Barrick Gold Corp. Annual Report 1998

Plain-text annual report

B A R R I C K G O L D C O R P O R A T I O N A N N U A L R E P O R T 1 9 9 8 Barrick B a r r i c k G o l d C o r p o r a t i o n A n n u a l R e p o r t Net earnings per share increased 13% Record operating cash flow of $539 million Cash operating costs declined 12% to $160 per ounce Gold production increased to 3.2 million ounces Gold reserves increased to 51.5 million ounces PERFORM ANCE HIGHLIGHTS F I N A N C I A L H I G H L I G H T S (millions of US dollars, except per share data) Revenue from gold sales Net income (loss) for the year: Before provision After provision Operating cash ﬂow Cash Shareholders’ equity Net income (loss) per share (fully diluted): Before provision After provision Operating cash ﬂow per share Dividends per share O P E R A T I N G H I G H L I G H T S Gold production (thousands of ounces) Cash operating costs per ounce G O L D R E S E R V E S A N D M I N E R A L I Z A T I O N (thousands of ounces) Reserves: proven and probable at $325 per ounce (1997 – $350 per ounce) Gold mineralized material 1998 1997 % Change $ 1,287 $ 1,284 301 301 539 416 3,592 +15% +15% 262 (123) 470 292 3,324 $ 0.79 $ 0.70 +13% 0.79 1.43 0.18 (0.33) 1.26 0.16 3,205 3,048 $ 160 $ 182 +13% +13% +5% –12% 51,456 16,789 50,318 20,206 C O R P O R A T E P R O F I L E Barrick Gold Corporation is a leading international gold producer with ﬁve low-cost mines in North and South America. The Company’s shares trade under the symbol ABX on the Toronto, Montreal, New York, London and Swiss stock exchanges and the Paris Bourse. Barrick entered the gold business in 1983. T A B L E O F C O N T E N T S A Word to Our Shareholders Objectives and Results Operations Overview 8 14 16 Exploration and Development 24 Social, Environmental and Employee Responsibilities Management’s Discussion and Analysis of Financial Results Financial Results 26 28 41 Reserve, Operating and Financial Information by Mine Shareholder Information Board of Directors and Ofﬁcers 58 64 66 All dollar amounts are in United States dollars, unless otherwise indicated. All 1999 ﬁgures are estimates. WE ARE Barrick Barrick Gold Corporation entered a new era of growth in 1998, as measured by record levels of earnings and cash ﬂow. And we did it as a team. Our operating personnel produced more gold at lower costs than ever before at our ﬁve mines in North and South America. Our ﬁnan- cial managers generated exceptional revenues with our Premium Gold Sales Program. We have the talented people, the low-cost quality asset base, the ﬁnancial strengths and the strategies to achieve our future goals. Luis M. Elu,Chief Refiner, Goldstrike B A R R I C K G O L D C O R P O R A T I O N WE ARE profitable 1998 was Barrick’s best year ever, even though gold prices reached their lowest level in two decades. Net income surpassed $300 million for the first time in the Company’s history and operating costs fell to a new low, continuing Barrick’s record as the most profitable and one of the lowest-cost gold producers in the world. These factors, combined with its Premium Gold Sales Program, meant that Barrick realized six times more profit per ounce than its peers. (cid:36)(cid:57)(cid:52)(cid:32) P R O F I T P E R O U N C E P R O D U C E D O F G O L D M EIK LE MINE This high-grade Nevada mine has consistently surpassed all profit targets since it began operations two years ago. Meikle’s 1998 production reached 850,000 ounces of gold, a 50% increase from the year before, while cash operating costs declined 25% to $77 per ounce. For 1999, Meikle is expected to increase production 18% to 1 million ounces of gold, at a cash operating cost of $75 per ounce. Steve Long, Mine Superintendent (l.) Richard Quesnel, Mine Manager (r.) 3 B A R R I C K G O L D C O R P O R A T I O N WE ARE growing Barrick defines growth in terms of rising earnings and cash flow per share, achieved through a focus on increasing low-cost production. Production is expected to rise from 3.2 million ounces of gold in 1998 to 3.6 million ounces in 1999. At the same time, cash operating costs should decline from $160 to $125 per ounce. The result: earnings are expected to rise 10% and cash flow 30% to $700 million in 1999. (cid:43)(cid:51)(cid:48)(cid:37) I N C A S H F L O W PIERINA MINE Completed in record time – just 31 months from date of discovery – the Pierina Mine in Peru entered production in November 1998. Production is expected to total 835,000 ounces of gold in 1999 at $45 per ounce, making it the lowest-cost gold mine in the world. Américo Villafuerte, Mine Superintendent (l.) Milton Mogollón, Communications (r.) 5 B A R R I C K G O L D C O R P O R A T I O N WE ARE strategic Barrick has become the most valuable gold company in the world through sound strategies. And they will continue to guide the Company in its new era of growth. Barrick has the aggressive operating approach to maximize the potential of its high-quality reserve base, the cash flow to develop new projects, and the financial strength to make selective acquisitions, all of which will generate superior performance for its shareholders into the new millennium. (cid:53)(cid:49)(cid:44)(cid:53)(cid:48)(cid:48)(cid:44)(cid:48)(cid:48)(cid:48)(cid:32) O U N C E S I N R E S E R V E S PASCUA A key part of Barrick’s future growth in earnings and cash flow, the Pascua Project in Chile and Argentina has total reserves and resources of 20 million ounces of gold and 525 million ounces of silver. When it enters production in 2002, Pascua is expected to pro- duce 675,000 ounces of gold and 20 million ounces of silver annually at an initial cash operating cost of $125 per ounce of gold. Javier Vega, Exploration Geologist (l.) Bob Leonardson, Chief Geologist (r.) 7 B A R R I C K G O L D C O R P O R A T I O N OUR commitment A Word to Our Shareholders A Y E A R O F A C H I E V E M E N T . . . For Barrick, 1998 was a remarkable year – we set new records for ﬁnancial performance and low-cost production. In the face of the low- est gold prices in two decades, we excelled – meeting or surpassing our objectives. And just as important, we set the stage for sustained growth in the future with the opening of our new Pierina Mine in Peru, and with exploration results that conﬁrmed the vast potential of our Pascua Property in Chile and Argentina. Our 1998 performance demonstrated once again that Barrick brings unparalleled strengths to the gold business: proven management ability, high-quality assets and ﬁnancial resources. Barrick has the right strategies in place to continue outperforming its peers, whether the price of gold is rising or falling. When we founded this Company in 1983, we set a course from which we have not deviated: we are, and will remain, a pure gold com- pany. We also decided to become the premier gold company for investors, as measured by shareholder value, not by production levels alone. We focus on being the industry’s best creators of share value. Rising earnings and cash ﬂow, in these times of lackluster gold prices, are the best vindication possible of the innovative ﬁnancial strategies and operating standards that have always set us apart from our peers. Today, as a result, we are in a unique position in the gold industry. We have begun a new era of growth in earnings and cash ﬂow that will be driven by rising, low-cost production. Our operations have stepped up their efforts to improve productivity and reduce costs, with gratify- ing results. And we continue to more than replace our production with new, high-quality reserves, year after year. 8 P E T E R M U N K Chairman B A R R I C K G O L D C O R P O R A T I O N . . . I N T H E M E A S U R E S T H A T M A T T E R M O S T Our objective is proﬁtable growth, not just any growth, and we met this goal decisively in 1998. Barrick made more money last year – $301 million – than the rest of the North American gold industry combined. Meanwhile, operating cash ﬂow reached a new level of $539 million, the highest in the industry. This ﬁnancial performance was underpinned by production of 3.2 million ounces of gold at cash operating costs of $160 an ounce, both records for the Company. In 1999, we will do even better, with production expected to reach 3.6 million ounces at $125 per ounce, making us the world’s lowest-cost gold producer. . . . I N O P E R A T I N G E X C E L L E N C E Achieving results like these requires a disciplined operating approach at our ﬁve mines in North and South America. Our ﬂagship Goldstrike Property, with its two world-class mines, open pit Betze-Post and underground Meikle, enjoyed its best year ever in 1998 in terms of pro- duction and costs. This reﬂected an outstanding performance at Meikle, which keeps surpassing every goal we set for it. We are excited about the future of Goldstrike, where drill results during 1998 conﬁrmed excellent potential in a mile-long corridor of land, extending from the Meikle Mine south through the Grifﬁn and Rodeo deposits. And as Goldstrike’s production potential unfolds, we are enhancing our processing capabilities. Construction began during the year on a new $330-million roaster to provide extra processing ﬂexibility and lower costs. More recently, in February 1999, we further improved the out- look for Goldstrike – an Agreement in Principle was signed with Newmont Mining Corporation for a mutually beneﬁcial exchange of assets on and around the Property. This transaction will allow us to develop Goldstrike to its full potential. We also beneﬁted from an excellent performance in 1998 by our Canadian mines, Holt-McDermott in Ontario and Bousquet in Quebec. They produced more gold at lower cost than planned as a result of productivity improvements. 9 R A N D A L L O L I P H A N T President and Chief Executive Ofﬁcer (cid:48)(cid:46)(cid:55)(cid:57) (cid:48)(cid:46)(cid:55)(cid:48)(cid:42) (cid:48)(cid:46)(cid:55)(cid:48) (cid:42) (cid:57)(cid:54) (cid:57)(cid:55) (cid:57)(cid:56) N E T I N C O M E P E R S H A R E (dollars) *before provision B A R R I C K G O L D C O R P O R A T I O N . . . I N G R O W T H T H R O U G H D E V E L O P M E N T A N D E X P L O R A T I O N Barrick demonstrated once again in 1998 that we have the ﬁnancial resources and technical capabilities to develop new assets with speed and efﬁciency. We completed the development of the Pierina Mine in November, under budget and in just over two years from the day we acquired the Property. This record-fast development is a tribute to the expertise and dedication of our combined North American and Peruvian development team. At the Pascua Project, on the Chile/Argentina border, our explo- ration crews expanded reserves and resources to 20 million ounces of gold and 525 million ounces of silver. We believe that Pascua will become a major contributor to our proﬁtable growth and expect to make a ﬁnal decision on development later this year. We are proving that we can continue to increase reserves in the face of growing production levels. Look at our record. Last year, exploration success, especially at Pascua and at Goldstrike, increased our reserves to 51.5 million ounces, even after we lowered the gold price assumption to $325 from $350 per ounce. Over the past ﬁve years we have increased our reserves by 37%, consistent with the previous ﬁve years. (cid:49)(cid:46)(cid:52)(cid:51) . . . I N S T R E N G T H E N E D F I N A N C I A L R E S O U R C E S (cid:49)(cid:46)(cid:50)(cid:56) (cid:49)(cid:46)(cid:50)(cid:54) (cid:49)(cid:46)(cid:48)(cid:48)(cid:32)(cid:45) (cid:57)(cid:54) (cid:57)(cid:55) (cid:57)(cid:56) O P E R A T I N G C A S H F L O W P E R S H A R E (dollars) Beyond our operating and exploration activities, there is a third element to our success: our Premium Gold Sales Program. As the name suggests, Barrick’s program is unique. The fact is that no other gold producer can match the quality of our reserves and the strength of our balance sheet. As a result, our program, with its ﬂexible terms and long lines, has no counterpart in the industry for its revenue gener- ating power. We win both ways: we can take full advantage of increases in the gold price, and conversely, protect our shareholders against a falling gold price. Barrick remains the only gold company with an “A” credit rating. We have virtually no net debt and no debt payments due until 2007. The Company has nearly $2 billion in cash and debt facilities, over and above the highest operating cash ﬂow in the industry, to develop new projects or ﬁnance acquisitions. 1 0 B A R R I C K G O L D C O R P O R A T I O N I T T A K E S A T E A M The success of 1998 is a tribute to the caliber of our committed team of employees, whose efforts lie behind every success that we achieve. From day one, Barrick’s employees have been part of a work environ- ment characterized by incisive decision-making, mutual trust, and pooled strengths that more than anything deﬁne the Barrick way. Late last year, the man most responsible for creating this excep- tional culture at Barrick passed on. Former President Bob Smith was a dear friend and colleague who helped deﬁne the very soul of Barrick. He left a legacy that can best be honored by continuing the values he stood for: professionalism, compassion and trust. Barrick’s executive team is exceptionally well qualiﬁed to both continue and build on Bob Smith’s legacy. On March 1 of this year, Randall Oliphant was appointed President and Chief Executive Ofﬁcer. Formerly Chief Financial Ofﬁcer, Randall brings business acumen, experience, and dynamism to the job of leading Barrick in a new era of growth. He replaced Paul Melnuk, who resigned the position for personal reasons in February 1999. We thank Paul for his contribution and wish him future success. Chief Operating Ofﬁcer John Carrington also became Vice Chairman of the Company, reﬂecting his outstanding contribution to Barrick’s record performance. Finally, Jamie Sokalsky became Chief Financial Ofﬁcer after a successful tenure as Treasurer. T H E O U T L O O K Our new era of growth will be remarkable for its ﬁnancial results. They will be driven by four key activities: Our focus on growing low-cost production – In 1999 we expect to set new milestones for production and costs. Our Premium Gold Sales Program – With 11.5 million ounces in the program at the end of 1998, Barrick has a locked-in minimum realized price of $385 per ounce over the next three years. Our exploration programs and development projects – We will continue our strategy of exploring on the major gold belts where we have infrastructure and land positions. Highly prospective areas include the Pascua Project, especially on the Argentinean side of the border, and the underground along the Meikle corridor at Goldstrike. 1 1 (cid:51)(cid:46)(cid:55) (cid:51)(cid:46)(cid:54) (cid:51)(cid:46)(cid:50) (cid:51)(cid:46)(cid:49) (cid:51)(cid:46)(cid:48) (cid:50)(cid:46)(cid:48)(cid:32)(cid:45) (cid:57)(cid:54) (cid:57)(cid:55) (cid:57)(cid:56) (cid:57)(cid:57)(cid:69) (cid:50)(cid:48)(cid:48)(cid:48)(cid:69) G O L D P R O D U C T I O N (millions of ounces) (cid:49)(cid:57)(cid:51) (cid:49)(cid:56)(cid:50) (cid:49)(cid:54)(cid:48) (cid:49)(cid:50)(cid:53) (cid:49)(cid:50)(cid:53) (cid:57)(cid:54) (cid:57)(cid:55) (cid:57)(cid:56) (cid:57)(cid:57)(cid:69) (cid:50)(cid:48)(cid:48)(cid:48)(cid:69) C A S H O P E R A T I N G C O S T S (dollars per ounce) B A R R I C K G O L D C O R P O R A T I O N Our selective acquisitions – We are only interested in the acqui- sition of high-quality assets that are accretive to earnings and cash ﬂow per share. An example is our proposed purchase of Sutton Resources “The success of 1998 Ltd., primarily for its gold property in Tanzania. We believe that this is a tribute to the caliber of our com- mitted team of employees, whose efforts lie behind every success that we achieve. From day one, Barrick’s employees have been part of a work environment char- acterized by incisive decision-making, mutual trust, and pooled strengths that more than anything define the Barrick way.” property holds outstanding potential to contribute long-term value to Barrick. We search for acquisitions whose value can be enhanced by the expertise and experience of Barrick’s management team. At Barrick, we look forward to the future with conﬁdence. Our strategy has never been to wait passively for gold price improvements. Whether the price remains at current levels for months or years, our ability to achieve predictable, proﬁtable growth will remain intact. At the same time, we stand to gain from a rising gold price to a greater degree than our peers by virtue of our ability to consistently realize pre- miums on our gold sales. While the chances of an imminent recovery in the gold price are uncertain, market factors could be aligning in gold’s favor. The supply/demand fundamentals are still very positive for gold. As Asian economic growth gradually recovers, it could lead to even greater demand. Finally, the cloud of uncertainty regarding central bank sales has largely been dispelled by the establishment of the European Central Bank, which has conﬁrmed that gold has an important reserve role to play. Just as signiﬁcant, a greater transparency in the Central Bank market has replaced bearish rumor-mongering with concrete factual information. Whatever the price of gold, we have the quality, low-cost ounces, as well as the ﬁnancial, technical and managerial strengths to reach our growth objectives. In 1999 and beyond, Barrick expects to remain the lowest-cost and the most proﬁtable gold producer in the world. Peter Munk (signed) Chairman Randall Oliphant (signed) President and Chief Executive Ofﬁcer March 3, 1999 1 2 A C E L E B R A T I O N O F L I F E Robert M. Smith 1932 ~ 1998 Friend, colleague and builder, Bob Smith epitomized the best attributes of leader- ship. His quiet fortitude and rock-solid integrity were an inspiration to all who knew him. His ability to motivate employees was legendary. His effect on Barrick was indelible. ○ When Barrick’s former President passed away on “His trust made you October 27, 1998, the sense of appreciation for his life extended across feel worthy of trust. a remarkable diversity of people, from his closest It was empowering.” family members, to the miners he was most at home with, to the international mining commu- nity. Founding Chairman Peter Munk gave Bob praise that rang so true: “Bob Smith was a giant of a human being and a kind of leader that I have never had the privilege of encountering before and I don’t think ever will again.” Bob’s legacy will be the foun- dation of our future success. He created a team that excels not only in expertise but also in the human qualities of trust and Bob Smith, left and Peter Munk visiting the Goldstrike Property. respect. ○ As President of Barrick from 1987 to 1996, Bob pro- vided the leadership that translated Peter Munk’s vision into reality. Together they led Barrick’s growth into the most valuable gold company in the world. As Vice Chairman after 1996, Bob continued to provide unerring guidance. ○ Bob’s pro- fessional achievements earned him the industry’s highest honor in 1999: posthumous induction into the Canadian Mining Hall of Fame. “Bob created a legacy His contribution to Barrick and to mining at large is an enduring that lives on.” one, surpassed only by his legacy of friendship and wise counsel for the beneﬁt of others. 1 3 B A R R I C K G O L D C O R P O R A T I O N 1998 OBJECTIVES 98 P R O D U C T I O N ○ Produce 3.05 million ounces in 1998, including 1998 RESULTS ○ Production increased to a new high of 765,000 ounces from Meikle. 