material it is. Is that fair?

That's correct. It's a comprehensive process and we want to ensure everything is in order. We need to plan for the permit and expect to have a preliminary estimate by the end of this quarter, which we will then communicate to the market.

Great. Can I also ask you about your new Asia Pacific team? Is that team based in Perth? Could that be seen as an indication that Barrick intends to reenter Australia after leaving a few years ago? If that's the case, is mergers and acquisitions something that might be included in that reentry strategy?

The focus for that team is not on running Porgera because there was a rumor regarding remote management. Our intention is clear, and we have a full Porgera team in Port Moresby. We still have some infrastructure in Cairns, and we will be moving all significant leadership roles for Porgera to Porgera and Port Moresby to honor our commitment to being host country based. The Perth team is currently working with the team in Pakistan. This leadership structure will support our Pakistan project as we develop capacity, and we have already started hiring for that project. Looking at the entire area from Pakistan to Papua New Guinea, theoretically, there’s nothing preventing us from returning to Australia if we find suitable opportunities. However, Australia is a mature destination for exploration, and based on my experience, it is not the best place to seek bargains in M&A.

Our next question comes from Josh Wolfson of RBC Capital Markets.

Just following on Lawson's question about Pueblo Viejo Capital. I understand there's a range of possible options for the tailings dam and the volumes and energy prices associated with that. But if you have to sort of provide some sort of goalposts for us to think about in terms of what a material change would be for the capital. Is there a percentage we should be thinking about or any information you can provide there?

So Josh, it's got nothing to do with power. I just explained to Lawson. It's got to do with the amount of material we have to move. We're busy going through that process of designing and calculating that. And I think it's appropriate for us. First of all, we need to share it with the government when we get to that point, and then we'll share it with the market. But I think it is substantial. But at the same time, it still delivers very robust economics. And this is a project that goes way beyond 2040. And by all accounts is going to deliver production above 800,000 ounces a year. We're busy with that feasibility study. When we're there, we'll let you know what it is.

Okay. And then looking at the timelines for the project or for the expansion there, when would you expect to be at a steady state run rate of that 800,000 ounces or higher? And then looking at the changes with the commissioning sort of timelines, how does that affect the 2023 production numbers?

The guidance for the expansion is not directly linked to the tailings facility. We had to manage the situation where not having the tailings facility would significantly impact operations, potentially causing us to halt mining. This was crucial because without a place to dispose of the waste, we would generate unmanageable waste. Now that this is clear, we can move forward. With the government's endorsement, we continued with the expansion program once we secured the space for the new tailings facility. This expansion program, which we previously indicated was delayed, was originally expected to be completed in the third quarter. We now expect it to be largely finished by the end of the year, with commissioning taking place in the new year. This upgrade will increase the plant's feed from 9 million tonnes to 14 million tonnes per year while maintaining a backend capacity of approximately 9 million tonnes. This means we can maintain or slightly improve our gold production rates from the past and keep costs low. Now that we have the capacity to store material, we can proceed with ramping up the new expansion. Therefore, next year is expected to be significantly better, and we anticipate reaching our planned run rate towards the end or latter half of 2024, returning to high production profiles.

Okay. And then maybe just thinking about the impact of the steps for the remainder of the year and the project completion, is there any kind of interruptions we should expect to see towards maybe the year-end with the commissioning process or with the construction activity.

So that’s what I highlighted in the presentation. We are running multiple construction streams simultaneously with the operation. The performance of this mine is impressive. We have an additional 3,500 people on site, which is quite a small footprint. Additionally, this is our best safety site. We have already completed some tie-ins and will continue to do so, as we are very committed to this aspect. Our team understands what is required to deliver results. Like many of our operations, we are focused on building long-term value, ensuring that we establish a solid foundation for the next 20 to 30 years. My experience has taught me that if we focus on getting it done correctly, the rest will follow.

Our next question comes from Tanya Jakusconek of Scotiabank.

