Barrick concerned about lack of new gold industry discoveries, drop in global mine production

Barrick Chairman Peter Munk declared Tuesday at the company’s AGM that, “this is as tough a business as it gets, and it’s not getting any easier.” Meanwhile, ailing CEO Greg Wilkins made a surprise appearance.

RENO, NV - 

The appearance of Barrick President and CEO Greg Wilkins, who is suffering from an undisclosed serious health condition that has forced him to take a medical leave of absence, at Barrick's annual general meeting Tuesday in Toronto, prompted a standing ovation from the audience.

Even Barrick's loyal opposition, the environmental and human rights NGOs, were respectful and kind to Wilkins as they urged him to consider the creation of a truly independent panel to oversee the potential impacts of the massive Pascua Lama project on local water systems in the area.

Faith-based institutional investors from the Regroupement pour la responsabilité social et l'équité (RRSE), the labor pension plan Batirente, and Amnesty International called for the creation of an advisory panel of independent experts to countercheck the design, execution and follow-up concerning water quantity and quality issues pertaining to Pascua-Lama.

However, Wilkins just as respectfully declined the request from religious-oriented investment funds. Wilkins responded that he had no disagreements or concerns about the objectives of the NGOs to maintain the quality and quantity of water supplies in communities near Pascua Lama. However, he added, that he had no desire to add a third layer of oversight to the environmental enforcement and laws of the two nations who are permitting and overseeing implementation and enforcement concerning Pascua Lama.

Meanwhile, more vociferous protests were being aired by an alliance of activists gathered outside the AGM. Their criticisms stemmed from concerns regarding the Lake Cowal gold mine in western New South Wales, including usual NGO complaints against the gold mining industry's use of cyanide in its processes, along with accusations of human rights and environmental abuses.

NEW PARADIGM FOR GOLD

While Barrick Chairman and acting CEO Peter Munk presided over the AGM and delivered a rambling closing address on the future of gold, Wilkins honed in on what he referred to a "new paradigm for gold." He noted that--despite the fact gold prices have soared and record levels have been spent on gold exploration-"virtually no new discoveries" have been made.

Meanwhile, global mine production has dropped 6.4% in six years. The situation is being exacerbated by South African gold mining safety issues and the shortages of electrical power, according to Wilkins.

The former top four gold producers-South Africa, the US, Australia and Canada-- now only produce 35% of total global gold mine supply, he added. As Munk would later reiterate, where the international gold industry is going is more of a challenging picture than a rosy one. "This is as tough a business as it gets, and it's not getting any easier," Munk declared.

Wilkins said Barrick alone expended $3 billion to acquire projects last year.

Nevertheless, Wilkins and Barrick CFO Jamie Sokalsky both stressed that gold has consistently outperformed the S&P 500, T-bills and the U.S. dollar for the past five years. And, they noted, Barrick has even outperformed the gold price during that same period.

Fortunately, Sokalsky explained to shareholders, the gold price rise "has really outdistanced the cash cost rise." For instance, during the first quarter of this year, Barrick reported a per ounce cash cost of $398, and a realized sales price of $925 per ounce. The result was a margin that was "twice what we realized in 2007" of $532 per ounce.

This year Barrick has a gold price assumption of $875/oz, a cash cost guidance of $390 to $425 per ounce, and a forecasted margin of $470 per ounce, according to Sokalsky.

Wilkins forecast that the future gold demand in China and India-now an estimated 40% of overall global demand-is expected to underpin the future gold price.

PROJECT PIPELINE

This year Barrick is concentrating on three of its most advanced projects: Cortez Hills in Nevada, which hopes to get its final permits during the second half of this year; Pueblo Viejo in the Dominican Republic, which has just commenced construction; and the Buzwagi project in Tanzania, which hopes to pour its first gold in mid-2009.

The most advanced suite of projects includes the Sedibelo platinum project in South Africa, which the company hopes to decide on whether to develop in due course. A feasibility study shows a 16-year life of mine production of 4.76 million ounces of 4E (platinum, palladium, rhodium and gold).

A feasibility study is on track for completion during the second half of this year for the Fedorova PGM project in Russia and for the Reko Dig gold-copper project in Pakistan in early 2009.

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