3.2 million ounces, with Meikle producing nearly 850,000 ounces. ○ All operations reported higher production than the prior year, driven by productivity improvements. C A S H C O S T S ○ Lower cash costs to $170 per ounce in 1998 with ○ Cash costs declined to $160 per ounce, the lowest Meikle producing at $90 per ounce; and level in Company history. ○ Develop Pierina to produce at $50 per ounce. ○ All operations reported lower cash costs, including Meikle at $77 per ounce and Pierina at $48 per ounce. E A R N I N G S A N D C A S H F L O W ○ Maintain earnings at a level similar to the prior year, ○ Earnings increased to $301 million, the highest in the $260 million range; and level ever recorded by the Company, as cash costs ○ Maintain operating cash ﬂow at $470 million, declined to their lowest level. consistent with the year before. ○ Operating cash ﬂow rose to $539 million, beneﬁting from strong earnings. D E V E L O P M E N T ○ Build Pierina on time and on budget; and ○ Pierina completed on time and under budget in ○ Expand reserves at Pascua and continue with November, contributing 57,000 ounces in 1998. engineering work. ○ Pascua reserves increased 25% to 14 million ounces; engineering work lowered estimated cash costs to $125 per ounce in the ﬁrst ﬁve years and $150 per ounce over the life of the mine. 1 4 B A R R I C K G O L D C O R P O R A T I O N 991999 OBJECTIVES P R O D U C T I O N Produce 3.6 million ounces, a 13% increase over 1998, including 1 million ounces at Meikle and 835,000 ounces at Pierina.* C A S H C O S T S Lower cash costs 22% to $125 per ounce, with Meikle producing at $75 per ounce and Pierina at $45 per ounce.* E A R N I N G S A N D C A S H F L O W Increase earnings 10% and operating cash flow 30% by virtue of higher production and lower cash costs. D E V E L O P M E N T Complete engineering at Pascua, with a priority of reducing the construction cost from the current $950 million and make a development decision. Continue exploration and engineering of the Goldstrike underground. *Although the 1997 operating plan envisioned production of 3.5 million ounces at $150 per ounce in 1999, those targets were revised after better-than-planned results in 1998. 1 5 B A R R I C K G O L D C O R P O R A T I O N OPERATION S overview (cid:78) (cid:79) (cid:82) (cid:84) (cid:65) (cid:77) (cid:69) (cid:82) (cid:73) (cid:72) (cid:67) (cid:65) PRINCIPA L PROPERTIES • Goldstrike Property • Pierina Property • Pascua Project • Canadian Properties (cid:83) (cid:79) (cid:85) (cid:84) (cid:65) (cid:77) (cid:69) (cid:82) (cid:73) (cid:72) (cid:67) (cid:65) CASH OPERATING COSTS PER OUNCE Barrick operations achieved a 12% decline in cash operating costs in 1998, as part of a continual effort to mine more gold, more efﬁciently. In 1999, cash operating costs are expected to reach a new low of $125 per ounce, with the Pierina and Meikle Mines producing at an average cost of $65 an ounce. (cid:49)(cid:57)(cid:51) (cid:49)(cid:56)(cid:50) (cid:49)(cid:54)(cid:48) (cid:49)(cid:50)(cid:53) (cid:49)(cid:50)(cid:53) (cid:57)(cid:54) (cid:57)(cid:55) (cid:57)(cid:56) (cid:57)(cid:57)(cid:69) (cid:50)(cid:48)(cid:48)(cid:48)(cid:69) C A S H O P E R A T I N G C O S T S (dollars per ounce) 1 6 GOLD PRODUCTION Gold production increased 5% to 3.2 million ounces in 1998. The key contri- butor was the Goldstrike Property, home of the Betze-Post and Meikle mines. Meikle production rose nearly 50% to 847,313 ounces. Production began in November at the Pierina Mine, which is expected to contribute 835,000 ounces in 1999. 1999 PRODUCTION Another record year is anticipated with gold production reaching 3.6 million ounces, a 13% increase from 1998. Growth will be driven by the Pierina and Meikle mines, which are expected to produce a total of more than 1.8 million low-cost ounces. (cid:51)(cid:46)(cid:55) (cid:51)(cid:46)(cid:54) (cid:51)(cid:46)(cid:50) (cid:51)(cid:46)(cid:49) (cid:51)(cid:46)(cid:48) (cid:50)(cid:46)(cid:48)(cid:32)(cid:45) (cid:57)(cid:54) (cid:57)(cid:55) (cid:57)(cid:56) (cid:57)(cid:57)(cid:69) (cid:50)(cid:48)(cid:48)(cid:48)(cid:69) G O L D P R O D U C T I O N (millions of ounces) 19 9 9 P R O D U C T I O N (estimate) (cid:71)(cid:111)(cid:108)(cid:100)(cid:115)(cid:116)(cid:114)(cid:105)(cid:107)(cid:101)(cid:32)(cid:80)(cid:114)(cid:111)(cid:112)(cid:101)(cid:114)(cid:116)(cid:121)(cid:32)(cid:40)(cid:53)(cid:57)(cid:37)(cid:41)(cid:32)(cid:32)(cid:32)(cid:32) (cid:80)(cid:105)(cid:101)(cid:114)(cid:105)(cid:110)(cid:97)(cid:32)(cid:80)(cid:114)(cid:111)(cid:112)(cid:101)(cid:114)(cid:116)(cid:121)(cid:32)(cid:40)(cid:50)(cid:51)(cid:37)(cid:41)(cid:32)(cid:32) (cid:67)(cid:97)(cid:110)(cid:97)(cid:100)(cid:105)(cid:97)(cid:110)(cid:32)(cid:80)(cid:114)(cid:111)(cid:112)(cid:101)(cid:114)(cid:116)(cid:105)(cid:101)(cid:115)(cid:32)(cid:40)(cid:56)(cid:37)(cid:41)(cid:32)(cid:32)(cid:32)(cid:32) (cid:79)(cid:116)(cid:104)(cid:101)(cid:114)(cid:32)(cid:80)(cid:114)(cid:111)(cid:112)(cid:101)(cid:114)(cid:116)(cid:105)(cid:101)(cid:115)(cid:32)(cid:40)(cid:49)(cid:48)(cid:37)(cid:41)(cid:32)(cid:32)(cid:32) B A R R I C K G O L D C O R P O R A T I O N CASH M ARGIN S BY MINE CAPITA L EXPENDITURES Barrick produced the highest cash margins in the industry in 1998. Low total cash costs, com- bined with a realized price of $400 per ounce for every ounce sold through the Premium Gold Sales Program, gen- erated these outstanding results. For 1999, margins are expected to rise again as costs decline further. Capital expenditures for 1998 totaled $507 million, with the major outlay being $248 million for development of the Pierina Mine. For 1999, planned capital expenditures, including reserve development, total $520 million, including $250 million for the construction of the roaster at Goldstrike. Sustaining capital will be $75 million, comparable to 1998. (cid:53)(cid:49)(cid:46)(cid:49) (cid:53)(cid:48)(cid:46)(cid:51) (cid:53)(cid:49)(cid:46)(cid:53) GOLD RESERVES 19 9 9 CA PITA L E X P E N DIT U R E S (estimate) (cid:71)(cid:111)(cid:108)(cid:100)(cid:115)(cid:116)(cid:114)(cid:105)(cid:107)(cid:101)(cid:32)(cid:80)(cid:114)(cid:111)(cid:112)(cid:101)(cid:114)(cid:116)(cid:121)(cid:32)(cid:40)(cid:55)(cid:50)(cid:37)(cid:41)(cid:32)(cid:32) (cid:80)(cid:105)(cid:101)(cid:114)(cid:105)(cid:110)(cid:97)(cid:32)(cid:80)(cid:114)(cid:111)(cid:112)(cid:101)(cid:114)(cid:116)(cid:121)(cid:32)(cid:40)(cid:49)(cid:48)(cid:37)(cid:41)(cid:32)(cid:32) (cid:80)(cid:97)(cid:115)(cid:99)(cid:117)(cid:97)(cid:32)(cid:80)(cid:114)(cid:111)(cid:106)(cid:101)(cid:99)(cid:116)(cid:32)(cid:40)(cid:56)(cid:37)(cid:41)(cid:32)(cid:32) (cid:67)(cid:97)(cid:110)(cid:97)(cid:100)(cid:105)(cid:97)(cid:110)(cid:32)(cid:80)(cid:114)(cid:111)(cid:112)(cid:101)(cid:114)(cid:116)(cid:105)(cid:101)(cid:115)(cid:32)(cid:40)(cid:50)(cid:37)(cid:41)(cid:32)(cid:32) (cid:82)(cid:101)(cid:115)(cid:101)(cid:114)(cid:118)(cid:101)(cid:32)(cid:68)(cid:101)(cid:118)(cid:101)(cid:108)(cid:111)(cid:112)(cid:109)(cid:101)(cid:110)(cid:116)(cid:32)(cid:40)(cid:56)(cid:37)(cid:41)(cid:32) (cid:51)(cid:55)(cid:46)(cid:54) (cid:51)(cid:54)(cid:46)(cid:53) In 1998, Barrick’s reserves increased to 51.5 million ounces of gold. This increase reﬂects the Com- pany’s discovery of 4.8 million ounces of gold during the year, which added a net 1.2 million ounces to reserves after production. Over the past ﬁve years, Barrick has added 30 million ounces to reserves while producing 15 million ounces of gold. G O L D R E S E R V E S (cid:71)(cid:111)(cid:108)(cid:100)(cid:115)(cid:116)(cid:114)(cid:105)(cid:107)(cid:101)(cid:32)(cid:80)(cid:114)(cid:111)(cid:112)(cid:101)(cid:114)(cid:116)(cid:121)(cid:32)(cid:40)(cid:53)(cid:51)(cid:37)(cid:41)(cid:32)(cid:32) (cid:80)(cid:97)(cid:115)(cid:99)(cid:117)(cid:97)(cid:32)(cid:80)(cid:114)(cid:111)(cid:106)(cid:101)(cid:99)(cid:116)(cid:32)(cid:40)(cid:50)(cid:55)(cid:37)(cid:41)(cid:32)(cid:32) (cid:80)(cid:105)(cid:101)(cid:114)(cid:105)(cid:110)(cid:97)(cid:32)(cid:80)(cid:114)(cid:111)(cid:112)(cid:101)(cid:114)(cid:116)(cid:121)(cid:32)(cid:40)(cid:49)(cid:52)(cid:37)(cid:41)(cid:32)(cid:32) (cid:67)(cid:97)(cid:110)(cid:97)(cid:100)(cid:105)(cid:97)(cid:110)(cid:32)(cid:80)(cid:114)(cid:111)(cid:112)(cid:101)(cid:114)(cid:116)(cid:105)(cid:101)(cid:115)(cid:32)(cid:40)(cid:51)(cid:37)(cid:41)(cid:32)(cid:32) (cid:79)(cid:116)(cid:104)(cid:101)(cid:114)(cid:32)(cid:80)(cid:114)(cid:111)(cid:112)(cid:101)(cid:114)(cid:116)(cid:105)(cid:101)(cid:115)(cid:32)(cid:40)(cid:51)(cid:37)(cid:41)(cid:32)(cid:32) (cid:51)(cid:53)(cid:50) (cid:50)(cid:51)(cid:51) (cid:50)(cid:51)(cid:50) (cid:121) (cid:116) (cid:114) (cid:101) (cid:112) (cid:111) (cid:114) (cid:80) (cid:32) (cid:101) (cid:107) (cid:105) (cid:114) (cid:116) (cid:115) (cid:100) (cid:108) (cid:111) (cid:71) (cid:121) (cid:116) (cid:114) (cid:101) (cid:112) (cid:111) (cid:114) (cid:80) (cid:32) (cid:97) (cid:110) (cid:105) (cid:114) (cid:101) (cid:105) (cid:80) (cid:115) (cid:101) (cid:105) (cid:116) (cid:114) (cid:101) (cid:112) (cid:111) (cid:114) (cid:80) (cid:32) (cid:110) (cid:97) (cid:105) (cid:100) (cid:97) (cid:110) (cid:97) (cid:67) (cid:49)(cid:51)(cid:57) (cid:115) (cid:101) (cid:105) (cid:116) (cid:114) (cid:101) (cid:112) (cid:111) (cid:114) (cid:80) (cid:32) (cid:114) (cid:101) (cid:104) (cid:116) (cid:79) 19 9 8 C A S H M A R G I N S (dollars per ounce) Barrick’s reserves are of unequalled quality. Even using a gold price of $300 per ounce as the basis for calcula- tion, 48 million ounces, or 93% of these reserves, are proﬁtable. (cid:50)(cid:48)(cid:46)(cid:48)(cid:32)(cid:45) (cid:57)(cid:52) (cid:57)(cid:53) (cid:57)(cid:54) (cid:57)(cid:55) (cid:57)(cid:56) G O L D P R I C E A S S U M P T I O N : (1998 – $325; 1997 – $350; 1994-1996 – $400) G O L D R E S E R V E S (millions of ounces) 1 7 B A R R I C K G O L D C O R P O R A T I O N G O L D S T R I K E P R O P E R T Y (cid:78) (cid:79) (cid:82) (cid:84) (cid:72) (cid:65) (cid:77) (cid:69) (cid:82) (cid:73) (cid:67) (cid:65) Betze-Post and Meikle Mines Situated on the rich Carlin Trend of north-central Nevada, Goldstrike is the home of Goldstrike Propert y Carlin Trend, Nevada two world-class mines, open pit Betze-Post and underground Meikle. As well, the Property hosts several other prospective gold deposits, including Grifﬁn and Rodeo. The Goldstrike Property has produced 14 million ounces of gold since 1987 and still had 27.3 million ounces in reserves at year-end 1998. The Property continues to evolve from the original Betze open pit operation into a dynamic complex. Today Goldstrike concurrently mines several deposits by both open pit and underground methods, and by mid-2000 will have two separate processing facilities. Production should total at least 2 million low-cost ounces of gold a year well into the next millennium. G O L D S T R I K E P R O P E R T Y 9 7 9 8 9 9 E O U T L O O K F O R 19 9 9 : Tons mined (millions) 161.5 159.8 Tons milled (thousands) 6,033 6,228 Grade processed (ounces per ton) 0.42 0.38 Recovery rate (%) 91.5 91.8 Gold production (thousands of ounces) 2,180 2,346 Cash operating costs per ounce $ 141 $ 153 Total production costs per ounce $ 230 $ 220 Reserves (thousands of ounces) 29,341 27,333 Mineralized material (thousands of ounces) 8,806 6,456 ○ Production is expected to total 2,130,000 ounces, with Meikle contributing 1 million ounces. ○ Cash operating costs are expected to decline to $133 an ounce, beneﬁting from higher production from low-cost Meikle. ○ Capital expenditures are estimated at $380 million, of which $250 million is for the roaster and the balance for deferred stripping, mine equipment, shaft deepening and under- ground development. ○ The asset exchange with Newmont Mining Corporation is targeted for completion by the end of the ﬁrst quarter. 151.0 6,085 0.39 92.7 2,130 $ 133 $ 213 – – Y E A R I N R E V I E W The Goldstrike Property produced a record 2.3 million ounces of gold, an 8% increase from 1997. Cash operating costs fell to a record low of $141 per ounce. Goldstrike also laid the groundwork for continued strong performance in the future. The Property commenced construction of a new roaster; conducted drilling that conﬁrmed the exciting underground exploration potential at depth at Meikle and at the Rodeo and Grifﬁn deposits; and signed an Agreement in Principle with Newmont Mining Corporation for an asset exchange on the Carlin Trend which increases the exploration potential and operational ﬂexibility of the Property. 1 8 B A R R I C K G O L D C O R P O R A T I O N B E T Z E- P O S T M I N E N E V A D A Betze-Post Mine Y E A R I N R E V I E W Betze-Post remained the backbone of Barrick’s operations in 1998, producing 1.5 million ounces of gold at a cash operating cost of $176 per ounce. Productivity improvements were key. At the Betze-Post pit, unit mining costs have fallen by 10% over the past two years. Notably, major savings have been realized in hauling costs through a variety of productivity improvements. For 1999, production is declining as mining activity moves into areas of the pit containing lower ore grades. As a result of higher production at Meikle, lower throughput is planned at Betze-Post in 1999. Production should rise in 2000 with the addition of the roaster to process an anticipated 10 million tons of stockpiled carbonaceous ore. B E T Z E- P O S T M I N E 9 7 9 8 9 9 E O U T L O O K F O R 19 9 9 : Tons mined (millions) 160.6 159.0 Tons milled (thousands) 5,176 5,487 Grade processed (ounces per ton) 0.32 0.32 Recovery rate (%) 89.2 91.0 Gold production (thousands of ounces) 1,606 1,499 Cash operating costs per ounce $ 176 $ 171 Total production costs per ounce $ 248 $ 255 Reserves (thousands of ounces) 24,058 21,213 Mineralized material (thousands of ounces) 2,838 2,398 ○ Production is expected to be 1,130,000 ounces, reﬂecting lower ore grades and milling rates than in 1998. ○ Cash operating costs are expected to be $185 an ounce; the decline in ore grades is partially offset by lower mining and processing unit costs. ○ Total cash costs, including royalties and production taxes, are expected to decline to $200 per ounce from $205 in 1998, as production moves into areas with lower royalties. ○ Capital expenditures of $90 million are planned, primarily for deferred stripping and replacement of mine equipment. 150.0 5,000 0.25 90.0 1,130 $ 185 $ 260 – – T H E B A R R I C K / N E W M O N T A S S E T E X C H A N G E The proposed agreement is scheduled to close at the end of the ﬁrst quarter of 1999. Barrick receives the land corridor currently sepa- rating the Betze-Post and Meikle mines; the Goldbug deposit; the Banshee Property to the north of the Meikle Mine; and other operat- ing synergies in the Betze-Post pit. Newmont receives Barrick’s portion of the underground Deep Post deposit; Barrick’s 40% interest in the High Desert Property; the land corridor between the Deep Post and Deep Star deposits; and some low- grade stockpiled material. 1 9 B A R R I C K G O L D C O R P O R A T I O N M E I K L E M I N E N E V A D A Meikle Mine Y E A R I N R E V I E W The high-grade Meikle Mine achieved outstanding operating results during its second full year of operation. Meikle produced 847,313 ounces of gold in 1998, an increase of nearly 50% over 1997. Cash operating costs declined 25% to $77 per ounce due to higher production at lower unit costs, which reﬂected higher ore grades and productivity improvements. A shaft deepening will be completed in 1999 to permit development of the lower portion of the main zone and further exploration; early results conﬁrm that high-grade mineralization continues at depth. South of Meikle, the Rodeo exploration shaft and the exploration decline linking the Rodeo and Grifﬁn deposits to the Meikle Mine were completed. As well, 1.4 million ounces were added to reserves at Rodeo and Grifﬁn by year-end 1998. Explo- ration in 1999 should further add to reserves along the Meikle corridor. M E I K L E M I N E 9 7 9 8 9 9 E O U T L O O K F O R 19 9 9 : Tons mined (thousands) Tons milled (thousands) Grade processed (ounces per ton) Recovery rate (%) Gold production (thousands of ounces) Cash operating costs per ounce Total production costs per ounce Reserves (thousands of ounces) Mineralized material (thousands of ounces) 775 741 0.81 95.6 574 $ 103 $ 181 5,283 877 857 1.03 95.9 847 $ 77 $ 155 6,120 1,000 1,085 1.00 96.0 1,000 $ 75 $ 160 – 5,968 4,058 – ○ Production is expected to rise to 1 million ounces due to higher mining rates and continued high ore grades. ○ Cash operating costs are expected to decline to $75 an ounce, beneﬁting from lower mining and processing unit costs. ○ Capital expenditures of $25 million are anticipated to com- plete shaft deepening and development. ○ A two-phase exploration program is planned to expand underground reserves in the Meikle corridor. M A J O R G O L D S T R I K E P R O J E C T Construction began in 1998 on a 12,000-ton- per-day roaster facility to treat the Property’s 12 million ounces of carbonaceous ore. Barrick chose proven roaster technology. When the $330-million project is completed in mid-2000, processing capacity at Goldstrike will rise from 17,500 to 29,500 tons per day. The roaster will achieve gold recovery rates of 2 0 90%, comparable to autoclaving. Overall, the roaster is expected to reduce processing costs for the Property by 10% and increase pro- cessing ﬂexibility. B A R R I C K G O L D C O R P O R A T I O N P I E R I N A P R O P E R T Y S O U T A M E R I H C A South American Property Production began in November 1998 and totaled 56,860 ounces of gold by year-end at Pierina Propert y Pierina Belt, Peru Y E A R I N R E V I E W Barrick’s new low-cost Pierina Mine, located 185 miles north of Lima, Peru. Barrick acquired Pierina as an advanced-stage exploration property from Arequipa Resources Ltd. in 1996. Barrick’s development team engineered a fast-track development plan that was approved and put into action within one year of the acquisition. Construction began in late 1997 and progressed through 1998, despite El Niño-related record rainfall in the region. The Pierina project brought about the construction of a 50-mile power transmission line, a 10-mile access road, a valley-ﬁll heap-leach facility with related infrastructure, ore crushing facilities, and a state-of-the-art Merrill-Crowe gold processing plant. The Mine was built at a cost of under $260 million. P I E R I N A M I N E 9 8* 9 9 E O U T L O O K F O R 19 9 9 : Tons mined (millions) Tons placed on pad (thousands) Gold production (thousands of ounces) Cash operating costs per ounce Total production costs per ounce Reserves (thousands of ounces) Mineralized material (thousands of ounces) *Production began in November 1998 2.7 20 1,506 7,800 57 835 $ 48 $ 45 $ 244 7,244 $ 250 – 782 – ○ Production is estimated to be 835,000 ounces, reﬂecting higher ore grades in early years. ○ Cash operating costs are estimated at $45 an ounce due to higher grades and lower mining and processing costs. ○ For the ﬁrst three years, production is expected to average 750,000 ounces, at a cash operating cost of $50 per ounce. ○ Planned capital expenditures of $50 million consist of a leach pad expansion and additional mining equipment. O V E R V I E W With reserves of 7.2 mil- lion ounces, Pierina has a mine life of at least 11 years. Cash operating costs are expected to average $100 per ounce over the life of the mine. The low costs are due to the Mine’s high grades, low processing costs and low strip ratio (ore to waste). The open pit truck-and-shovel opera- tion will employ satellite tracking to ensure pro- per routing of material. The process facilities consist of a valley-ﬁll heap leach pad and a Merrill- Crowe gold and silver recovery plant. Both are proven recovery methods that Barrick has applied at Pierina under strict environmental standards. In addition, exploration continues on the Pierina Belt for similar type deposits. 