Maybe just on some of the development projects. I'm just going to circle back and finish off on Pueblo Viejo. So I understand the timeline, Mark, from you. So we are working on a pre-feasibility study that is going to be completed in Q3. So will we be getting an update with Q3 results on your findings on the pre-feasibility study then?

So Tanya, the only issue is the cost of the tailings facility, and we will provide that information once we have a clear understanding of the number. We also need to present it to the government, as this is part of our agreement related to a major expansion. However, this does not affect the current program for ramping up the expansion, as the expansion is separate from the tailings facility.

Yes. No, I appreciate that. So sometime in Q3, maybe Q4, we will get a new costing number for the tailings. Is that...?

That's a fair assumption. And of course, it's in our interest to give it to the market as soon as we can.

Okay. And then the permit, which you are going to be filing in Q3 2022, when are you expecting the permit to be granted to you?

Yes. It's a project that's been going on in parallel in consultation with the government. Grant's on the call. Grant Beringer, do you want to have a crack at that? Do you know how long it takes?

Yes. So it is dependent on the government review. We intend in submitting EISA towards the end of this month in September. And they obviously need to do their review, the government that is. But we are expecting it in the first half of next year.

And is it when you are granted this permit that we would look at that resource to reserve conversion in your reserve statements?

No. Rod, do you want to comment on that? It's once we are clear and comfortable that we will deliver.

Yes, no, once we are clear that we're going to get the permit, then we're happy to sign off on the reserve increase. So we don't necessarily need to have the terms in hand. We just need to be confident that there's nothing that's going to impede that granting of the permits. So still expecting that reserve increase this year, Tanya.

Okay. So we could get it this year, so with your year-end financials.

Yes.

For clarity, with the plant expansion and the necessary tie-ins at the end of this year, can we assume that Q4 might be somewhat weaker than Q3 because of these tie-ins?

It is somewhat in line with our expectations, and we anticipate it will remain that way, Tanya. We do not foresee any major fluctuations. Ideally, we would like to advance some production into Q3 to provide the flexibility you mentioned. However, at this time, we are not planning to exceed the run rate we established for Q4, which remains achievable based on the first two quarters of this year.

Okay. And then when we come to this CapEx number for the tailings, Mark, I remember, I think from the previous conference call that of the $1.4 billion, I think $500 million to $600 million was the previous tailings facility. So is it safe to assume that whatever CapEx increases are going to occur, it would be on the $500 million to $600 million separate from the remaining $1.4 billion plus, obviously, we've got three months delay. So there's a bit of costing on that. Is that a safe assumption?

Yes. There are some increases as we point to in the expansion project. That's within the guidance. And then we will redefine the tailings facility, capital estimates along with the new plan once we've done the drilling. Tanya, it's really about the drilling, the estimates on volumes. So how deep do we have to dig the key to tie it in? Because remember, this mine sits in a seismic active zone. Our current gold tailings facility is probably the best constructed tailings facility in the world today. And we have absolutely committed to ensure that this tailings dam is designed like that one, if not better, to ensure the safety and competency of the facility itself.

Appreciate that.

Tanya, your assumption is correct.

Would it be that whatever CapEx increase we have, I should look at it based on the $500 million, 600 million…

Yes, it will be in addition to that. It will be in addition to it.

Maybe I'm just going to leave Pueblo Viejo, if I could. And I just want to come back to just Nevada. Just two things on Nevada, just as the delays on Goldrush, you started the public hearings. Maybe just an update on how that's going. Is it because we're having issues on the public hearing side that we slipped six months? So maybe just a little bit more detail on the slippage there.

