BARRICK GOLD CORPORATION LBMA/LPPM Conference Hong Kong | November 2012
International Mine Production LBMA/LPPM Precious Metals Conference 2012 Hong Kong | November 2012 1
CAUTIONARY STATEMENT ON FORWARD‐LOOKING INFORMATION Certain information contained or incorporated by reference in this presentation, including any information as to our strategy, project plans or future financial or operating performance, constitutes "forward-looking statements". All statements, other than statements of historical fact, are forward-looking statements. The words "believe", "expect", "anticipate", "contemplate", "target", "plan", "intend", "continue", "budget", "estimate", "may", "will", "schedule" and similar expressions identify forward-looking statements. Forward-looking statements are necessarily based upon a number of estimates and assumptions that, while considered reasonable by the company, are inherently subject to significant business, economic and competitive uncertainties and contingencies. Known and unknown factors could cause actual projected j in the forward-looking g statements. Such factors include,, but are not limited to: results to differ materiallyy from those p fluctuations in the market and forward price of gold and copper or certain other commodities (such as silver, diesel fuel and electricity); the impact of global liquidity and credit availability on the timing of cash flows and the values of assets and liabilities based on projected future cash flows; fluctuations in the currency markets (such as Canadian and Australian dollars, Chilean and Argentinean peso, British pound, Peruvian sol, Zambian kwacha and Papua New Guinean kina versus US dollar); changes in US dollar interest rates that could impact the mark-to-market value of outstanding derivative instruments and ongoing payments/receipts under interest rate swaps and variable rate debt obligations; risks arising from holding derivative instruments (such as credit risk, market liquidity risk and mark-tomarket risk); changes in national and local government legislation, taxation, controls, regulations and political or economic developments in Canada, the United States, Dominican Republic, Australia, Papua New Guinea, Chile, Peru, Argentina, Tanzania, Zambia, Saudi Arabia, United Kingdom, Pakistan or Barbados or other countries in which we do or may carry on business in the future; acts of war, terrorism, sabotage and civil disturbances; business opportunities that may be presented to, or pursued by, the company; our ability to successfully integrate acquisitions; operating or technical difficulties in connection with mining or development activities; employee relations; availability and increased costs associated with mining inputs; increased costs and technical challenges associated with the construction of capital projects; inflation; litigation; the speculative nature of exploration and development, including the risks of obtaining necessary licenses and permits; diminishing quantities or reserve grades; adverse changes in our credit rating; contests over title to properties, properties particularly title to undeveloped properties; and the organization of our previously held African gold operations and properties under a separate listed company. In addition, there are risks and hazards associated with the business of exploration, development and mining, including environmental hazards, industrial accidents, unusual or unexpected formations, pressures, cave-ins, flooding and gold bullion or copper cathode losses (and the risk of inadequate insurance, or inability to obtain insurance, to cover these risks). Many of these uncertainties and contingencies can affect our actual results and could cause actual results to differ materially from those expressed or implied in any forward-looking statements made by, or on behalf of, us. Readers are cautioned that forward-looking statements are not guarantees of future performance. All of the forward-looking statements made in this presentation are qualified by these cautionary statements. Specific reference is made to the most recent Form 40-F/Annual Information Form on file with the SEC and Canadian provincial securities regulatory authorities for a discussion of some of the factors underlying forward-looking statements. The company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise, except to the extent required by applicable law.