2 1 B A R R I C K G O L D C O R P O R A T I O N C A N A D I A N P R O P E R T I E S N O R T H A M E R I C A Holt-McDermott and Bousquet Mines Canad ian Properties Abitibi Belt, Canada H O LT- M C D E R M O T T M I N E Holt-McDermott is an under- ground mine located on the Abitibi Belt in northeastern Ontario. Holt-McDermott had the best year in its history in 1998, with record-high production and record-low cash costs. The Mine produced 134,379 ounces of gold during the year at a cash operating cost of $134 per ounce, reﬂecting higher milling rates and lower unit costs. A shaft deep- ening program was begun in the third quarter of 1998 to provide access to the deeper reserves and explore the potential of the Mine at depth. O U T L O O K F O R 19 9 9 : ○ Production is estimated to be 110,000 ounces due to lower processing grades in 1999. ○ Cash operating costs are expected to decline to $130 an ounce due to further reductions in unit costs. ○ Capital expenditures of $5 million will complete shaft deepening. H O LT- M C D E R M O T T M I N E 9 7 9 8 9 9 E B O U S Q U E T M I N E 9 7 9 8 9 9 E Tons mined (thousands) 503 Tons milled (thousands) 462 Grade processed (ounces per ton) 0.26 Recovery rate (%) 96.5 Gold production (thousands of ounces) 117 Cash operating costs per ounce $ 139 Total production costs per ounce $ 221 Reserves (thousands of ounces) 705 Mineralized material (thousands of ounces) 363 513 548 0.26 96.4 134 $ 134 $ 229 611 535 535 0.22 96.5 110 $ 130 $ 220 – 370 – Tons mined (thousands) 656 Tons milled (thousands) 667 Grade processed (ounces per ton) 0.27 Recovery rate (%) 96.2 Gold production (thousands of ounces) 170 Cash operating costs per ounce $ 194 Total production costs per ounce $ 293 Reserves (thousands of ounces) 906 Mineralized material (thousands of ounces) 1,064 714 714 0.26 95.8 176 $ 194 $ 400 666 790 790 0.24 94.0 175 $ 200 $ 480 – 776 – B O U S Q U E T M I N E Bousquet is an underground operation located on the Abitibi Belt in northwestern Quebec. Bousquet had an excellent year in 1998. The Mine achieved higher mining rates and lower cash operating costs, as a result of productivity improvements and cost-control strategies. Production totaled 175,621 ounces of gold at a cash operating cost of $194 per ounce. During the year, development continued on the new 3-1 Zone, an area of mineralization located 3,500 feet from the main ore body that will enter production in early 1999. O U T L O O K F O R 19 9 9 : ○ Production is estimated to be 175,000 ounces. ○ Cash operating costs should average $200 an ounce, with higher mining rates offsetting marginally lower ore grades. ○ Capital expenditures of $5 million will complete the 3-1 Zone development. 2 2 B A R R I C K G O L D C O R P O R A T I O N (cid:72) (cid:67) (cid:65) (cid:65) (cid:78) (cid:79) (cid:82) (cid:84) (cid:77) (cid:69) (cid:82) (cid:73) B U L L F R O G A N D P I N S O N M I N E S (cid:65) (cid:83) (cid:79) (cid:85) (cid:84) (cid:77) (cid:69) (cid:82) (cid:73) E L I N D I O A N D T A M B O M I N E S North and South American Properties Ot her Properties Nevada, USA El Indio Belt, Chile During 1998, Other Properties delivered improved perfor- mance, producing a total of 492,034 ounces of gold at a cash operating cost of $255 per ounce. All operations reduced cash operating costs from the previous year and increased production, with the exception of Pinson. The Doyon Mine was sold early in the ﬁrst quarter for cash proceeds of $95 million, as well as a 50% interest in the El Coco exploration property and a gold price participation right on future production above an average gold price of $375 per ounce. In late 1997, Barrick embarked on a plan to phase out its higher-cost mines, which were not contributing signiﬁcantly to earnings and cash ﬂow. Those mines scheduled for clo- sure included the El Indio and Tambo mines in Chile, and the Bullfrog and Pinson mines in the United States. Pinson ceased operations in January 1999. The three remaining operations are expected to close by year-end 1999. Mercur and Golden Patricia ceased operations in 1997. O U T L O O K F O R 19 9 9 : ○ Production is estimated to be 350,000 ounces. This reﬂects a smaller contribution from Bullfrog, which completed underground mining at the end of 1998 and is processing low grade stockpiles in 1999. ○ Cash operating costs are expected to decline to $230 an ounce due to lower costs at the Chilean mines. ○ Closure of the three remaining operations is expected by the end of 1999. O T H E R P R O P E R T I E S P R O D U C T I O N (ounces) 97 98 99E C A S H O P E R A T I N G C O S T S P E R O U N C E 97 98 99E Bullfrog Tambo El Indio Pinson Doyon Mercur Golden Patricia 206,571 133,297 81,898 25,583 81,336 40,269 12,428 208,123 167,357 99,102 17,452 – – – 75,000 175,000 100,000 – – – – Bullfrog Tambo El Indio Pinson Doyon Mercur Golden Patricia $ 277 $ 233 $ 270 299 339 316 297 320 223 267 274 298 – – – 220 220 – – – – Total 581,382 492,034 350,000 Total $ 297 $ 255 $ 230 2 3 B A R R I C K G O L D C O R P O R A T I O N EXPLORATION AND development Barrick is conducting exploration on the major gold belts where it has land positions with proven potential. Exploration drilling has confirmed exciting new underground mineralization at Goldstrike and continues to expand the already vast reserves and resources of the Pascua Project in Chile and Argentina. T H E P A S C U A P R O J E C T With reserves and resources of 20 million ounces of gold and 525 million ounces of silver, the Pascua Project is expected to be a major part of Barrick’s growing production proﬁle. Located at the northern end of the El Indio gold belt, the Pascua Project straddles the border between Chile and Argentina. The Property’s potential has expanded steadily since Barrick acquired it in 1994. In 1998 alone, exploration drilling on the Property increased proven and probable reserves by three million ounces to 14 million ounces of gold and 440 million ounces of silver. And that does not take into account the unfolding exploration potential on the Argentinean side of the border. Exploration in Argentina during 1998 discovered new mineralized zones that will be targeted for further drilling in 1999. The engineering at Pascua is nearly complete. Based on work done to date, the Mine is expected to be developed at a cost of $950 million and produce 675,000 ounces of gold and 20 million ounces of silver annually at an initial cash operating cost of $125 per ounce. 2 4 Pascua Ore Body Pit Boundary Exploration Targets Main Faults N El Morro Oeste CHILE Pascua Extension ARGENTINA K I L O M E T E R S 0 1 P A S C U A P R O J E C T For 1999, the Pascua exploration program consists of 13,000 meters of drilling from an exploration tunnel extending from Chile into Argentina. The tunnel is scheduled for completion in the second quarter of 1999. A surface program consists of 40,000 meters of drilling on the principal targets (identiﬁed above) to add to the resource category. T H E D E E A N D R O S S I P R O P E R T I E S Located just three miles north of Goldstrike, the Dee and Rossi Properties lie on the extension of the same Post Fault that deﬁnes the Betze-Post, Meikle, Grifﬁn and Rodeo ore bodies. Dee and Rossi provide great exploration potential, particularly at depth. During 1999, drilling will follow up promising 1998 results at Dee and begin to deﬁne the underground potential of Rossi. The proximity of these pro- perties to the Goldstrike Property means that excel- lent synergies could be achieved in the event of a discovery. B A R R I C K G O L D C O R P O R A T I O N (cid:78) N O R T H C A R L I N T R E N D Goldstrike Property Proposed land to Barrick Proposed land to Newmont Dee Property Rossi Property Roads Post Fault M E I K L E C O R R I D O R Development Completed Development Phase 2 Development Proposed FEET 0 500 1000 Rodeo Shaft Rodeo N E. Griffin W. Griffin 5000 foot decline (cid:77) (cid:73) (cid:76) (cid:69) (cid:83) (cid:48) (cid:49) (cid:50) (cid:51) 25 feet Production Shaft Vent Shaft Meikle 1025 2025 Meikle deep drilling Meikle deep drilling Griffin deep drilling Rodeo deep drilling G O L D S T R I K E ’ S M E I K L E C O R R I D O R Excellent exploration potential exists at Gold- strike, where underground drilling has conﬁrmed a mile-long corridor of mineralization, stretching from the Meikle Mine in the north, through the Grifﬁn deposit, to the Rodeo deposit in the south. Early exploration has also conﬁrmed the continuation of high-grade mineralization at depth at Meikle. Exploration drilling along the 5,000- foot decline, completed in 1998 between Meikle and the Rodeo exploration shaft, added 1.4 million ounces in reserves at the Rodeo and Grifﬁn deposits alone. During 1999, 85,000 feet of drilling will take place in the Meikle corridor in a ﬁrst-phase program. Upon comple- tion of the asset exchange with Newmont, a second phase will incorporate the Goldbug deposit. It is expected that Grifﬁn will enter production in 2000, with Rodeo follow- ing in 2001 or 2002. 2 5 B A R R I C K G O L D C O R P O R A T I O N SOCIA L, ENVIRON M ENTA L AND E MPLOYEE responsibility For Barrick, operating excellence extends beyond production results to include a strong sense of responsibility to the environment, local communities and Company employees. S O C I A L Barrick’s policy is to give 1% of annual pre-tax income to charitable endeavors. During 1998, Barrick donated $4.3 million to education, health care and other causes in the communities where it operates in order to build lasting, mutually beneﬁcial partnerships. As Barrick develops each mine site, it invests time and energy into building strong ties with surrounding communities. 2 6 Dr. Edgardo Alanis, Pierina C O M M U N I T Y R E L A T I O N S The most recent example of Barrick’s community involvement is at the Pierina Mine in Peru. Barrick has funded new health care facilities; built and improved roads throughout the district; constructed new water and irrigation systems; and provided bussing for school children as well as desks for them to work on. Devel- oping self-reliance is key. In consul- tation with local leaders, Barrick has created programs to advise local entrepreneurs and train farmers in crop rotation and animal husbandry. B A R R I C K G O L D C O R P O R A T I O N E N V I R O N M E N T A L Barrick believes that laws and reg- ulations are only the starting point for environ- mental leadership at every stage of the mining life cycle. The Company seeks to instill an aware- ness in all employees of their role in protecting the environment, whether it be through ensuring water and air quality, or enhancing wildlife habitat. E N V I R O N M E N T A L A W A R D S During 1998, Barrick environmental staff earned several awards for environmen- tal leadership. ○ “1998 Earth Day Award for Outstanding Site Restoration” from the Utah Department of Natural Resources, for exemplary work at the Mercur Mine. ○ “1998 Excellence in Mine Reclamation Award” from the New Mexico Department of Energy, Minerals and Natural Resources, for reclamation work at the Cunningham Hill Mine. ○ “1998 Conservation Company of the Year” awarded to Goldstrike by Trout Unlimited, Northeast Nevada Chapter. C A R I N G F O R E M P L O Y E E S Barrick provides employ- ees with attractive wages and beneﬁts in order to promote an entrepreneur- ial spirit. As well as medical and performance incentive plans, those beneﬁts include the Barrick schol- arship program for employees’ children. To honor the memory of its former President, Barrick has renamed the award the “Robert M. Smith Scholar- ship Program.” Created by Bob Smith in 1986, the program entitles all chil- dren of Barrick employees to receive Company- paid scholarships for post- secondary education. During 1998 Barrick awarded $1.1 million in scholarship funds to 502 students. As Bob once explained about the scholarships, “Our employ- ees are the main reason for Barrick’s success. The scholarship program is a way to share the beneﬁts.” Since its inception, the program has awarded about 2,850 scholarships with a total value of approximately $6 million. Work place health and safety is a top priority at all Barrick operations. Employees and managers share a common philoso- phy: there is only one way to work, the safe way. The result is exemplary safety performance, such as the Betze-Post Mine’s record-low loss-time- accident frequency rate in 1998, which was among the lowest in the industry. Chris Chapman 2 7 B A R R I C K G O L D C O R P O R A T I O N WE ARE strong Barrick’s balance sheet grew stronger than ever in 1998, reinforced by the cash flow created by rising production, falling costs and the premium earned on the Company’s gold sales. The Company has a cash position of $416 million, shareholders’ equity of $3.6 billion and virtually no net debt. As a result, Barrick remains the only company in the gold industry with an “A” credit rating. C R E D I T R A T I N G 2 8 B A R R I C K G O L D C O R P O R A T I O N M ANAGE M ENT’S DISCUSSION AND ANA LYSIS OF FINANCIA L RESULTS Barrick had a remarkable year in 1998, achieving record earnings and cash ﬂow during the weakest gold market in 20 years. Net income in 1998 was $301 million, or $0.79 per share, 15% higher than the $262 million, or $0.70 per share, earned in 1997 before a provision for mining prop- erties. Correspondingly, operating cash ﬂow also increased 15% to $539 million, or $1.43 per share, from the $470 million, or $1.26 per share, recorded in 1997. The record results were attributable to the highest production and lowest cash operating costs in the Company’s history, combined with the premium earned on gold sales. The Company expects this trend to continue in 1999 with an increase in production and a further decrease in cash costs. (cid:53)(cid:51)(cid:57) (cid:49)(cid:46)(cid:52)(cid:50) (cid:49)(cid:46)(cid:52)(cid:51) (cid:52)(cid:54)(cid:51) (cid:52)(cid:55)(cid:48) (cid:49)(cid:46)(cid:50)(cid:50) (cid:49)(cid:46)(cid:50)(cid:56) (cid:49)(cid:46)(cid:50)(cid:54) (cid:53)(cid:48)(cid:50) (cid:51)(cid:55)(cid:54) (cid:50)(cid:57)(cid:50) (cid:50)(cid:53)(cid:49) (cid:50)(cid:53)(cid:54) (cid:42) (cid:50)(cid:54)(cid:50) (cid:42) (cid:51)(cid:48)(cid:49) (cid:48)(cid:46)(cid:56)(cid:48) (cid:48)(cid:46)(cid:56)(cid:50) (cid:48)(cid:46)(cid:55)(cid:57) (cid:48)(cid:46)(cid:55)(cid:48)(cid:32)(cid:42) (cid:48)(cid:46)(cid:55)(cid:48)(cid:32)(cid:42) (cid:57)(cid:52) (cid:57)(cid:53) (cid:57)(cid:54) (cid:57)(cid:55) (cid:57)(cid:56) (cid:57)(cid:52) (cid:57)(cid:53) (cid:57)(cid:54) (cid:57)(cid:55) (cid:57)(cid:56) E A R N I N G S A N D C A S H F L O W (millions of dollars) *before provision E A R N I N G S A N D C A S H F L O W P E R S H A R E (dollars per share) *before provision (cid:79)(cid:112)(cid:101)(cid:114)(cid:97)(cid:116)(cid:105)(cid:110)(cid:103)(cid:32)(cid:67)(cid:97)(cid:115)(cid:104)(cid:32)(cid:70)(cid:108)(cid:111)(cid:119) (cid:78)(cid:101)(cid:116)(cid:32)(cid:73)(cid:110)(cid:99)(cid:111)(cid:109)(cid:101) (cid:79)(cid:112)(cid:101)(cid:114)(cid:97)(cid:116)(cid:105)(cid:110)(cid:103)(cid:32)(cid:67)(cid:97)(cid:115)(cid:104)(cid:32)(cid:70)(cid:108)(cid:111)(cid:119) (cid:78)(cid:101)(cid:116)(cid:32)(cid:73)(cid:110)(cid:99)(cid:111)(cid:109)(cid:101) O U T L O O K Q U I C K FA C T S 9 8 9 9 E change C O M M E N T O N 19 9 9 Production (millions of ounces) 3.2 3.6 +13% ○ First full year of production at Pierina and higher mining rates at Meikle. Realized gold price per ounce $ 400 $ 385 –4% ○ Higher production than originally planned reduced the Cash operating costs per ounce $ 160 $ 125 –22% Total cash costs per ounce $ 180 $ 137 –24% Depreciation per ounce $ 67 $ 103 +54% Exploration expense (millions) $ 50 $ 40 –20% realized price from $400 per ounce. ○ Pierina and Meikle are expected to produce a total of 1.8 million ounces at an average cash operating cost of less than $65 per ounce. ○ Reﬂects lower royalties at Goldstrike and new royalty-free pro- duction at Pierina, combined with lower cash operating costs. ○ First year of Pierina depreciation at $200 per ounce. ○ Focused on and around existing properties in Nevada, Peru, Chile and Argentina. 2 9 B A R R I C K G O L D C O R P O R A T I O N G O L D S A L E S for its gold production through to the Under its Premium Gold Sales Program, end of 2001. If gold prices remain at Barrick realized $400 per ounce on its gold current levels, the Company will generate sales in 1998, compared with $420 in 1997 an additional $1 billion in revenue over ($415 in 1996). The Company generated a the next three years. $106-per-ounce premium over the average spot price of $294 per ounce for the year, resulting in $340 million in additional revenue in 1998. Over the past 10 years, THE PREMIUM GOLD SALES PROGRAM Barrick has realized $56 per ounce above is a cornerstone of Barrick’s new era the average spot price of $356 per ounce of growth. Under the program, Barrick during the period, or $1.1 billion in has the next three years of production, additional revenues. Revenue from gold sales of 3,216,323 ounces was $1,287 million in 1998, marginally higher than the $1,284 million reported in 1997 on gold sales of 3,058,546 ounces ($1,299 million in 1996 on gold sales of 3,128,941 ounces). In 1998, the beneﬁt of the 5% increase in gold production was offset by a similar decrease in the realized price. The Company expects to realize an average minimum price of $385 per or 11.5 million ounces, sold forward at $385 per ounce. This represents a $4 billion off-balance sheet asset, which generates interest income of more than $200 million a year. The Program offers protection against a falling gold price and potential to fully benefit from a gold price rally. The track record shows that because of the Program, Barrick shares outperform those of its peers in both rising and falling markets. (cid:52)(cid:48)(cid:50) (cid:49)(cid:56) (cid:51)(cid:56)(cid:52) (cid:52)(cid:48)(cid:54) (cid:50)(cid:50) (cid:51)(cid:56)(cid:52) (cid:52)(cid:49)(cid:53) (cid:50)(cid:55) (cid:51)(cid:56)(cid:56) (cid:52)(cid:50)(cid:48) (cid:56)(cid:56) (cid:51)(cid:51)(cid:50) (cid:52)(cid:48)(cid:48) (cid:49)(cid:48)(cid:54) (cid:50)(cid:57)(cid:52) (cid:50)(cid:48)(cid:48) (cid:57)(cid:52) (cid:57)(cid:53) (cid:57)(cid:54) (cid:57)(cid:55) (cid:57)(cid:56) P R E M I U M G O L D S A L E S R E V E N U E V S S P O T G O L D P R I C E (dollars per ounce) (cid:80)(cid:114)(cid:101)(cid:109)(cid:105)(cid:117)(cid:109)(cid:32)(cid:71)(cid:111)(cid:108)(cid:100)(cid:32)(cid:83)(cid:97)(cid:108)(cid:101)(cid:115)(cid:32)(cid:82)(cid:101)(cid:118)(cid:101)(cid:110)(cid:117)(cid:101) ounce, compared with the current spot price (cid:83)(cid:112)(cid:111)(cid:116)(cid:32)(cid:71)(cid:111)(cid:108)(cid:100)(cid:32)(cid:80)(cid:114)(cid:105)(cid:99)(cid:101) of gold of approximately $285 per ounce, C O S T S A N D E X P E N S E S Production costs per ounce Gold production – ounces (thousands) Cash operating costs Royalties and production taxes Total cash costs Depreciation and amortization Reclamation Total production costs Goldstrike Property 1998 1999E Pierina Property 1998 1997 1997 2,180 $ 153 31 184 44 2 2,346 $ 141 26 167 50 3 2,130 $ 133 21 154 57 3 $ 230 $ 220 $ 214 3 0 1999E 835 $ 45 – 45 200 5 57 $ 48 – 48 191 5 $ 244 $ 250 – – – – – – – B A R R I C K G O L D