No, we are not experiencing any delays. The permitting process in the United States takes time and requires consultations. We are currently engaged in that process. There was a slight setback regarding availability, but the Bureau of Land Management and the Department of Interior have worked diligently, and we managed to advance the timeline after that delay. This is positive news. Our teams are fully engaged with the BLM and external consultants to move this asset's permitting forward. The long-term impact on Cortez is substantial, potentially exceeding 1 million ounces. In terms of production, Carlin is expected to reach 1.5 to 1.6 million ounces, Cortez will surpass 1 million ounces, and Turquoise Ridge will reach around 600,000 ounces. These three assets are fundamental to Barrick's production profile and are also significant for our partners at Newmont, as we want to establish a solid foundation. This process will take a considerable amount of time. We have exciting projects like Goldrush and Fourmile, and while we mentioned North Leeville and the REN project, there are many more opportunities within the Carlin portfolio, especially as we explore more underground. Additionally, we have new greenfields projects, which we will provide updates on later this year. These include the gap between Turquoise Ridge and Twin Creeks and opportunities around the Cortez complex. I am very optimistic about both the brownfields and greenfields potential that our exploration teams are starting to uncover.

Okay. So I was just trying to understand whether there was any issues with the, I guess, the local...

No, not at this stage, of course, we're going to have lots of detractors. And we're going to have to engage in a robust way to keep this project moving along. But at this stage, we do not have any concerns about the process or the arguments for and against.

Okay. And if I could, my last question is just on Long Canyon. I see that it's no longer for sale. You took that off. I'm just wondering what's the change there? Do you see something different for this asset? Maybe the underground potential, maybe what's changed there?

So this asset was one that the market misjudged when we made the deal with Newmont, which was a hostile acquisition. We had to rely on the market, and it didn't accurately value some of the assets. The next phase of Long Canyon had not been permitted yet. It has been a valuable asset so far, with resources. However, we believed it didn't fit well within our Nevada portfolio, so we looked for other parties interested in taking on the project. The interest in that project reminded me of when we put Lumwana on the market; people viewed it as a chance for a good deal. We weren't willing to go down that route, and we couldn't find anyone we thought could uphold our standards of responsible mining for Long Canyon. The project still has some potential for residual leaching, and our team is in the process of renewing the licensing for it. We're confident in managing that aspect. Additionally, the sale process was impacted by a sudden drop in gold prices, altering market sentiment significantly. We are not considering a rushed sale for Long Canyon, so it remains part of our portfolio.

Our next question comes from Jatinder Goel of BNP Paribas.

First question on Cortez and Fourmile royalty that's reared and thus sold to Royal Gold, was there any interest from your perspective, Mark, to acquire that royalty stream or at the JV level at NGM, or it did not make financial sense?

So Jatinder, as everyone recognized, it's quite a big price tag, what was paid for that royalty. Of course, we're always interested. I think it would be incorrect for me to disclose our corporate considerations and strategy around that. But I think one thing that's important is it's a real endorsement of the capacity of both Nevada Gold Mines management and its ability to grow that resource. And I think that's what's in the price is that I believe that we can continue to grow that resource. From Nevada Goldmines point of view, our focus is to grow our resources. And so we'd rather spend money, particularly at that sort of level back in our orebodies. And I hope that explains your question adequately, Jatinder.

Just to follow up on that. I mean you run the asset. So no one can know about the reserve resource and potential production and cost situation better than you, especially sitting outside, evaluating that. So from that perspective, is it a difference in gold price assumption that would result in a different valuation? Or was it a question of you trying to put your money at a better place, as you said, on exploration rather than trying to buy back the royalty stream?

Yes. I think you've answered your own question, Jatinder.

Okay. That's very clear then. Just one more on cash flow modeling perspective. From Kibali, is it going to be once a quarter with like a one quarter lag type of cash inflow or repatriation just to see the consistency of that cash coming through? Or can it still be subject to different timings in terms of how it comes into Barrick?