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BARRICK GOLD CORPORATION LBMA/LPPM Conference Hong Kong | November 2012
Mine Supply Inelasticity Mine Supply
Gold Price
Moz
US$/oz
100
$1,500
90
$1,200
80
$900
70
$600
60
$300
50
01
02
03
04
05
06
07
08
09
10
11
$0
Supply has not kept pace with the rising gold price Production declines in mature areas Reserve replacement challenges Increasing cash costs and capital costs Political risk Higher environmental standards Sources: Thomson Reuters GFMS, Bloomberg
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Scarcity of Large Operations Total Global Gold Mines by Size (2011 gold production)
156 mines >100,000 ounces
21 mines >500,000 ounces
6 mines >1,000,000 ounces
Source: Metals Economics Group
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BARRICK GOLD CORPORATION LBMA/LPPM Conference Hong Kong | November 2012
Changing of the Guard Annual Gold Production
Moz
2004
2011
Moz
11.0
South Africa
China
11.9
8.4
United States
8.3
Australia
7.0
China
5.9
Russia
Australia
8.3
United States
7.5
Russia
6.8
South Africa
6.4
Source: Thomson Reuters GFMS
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Global Exploration Trends Focus on big deposits Discoveryy rates: down Supergiants: rare Mine maturity: up
The bar is getting higher
Discovery costs: up Development p time: up p Technical risk: up
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BARRICK GOLD CORPORATION LBMA/LPPM Conference Hong Kong | November 2012
Declining Discovery Rates Endowment (Moz)(1)
Gold Exploration Spending (US$B)
120
9.0
100
7.5
80
6.0
60
4.5
40 0
3.0
20
1.5
0
0 91
92
93
94
95
96
97
98
99
00
01
02
03
04
05
06
07
08
09
10
11
Discovery Year Sources: Metals Economics Group, Intierra and Barrick
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Declining Supergiant Discoveries Number of Gold Discoveries Per Decade Over 20Moz (Supergiant) 18
14 11
5
4
1900s
1910s
Source: Barrick
1
1
1920s
1930s
3
3
1940s
1950s
1960s
6
1970s
5
1980s
1990s
2000s
?
2010s 8
BARRICK GOLD CORPORATION LBMA/LPPM Conference Hong Kong | November 2012
Declining Discoveries Number 12 10
of Gold Discoveries Per Year Over 5Moz
7
7
6
8
Operating
4 4
6
4
Not Operating
5
2 3 5
1 4
2
4 3
2
4
6 2
4
4
3
3 1 1
0 92
4
3
2
91
93
94
95
96
97
1
98
Sources: Intierra, Barrick
3
2
1
99 00 01 02 Discovery Year
1 03
04
05
06
07
1
1
08
09
1 10
11 9
Declining Grades g/mt
$/oz
2.1
$1,750
Annual Gold Price $1,500
2.0
$1,250
1.9
$1,000
1.8
$750
17 1.7
22% 1.6
$500
Weighted Avg. Head Grade 1.5
$250 2001
2002
Source: Metals Economics Group
2003
2004
2005
2006
2007
2008
2009
2010
2011 10
BARRICK GOLD CORPORATION LBMA/LPPM Conference Hong Kong | November 2012
Industry Cash Costs Higher gold prices and lower cutoff grades have 2012 contributed to cash cost escalation 2011 $/oz 750
Total for the period Q4 2005 – Q2 2012
Cash Costs +187% Gold Price +270%
650
2010
+24% +16%
2009 2008
550
1,200
+28% +30%
2006
450
1,500
+38% +12%
+1% +7%
2007
-5% +12% $/oz 1,800
+23% +12%
+26% +23%
900
600
350
250
Q4 2005
Q4 2006
Q4 2007
Q4 2009
Q4 2008
Q4 2010
Q4 2011
Q2 2012
Source: Thomson Reuters GFMS
300 11
Cash Cost Inflation CPI
Compound Annual Growth Rate 2001-2011 (percent)
Gold 2.3
Factor price inflation Gold
2.3
Mine Site factor costs
Non-Gold
9.7
9.7
Gold
Non-Gold
4.3 USD decline Gold
Total cost inflation nominal Gold
Non-Gold
4.3 Non-Gold
2.8
2.8
Non-Gold
~16.0
Grade decline
~14.5
Gold Geological inflation Gold 6.0
Non-Gold
3.5 3 5 Recovery decline
Non-Gold 4.6
Gold 1.0
20 2.0
Non-Gold 1.0
Mine conditions decline Gold Non-Gold 1.4 Source: McKinsey Mining Practice
1.5 12
BARRICK GOLD CORPORATION LBMA/LPPM Conference Hong Kong | November 2012
Production Costs
~20%
Maintenance (and other)
~25%
~40%
Other Consumables
Wages
(including contract)
~15% Energy
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Increasing Labor Scarcity Skilled Labor - Supply and Demand Australian minerals sector CAGR 2005-2015 (percent) 2.3
Managers and administrators
5.4 1.9
Professionals
5.9 2.5
Technicians
6.5 0.8
Trades p persons Semiskilled workers Laborers and related workers
5.7 0.2 5.7 -0.2
Sources: McKinsey Analysis, Minerals Council of Australia
6.1 14
BARRICK GOLD CORPORATION LBMA/LPPM Conference Hong Kong | November 2012
Sustaining Capital
+7‐10% PER ANNUM
Higher Hi h labor l b costs t
$300/oz +7‐10%
Higher energy costs
UNDERGROUND
Less experienced personnel
PER ANNUM
$200/oz
Other inflationary pressures
OPEN PIT
Source: CIBC World Markets Inc.