C O R P O R A T I O N O P E R A T I N G C O S T S / P R O D U C T I O N the average grade of Betze-Post ore pro- Overv iew cessed was 0.32 opt, similar to 1997. The Company lowered operating costs by Betze-Post Mine 9% to $595 million in 1998, compared Total unit mining costs at the Betze-Post with $655 million in 1997 ($691 million in Mine declined to $1.11 per ton in 1998 1996). On a per ounce basis, cash operat- from $1.15 per ton in 1997 ($1.18 per ton ing costs, at $160, were $10 lower than plan in 1996). Major savings have been realized and $22 lower than the $182 per ounce over the past two years through lower incurred in 1997 ($193 per ounce in 1996). diesel fuel usage, extended tire life, fewer Goldstrike Propert y The Goldstrike Property, which accounted for more than 70% of the Company’s gold production, or 2.3 million ounces, reported cash operating costs of $141 per ounce, 8% lower than 1997 costs of $153 per ounce. Increased production of higher- grade ore as well as productivity improvements were the primary reasons major rebuilds of haul truck components and higher utilization of the overhead trolley line system used to power trucks leaving the pit. Mining costs are expected to rise marginally in 1999 due to longer haulage distances. Cash operating costs are expected to rise from $176 per ounce to $185 per ounce as the processed grade declines to 0.25 opt. (cid:49)(cid:57)(cid:56) (cid:49)(cid:56) (cid:49)(cid:56)(cid:48) (cid:49)(cid:57)(cid:52) (cid:50)(cid:57) (cid:49)(cid:54)(cid:53) (cid:50)(cid:49)(cid:55) (cid:50)(cid:52) (cid:49)(cid:57)(cid:51) (cid:50)(cid:48)(cid:54) (cid:50)(cid:52) (cid:49)(cid:56)(cid:50) (cid:49)(cid:56)(cid:48) (cid:50)(cid:48) (cid:49)(cid:54)(cid:48) for the favorable cost performance. The Meikle Mine average grade processed at the Property In 1998, total unit mining costs at the (cid:57)(cid:52) (cid:57)(cid:53) (cid:57)(cid:54) (cid:57)(cid:55) (cid:57)(cid:56) increased to 0.42 ounces per ton (opt) Meikle Mine of $50.67 per ton were in 1998 from 0.38 opt in 1997. The higher similar to 1997, with lower mining costs average grade reﬂects increased throughput being offset by higher dewatering costs. of higher-grade ore from the Meikle Mine. The lower mining costs were due to the The average grade of Meikle ore processed mining of larger stopes and other pro- was 1.03 opt versus 0.81 opt in 1997, while ductivity improvements. The offsetting C A S H O P E R A T I N G C O S T S / T O T A L C A S H C O S T S (dollars per ounce) (cid:82)(cid:111)(cid:121)(cid:97)(cid:108)(cid:116)(cid:105)(cid:101)(cid:115)(cid:32)(cid:97)(cid:110)(cid:100)(cid:32)(cid:80)(cid:114)(cid:111)(cid:100)(cid:117)(cid:99)(cid:116)(cid:105)(cid:111)(cid:110)(cid:32)(cid:84)(cid:97)(cid:120)(cid:101)(cid:115) (cid:67)(cid:97)(cid:115)(cid:104)(cid:32)(cid:79)(cid:112)(cid:101)(cid:114)(cid:97)(cid:116)(cid:105)(cid:110)(cid:103)(cid:32)(cid:67)(cid:111)(cid:115)(cid:116)(cid:115) Canadian Properties 1998 1999E 310 $ 168 – 168 153 5 285 $ 173 – 173 204 5 1997 286 $ 172 – 172 87 5 Other Properties 1998 1999E 492 $ 255 6 261 83 19 350 $ 230 8 238 70 24 1997 582 $ 297 10 307 115 31 1997 3,048 $ 182 24 206 62 8 Total 1998 3,205 $ 160 20 180 67 5 1999E 3,600 $ 125 12 137 103 5 $ 264 $ 326 $ 382 $ 453 $ 363 $ 332 $ 276 $ 252 $ 245 3 1 B A R R I C K G O L D C O R P O R A T I O N rise in dewatering costs was associated Goldstrike Process Div ision with a higher pumping rate over the prior Processing costs in 1998 at the Property year. However, in mid-1999 the pumping were $20.44 per ton, slightly lower than rate will decline to approximately half the the $20.91 per ton in 1997, due to lower current rate for the remainder of the reagent costs, which comprise 40% of mine life. At the same time, mining costs total processing costs. Processing costs are expected to decline by approximately in 1999 are expected to decline by a further 10%, reﬂecting the continued mining of 4.5% to $19.50 per ton as a result of lower larger stopes, improvements in the backﬁll reagent consumption and maintenance system and lower ground support costs. costs. The facilities processed 16,528 tons Cash operating costs are expected to decline per day in 1998, down from 17,063 tons to $75 per ounce from $77 per ounce, as per day in 1997, reﬂecting the longer a result of lower mining and processing grinding time required for the Meikle ore, unit costs and the continued processing which lowers throughput. Goldstrike Propert y – Outlook For 1999, the Property is expected to produce 2.13 million ounces of gold at a cash operating cost of $133 per ounce. Lower production of 1.13 million ounces is expected at Betze-Post, due to a combination of lower ore grades and lower throughput. Higher production (cid:49)(cid:53)(cid:51) from Meikle, totaling 1 million ounces, will displace lower-grade Betze-Post material. The Meikle production is expected to limit throughput to 16,500 tons per day in 1999, similar to 1998. Pierina Propert y Production began in November 1998 and by year-end totaled 56,860 ounces of gold at a cash operating cost of $48 per ounce. For 1999, the Property is expected to produce 835,000 ounces of gold at a cash operating cost of $45 per ounce. The low cash costs are due to the Mine’s high grades, low processing costs and low strip ratio (ore to waste). (cid:50)(cid:57)(cid:55) (cid:50)(cid:53)(cid:53) (cid:49)(cid:55)(cid:50) (cid:49)(cid:54)(cid:56) (cid:49)(cid:53)(cid:51) (cid:49)(cid:52)(cid:49) (cid:32) (cid:110) (cid:97) (cid:105) (cid:100) (cid:97) (cid:110) (cid:97) (cid:67) (cid:114) (cid:101) (cid:104) (cid:116) (cid:79) (cid:32) (cid:101) (cid:107) (cid:105) (cid:114) (cid:116) (cid:115) (cid:100) (cid:108) (cid:111) (cid:71) (cid:57)(cid:55) (cid:57)(cid:56) (cid:57)(cid:55) (cid:57)(cid:56) (cid:57)(cid:55) (cid:57)(cid:56) (cid:52)(cid:56) (cid:97) (cid:110) (cid:105) (cid:114) (cid:101) (cid:105) (cid:80) (cid:57)(cid:56)(cid:42) C A S H O P E R A T I N G C O S T S B Y P R O P E R T Y (dollars per ounce) *ﬁrst year of production of 1.0 opt ore. (cid:49)(cid:57)(cid:49) (cid:32) (cid:97) (cid:110) (cid:105) (cid:114) (cid:101) (cid:105) (cid:80) (cid:57)(cid:56)(cid:42) (cid:49)(cid:49)(cid:53) (cid:56)(cid:55) (cid:56)(cid:51) (cid:53)(cid:48) (cid:52)(cid:52) (cid:32) (cid:101) (cid:107) (cid:105) (cid:114) (cid:116) (cid:115) (cid:100) (cid:108) (cid:111) (cid:71) (cid:110) (cid:97) (cid:105) (cid:100) (cid:97) (cid:110) (cid:97) (cid:67) (cid:114) (cid:101) (cid:104) (cid:116) (cid:79) (cid:57)(cid:55) (cid:57)(cid:56) (cid:57)(cid:55) (cid:57)(cid:56) (cid:57)(cid:55) (cid:57)(cid:56) D E P R E C I A T I O N B Y P R O P E R T Y (dollars per ounce) *ﬁrst year of production 3 2 B A R R I C K G O L D C O R P O R A T I O N Canad ian Properties low-grade stockpiles through 1999. Bullfrog The Holt-McDermott and Bousquet Mines and the two Chilean mines are scheduled produced 310,000 ounces of gold at an to be closed by year-end 1999. average cash operating cost of $168 per ounce in 1998, in line with 1997, and should produce 285,000 ounces at a similar combined cost in 1999. At the Holt- McDermott Mine, cash operating costs of $134 an ounce were the lowest in the Mine’s history. The operation beneﬁted from higher milling rates and lower unit mining and processing costs. Cash operating costs per ounce at the Bousquet Mine were the same as in 1997. Lower unit mining and processing costs were offset by lower grades and recovery rates. Ot her Properties Royalties and Production Taxes Substantially all of the Company’s royalties and production tax expenses are incurred at the Goldstrike Property, where produc- tion is subject to a net smelter royalty (NSR) and a net proﬁts interest royalty (NPI). Royalty costs ﬂuctuate with the average spot price of gold, changes (cid:52)(cid:54) in production, and operating and capital costs. Total royalties at the Goldstrike Property, which have been declining steadily over the past three years, were $18 per ounce in 1998 compared with $24 per ounce in 1997 (1996 – $26 per The mines designated for closure in the ounce) and are expected to decline operating plan announced in Septem- further in 1999 to $15 per ounce. The (cid:54)(cid:55) (cid:54)(cid:50) (cid:53)(cid:55) (cid:53)(cid:56) ber 1997 included the El Indio and Tambo declining royalty costs reﬂect the lower (cid:57)(cid:52) (cid:57)(cid:53) (cid:57)(cid:54) (cid:57)(cid:55) (cid:57)(cid:56) D E P R E C I A T I O N P E R O U N C E (dollars per ounce) Mines in Chile, and the Bullfrog, Mercur spot gold prices, higher capital expenditures, and Pinson Mines in the United States. and the gradual migration of mining Mercur ceased operations in December 1997 activity into claim groups that have lower and the Company sold its 50% interest in royalties. Production taxes at the Gold- the Doyon Mine in January 1998. During strike Property in 1998 were $8 per ounce, 1998, all remaining operations reduced comparable to the $7 per ounce incurred costs from the previous year and increased in 1997 and 1996. Production taxes in 1999 production, other than the Pinson Mine, are expected to decline to the $6-an- which closed in January 1999. ounce level, reﬂecting the increase in Ot her Properties – Ou tlook In 1999, the Other Properties are expected to produce 350,000 ounces of gold at an average cash operating cost of $230 per ounce. The lower production reﬂects a smaller contribution from the Bullfrog Mine, which completed mining in December 1998 and is processing capital expenditures. D E P R E C I A T I O N A N D A M O R T I Z A T I O N Depreciation and amortization of $216 million in 1998 was 15% higher than the $188 million incurred in 1997. The higher depreciation resulted from: a 5% increase in production; additional 3 3 P R E M I U M G O L D S A L E S R E V E N U E (cid:52)(cid:48)(cid:54) (cid:49)(cid:49)(cid:55) (cid:52)(cid:49)(cid:53) (cid:49)(cid:48)(cid:55) (cid:52)(cid:48)(cid:50) (cid:49)(cid:50)(cid:48) (cid:50)(cid:57) (cid:54)(cid:50) (cid:50)(cid:52) (cid:49)(cid:57)(cid:51) (cid:51)(cid:49) (cid:54)(cid:48) (cid:49)(cid:56) (cid:49)(cid:56)(cid:48) (cid:52)(cid:48) (cid:52)(cid:56) (cid:50)(cid:57) (cid:49)(cid:54)(cid:53) (cid:52)(cid:50)(cid:48) (cid:49)(cid:49)(cid:52) (cid:51)(cid:48) (cid:55)(cid:48) (cid:50)(cid:52) (cid:49)(cid:56)(cid:50) (cid:52)(cid:48)(cid:48) (cid:49)(cid:49)(cid:49) (cid:51)(cid:55) (cid:55)(cid:50) (cid:50)(cid:48) (cid:49)(cid:54)(cid:48) (cid:57)(cid:52) (cid:57)(cid:53) (cid:57)(cid:54) (cid:57)(cid:55) (cid:57)(cid:56) N E T O P E R A T I N G I N C O M E (dollars per ounce) (cid:78)(cid:101)(cid:116)(cid:32)(cid:79)(cid:112)(cid:101)(cid:114)(cid:97)(cid:116)(cid:105)(cid:110)(cid:103)(cid:32)(cid:73)(cid:110)(cid:99)(cid:111)(cid:109)(cid:101)(cid:32)(cid:32) (cid:73)(cid:110)(cid:99)(cid:111)(cid:109)(cid:101)(cid:32)(cid:84)(cid:97)(cid:120)(cid:32)(cid:32) (cid:68)(cid:101)(cid:112)(cid:114)(cid:101)(cid:99)(cid:105)(cid:97)(cid:116)(cid:105)(cid:111)(cid:110)(cid:32)(cid:97)(cid:110)(cid:100)(cid:32)(cid:82)(cid:101)(cid:99)(cid:108)(cid:97)(cid:109)(cid:97)(cid:116)(cid:105)(cid:111)(cid:110)(cid:32)(cid:32) (cid:82)(cid:111)(cid:121)(cid:97)(cid:108)(cid:116)(cid:105)(cid:101)(cid:115)(cid:32)(cid:97)(cid:110)(cid:100)(cid:32)(cid:80)(cid:114)(cid:111)(cid:100)(cid:117)(cid:99)(cid:116)(cid:105)(cid:111)(cid:110)(cid:32)(cid:84)(cid:97)(cid:120)(cid:101)(cid:115)(cid:32)(cid:32) (cid:67)(cid:97)(cid:115)(cid:104)(cid:32)(cid:79)(cid:112)(cid:101)(cid:114)(cid:97)(cid:116)(cid:105)(cid:110)(cid:103)(cid:32)(cid:67)(cid:111)(cid:115)(cid:116)(cid:115) B A R R I C K G O L D C O R P O R A T I O N capital expenditures at the Goldstrike as the properties in development com- Property, principally the roaster, which mence production or the assets under changed the depreciation basis for the construction are completed. autoclaves and mills; a reduction of the expected life of the Bousquet Mine; S A L E O F / P R O V I S I O N F O R M I N I N G and the start-up of the Pierina Mine. P R O P E R T I E S Accordingly, depreciation of $67 per In January 1998, the Company sold its ounce was higher than the $62 per ounce 50% interest in the Doyon Mine for in 1997 (1996 – $58 per ounce). In 1999, proceeds of $95 million, a 50% interest depreciation is expected to be in the in the El Coco exploration property $100-per-ounce range, primarily due to and a gold price participation right on the higher proportion of Pierina pro- future production above an average duction and the amortization of its spot price of $375 per ounce. The acquisition costs. A D M I N I S T R A T I O N Company recognized a pre-tax gain of $42 million, principally for the close-out of the forward sales position Administration costs of $36 million in on future Doyon production. However, 1998 were the same as in 1997 ($33 million a deferred tax provision of $42 million in 1996). Costs include World Gold offset the gain. Council and other industry membership In September 1997, the Company fees of $7 million in 1998. In 1999, admin- took a non-cash provision of $431 million istration costs are expected to be slightly ($385 million net of tax) to cover the lower than in 1998. I N T E R E S T E X P E N S E write-down of the carrying values associ- ated with the phasing out of ﬁve mines. The ﬁve mines scheduled for closure were In 1998, the Company incurred $43 million the El Indio and Tambo Mines in Chile, in interest expense ($44 million in 1997), and the Bullfrog, Mercur and Pinson Mines relating primarily to the Company’s in the United States. $500 million of debentures. All of the amount was capitalized to properties in development, I N C O M E T A X E S primarily the Pierina Mine Project. In The Company’s average effective tax 1999, interest is expected to be approximately rate, before the impact of disposals and $40 million, of which $10 million is to be provisions for mining properties, has expensed. The remainder will be capitalized been constant over the past three years at to assets under construction, princi- approximately 25% and is expected to pally the Goldstrike roaster and Pascua. remain at this level in 1999. Reference is Capitalization of interest is discontinued drawn to Note 7 to the Consolidated when the assets are ready for their intended Financial Statements for a detailed income use. The capitalized interest is amortized tax reconciliation. 3 4 B A R R I C K G O L D C O R P O R A T I O N E X P L O R A T I O N A N D R E S E R V E D E V E L O P M E N T Barrick’s exploration and reserve In 1998, total exploration and reserve growth strategy is focused on its existing development expenditures were $87 million, operating mines and the major gold belts compared with $109 million in 1997 (1996 – of North and South America. The strategy $139 million). During 1998, $50 million is directed toward ﬁnding multi-million- was expensed versus $64 million in 1997 ounce gold deposits that will both sustain (1996 – $66 million). Total expenditures and increase Barrick’s growth in low-cost were $17 million higher than plan due to production. additional work performed in Chile In 1998, the Company added 4.8 million and Argentina on the El Indio Belt and a ounces of gold to reserves, more than greater number of business development replacing the ounces produced during the opportunities. The level of expenditures year, as well as the small decline associated in any particular year is a function of with recalculating reserves at a lower gold programs on existing properties and new price of $325 per ounce (1997 – $350 per opportunities or initiatives that present ounce). The recalculation of reserves at the themselves during the period. lower gold price reﬂects the fact that the The Company has planned an $80 mil- spot gold price has not traded above the lion exploration and reserve development $350 level in the last two years. The program for 1999, which includes work at reserves added were of a low-cost nature the existing mines, the Pascua Property and are primarily located at the Pascua and the Dee/Rossi Joint Venture Property Project and Goldstrike underground. just north of Goldstrike. Approximately half of the expenditures are expected to be expensed. 19 9 8 E X P L O R A T I O N (millions of dollars) 19 9 9 E X P L O R A T I O N (millions of dollars) 19 9 8 R E S E R V E D E V E L O P M E N T (millions of dollars) 19 9 9 R E S E R V E D E V E L O P M E N T (millions of dollars) (cid:78)(cid:111)(cid:114)(cid:116)(cid:104)(cid:32)(cid:65)(cid:109)(cid:101)(cid:114)(cid:105)(cid:99)(cid:97)(cid:32) (cid:83)(cid:111)(cid:117)(cid:116)(cid:104)(cid:32)(cid:65)(cid:109)(cid:101)(cid:114)(cid:105)(cid:99)(cid:97)(cid:32) (cid:32)(cid:32)(cid:32)(cid:32)(cid:57)(cid:32)(cid:32) (cid:32)(cid:32)(cid:50)(cid:52) (cid:66)(cid:117)(cid:115)(cid:105)(cid:110)(cid:101)(cid:115)(cid:115)(cid:32)(cid:68)(cid:101)(cid:118)(cid:101)(cid:108)(cid:111)(cid:112)(cid:109)(cid:101)(cid:110)(cid:116)(cid:32) (cid:32) (cid:32)(cid:49)(cid:55)(cid:32)(cid:32) (cid:97)(cid:110)(cid:100)(cid:32)(cid:79)(cid:116)(cid:104)(cid:101)(cid:114) (cid:78)(cid:111)(cid:114)(cid:116)(cid:104)(cid:32)(cid:65)(cid:109)(cid:101)(cid:114)(cid:105)(cid:99)(cid:97)(cid:32) (cid:83)(cid:111)(cid:117)(cid:116)(cid:104)(cid:32)(cid:65)(cid:109)(cid:101)(cid:114)(cid:105)(cid:99)(cid:97)(cid:32) (cid:32)(cid:32)(cid:49)(cid:51)(cid:32)(cid:32) (cid:32)(cid:32)(cid:49)(cid:57) (cid:66)(cid:117)(cid:115)(cid:105)(cid:110)(cid:101)(cid:115)(cid:115)(cid:32)(cid:68)(cid:101)(cid:118)(cid:101)(cid:108)(cid:111)(cid:112)(cid:109)(cid:101)(cid:110)(cid:116)(cid:32) (cid:32)(cid:32)(cid:32)(cid:56) (cid:97)(cid:110)(cid:100)(cid:32)(cid:79)(cid:116)(cid:104)(cid:101)(cid:114) (cid:71)(cid:111)(cid:108)(cid:100)(cid:115)(cid:116)(cid:114)(cid:105)(cid:107)(cid:101)(cid:32)(cid:80)(cid:114)(cid:111)(cid:112)(cid:101)(cid:114)(cid:116)(cid:121)(cid:32) (cid:32) (cid:53) (cid:80)(cid:97)(cid:115)(cid:99)(cid:117)(cid:97)(cid:32)(cid:80)(cid:114)(cid:111)(cid:106)(cid:101)(cid:99)(cid:116)(cid:32)(cid:32)(cid:32)(cid:32)(cid:32)(cid:32)(cid:32)(cid:32)(cid:32)(cid:32)(cid:32)(cid:32)(cid:51)(cid:48) (cid:79)(cid:116)(cid:104)(cid:101)(cid:114)(cid:32)(cid:80)(cid:114)(cid:111)(cid:112)(cid:101)(cid:114)(cid:116)(cid:105)(cid:101)(cid:115)(cid:32) (cid:32)(cid:32)(cid:50) (cid:71)(cid:111)(cid:108)(cid:100)(cid:115)(cid:116)(cid:114)(cid:105)(cid:107)(cid:101)(cid:32)(cid:80)(cid:114)(cid:111)(cid:112)(cid:101)(cid:114)(cid:116)(cid:121)(cid:32)(cid:32)(cid:32)(cid:32)(cid:32)(cid:32)(cid:49)(cid:48) (cid:80)(cid:97)(cid:115)(cid:99)(cid:117)(cid:97)(cid:32)(cid:80)(cid:114)(cid:111)(cid:106)(cid:101)(cid:99)(cid:116)(cid:32)(cid:32)(cid:32)(cid:32)(cid:32)(cid:32)(cid:32)(cid:32)(cid:32)(cid:32)(cid:32)(cid:32)(cid:32)(cid:50)(cid:57) (cid:79)(cid:116)(cid:104)(cid:101)(cid:114)(cid:32)(cid:80)(cid:114)(cid:111)(cid:112)(cid:101)(cid:114)(cid:116)(cid:105)(cid:101)(cid:115)(cid:32)(cid:32)(cid:32)(cid:32)(cid:32)(cid:32)(cid:32)(cid:32)(cid:32)(cid:32)(cid:32)(cid:32)(cid:49) 3 5 B A R R I C K G O L D C O R P O R A T I O N C A S H F L O W C A P I T A L E X P E N D I T U R E S 19 9 8 Cash ﬂow provided by operating activities Barrick’s capital and development expen- was $539 million, the highest in the ditures of $507 million in 1998 were Company’s history, compared with according to plan and included $37 million $470 million in 1997 (1996 – $463 million). for reserve development. At the Pierina Operating cash ﬂow is expected to increase Mine, $248 million, including capitalized to $700 million in 1999, with an expected interest of $35 million, was spent on the 13% rise in production to 3.6 million completion of mine construction. At the ounces and a 22% decline in cash operat- Goldstrike Property, $107 million was ing costs to $125 an ounce. The Company spent primarily on engineering and initial will continue to beneﬁt from its Premium construction of the roaster facility and Gold Sales Program, which has locked in on increasing long-term ore stockpiles a minimum realized price of $385 per at the Betze-Post Mine. An additional ounce for its production for 1999 through $46 million was spent for shaft deepening 2001. Free cash ﬂow is expected to rise to and development at Meikle and Rodeo. approximately $200 million, even after At Pascua, $51 million was incurred for over $500 million in capital expenditures. metallurgical and engineering work and the purchase of the 9.8% interest in the Property that the Company did not already own. The remaining $18 million was incurred primarily at the Canadian Properties for underground development. 