We are actively moving forward with the agreement we have with the government, which outlines that we will allocate the cash flow approximately 50% towards repaying the outstanding debt and 50% towards dividends. This approach allows everyone to benefit, especially our partner, SOKIMO, who will receive the dividends, while the government will collect withholding tax on those dividends, and we will gradually reduce the outstanding debt. That is our plan. We will decide whether to execute this quarterly or biannually, and we will keep the market updated.

Our next question comes from Brian MacArthur of Raymond James.

Most of my questions have been answered. But I just wanted to follow up on a comment, Mark, you made about Bulyanhulu. You talked about 20 years now. You've sort of rebuilt the whole mine. A number of years ago, there was talk that this could be a much bigger mine than it currently is. Now that you've got it figured out the new mine, you've got a long reserve life. Is there any possibility of going towards those 500,000 ounces a year numbers that were talked about maybe 15 years ago?

So the best way to explain that, Brian, is there's no chance and probably no other charts. So let me explain to you that kept failing Bulyanhulu is this is an ore body about 250,000 ounces between 200,000 and 250,000 ounces a year. And it's a narrow ore body, high grade. Every time you reduce the feed grade and you just can't make it work. And so the only way we will get that increase is to open up new working front, so new faces. And to do that, you need additional orebodies. How we did the deal and expanded that footprint around Bulyanhulu is because our geologists feel that there's certainly potential for additional orebodies and that perhaps there’s a bit more folding than people in the past understood. And so we could open up addition working areas and not rely on the current infrastructure on its own; and two, trying to mine at any faster rate given the size of the ore body, then we could add to it. So that’s why, at the stage, the life of the mine just gets bigger and bigger. And so North Mara is about 300, a little bit more, maybe, depending on grade produced and Bulyanhulu is just over the 200,000, maybe up to 230,000, 240,000 ounces a year. And if you add them together, there's the 500,000 ounces. They're both good cost mines. And Buly has got a longer life than North Mara, but North Mara has equally got more untested prospectivity today than Buly has.

Our next question comes from Adam Josephson of KeyBanc.

Mark and Graham, good afternoon. I have a two-part question regarding costs for either of you. Can you discuss the assumptions behind your expectation that gold cash costs will be at the high end or slightly above your full year range, especially considering the recent significant decline in global commodity prices? Additionally, if you do end up at the high end or slightly above, what do you anticipate as a reasonable expectation for cash cost per ounce next year? I'm aware that you expect production to increase to some degree next year. Given that information, what do you think is a reasonable expectation for the year-over-year change, if any?

I'm going to focus on the operations, and I'll let Graham provide additional details. The situation is that we're discussing high gold prices and their potential impact, but we also need to face the reality of costs. These costs are influenced by inflation, which isn't going away anytime soon without significant action. We're managing these costs while also navigating the challenges posed by the crisis in Eastern Europe, which has severely affected fuel markets, including oil, diesel, and gas. The fluctuations in gas exports from the U.S., which we depend on as we expand gas power generation, add complexity to the situation. It's not enough to simply consider commodity prices as a direct reflection of costs. Additionally, Barrick is currently engaged in several major sustaining capital programs, especially in our pits, which will incur extra costs, particularly due to rising fuel prices. However, we are in a position of strength; having world-class assets protects us from risk and does not affect our capital allocation strategy. Our role as managers is to navigate these challenges without compromising our capital commitments, whether for growth or sustaining projects. Unlike many competitors, we aren't dependent on new projects to achieve our five and ten-year plans. We're confident in our ability to handle the fluctuations in commodity cycles. We've successfully cut about $500 million in Barrick's logistics, supply chain, and procurement costs, and we have further budgeted improvements this year to counter the pressures from inflation, whether caused by Eastern Europe or general inflation trends that we see globally. Many people still don't acknowledge that these inflationary concerns are significant for the global economy. Now, I'll turn it over to Graham, who can provide more insights on how we approach costs and capital management.