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Project Cost Overruns Projected Cost Variances (for selected over-running capital infrastructure projects) 120% 100% For selected over-running projects, average over-budget variance is 71%
80% 60% 40%
S. Am. (Steel)
Aus. (Magnetite)
Aus. (Iron Ore)
N. Am. (Moly)
S. Am. (Alum)
Africa (Nickel)
Aus. (Magnetite)
Aus. (Nickel)
Aus. (Diamond)
Aus. (Iron Ore)
N. Am. (Steel)
Aus. (Alumina)
Aus. (Iron Ore)
Pacific (Copper)
Aus. (Gold)
N. Am. (Gold)
S. Am. (Copper)
Aus. (Iron Ore)
0%
N. Am. (Copper)
20%
Note: Percentage variances between market-advised cost projections and original estimates for selected capital infrastructure projects Source: Ernst & Young
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BARRICK GOLD CORPORATION LBMA/LPPM Conference Hong Kong | November 2012
“All-In” Costs Increasing capital expenditures are leading to higher all-in costs $1,498
All-in Co-Product Cash Costs
$/oz 1,400
US$ per ounce
1,200 1,000 800 600 400
Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 08 08 09 09 09 09 10 10 10 10 11 11 11 11 12 12
200 0
Source: UBS
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Contracting Multiples 80
Gold equity P/E multiples have been compressed to below S&P levels 60
40
20
P/E Multiples 13 S&P 500 11 XAU
GLD ETF introduced
0 12-31
2004
Source: Bloomberg
12-31
2005
12-31
2006
12-31
2007
12-31
2008
12-31
2009
12-31
2010
12-31
2011
12-31
2012E
12-31
2013E
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BARRICK GOLD CORPORATION LBMA/LPPM Conference Hong Kong | November 2012
Shrinking Junior Miners Market Cap of Top 100 Junior Miners Listed on TSX-V
Other findings:
$20 6B $20.6B JUNE 30, 2011
‐43% $11.7B JUNE 30 2012 JUNE 30, 2012
61% decrease in +$200M market cap entities 41% decrease in equity funds raised Spending cuts c ts and delays
Source: PricewaterhouseCoopers
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Business Risks Top Business Risks for Mining and Metals (2012-2013) 1)) Resource Nationalism 2) Skills Shortage 3) Infrastructure Access 4) Cost Inflation 5) Capital Project Execution 6) Maintaining a Social License to Operate
Source: Ernst & Young
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BARRICK GOLD CORPORATION LBMA/LPPM Conference Hong Kong | November 2012
Greater Responsibilities Growing number of responsibilities
Rising investor and NGO pressure
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Challenges in Common Environmental Impacts – Water and land management – Low trust in the private sector – Competing for shared and scarce resources
Energy – Reliability of energy sources – Volatile policy and price environment
Sharing Benefits – Managing high expectations – Ensuring all stakeholders benefit
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BARRICK GOLD CORPORATION LBMA/LPPM Conference Hong Kong | November 2012
Managing in this Environment Industry association established to facilitate member companies’ efforts toward sustainable development
Industry association that has recently launched Conflict Free Gold Standard
Multi-sector initiative focused on safety, security, and protection & respect for human rights
Multi-sector initiative to improve transparency of industry’s payments to governments 25
Industry Shift in Focus Industry shift from production growth at any cost Renewed market focus on disciplined capital allocation, higher returns and free cash flow Producers shelving/deferring marginal mines and projects or downsizing to smaller development scenarios Industry response may result in lower mine supply, but this will also be supportive for the gold price and create a healthier industry
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BARRICK GOLD CORPORATION LBMA/LPPM Conference Hong Kong | November 2012
International Mine Production LBMA/LPPM Precious Metals Conference 2012 Hong Kong | November 2012 27