19 9 8 C A P I T A L E X P E N D I T U R E S (millions of dollars) (cid:80)(cid:105)(cid:101)(cid:114)(cid:105)(cid:110)(cid:97)(cid:32)(cid:77)(cid:105)(cid:110)(cid:101) (cid:50)(cid:52)(cid:56) (cid:71)(cid:111)(cid:108)(cid:100)(cid:115)(cid:116)(cid:114)(cid:105)(cid:107)(cid:101)(cid:32)(cid:80)(cid:114)(cid:111)(cid:112)(cid:101)(cid:114)(cid:116)(cid:121)(cid:32) (cid:49)(cid:53)(cid:51)(cid:32)(cid:32) (cid:80)(cid:97)(cid:115)(cid:99)(cid:117)(cid:97)(cid:32)(cid:80)(cid:114)(cid:111)(cid:106)(cid:101)(cid:99)(cid:116) (cid:32)(cid:32)(cid:53)(cid:49)(cid:32)(cid:32) (cid:67)(cid:97)(cid:110)(cid:97)(cid:100)(cid:105)(cid:97)(cid:110)(cid:32)(cid:80)(cid:114)(cid:111)(cid:112)(cid:101)(cid:114)(cid:116)(cid:105)(cid:101)(cid:115)(cid:32) (cid:32)(cid:32)(cid:32)(cid:49)(cid:56) (cid:82)(cid:101)(cid:115)(cid:101)(cid:114)(cid:118)(cid:101)(cid:32)(cid:68)(cid:101)(cid:118)(cid:101)(cid:108)(cid:111)(cid:112)(cid:109)(cid:101)(cid:110)(cid:116)(cid:32) (cid:32)(cid:32)(cid:51)(cid:55) (cid:53)(cid:51)(cid:57) (cid:51)(cid:50) (cid:53)(cid:48)(cid:55) (cid:53)(cid:48)(cid:50) (cid:49)(cid:49)(cid:55) (cid:52)(cid:54)(cid:51) (cid:56)(cid:57) (cid:52)(cid:55)(cid:48) (cid:57)(cid:56) (cid:51)(cid:55)(cid:54) (cid:49)(cid:48)(cid:52) (cid:51)(cid:56)(cid:53) (cid:51)(cid:55)(cid:52) (cid:51)(cid:55)(cid:50) (cid:50)(cid:55)(cid:50) (cid:50)(cid:48)(cid:48) (cid:57)(cid:52) (cid:57)(cid:53) (cid:57)(cid:54) (cid:57)(cid:55) (cid:57)(cid:56) O P E R A T I N G C A S H F L O W (millions of dollars) (cid:70)(cid:114)(cid:101)(cid:101)(cid:32)(cid:67)(cid:97)(cid:115)(cid:104)(cid:32)(cid:70)(cid:108)(cid:111)(cid:119) (cid:67)(cid:97)(cid:112)(cid:105)(cid:116)(cid:97)(cid:108)(cid:32)(cid:69)(cid:120)(cid:112)(cid:101)(cid:110)(cid:100)(cid:105)(cid:116)(cid:117)(cid:114)(cid:101)(cid:115) 3 6 B A R R I C K G O L D C O R P O R A T I O N C A P I T A L E X P E N D I T U R E S 19 9 9 D I V I D E N D S For 1999, capital expenditures are estimated During 1998 the Company paid dividends at $520 million, including reserve devel- of $0.18 per share compared with $0.16 per opment of $40 million. Of the $380 million share in 1997 and $0.14 per share in 1996. planned for the Goldstrike Property, $250 million is for the roaster facility and R I S K M A N A G E M E N T $85 million for deferred stripping and replacement of mine equipment at Betze- Post. At Pierina, $50 million is to be spent for the ﬁrst expansion of the heap leach pad and for additional mine equipment required for an expansion of the Mine. At Pascua, $40 million is to be spent on engineering and infrastructure work. A ﬁnal go ahead on the Project is expected during the summer. The additional capital required for mine development is not incorporated in this total. The remaining expenditures of $10 million are for the Canadian underground mines. The 1999 capital expenditure programs will be funded from cash ﬂow from operations and existing cash balances. 19 9 9 C A P I T A L E X P E N D I T U R E S (millions of dollars) (cid:71)(cid:111)(cid:108)(cid:100)(cid:115)(cid:116)(cid:114)(cid:105)(cid:107)(cid:101)(cid:32)(cid:80)(cid:114)(cid:111)(cid:112)(cid:101)(cid:114)(cid:116)(cid:121)(cid:32)(cid:32)(cid:32)(cid:32)(cid:32)(cid:32)(cid:32)(cid:51)(cid:56)(cid:48) (cid:80)(cid:105)(cid:101)(cid:114)(cid:105)(cid:110)(cid:97)(cid:32)(cid:77)(cid:105)(cid:110)(cid:101)(cid:32) (cid:80)(cid:97)(cid:115)(cid:99)(cid:117)(cid:97)(cid:32)(cid:80)(cid:114)(cid:111)(cid:106)(cid:101)(cid:99)(cid:116)(cid:32) (cid:32)(cid:32)(cid:32)(cid:53)(cid:48) (cid:32)(cid:32)(cid:32)(cid:52)(cid:48) (cid:67)(cid:97)(cid:110)(cid:97)(cid:100)(cid:105)(cid:97)(cid:110)(cid:32)(cid:80)(cid:114)(cid:111)(cid:112)(cid:101)(cid:114)(cid:116)(cid:105)(cid:101)(cid:115)(cid:32) (cid:32)(cid:32)(cid:32)(cid:49)(cid:48) (cid:82)(cid:101)(cid:115)(cid:101)(cid:114)(cid:118)(cid:101)(cid:32)(cid:68)(cid:101)(cid:118)(cid:101)(cid:108)(cid:111)(cid:112)(cid:109)(cid:101)(cid:110)(cid:116)(cid:32)(cid:32)(cid:32)(cid:32)(cid:32)(cid:32)(cid:52)(cid:48) Financial Risk Barrick actively manages its exposure to gold prices, currencies, interest rates and by-product commodity prices. The Company uses a variety of hedging products to mitigate these risks. These instruments are used solely for hedging purposes related to the Company’s speciﬁc exposures and not for trading purposes. Operational Risk Barrick continually assesses the mining risks encountered at each of its operations. It reduces both the likelihood and the potential severity of such risks through its high operational standards, emphasis on employee training, and the risk management and loss-control programs in place at each mine site. The Company also maintains adequate insurance at all times to cover normal business risks. Further, operational risk is minimized through both asset and reserve diversiﬁ- cation. Currently, approximately 50% of the Company’s assets and 60% of its reserves are in North America, the balance being in South America. 3 7 B A R R I C K G O L D C O R P O R A T I O N The political risks of operating in Chile Year 2 0 0 0 and Peru were assessed and management The Year 2000 Issue (Y2K) could poten- is comfortable that there is little risk to tially affect most companies. The issue is corporate assets. that many computers and date-sensitive In each country where it has operations, devices that utilize microprocessors may Barrick is subject to various levels of gov- be unable to correctly process dates that ernment control and regulation, and is thus occur after 1999. The Company has exposed to the risk of potentially adverse reviewed, and continues to review, possible changes. The Company endeavors to ensure effects of this issue on its ﬁnancial and that it is at all times in compliance with operating systems. In 1998, the Board of current laws, and it seeks to foster an equi- Directors was presented with a Year 2000 table future climate through both direct Project Plan to guide the Company’s over- and industry-wide contact with appropriate all approach to assessing the impact of the regulatory bodies. Barrick draws on Y2K problem on Barrick and its operations the expertise of its management team, its and to minimize the potential risks and Board of Directors and International exposures. Each of the Company’s sites Advisory Board, and a broad range of has been assigned responsibility for ﬁnancial advisors to help assess risk managing its own Y2K project, with assis- before making an investment in a partic- tance and direction provided by the ular country. Corporate Year 2000 Project Ofﬁce. 19 9 8 P R O D U C T I O N B Y P R O P E R T Y 19 9 8 R E S E R V E S B Y P R O P E R T Y (cid:71)(cid:111)(cid:108)(cid:100)(cid:115)(cid:116)(cid:114)(cid:105)(cid:107)(cid:101)(cid:32)(cid:80)(cid:114)(cid:111)(cid:112)(cid:101)(cid:114)(cid:116)(cid:121)(cid:32)(cid:40)(cid:55)(cid:51)(cid:37)(cid:41)(cid:32)(cid:32) (cid:80)(cid:105)(cid:101)(cid:114)(cid:105)(cid:110)(cid:97)(cid:32)(cid:77)(cid:105)(cid:110)(cid:101)(cid:32)(cid:40)(cid:50)(cid:37)(cid:41)(cid:32)(cid:32) (cid:67)(cid:97)(cid:110)(cid:97)(cid:100)(cid:105)(cid:97)(cid:110)(cid:32)(cid:80)(cid:114)(cid:111)(cid:112)(cid:101)(cid:114)(cid:116)(cid:105)(cid:101)(cid:115)(cid:32)(cid:40)(cid:49)(cid:48)(cid:37)(cid:41)(cid:32)(cid:32) (cid:79)(cid:116)(cid:104)(cid:101)(cid:114)(cid:32)(cid:80)(cid:114)(cid:111)(cid:112)(cid:101)(cid:114)(cid:116)(cid:105)(cid:101)(cid:115)(cid:32)(cid:40)(cid:49)(cid:53)(cid:37)(cid:41)(cid:32)(cid:32) (cid:71)(cid:111)(cid:108)(cid:100)(cid:115)(cid:116)(cid:114)(cid:105)(cid:107)(cid:101)(cid:32)(cid:80)(cid:114)(cid:111)(cid:112)(cid:101)(cid:114)(cid:116)(cid:121)(cid:32)(cid:40)(cid:53)(cid:51)(cid:37)(cid:41)(cid:32)(cid:32) (cid:80)(cid:97)(cid:115)(cid:99)(cid:117)(cid:97)(cid:32)(cid:80)(cid:114)(cid:111)(cid:106)(cid:101)(cid:99)(cid:116)(cid:32)(cid:40)(cid:50)(cid:55)(cid:37)(cid:41)(cid:32)(cid:32) (cid:80)(cid:105)(cid:101)(cid:114)(cid:105)(cid:110)(cid:97)(cid:32)(cid:77)(cid:105)(cid:110)(cid:101)(cid:32)(cid:40)(cid:49)(cid:52)(cid:37)(cid:41)(cid:32)(cid:32) (cid:67)(cid:97)(cid:110)(cid:97)(cid:100)(cid:105)(cid:97)(cid:110)(cid:32)(cid:80)(cid:114)(cid:111)(cid:112)(cid:101)(cid:114)(cid:116)(cid:105)(cid:101)(cid:115)(cid:32)(cid:40)(cid:51)(cid:37)(cid:41)(cid:32)(cid:32) (cid:79)(cid:116)(cid:104)(cid:101)(cid:114)(cid:32)(cid:80)(cid:114)(cid:111)(cid:112)(cid:101)(cid:114)(cid:116)(cid:105)(cid:101)(cid:115)(cid:32)(cid:40)(cid:51)(cid:37)(cid:41)(cid:32)(cid:32) 3 8 B A R R I C K G O L D C O R P O R A T I O N Barrick has retained specialized external difﬁculty of concluding a negotiation on consultants to assist the Project Ofﬁce and terms that the Company considers various operational locations with related acceptable. However, a number of factors Y2K compliance, project implementation, strengthen Barrick’s competitive position. remediation, and risk management. By the It is an entrepreneurial company, with the end of 1998, all sites in the United States, ﬁnancial and operational strength required Canada and Peru – the location of the to move quickly and effectively as the Company’s principal operations – had situation warrants. developed formal Y2K Plans and were Barrick also operates from a position of progressing according to schedule. Inven- strength through the quality of its people. tories and analyses of internal equipment The Company seeks out the best people and systems are largely complete with from around the world, and retains follow-up of remaining items to be com- them through high corporate standards of pleted by the end of the second quarter operation, the professional opportunities of 1999. No signiﬁcant non-compliance that it provides, and excellent remuneration. has been identiﬁed to date at any of Barrick has one of the lowest turnover the Company’s mines or process plants. rates in the industry. Generally, the risk of internal failures is expected to be low. Cost incurred and O U T L O O K to be incurred is expected to total Barrick has entered a new era of growth, approximately $2 million. Review of which will gain momentum in 1999 and external dependencies has revealed that beyond. In the face of the lowest gold prices all sites will be exposed to disruption if in two decades, Barrick is excelling. In there is widespread and prolonged 1998, the Company excelled by producing interruption of electricity and telecom- more gold at lower costs and greater proﬁt. munications services. While it is In 1999, Barrick is building strength upon recognized that Barrick has little control strength, with production expected to over these services, the focus in 1999 reach a record 3.6 million ounces of gold. will be on contingency planning, which And as production is rising, costs should is expected to be completed by mid- fall to an industry low of $125 per ounce. year with practice drills carried out The platform for continued growth during the third quarter. in low-cost production is a reserve base Competitive Env ironment Barrick competes with other mining companies for exploration properties, for joint-venture agreements and for the acquisition of attractive gold companies. Such competition could increase the that is unrivaled in the industry. Barrick’s reserves stand at 51.5 million ounces of gold, located on three of the best gold belts in the Americas. The high quality of those reserves is demonstrated by the fact that 48 million ounces are proﬁtable even at a gold price of $300 per ounce. 3 9 B A R R I C K G O L D C O R P O R A T I O N As for future growth, no other com- reserves and resources, which today pany has a comparable line-up of new, stand at 20 million ounces. As a low-cost gold mines and projects: Mine, Pascua is expected to produce 1. The Pierina Mine in Peru is expected gold at a cash operating cost in the to increase production to 835,000 early years of $125 per ounce. ounces at $45 per ounce. 4. With the proposed Sutton transaction, 2. The Meikle Mine on the Goldstrike Barrick gains a world-class asset in Property should produce 1 million what is emerging as one of the most ounces at $75 per ounce in 1999. exciting new gold districts anywhere. Furthermore, the potential to expand underground reserves is excellent in a mile-long corridor extending from the Meikle Mine south through the Grifﬁn and Rodeo deposits. 3. The Pascua Project in Chile and Argentina continues to expand (cid:51)(cid:46)(cid:55) (cid:49)(cid:57)(cid:51) (cid:51)(cid:46)(cid:54) (cid:49)(cid:56)(cid:50) (cid:49)(cid:54)(cid:48) (cid:49)(cid:50)(cid:53) (cid:49)(cid:50)(cid:53) (cid:51)(cid:46)(cid:50) (cid:51)(cid:46)(cid:49) (cid:51)(cid:46)(cid:48) (cid:50)(cid:46)(cid:48) (cid:57)(cid:54) (cid:57)(cid:55) (cid:57)(cid:56) (cid:57)(cid:57)(cid:69) (cid:50)(cid:48)(cid:48)(cid:48)(cid:69) (cid:57)(cid:54) (cid:57)(cid:55) (cid:57)(cid:56) (cid:57)(cid:57)(cid:69) (cid:50)(cid:48)(cid:48)(cid:48)(cid:69) G O L D P R O D U C T I O N (millions of ounces) C A S H O P E R A T I N G C O S T S (dollars per ounce) 4 0 Furthermore, the Premium Gold Sales Program Barrick developed ensures that the Company maximizes the revenue earned on every ounce of gold produced in any gold market. Currently, Barrick has 11.5 million ounces in the program, guaranteeing a minimum realized price of $385 over the next three years. The Company’s positive outlook for growth is underpinned by a strong balance sheet. Barrick has the only “A” credit rating in the gold business, over $400 million in cash and no debt payments due until 2007. In 1999, the combination of rising production and falling costs, and the beneﬁts of the Premium Gold Sales Program are expected to generate record earnings and cash ﬂow for the Company. These strong money ﬂows, backed by the strongest balance sheet in the gold industry, allow Barrick to go forward with certainty to develop or acquire new low-cost production. And ﬁnally, Barrick has a team of skilled and dedicated men and women, all of whom are committed to achieving a singular goal. That goal is increasing earnings and cash ﬂow per share, which is the only way to build share value. B A R R I C K G O L D C O R P O R A T I O N CON SOLIDATED STATE M ENTS OF INCOM E Barrick Gold Corporation for the years ended December 31, 1998, 1997 and 1996 (in millions of United States dollars except per share data) Revenues Gold sales Interest and other income Costs and expenses Operating Depreciation and amortization Administration Exploration Interest on long-term debt Gain on sale of/provision for mining properties (note 8) Income (loss) before taxes Income taxes (note 7) Net income (loss) for the year Net income (loss) per share (note 6) Basic Fully diluted 1998 1997 1996 $ 1,287 11 1,298 595 216 36 50 – (42) 855 443 (142) $ 1,284 10 1,294 655 188 36 64 – 431 1,374 (80) (43) $ 1,299 19 1,318 691 183 33 66 10 45 1,028 290 (72) $ 301 $ (123) $ .218 $ 0.80 $ 0.79 $ (0.33) $ (0.33) $ 0.60 $ 0.60 CON SOLIDATED STATE M ENTS OF RETAINED E ARNINGS Barrick Gold Corporation for the years ended December 31, 1998, 1997 and 1996 (in millions of United States dollars) Retained earnings at beginning of year Net income (loss) Dividends (note 6) Retained earnings at end of year See accompanying notes to consolidated ﬁnancial statements. $ 1998 ,960 301 (68) $ 1,193 1997 $ 1,143 (123) (60) $ 960 1996 $ 976 218 (51) $ 1,143 4 1 B A R R I C K G O L D C O R P O R A T I O N CON SOLIDATED STATE M ENTS OF CASH FLOW Barrick Gold Corporation for the years ended December 31, 1998, 1997 and 1996 (in millions of United States dollars) Cash provided by (used in) operating activities Net income (loss) Non-cash items: Depreciation and amortization Deferred income taxes Gain on sale of /provision for mining properties Other Cash provided by (reinvested in) working capital Bullion settlements and other receivables Inventories Accounts payable and accrued liabilities Cash provided by operating activities Cash provided by (used in) development activities Property, plant and equipment Sale (acquisition) of mining properties Other Cash (used in) development activities Cash provided by (used in) ﬁnancing activities Capital stock (note 6) Long-term obligations Proceeds Repayments Dividends Cash provided by (used in) ﬁnancing activities Increase (decrease) in cash and equivalents Cash and equivalents at beginning of year Cash and equivalents at end of year Cash and equivalents comprise: Cash Short-term deposits See accompanying notes to consolidated ﬁnancial statements. 4 2 1998 1997 1996 $ 301 $ (123) $ 218 216 57 (42) 5 537 (10) (14) 26 539 (507) 170 (25) (362) 35 – (20) (68) (53) 124 292 $ 416 $ 21 395 $ 416 188 (42) 431 5 459 37 (5) (21) 470 (372) – 4 (368) 6 500 (501) (60) (55) 47 245 $ 292 $ 11 281 $ 292 183 14 45 (2) 458 17 (22) 10 463 (374) (422) (23) (819) 22 500 (154) (51) 317 (39) 284 $ 245 $ 16 229 $ 245 B A R R I C K G O L D C O R P O R A T I O N CON SOLIDATED BA L ANCE SHEETS Barrick Gold Corporation As at December 31, 1998 and 1997 (in millions of United States dollars) Assets Current assets Cash and equivalents Bullion settlements and other receivables Inventories (note 2) Property, plant and equipment (note 3) Other assets Liabilities Current liabilities Accounts payable and accrued liabilities Current portion of long-term obligations (note 5) Long-term debt (note 4) Reclamation and closure liabilities (note 5) Deferred income taxes Shareholders’ equity Capital stock (note 6) Retained earnings Commitments and contingencies (note 9) See accompanying notes to consolidated ﬁnancial statements. Signed on behalf of the Board Peter Munk (signed) Director C. William D. Birchall (signed) Director 4 3 1998 1997 $ 416 89 106 611 3,991 53 $ 4,655 $ 213 20 233 500 128 202 1,063 2,399 1,193 3,592 $ 292 62 92 446 3,824 36 $ 4,306 $ 163 30 193 500 144 145 982 2,364 960 3,324 $ 4,655 $ 4,306 B A R R I C K G O L D C O R P O R A T I O N NOTES TO CON SOLIDATED FINANCIA L STATE M ENTS Barrick Gold Corporation (tabular dollar amounts in millions of United States dollars) 1. A ccounting Poli cies These consolidated ﬁnancial statements are prepared in accordance with accounting principles generally accepted in Canada. As described in note 10, these principles differ in certain respects from principles and practices generally accepted in the United States. Summarized below are those policies considered particularly signiﬁcant for the Company. References to the Company included herein mean the Company and its consolidated subsidiaries. The United States dollar is the principal currency of the Company’s business; accordingly, these consolidated ﬁnancial statements are expressed in United States dollars. A . N A T U R E O F O P E R A T I O N S The Company is engaged in gold mining and related activities including exploration, development, mining and processing in the United States, Canada, Chile and Peru. B . U S E O F E S T I M A T E S The preparation of ﬁnancial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the ﬁnancial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. C . B A S I S O F C O N S O L I D A T I O N These consolidated ﬁnancial statements include the accounts of the Company and its subsidiaries. D . T R A N S L A T I O N O F F O R E I G N C U R R E N C I E S The United States dollar is the functional currency of all of the Company’s operations which are classiﬁed as integrated for foreign currency translation purposes. Under the temporal method, translation gains or losses are included in the determination of net income. E . C A S H A N D E Q U I V A L E N T S Cash and equivalents comprise cash, term deposits and treasury bills, with original maturity dates of less than 90 days. F. I N V E N T O R I E S Gold in process and mine operating supplies are valued at the lower of average cost and net realizable value. G . P R O P E R T Y, P L A N T A N D E Q U I P M E N T (i) Propert y acquisition and deferred mine costs Property acquisition and deferred mine costs are recorded at cost and amortized by the units of production method based on estimated recoverable ounces of gold. Estimated recoverable ounces include proven and probable reserves and a component of mineralized material. (ii) Build ings and equipment Buildings and equipment are recorded at cost and depreciated, net of residual value, using the straight-line method based on the estimated useful lives of the assets. The maximum estimated useful life of buildings and mill equipment is 25 years and of mine equipment is 15 years. Repairs and maintenance expenditures are charged to operations; major improvements and replacements which extend the useful life of an asset are capitalized and depreciated over the remaining estimated useful life of that asset. 