Thanks, Mark. I mean I think you've really addressed the question quite well, and it is very tricky to be forecasting costs in the current environment. I will just say that the current guidance for 2022 in terms of this at or slightly above our previous guidance is a function of an expectation of $110 oil. And as you will have seen, a few weeks ago, we were trading over $120, and then we dropped below $100. So it's moving around all over the place. It's difficult to predict, and that's why we're reluctant to be drawn on a particular number. And as we look to 2023, as Mark has indicated, it's so much depends on the global economic environment when we get there. So I think that's something we'll give you guidance on at the end of the year, as we always do.

Yes. Mark, just back to what you were saying about we look at some of these commodity prices falling hard. And as you said, some people are quick to assume that inflation is going to dissipate, go away, whatever the case may be. But what you're saying is that that's just not the way it's looking at all that supply chains are still quite problem. Can you just go into what you're seeing, Mark, in terms of supply chain, et cetera, and how that's affecting the inflation that you're dealing with and presumably affecting what you think will be the persistence of that inflation?

Yes. Regarding supply chains, we are facing challenges related to costs and management. However, we have successfully navigated these issues, especially during COVID. For instance, we altered our sourcing of steel balls multiple times between China and Europe, demonstrating our supplier flexibility. We have also increased our inventory to over three months for key assets that are currently at risk due to the Ukraine crisis. Nevertheless, several crises are emerging, including escalating tensions between the USA and China, which complicate matters further. Our strategy involves establishing strong partnerships with significant contracts and a robust supply infrastructure that enhances our procurement capabilities. For example, in Pueblo Viejo, we encountered stress with critical components during our expansion. We adapted by importing steel and developing local manufacturing capabilities, which allowed us to maintain production with minimal delays. Historically, every crisis, especially those involving inflation or global economic downturns, tends to feel worse than it is and requires a longer recovery. Very few people understand inflation today, but I have experienced past inflationary periods, and it demands diligence, world-class assets, agility, innovation, and skilled employees to navigate. Barrick possesses these essential qualities to address current challenges. In conclusion, it is important to recognize that the global environment is complex. Transitioning from COP26's push for green initiatives to current reliance on fossil fuels reflects a lack of global coordination, reminiscent of the disparities witnessed during COVID. Emerging markets are often overlooked, even in significant legislative discussions like the recent U.S. Senate bill. It's crucial to understand that the world operates as an interconnected system and that isolationist policies are increasingly prevalent. The need for sustainable and responsible mining has never been greater. At Barrick, we remain committed to sustainability, focusing on high-quality assets that benefit both our shareholders and the stakeholders in the host countries where we operate.

Thank you for that, Mark. I have a question about the buyback. Last quarter, inflation increased and gold prices dropped from $2,050 to $1,700. I believe this might have contributed to the dislocation in your stock. Can you clarify whether the dislocation was primarily due to the gold price falling to $1,700? What were your specific thoughts on the dislocation? Additionally, do you anticipate that these buybacks will continue, or should we not expect a consistent level of buybacks in future quarters for any particular reason?

So we were very clear that we're going to use this facility to buy back our stock when we feel that it's trading at a discount to what we feel is fair and tighten up the market when we can. And that's what happened last quarter. As you pointed out, the share price showed a lot of weakness and we entered the market in a considered way, we're not planning to buy back all our shares. But in a considered way, we were active in the market. And again, today, we feel the same applies, and we will continue with this buyback strategy that we shared with the market. And again, in a considered way, all the time we feel that it's in the interest of our genuine long-term shareholders to take out some of the softness in the market when we can.

There are no more questions from the conference call.

Thank you all for your time. I believe it was a productive session. I appreciate the questions. If anyone has additional inquiries or didn't feel comfortable asking in this public setting, please know that our management team is always available to answer your questions. You can reach out to us or contact Lois, Kathy, or any member of our investor team, and we will ensure you get the information you need. Thank you again, and for those in the Northern Hemisphere, enjoy the summer. We look forward to speaking with you soon.

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. Thank you for participating and have a pleasant day.