4 4 B A R R I C K G O L D C O R P O R A T I O N (iii) Deferred stripping costs Mining costs associated with waste rock removal are deferred and charged to operating expenses over the life of the mine. (iv) Properties in development Upon determination that a mineral property can be eco- nomically developed, costs incurred are capitalized until the assets are put in service, at which time the capitalized costs are depreciated in accordance with the policies described above. Financing costs, including interest, are capitalized on the basis of expenditures incurred for the acquisition and development of projects, without restriction to speciﬁc borrowings for these projects, while the projects are actively being prepared for proposed production. Capitalization is discontinued when the asset is ready for its intended use. (v) Exploration properties Mineral exploration expenditures are expensed as incurred. Property acquisition costs relating to explora- tion properties and expenditures incurred on properties identiﬁed as having development potential are deferred on a project basis until the viability of the project is determined. Costs associated with economically viable projects are depreciated and amortized in accordance with the policies described above. If a project is not viable, the accumulated project costs are charged to opera- tions in the year in which that determination is made. (v i) Propert y evaluations The Company reviews and evaluates the recoverability of its properties when events or changes in circumstances indicate that the carrying amount of a property may not be recoverable. Estimated future net cash ﬂows, on an undiscounted basis, from a property are calculated using estimated recoverable ounces of gold (considering current proven and probable reserves and mineralization expected to be classiﬁed as reserves); estimated future gold price realization (considering historical and current prices, price trends and related factors); and operating, capital and reclamation costs. Reductions in the carrying value of property, plant and equipment, with a corresponding charge to earnings, are recorded to the extent that the estimated future net cash ﬂows are less than the carrying value. Estimates of future cash ﬂows are subject to risks and uncertainties. It is reasonably possible that changes in circumstances could occur which may affect the recov- erability of the Company’s properties. H . D E R I V A T I V E F I N A N C I A L I N S T R U M E N T S (i) Commod it y and foreign exchange contracts The Company enters into derivative ﬁnancial instruments to reduce the risk associated with price volatility of the commodities and currencies it is exposed to (“hedging transactions”). The instruments used include spot deferred contracts, commodity options and currency swaps. The Company does not hold or issue derivative ﬁnancial instruments for trading purposes. Hedging transactions are matched to anticipated future production for commodities and cash ﬂows for currencies and are designated in the accounting records as hedges. The Company regularly monitors its commodity and currency exposures and ensures that contracted amounts do not exceed the amounts of underlying exposures. Primarily, the Company enters into hedging transac- tions, which establish a price for future gold production. Contracted prices for spot deferred sales are recognized in gold sales as the designated production is delivered to meet commitments. Long-term written call options, which can be converted into spot deferred contracts at the strike price in the event the option is exercised, are designated and accounted for as hedges of future production. Premiums received are recognized in gold sales at the designated date. Similar contracts are used to hedge by-products such as silver and copper. 4 5 B A R R I C K G O L D C O R P O R A T I O N In the event of early settlement of hedging transac- J . I N C O M E T A X E S The Company records income and mining taxes on the tax allocation basis. Differences between amounts reported for tax and accounting purposes may result in deferred income and mining taxes. Deferred income and mining taxes relate primarily to the depreciation and amortization of property, plant and equipment costs. Provisions are made for witholding taxes payable on anticipated repatriation of unremitted earnings of the Company’s foreign subsidiaries. No provision is made for unremitted earnings which have been indeﬁ- nitely reinvested. In December 1997, the CICA Accounting Standards Board issued Section 3465 Income Taxes which adopts the liability approach based on the temporary differences method of accounting for income taxes. The standard is similar in many respects to the United States accounting standard FAS No. 109. The new standard, which is effective as of 2000, is currently being reviewed. The Company does not expect it to have a material effect on net income. 1998 $ 73 33 $ 106 $ 206 1997 $ 57 35 $ 92 $ 105 tions, gains or losses are deferred and brought into income at the delivery dates originally designated. Where the underlying transactions are no longer expected to occur, with the effect that a hedge no longer exists, unrealized gains or losses are recognized in income at the point such a determination is made. Cash ﬂows arising in respect of hedging transactions are recognized under cash ﬂow from operating activities. (ii) Ot her derivative financial instruments The Company enters into derivative ﬁnancial instruments to manage the interest returns received on its spot deferred hedging program. The instruments, which primarily comprise a portfolio of total return swaps, are accounted for as long-term portfolio investments, and accordingly, are carried at cost less any provisions for other than temporary impairment. Gains and losses are recognized in the income statement upon realization or at the maturity of the instrument. I . R E V E N U E R E C O G N I T I O N Gold poured, in transit and at reﬁneries, is recorded at net realizable value and included in bullion settlements and other receivables and gold sales. Revenue from the sale of by-products such as silver and copper is credited against operating costs. 2. Inv e ntories Current: Gold in process Mine operating supplies Non-current (included in property, plant and equipment): Ore in stockpiles 4 6 B A R R I C K G O L D C O R P O R A T I O N 3. Pr op e r t y, Plant and Equipme nt Cost Accumulated Depreciation $ 2,440 985 860 306 227 $ 461 366 – – – 1998 Net $ 1,979 619 860 306 227 Cost Accumulated Depreciation $ 1,347 962 1,643 268 250 $ 349 297 – – – 1997 Net $ 998 665 1,643 268 250 $ 4,818 $ 827 $ 3,991 $ 4,470 $ 646 $ 3,824 Property acquisition and deferred mine costs Buildings and equipment Properties in development Deferred stripping costs and ore in stockpiles Exploration properties 4. L ong-Te rm D eb t A . R E V O L V I N G C R E D I T F A C I L I T Y B . 7 1⁄2 % D E B E N T U R E S The Company has a credit and guarantee agreement (the “Credit Agreement”) with a group of international banks (the “Lenders”). The Credit Agreement provides for the Lenders to make available to the Company and subsidiaries designated by it from time to time a credit facility in the maximum amount of $1 billion or the equivalent amount in Canadian currency. The Credit Agreement, which is unsecured, has a remaining term of four years. The facility has an interest rate of LIBOR plus 0.15% when utilized, and an annual fee of 0.075%. As at December 31, 1998 and 1997, no amounts were drawn under the Credit Agreement. On April 22, 1997 the Company issued $500 million of redeemable, non-convertible debentures. The debentures bear interest at 71⁄2% per annum, payable semi-annually, and mature on May 1, 2007. C . I N T E R E S T Interest of $43 million was incurred during the year (1997 – $44 million, 1996 – $20 million). Of this amount $43 million was capitalized to properties in development (1997 – $44 million, 1996 – $10 million). 5. Re clamati on and Cl osur e Liabili ties Estimated reclamation and closure costs are accrued and charged to income over the estimated life of a mine by the units of production method based on estimated recov- erable ounces of gold. Although the ultimate amount of reclamation and closure costs to be incurred is uncertain, the Company has estimated the future site reclamation obligations, which it believes will meet current regulatory requirements, to be $218 million, $130 million of which has been accrued to December 31, 1998 (1997 – $140 mil- lion). Closure costs are estimated at $34 million, $18 million of which has been accrued to December 31, 1998 (1997 – $34 million). A total of $20 million of these accruals is included in current liabilities at December 31, 1998 (1997 – $30 million). Future changes, if any, in regulations and cost estimates may be signiﬁcant and will be recognized when applicable. 4 7 B A R R I C K G O L D C O R P O R A T I O N 6. Capi tal S to ck A . I S S U E D A N D O U T S T A N D I N G S H A R E S Details of issued and outstanding shares are as follows: Common shares (millions) Outstanding at December 31, 1995 Issued during 1996 In part consideration for an exploration property For cash Outstanding at December 31, 1996 Issued during 1997 For cash Outstanding at December 31, 1997 Issued during 1998 For cash Outstanding at December 31, 1998 In 1996, the Company acquired the Pierina Property. As part of the consideration, 14 million shares of the Company were issued. The Company assigned a value of $364 million to the shares as required by generally accepted accounting principles, based on the quoted market price for the shares less a 5% discount which represented the issue costs that would otherwise have been incurred. B . A U T H O R I Z E D C A P I T A L Authorized capital stock of the Company is comprised of an unlimited number of common shares, 9,764,929 First preferred shares, Series A and 9,047,619 Series B, and 14,726,854 Second preferred shares, Series A. C . S H A R E H O L D E R R I G H T S P L A N In 1998, the Company adopted a Shareholder Rights Plan (the “Plan”) which will be in effect until the 2002 shareholders’ meeting. Issued 357 14 2 373 – 373 4 377 Amount $ 1,972 364 22 2,358 6 2,364 35 $ 2,399 The rights issued under the Plan become exercisable only when a person, including any party related to them, acquires, or announces their intention to acquire, 20% or more of Barrick’s outstanding common shares without complying with the “Permitted Bid” provisions or without approval of the Board of Directors. Should such an acquisition occur, each right would entitle a holder, other than the acquiring person and persons related to them, to purchase common shares of Barrick at a 50% discount to the market price. A Permitted Bid is a bid made to all shareholders that is open for at least 60 days. If at the end of 60 days, at least 50% of the outstanding shares, other than those owned by the offeror and certain related parties, have been tendered, the offeror may take up and pay for the shares, but must extend the bid for a further 10 days to allow other share- holders to tender. 4 8 B A R R I C K G O L D C O R P O R A T I O N D . C O M M O N S H A R E P U R C H A S E O P T I O N S There are common share purchase options outstanding, expiring at various dates to December 6, 2008. The options vest over the ﬁrst four years at a rate of one quarter each year, beginning in the year subsequent to granting and are exercisable over 7 to 10 years. (shares in millions) Outstanding at beginning of year Granted at an average price of C$29.34 per share (1997 – C$25.08, 1996 – C$40.95) Exercised at an average price of C$13.98 per share (1997 – C$22.76, 1996 – C$20.09) Cancelled Outstanding at end of year As at December 31, 1998, 9 million (1997 – 13 million, 1996 – 17 million) common shares, beyond those out- standing at year end, were available for granting of options. The following is a summary of common share purchase options: 1998 1997 1996 20 5 (4) (1) 20 17 4 – (1) 20 16 3 (2) – 17 Outstanding and exercisable share purchase options at December 31, 1998 consisted of 12 million and 6 million shares respectively with an exercise price range of C$18.19 to C$29.25, and 8 million and 4 million shares respectively with a price range of C$30.13 to C$44.25. E . N E T I N C O M E P E R S H A R E Net income per share was calculated on the basis of the weighted average number of common shares outstand- ing for the year, which amounted to 376 million shares (1997 – 373 million shares, 1996 – 363 million shares). Fully diluted net income per share reﬂects the dilutive effect of the exercise of the common share purchase options outstanding as at December 31, 1998. The number of shares for the fully diluted net income per share calcu- lation was 390 million shares (1997 – 373 million shares, 1996 – 367 million shares). In 1998, interest on funds which would have been received had the options been exercised of $8 million, net of income tax, has been imputed at a rate of 5%. F. D I V I D E N D S In 1998, the Company declared and paid dividends in United States dollars totaling $0.18 per share (1997 – $0.16, 1996 – $0.14 per share). 4 9 B A R R I C K G O L D C O R P O R A T I O N 7. In come Tax es As the Company operates in a specialized industry and in several tax jurisdictions, its income is subject to varying rates of taxation. Major items causing the Company’s income tax rate to differ from the Canadian federal income tax rate of 38% are set out below: At the Canadian federal income tax rate Increase (decrease) resulting from: Resource and depletion allowances Tax rates of other jurisdictions Sale of/provision for mining properties Operating losses not tax effected Exploration expenditures not tax effected Non-deductible depreciation and amortization arising from acquisitions Miscellaneous Income tax expense The principal timing differences and their tax effect are: Deferred mining and exploration costs Depreciation and amortization Reclamation Net operating loss Details of income tax expense by jurisdiction are: Current: United States Canada Other Deferred: United States Canada Other 1998 $ 168 (54) (47) 30 32 6 9 (2) $ 142 $ 33 33 7 (16) $ 57 $ 78 6 1 85 8 54 (5) 57 1997 $ (31) (56) 60 30 30 1 7 2 $ (43 $ (9 (32) (3) (16) $ (42) $ (82 2 1 85 (23) (5) (14) (42) 1996 $ 110 (43) (19) – – 19 3 2 $ 72 $ 18 (4) – – $ 14 $ 54 4 – 58 9 12 (7) 14 $ 142 $ (43 $ 72 5 0 B A R R I C K G O L D C O R P O R A T I O N 8. S egme nt Inf o rmati on The Company adopted the CICA Accounting Recommen- dations in Section 1701 Segment Disclosures during the year. The Company operates in the gold mining industry. The operations are evaluated and managed on a property basis. The Goldstrike Property includes the Betze-Post and Meikle Mines. Canadian properties include the Bousquet and Holt-McDermott Mines. Other Properties include operations which have been closed, sold or are being phased out. The Company’s interest in the Doyon Mine was sold in January 1998. The pre-tax gain of $42 million was offset by a deferred tax provision, resulting in no gain or loss after tax. In September 1997, following a compre- hensive evaluation of its mining properties, on the basis set out in note 1(g), the Company took a $385 million charge to earnings, net of income taxes of $46 million, to cover the writedown of the carrying values associated with the El Indio and Tambo Mines in Chile and the Bullfrog, Mercur and Pinson Mines in the United States. Revenues Gold sales Goldstrike Property Canadian Properties Pierina Property Other Properties Operating costs Goldstrike Property Canadian Properties Pierina Property Other Properties Depreciation and amortization Goldstrike Property Canadian Properties Pierina Property Other Properties Gain on sale of (provision for) mining properties – Other Properties Segment income (loss) before income taxes Goldstrike Property Canadian Properties Pierina Property Other Properties Exploration Corporate expenses, net Income taxes Net income (loss) 1998 1997 1996 $ 941 124 23 199 $ 1,287 $ 920 120 – 244 $ 1,284 $ 827 144 – 328 1,299 399 54 3 139 595 117 47 11 41 216 42 425 23 9 61 518 (50) (25) (142) 408 51 – 196 655 96 25 – 67 188 (431) 416 44 – (450) 10 (64) (26) (43) 393 64 – 234 691 74 27 – 82 183 (45) 360 53 – (33) 380 (66) (24) (72) $ 301 $ (123) $ 218 5 1 Gold sales by geographic area United States Canada Chile Peru Segment capital expenditures Goldstrike Property Canadian Properties Pierina Property Pascua Property Other Properties Identiﬁable assets by geographic area United States Peru Chile Canada Other countries Segment assets Goldstrike Property Canadian Properties Pierina Property Pascua Property Other Properties Total assets for reportable segments Exploration properties Cash and equivalents Other B A R R I C K G O L D C O R P O R A T I O N 1998 1997 1996 $ 953 209 137 – $ 1,299 $ 98 16 19 32 209 $ 374 $ 1,032 124 108 23 $ 1,287 $ 158 17 248 79 5 $ 507 $ 2,013 1,217 1,034 270 121 $ 4,655 $ 1,615 235 1,212 822 50 3,934 230 416 75 $ 1,036 160 88 – $ 1,284 $ 118 12 103 65 74 $ 372 $ 1,886 933 1,023 429 35 $ 4,306 $ 1,546 207 930 733 246 3,662 231 292 121 $ 4,655 $ 4,306 5 2 B A R R I C K G O L D C O R P O R A T I O N 9. Commi tme nts and Contingen cies A . D E R I V A T I V E F I N A N C I A L I N S T R U M E N T S (i) Commod it y and foreign exchange contracts As part of its gold hedging program, the Company has entered into spot deferred contracts with several major ﬁnancial institutions to deliver 11.5 million ounces of gold. A spot deferred contract represents a forward sale on which contango accrues until the intended delivery date of the contract. The rate at which contango accrues is determined by LIBOR interest rate less the gold lease rate existing at the time of each rollover. The contracts have an average price of $357 per ounce at December 31, 1998. The Company’s expected gold production is fully hedged over the next two years and it has further con- tracts in place designated from 2001 to 2004. Delivery under these spot deferred contracts can be deferred at the Company’s option for up to 15 years. In addition, the Company has entered into long-term written gold call options in respect of 1.7 million ounces. The call options have an average strike price of $380 per ounce and expire at various dates over the period from 2000 to 2007. In the event that they are exercised at their maturity date, the Company has the intent and ability to convert them into spot deferred contracts at the strike price. As a portion of the Company’s operating costs and capital expenditures are denominated in foreign currencies, it has entered into forward exchange contracts to maintain its purchasing power relative to the United States dollar. As at December 31, 1998, the Company has entered into foreign exchange contracts to purchase C$145 million in 1999 at an exchange rate of $0.69 for each Canadian dol- lar, and an additional C$143 million in the following three years at $0.71 for each Canadian dollar. The Company has entered into spot deferred contracts to deliver 19 million ounces of silver over the next ﬁve years at an average price of $5.15 per ounce. (ii) Ot her derivative financial instruments In connection with the management of the interest com- ponent of its gold hedging activities, the Company has entered into derivative ﬁnancial instruments with a total notional amount of $570 million or approximately 14% of the value of the gold spot hedge position of $4.1 billion. The instruments comprise a portfolio of total return swaps whose underlying investments are bond indices with diversiﬁed credit exposure. Total return swaps gener- ally represent the contractual exchange of LIBOR interest payments for a return equivalent to the future perfor- mance of a speciﬁed investment instrument based on a ﬁxed notional amount. The swaps typically have terms of either ﬁve or seven years and mature at various times in 2003 and 2005. (iii) Fair value of derivative financial inst ruments The carrying amounts for cash, bullion settlements and other receivables, accounts payable and accrued liabilities on the balance sheets approximate fair value. The fair value of long-term debt is $543 million (1997 – $528 mil- lion) reﬂecting the decline in interest rates since the debt was incurred. The aggregate unrealized gain of the value of the Company’s commodity and foreign exchange contracts, based on forward rates, the gold price of $288 per ounce and the silver price of $5 per ounce as at December 31, 1998 amounted to approximately $735 million (1997 – $825 million). The fair value of the total return swaps approximates cost. (iv) Cred it and market risks The Company utilizes privately negotiated over-the- counter derivatives to manage the exposures to commodity and foreign currency risks, and also to manage the interest returns on its gold spot deferred program. These derivatives include spot deferred contracts, commodity options and total return swaps, and involve varying degrees of credit and market risk. The market risk of the Company’s derivatives arises principally from potential changes in interest and foreign exchange rates. The Company manages its market risk by maintaining a diversiﬁed portfolio of derivatives. Credit risk represents the maximum potential accounting loss due to non-performance by obligors and counterparties under the terms of their contracts. 5 3 B A R R I C K G O L D C O R P O R A T I O N The Company manages credit risk by only dealing with major ﬁnancial institutions that meet its credit rating standards; by limiting arrangements outstanding with individual counterparties; and by entering into master netting agreements which incorporate the right of setoff and provide for the net settlement of contracts with the same counterparty in the event of default or other cancel- lation under the agreement. Credit risk associated with the Company’s commodity and foreign exchange contracts is limited to the amount of unrealized gains at any point in time. For total return swaps, the amount of credit risk is equivalent to the value of the underlying investments. B . R O Y A L T I E S The Goldstrike and Pascua Properties are subject to royalty obligations based on the valuable minerals produced from the properties and various methods of calculation. C . E N V I R O N M E N T A L The Company’s mining and exploration activities are subject to various federal, provincial and state laws and regulations governing the protection of the environment. These laws and regulations are continually changing and generally becoming more restrictive. The Company con- ducts its operations so as to protect public health and the environment and believes its operations are materially in compliance with all applicable laws and regulations. The Company has made, and expects to make in the future, expenditures to comply with such laws and regulations. D . C L A I M S On April 30, 1998, the Company was added as a defendant in a class action lawsuit against Bre-X Minerals Ltd., certain of its directors and ofﬁcers or former directors and ofﬁcers and others in the United States District Court for the Eastern District of Texas, Texarkana Division. The class action alleges, among other things, that statements made by the Company in connection with its efforts to secure the right to develop the Busang gold deposit in West Kalimantan, Indonesia were materially false and mis- leading and omitted to state material facts relating to the preliminary due diligence investigation undertaken by the Company in late 1996. The Company believes that the claims are without merit. The Company is from time to time involved in various claims, legal proceedings and complaints arising in the ordinary course of business. The Company is also subject to reassessment for income and mining taxes for certain years. It does not believe that adverse decisions in any pending or threatened proceedings related to any potential tax assessments or other matters, or any amount which it may be required to pay by reason thereof, will have a material adverse effect on the ﬁnancial condition or future results of operations of the Company. E . Y E A R 2 0 0 0 I S S U E The Year 2000 Issue arises because many computerized systems use two digits rather than four to identify a year. Date-sensitive systems may recognize the Year 2000 as 1900 or some other date, resulting in errors when infor- mation using Year 2000 dates is processed. In addition, similar problems may occur in some systems which use certain dates in 1999 to represent something other than a date. The effects of the Year 2000 Issue may be experienced before, on, or after January 1, 2000 and if not addressed, the impact on applications and ﬁnancial reporting may range from minor errors to signiﬁcant system failure which could affect the Company’s ability to conduct nor- mal business operations. The Company has a plan in place to address the Issue and is presently testing the potential impact on critical systems of its material operations. However, it is not possible to be certain that all aspects of the Year 2000 Issue affecting the Company including those related to the efforts of counterparties, suppliers or other third parties, will be fully resolved on a timely basis. 5 4 B A R R I C K G O L D C O R P O R A T I O N 10. Dif f e r e n c es fr om Uni te d S tates A ccounting Prin ciples These consolidated ﬁnancial statements have been prepared in accordance with accounting principles generally accepted in Canada. The Company monitors differences between Canadian and US GAAP, none of which have a material effect on the ﬁnancial statements except as noted below. A . A C Q U I S I T I O N S Acquisitions would have been accounted for based on the US GAAP method used to value shares issued as consider- ation. In determining the value of the shares exchanged in acquisitions, for accounting purposes under US GAAP the Company has used the unadjusted quoted market price of its shares based on the understanding that US GAAP, including the Securities and Exchange Commis- sion requirements, only permits adjustments to the quoted market price in very limited circumstances, such as where the holders are restricted in their ability to sell the securities exchanged. In addition, acquisitions would have been accounted for gross of underlying tax effects of treating non-deductible acquisition costs as temporary differences, as required by FAS No. 109, with an offsetting credit to deferred income taxes. This method of accounting would have no effect on the Company’s reported net income for the year. Following a further evaluation of the Company’s mining properties on the basis set out in note 1(g) for the purposes of the 1997 annual ﬁnancial statements and reﬂecting a further decline in the market price for gold during the fourth quarter of 1997, a $340 million charge, net of tax of $60 million, was taken to US GAAP earnings to write down the carrying value associated with the poten- tial of mineral exploration properties which had been carried at higher amounts under US GAAP as set out above. B . S T O C K - B A S E D C O M P E N S A T I O N US GAAP encourages but does not require companies to include in compensation cost the fair value of stock options granted to employees. A company that does not adopt the fair-value method must disclose the cost of stock compensation awards, at their fair value, at the date the award is granted. The fair value of the Company’s options was estimated using the Black-Scholes model with assumptions of a 41⁄2- to a 6-year expected term, 30% volatility, interest rates ranging from 4.8% to 7.4% and an expected dividend yield ranging from 0.44% to 0.95%. Under US GAAP the cost of stock compensation for the year ended December 31, 1998 would be $22 million (1997 – $16 million). The resulting pro forma net income and income per share for the year ended December 31, 1998 is $279 million and $0.74 respectively (1997 – net loss of $478 million and loss per share of $1.28). C . D E F E R R E D T A X L I A B I L I T I E S The amount of unrecognized deferred tax liability for temporary differences related to the Company’s invest- ments in the United States and Chile, which are essentially permanent in duration, is $94 million (1997 – $88 million). Net deferred tax assets include $49 million relating to operating loss carry forwards, the recognition of which is based on the Company’s judgment regarding its ability to utilize the related tax losses against future income. Operating loss carry forwards amount to $659 mil- lion, of which $443 million do not expire and $216 million expire at various times over the next 2 to 20 years. The components of the Company’s deferred tax liability at December 31 are as follows: Assets United States Canada Chile Peru and other Total Valuation allowances United States Canada Chile Peru and other Total Property, plant and equipment United States Canada Chile Peru and other Total 1998 1997 $ (75 25 72 14 $ 74 25 59 3 186 161 $ (32) (20) (50) (3) $ (32) (20) (30) (3) (105) (85) $ (177) (116) (72) (100) $ (175) (100) (82) (100) (465) (457) Total deferred income tax liability $ (384) $ (381) 5 5 B A R R I C K G O L D C O R P O R A T I O N D . B A L A N C E S H E E T S The following summarizes the balance sheet amounts in accordance with US GAAP where different from the amounts reported under Canadian GAAP: Property, plant and equipment Deferred income taxes Shareholders’ equity 1998 1997 Canadian GAAP United States GAAP Canadian GAAP United States GAAP $ 3,991 202 3,592 $ 4,124 384 3,543 $ 3,824 145 3,324 $ 4,008 381 3,270 E . I N C O M E S T A T E M E N T S The following summary sets out the adjustment to the Company’s reported net loss in 1997 in order to conform to accounting principles generally accepted in the United States: Net income (loss) for the year as reported Provision for exploration properties Net income (loss) for the year based on United States accounting principles Net income (loss) per share for the year (dollars) Basic Fully diluted 1998 $ .301 – 1997 $ (123) (340) $ .301 $ (463) $ 0.80 $ 0.79 $ (1.24) $ (1.24) 1996 $ 218 – $ 218 $ 0.60 $ 0.60 F. N E W S T A N D A R D S The Company adopted FAS No. 130 “Reporting Compre- hensive Income” during the year. There are no material differences between the Company’s US GAAP net income as reported and its comprehensive income as deﬁned by the standard. Accordingly, a separate statement of comprehensive income has not been presented. In June 1998, the Financial Accounting Standards Board issued FAS No. 133 “Accounting for Derivative Instruments and Hedging Activities” which will be effec- tive for the Company’s 2000 ﬁscal year. Under the new standard, companies will be required to record derivatives on the balance sheet as assets or liabilities measured at fair value. For those derivatives representing effective hedges of risks and exposures, unrealized gains or losses resulting from changes in the fair values will be presented as a com- ponent of comprehensive income as deﬁned by FAS No. 130. To the extent certain derivatives do not represent effective hedges, unrealized gains or losses will be included in the income statement for US GAAP purposes. The Company is currently reviewing the standard but has not yet fully determined the impact it will have on its reported US GAAP ﬁnancial information. 5 6 B A R R I C K G O L D C O R P O R A T I O N M A N A G E M E N T R E S P O N S I B I L I T Y F O R F I N A N C I A L S T A T E M E N T S The accompanying consolidated ﬁnancial statements and all of the data included in this annual report have been prepared by and are the responsibility of the Board of Directors and Management of the Company. The consolidated ﬁnancial statements have been prepared in accordance with accounting principles generally accepted in Canada and reﬂect Management’s best estimates and judgments based on currently available information. The Company has developed and maintains a system of internal accounting controls in order to ensure, on a reasonable and cost effective basis, the reliability of its ﬁnancial information. The consolidated ﬁnancial statements have been audited by PricewaterhouseCoopers,  Chartered Accountants. Their report outlines the scope of their examination and opinion on the consolidated ﬁnancial statements. Jamie C. Sokalsky (signed) Senior Vice President and Chief Financial Ofﬁcer Toronto, Canada March 3, 1999 A U D I T O R S ’ R E P O R T T O T H E S H A R E H O L D E R S O F B A R R I C K G O L D C O R P O R A T I O N We have audited the consolidated balance sheets of Barrick Gold Corporation as at December 31, 1998 and 1997 and the consolidated statements of income, retained earnings and cash ﬂow for each of the three years in the period ended December 31, 1998. These ﬁnancial state- ments are the responsibility of the Company’s manage- ment. Our responsibility is to express an opinion on these ﬁnancial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards in Canada. Those standards require that we plan and perform an audit to obtain reason- able assurance whether the ﬁnancial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the ﬁnancial statements. An audit also includes assessing the accounting principles used and signiﬁcant estimates made by management, as well as evaluating the overall ﬁnancial statement presentation. In our opinion, these consolidated ﬁnancial state- ments present fairly, in all material respects, the ﬁnancial position of the Company as at December 31, 1998 and 1997 and the results of its operations and its cash ﬂows for each of the three years in the period ended December 31, 1998 in accordance with accounting principles generally accepted in Canada. PricewaterhouseCoopers Chartered Accountants (signed) Toronto, Canada January 29, 1999 5 7 B A R R I C K G O L D C O R P O R A T I O N RESERVES AND GOLD MINERA LIZED M ATERIA L The table on the next page sets forth Barrick’s interest in the total proven and probable gold reserves at each property, based on a gold price of $325 per ounce (1997 – $350 per ounce). For deﬁnitions of proven and probable reserves and gold mineralized material, see Deﬁnitions, below. The proven and probable gold reserves at the Goldstrike, Pierina and Pascua Properties, which represent 94% of the Company’s estimated total contained ounces as at December 31, 1998, have been audited by Pincock, Allen & Holt, a division of Hart Crowser, Inc., an inde- pendent international mineral consulting ﬁrm. The Company has carefully prepared and veriﬁed the ore reserve ﬁgures and believes that its method of estimating reserves has been veriﬁed by mining experience. These ﬁgures are estimates, however, and no assurance can be given that the indicated quantities of gold will be produced. Gold price ﬂuctuations may render ore reserves containing relatively lower grades of gold mineralization uneconomic. Moreover, short-term operating factors relating to the ore reserves, such as the need for orderly development of ore bodies or the processing of new or different ore grades, could affect the Company’s proﬁt- ability in any particular accounting period. D E F I N I T I O N S Cont ained ounces: represents ounces in the ground without the reduction of ounces not recovered by the applicable metallurgical process. Reserve grade: estimated metal content of an ore body, based on reserve calculations. Reserves: that part of a mineral deposit which could be economically and legally extracted or produced at the time of the reserve determination. Reserves are customarily stated in terms of ore when dealing with metalliferous minerals. There are two categories of reserves: Proven ore: material for which tonnage and grade are computed from dimensions revealed in outcrops, trenches, underground workings or drill holes; grade is computed from the results of adequate sampling; and the sites for inspection, sampling and measurement are so spaced and the geological character so well-deﬁned that size, shape and mineral content are established. Probable ore: material for which tonnage and grade are computed partly from speciﬁc measurements, samples or production data and partly from projection for a reason- able distance on geological evidence; and for which the sites available for inspection, measurement and sampling are too widely or otherwise inappropriately spaced to outline the material completely or to establish its grade throughout. Gold mineralized material: mineralization based on geological evidence and assumed continuity. May or may not be supported by samples but is supported by geo- logical, geochemical, geophysical or other data. This material is sufﬁciently geologically deﬁned to be deemed potentially economic, yet is not in a deﬁnitive mine plan. This material requires reasonable cut-off grade criteria and has no untenable non-technical issues barring its exploitation. 5 8 B A R R I C K G O L D C O R P O R A T I O N Tons (thousands) 123,097 30,157 6,637 5,043 2,856 5,847 3,237 4,386 3,022 2,444 114,301 61,020 241,981 200,221 8,055 15,670 G O L D S T R I K E P R O P E R T Y Betze-Post Mine Proven and probable Mineralized material Meikle Mine Proven and probable Mineralized material Rodeo/Griffin Projects Proven and probable Mineralized material C A N A D I A N P R O P E R T I E S Bousquet Mine Proven and probable Mineralized material Holt-McDermott Mine Proven and probable Mineralized material P I E R I N A P R O P E R T Y Proven and probable Mineralized material P A S C U A P R O P E R T Y Proven and probable Mineralized material O T H E R P R O P E R T I E S Proven and probable Mineralized material T O T A L Proven and probable Mineralized material December 31, 1998 Grade (ounce per ton) Contained Ounces (thousands) Tons (thousands) December 31, 1997 Grade (ounce per ton) Contained Ounces (thousands) 21,213 2,398 132,825 22,726 6,754 1,780 – 22,882 3,794 6,302 3,526 2,373 112,482 29,584 175,381 157,518 14,124 47,691 4,729 2,293 1,391 1,765 666 776 611 370 7,244 782 14,008 6,659 1,594 1,746 51,456 16,789 0.181 0.125 0.782 0.732 – 0.204 0.239 0.169 0.200 0.153 0.064 0.030 0.058 0.034 0.146 0.078 24,058 2,838 5,283 1,303 – 4,665 906 1,064 705 363 7,191 878 10,111 5,380 2,064 3,715 50,318 20,206 0.172 0.080 0.713 0.455 0.487 0.302 0.206 0.177 0.202 0.151 0.063 0.013 0.058 0.033 0.198 0.111 5 9 B A R R I C K G O L D C O R P O R A T I O N OPERATING AND FINANCIA L INFORM ATION G O L D S T R I K E P R O P E R T Y P I E R I N A P R O P E R T Y O P E R A T I N G I N F O R M A T I O N (thousands) Tons of ore milled Average grade (ounces per ton) Recovery rate (%) Ounces of gold produced from: Mill ore Leach ore Total ounces produced F I N A N C I A L I N F O R M A T I O N (dollars) Gold sales per ounce Production costs per ounce Direct mining costs Applied (deferred) stripping By-product credits Cash operating costs per ounce Royalties Production taxes Total cash costs per ounce Depreciation and amortization Reclamation Total production costs per ounce Operating cash flow per ounce Capital expenditures (millions) Deferred stripping/stockpile (millions) – – – – – – – – – – – – – – – – – – $ 103 – Betze-Post Mine Meikle Mine 1998 5,176 0.320 89.2 1,479 20 1,499 1997 5,487 0.319 91.0 1,593 13 1,606 1998 857 1.031 95.9 847 – 847 1997 741 0.811 95.6 574 – 574 1998 1997 – – – – 57 57 $ 400 $ 420 $ 400 $ 420 $ 400 $ 142 34 – 176 22 7 205 46 4 $ 255 $ 195 $ 68 $ 39 $ 173 (2) – 171 26 7 204 41 3 $ 248 $ 216 $ 75 $ 15 $ 78 – (1) 77 12 8 97 57 1 $ 155 $ 303 $ 46 – $ 105 – (2) 103 16 8 127 53 1 $ 181 $ 293 $ 20 – $ 53 – (5) 48 – – 48 191 5 $ 244 $ 352 $ 248 – 6 0 B A R R I C K G O L D C O R P O R A T I O N C A N A D I A N P R O P E R T I E S O T H E R P R O P E R T I E S Bousquet Mine Holt-McDermott Mine Bullfrog Mine Tambo Mine El Indio Mine 1998 714 0.257 95.8 176 – 176 1997 667 0.265 96.2 170 – 170 1998 548 0.255 96.4 134 – 134 1997 462 0.262 96.5 117 – 117 1998 3,213 0.070 92.3 208 – 208 1997 3,071 0.073 92.2 206 – 206 1998 2,449 0.077 88.4 167 – 167 1997 2,080 0.075 85.4 133 – 133 1998 596 0.187 85.4 99 – 99 1997 855 0.123 78.2 82 – 82 $ 400 $ 420 $ 400 $ 420 $ 400 $ 420 $ 400 $ 420 $ 400 $ 420 $ 243 – (49) 194 – – 194 201 5 $ 400 $ 206 $ 10 – $ 253 – (59) 194 – – 194 95 4 $ 293 $ 226 $ 7 – $ 135 – (1) 134 – – 134 91 4 $ 229 $ 266 $ 5 – $ 140 – (1) 139 – – 139 75 7 $ 221 $ 281 $ 4 – $ 241 – (8) 233 – 1 234 85 13 $ 332 $ 166 – – $ 279 5 (7) 277 12 1 290 47 19 $ 356 $ 130 $ 5 $ (1) $ 278 – (11) 267 6 – 273 104 15 $ 392 $ 127 – – $ 348 (38) (11) 299 10 – 309 136 11 $ 456 $ 111 $ $ 5 5 $ 558 – (284) 274 13 – 287 24 40 $ 351 $ 113 $ 3 – $ 869 – (530) 339 12 – 351 203 31 $ 585 $ 69 $ 26 – 6 1 B A R R I C K G O L D C O R P O R A T I O N SUPPLE M ENTA L INFORM ATION E L E V E N - Y E A R H I S T O R I C A L R E V I E W * 1998 1997 1996 1995 Operating results (in millions) Revenues Net income (loss) Operating cash ﬂow Capital expenditures Per share data Net income (loss) per share Cash dividends per share Financial position (in millions) Cash and short-term investments Total assets Working capital Long-term debt Shareholders’ equity Debt to total capitalization Operational statistics (unaudited) Gold production (thousands of ounces) Cash operating costs per ounce Average price realized per ounce of gold sold Average spot price of gold per ounce Reserves (proven and probable) (thousands of ounces) $ 1,298 301 539 507 $ 0.79 $ 0.18 $ 416 4,655 378 500 3,592 12% 3,205 $ 160 400 294 51,456 $ 1,294 (123) 470 372 $ (0.33) $ 0.160 $ 292 4,306 253 500 3,324 13% 3,048 $ 182 420 332 50,318 $ 1,318 218 463 374 $ 0.60 $ 0.140 $ 245 4,515 291 500 3,501 12% 3,149 $ 193 415 388 51,117 $ 1,307 292 502 385 $ 0.82 $ 0.120 $ 284 3,556 285 100 2,948 3% $ 3,141 180 406 384 36,539 *Information has been derived from audited ﬁnancial statements, except as indicated. Q U A R T E R L Y D A T A (unaudited) (in millions except per share data) 1998 March 1997 1998 June 1997 September 1997 1998 December 1997 1998 Revenues Gold sales Interest and other income Costs and expenses Operating Depreciation and amortization Administration Exploration Gain on sale of/provision for mining properties Income (loss) before taxes Income taxes $ 302 3 $ 302 4 $ 293 3 $ 312 2 $ 324 3 $ 314 2 $ 368 2 $ 356 2 305 306 296 314 327 316 370 358 135 49 10 11 (42) 163 142 (67) 163 48 10 13 – 234 72 (17) 141 46 7 13 – 207 89 (22) 156 49 9 18 – 232 82 (20) 154 51 8 12 – 225 102 (26) 151 44 10 18 431 654 (338) 23 165 70 11 14 – 260 110 (27) 185 47 7 15 – 254 104 (29) Net income (loss) for the period $ 75 $ 55 $ 67 $ 62 $ 76 $ (315) $ 83 $ 75 Net income (loss) per share Fully diluted $ 0.20 $ 0.15 $ 0.18 $ 0.16 $ 0.20 $ (0.84) $ 0.21 $ 0.20 6 2 B A R R I C K G O L D C O R P O R A T I O N 1994 1993 1992 1991 1990 1989 1988 $ 954 251 376 272 $ 0.80 $ 0.100 $ 458 3,472 367 283 2,617 10% 2,326 $ 165 402 384 37,589 $ 681 213 317 165 $ 0.74 $ 0.080 $ 348 1,635 270 211 1,191 15% $ 1,632 168 409 360 28,439 $ 554 175 283 256 $ 0.61 $ 0.065 $ 288 1,499 210 260 984 21% $ 1,325 162 422 345 25,719 $ 369 92 160 246 $ 0.34 $ 0.055 $ 252 1,301 211 263 832 24% $ 790 204 438 362 24,377 $ 283 58 94 174 $ 0.23 $ 0.040 $ 312 1,143 274 331 636 34% $ 596 217 437 384 19,510 $ 228 34 77 205 $ 0.14 $ 0.030 $ 305 1,012 272 387 484 44% $ 468 222 436 382 19,877 $ 163 28 50 178 $ 0.12 $ 0.020 $ 51 668 35 215 352 38% $ 341 223 446 437 17,083 Q U A R T E R L Y D A T A (unaudited) (in millions except per share data) 1998 March 1997 1998 June 1997 September 1997 1998 December 1997 1998 Operating activities Net income (loss) Depreciation and other non-cash items Working capital changes Development activities Property, plant and equipment Sale of mining properties Other Financing activities Capital stock Long-term obligations Dividends Increase (decrease) in cash Cash beginning of period Cash at end of period $ 75 $ 55 $ 67 $ 62 $ 76 $ (315) $ 83 $ 75 53 7 135 (113) 90 17 (6) 21 (3) – 18 147 292 54 (8) 101 (65) – (4) (69) 2 (2) – – 32 245 51 (9) 109 (161) 60 (27) (128) 4 (1) (34) (31) (50) 439 56 3 121 (113) – (21) (134) 1 (5) (30) (34) (47) 277 55 15 146 (121) – (10) (131) 3 (5) – (2) 13 389 436 7 128 (75) – 45 (30) 2 (3) – (1) 97 230 77 (11) 149 (112) 20 (5) (97) 7 (11) (34) (38) 14 402 36 9 120 (119) – (16) (135) 1 9 (30) (20) (35) 327 $ 439 $ 277 $ 389 $ 230 $ 402 $ 327 $ 416 $ 292 6 3 B A R R I C K G O L D C O R P O R A T I O N SHAREHOLDER INFORM ATION S H A R E S T R A D E D O N S I X M A J O R T I C K E R S Y M B O L A N N U A L D I V I D E N D P E R S H A R E I N T E R N A T I O N A L S T O C K E X C H A N G E S ABX US 18¢ New York Toronto Montreal London Paris Swiss I N D E X L I S T I N G S S&P 500 Index TSE 60 TSE 300 TSE Gold & Precious Minerals Index FT of London Gold Index Philadelphia Gold/Silver Index S H A R E T R A D I N G I N F O R M A T I O N Toronto Stock Exchange Quarter Share Volume (millions) N U M B E R O F S H A R E H O L D E R S V O L U M E O F S H A R E S T R A D E D 14,397 C O M M O N S H A R E S (millions) Outstanding at December 31, 1998 Weighted average Basic Fully diluted 377 376 390 The Company’s shares were split on a two-for-one basis in 1987, 1989 and 1993. (millions) NYSE TSE 1998 365 409 1997 300 281 C L O S I N G P R I C E O F S H A R E S December 31, 1998 NYSE TSE US$ 19.50 C$ 29.80 New York Stock Exchange High Low Quarter Share Volume (millions) High Low 1998 First Second Third Fourth 1997 First Second Third Fourth C$ 31.65 34.00 32.60 35.95 C$ 21.65 24.50 20.10 27.90 C$ 39.30 36.20 34.90 34.80 C$ 32.35 29.75 26.25 21.50 107 93 97 112 409 68 74 67 72 281 1998 First Second Third Fourth 1997 First Second Third Fourth US$ 22.25 26.69 21.56 23.63 US$ 15.13 16.63 12.88 17.94 US$ 30.50 26.00 25.13 25.19 US$ 25.13 21.50 19.38 15.13 104 81 82 98 365 80 65 70 85 300 6 4 B A R R I C K G O L D C O R P O R A T I O N D I V I D E N D P A Y M E N T S F O R M 4 0 - F S H A R E H O L D E R C O N T A C T S In 1998, the Company paid a cash dividend of $0.18 per share – $0.09 on June 15 and $0.09 on December 15. A cash dividend of $0.16 per share was paid in 1997 – $0.08 on June 16 and $0.08 on December 15. D I V I D E N D P O L I C Y In the past, the Company increased cash dividends as earnings and cash ﬂow rose. However, dividends will remain modest as it is the Company’s intention to retain most of its earn- ings to support current operations, to fund exploration and development projects, and to fund acquisitions of gold properties. The Board of Directors reviews the dividend policy semi-annually based on the Company’s cash requirements and ﬁnancial position. A N N U A L M E E T I N G The Annual General Meeting of Shareholders will be held on Tuesday, May 4, 1999 at 10:00 a.m. in the Canadian Room, Royal York Hotel, Toronto, Ontario. Annual Report on Form 40-F is ﬁled with the United States Securities and Exchange Commission. This report will be made available to shareholders, without charge, upon written request to the Secretary of the Company at the Corporate Ofﬁce. O T H E R L A N G U A G E R E P O R T S French and Spanish versions of this annual report are available from Investor Relations at the Corporate Ofﬁce. D I V I D E N D R E I N V E S T M E N T P R O G R A M The Canadian Shareowners Asso- ciation, a non-proﬁt educational organization of retail investors, has selected Barrick to be a part of its dividend reinvestment program for Canadian investors. Barrick share- holders interested in this program should contact the Association at: Telephone: (416) 595-9600 Fax: (416) 595-0400 Email: questions @shareowner.ca Web site: www.shareowner.ca Shareholders are welcome to contact the Company for informa- tion or questions concerning their shares. For general information on the Company, contact the Investor Relations Department; see inside back cover for contact information. For information on such matters as share transfers, dividend cheques and change of address, inquiries should be directed to the Secretary of Barrick or the Transfer Agents. Addresses and telephone numbers of the Transfer Agents follow. T R A N S F E R A G E N T S A N D R E G I S T R A R S CIBC Mellon Trust Company P.O. Box 7010 Adelaide Street Postal Station Toronto, Ontario M5C 2W9 Telephone: (416) 643-5500 Toll-free throughout North America: 1-800-387-0825 Fax: (416) 643-5501 Email: inquiries@cibcmellon.ca Web site: www.cibcmellon.ca ChaseMellon Shareholder Services, ... 85 Overpeck Center Ridgeﬁeld Park, New Jersey 07660 Telephone: (201) 296-4002 Toll-free within the United States: 1-800-526-0801 6 5 BOARD OF DIRECTORS Howard L. Beck, .. Toronto, Ontario Chairman, Wescam Inc. Mr. Beck was a founding Partner of the law ﬁrm Davies, Ward & Beck. He has been on the Barrick Board since 1984. C. William D. Birchall London, England Vice Chairman, TrizecHahn Corporation Mr. Birchall has had a long association with Barrick, being one of the original Board members of the Company. John K. Carrington Thornhill, Ontario Vice Chairman and Chief Operating Ofﬁcer, Barrick Gold Corporation Mr. Carrington was appointed a Vice Chairman of the Company in March 1999 in addition to his role as Chief Operating Ofﬁcer, which he assumed at the end of 1996. He has been a member of the Board since 1996 and joined the Company in 1995 as Executive Vice President, Operations. Marshall A. Cohen, .. Toronto, Ontario Counsel, Cassels Brock & Blackwell Mr. Cohen served the Government of Canada for 15 years in a number of senior positions including Deputy Minister of Finance. He has been a Director of Barrick since 1988. Peter A. Crossgrove Toronto, Ontario Chairman, Camreal Corporation Prior to January 1993, he was Vice Chairman and Acting Chief Executive Ofﬁcer of Placer Dome Inc. He has been a Director of Barrick since 1993. B A R R I C K G O L D C O R P O R A T I O N The Honourable J. Trevor Eyton, .., .. Caledon, Ontario Senior Group Chairman, EdperBrascan Corporation Member of the Senate of Canada Mr. Eyton has been a member of the Senate of Canada and on Barrick’s Board since 1990. David H. Gilmour Palm Beach, Florida Chairman, Fiji Water,  David Gilmour is one of the original partners in Barrick and has been on the Board since the Company’s inception. Angus A. MacNaughton Danville, California President, Genstar Investment Corporation Mr. MacNaughton is a Vice Chairman of Barrick. He has been a member of the Board since 1986. The Right Honourable Brian Mulroney, .., .. Montreal, Quebec Senior Partner, Ogilvy Renault Mr. Mulroney was Prime Minister of Canada from 1984 to 1993. He joined the Barrick Board in 1993 and is Chairman of the Company’s International Advisory Board. Anthony Munk Toronto, Ontario Vice President, Onex Corporation Mr. Munk became a member of the Board of Directors in 1996. He is a Partner of Onex Corporation, an investment company. Peter Munk, .. Toronto, Ontario Chairman, Barrick Gold Corporation Peter Munk is the founder and Chairman of the Board of Barrick Gold Corporation. He is also the founder, Chairman and Chief Executive Ofﬁcer of TrizecHahn Corporation. 6 6 The Honorable Edward N. Ney New York, New York Chairman, Board of Advisors, Burson-Marsteller From 1989 to 1992, Edward Ney was United States Ambassador to Canada. He has been a Director of Barrick since 1992. Randall Oliphant Unionville, Ontario President and Chief Executive Ofﬁcer, Barrick Gold Corporation Mr. Oliphant was appointed President and Chief Executive Ofﬁcer in March 1999. Previously he was Executive Vice President and Chief Financial Ofﬁcer. He has been on the Board since 1997. Mr. Oliphant joined Barrick in 1987. Joseph L. Rotman, .. Toronto, Ontario Chairman and Chief Executive Ofﬁcer, Clairvest Group Inc. Joseph Rotman is also chairman of several private companies including Roy-L Capital Corporation. He has been a Director of Barrick since its inception. Gregory C.Wilkins Toronto, Ontario President and Chief Operating Ofﬁcer, TrizecHahn Corporation Mr. Wilkins was Executive Vice President and Chief Financial Ofﬁcer of Barrick until his appointment at Horsham in September 1993. He assumed his present position in 1996 with the merger of Trizec Corporation Ltd. and Horsham Corporation. He has been a member of the Board since 1991. B A R R I C K G O L D C O R P O R A T I O N CORPORATE GOVERNANCE The Company, the Board of Directors and management of Barrick empha- size effective corporate governance. Accordingly, they have developed systems and procedures that are appropriate to the Company and its business. The Board of Directors is continuing to monitor its governance practices to ensure they remain appro- priate and responsive to changing circumstances. B O A R D M A N D A T E Barrick’s management is responsible for the Company’s day-to-day oper- ations, for proposing its strategic direction and presenting budget and business plans to the Board of Direc- tors for approval. All major acquisi- tions, dispositions and investments, as well as signiﬁcant ﬁnancing and other signiﬁcant matters outside the ordinary course of Barrick’s business, are subject to approval by the Board of Directors. B O A R D C O N S T I T U T I O N Barrick’s Board of Directors is cur- rently comprised of 15 directors, eight of whom are unrelated to the Company. The composition of the Board reﬂects a breadth of back- ground and experience that is impor- tant for effective governance of a company in the mining industry. B O A R D O P E R A T I O N S The Board of Directors has estab- lished six committees, including the Audit, Compensation and Stock Option, Corporate Governance and Nominating, Executive, Environ- mental, Occupational Health and Safety and Finance Committees. The mandates of these Committees are described below. The Audit, Corporate Governance and Nominat- ing and Compensation and Stock Option Committees are comprised entirely of unrelated directors. COM MIT TEES OF THE BOARD The Board of Directors believes that it is desirable for the majority of the Executive Committee to be related to the Company since its mandate requires members to be available on very short notice to deal with signiﬁ- cant issues. All actions approved by the Executive Committee are subse- quently brought to the attention of the full Board of Directors. The fact that a majority of the members of the Finance Committee are related to the Company is balanced by the fact that the recommendations of the Committee are considered by the full Board of Directors. A detailed Statement of Corporate Governance practices appears in the Company’s Infor- mation Circular. A U D I T C O M M I T T E E C O M P E N S A T I O N A N D S T O C K C O R P O R A T E G O V E R N A N C E A N D (H.L. Beck, P.A. Crossgrove, J.L. Rotman) Responsible for reviewing the Com- pany’s ﬁnancial statements with man- agement and the external auditors. The Committee also reviews the external audit plan, the adequacy of internal control systems and meets with the external auditors to discuss ﬁnancial issues relevant to the Company. E X E C U T I V E C O M M I T T E E (A.A. MacNaughton, B. Mulroney, P. Munk, G.C. Wilkins) Exercises all the powers of the Board of Directors (except those powers speciﬁcally reserved by law to the Board of Directors) in the manage- ment and direction of business during intervals between Board meetings. O P T I O N C O M M I T T E E N O M I N A T I N G C O M M I T T E E (H.L. Beck, M.A. Cohen, A.A. MacNaughton) Reviews and approves compensation policies and practices and reviews and recommends to the Board the remuneration for directors and senior management of the Company. The Committee also administers the Company’s stock option plan. E N V I R O N M E N T A L , O C C U P A T I O N A L H E A L T H A N D S A F E T Y C O M M I T T E E (P.A. Crossgrove, A. Munk, J.L. Rotman) Reviews the Company’s environmen- tal and occupational health and safety policies and programs, oversees its environmental and occupational health and safety performance, and monitors current and future regulatory issues. (M.A. Cohen, J.T. Eyton, A.A. MacNaughton, E.N. Ney) Reviews corporate governance poli- cies and practices. This Committee also reviews candidates for election as directors, annually recommends to the Board the slate of nominees for election to the Board by the shareholders and recommends to the Board nominees to ﬁll vacancies on the Board. F I N A N C E C O M M I T T E E (C.W.D. Birchall, A.A. MacNaughton, G.C. Wilkins) Reviews the Company’s investment strategies, gold price hedging pro- gram and debt and equity structure. 6 7 B A R R I C K G O L D C O R P O R A T I O N OFFICERS Peter Munk Chairman Angus A. MacNaughton Vice Chairman Randall Oliphant President and Chief Executive Ofﬁcer John K. Carrington Vice Chairman and Chief Operating Ofﬁcer Patrick J. Garver Executive Vice President and General Counsel Alan R. Hill Executive Vice President, Development Ronald S. Lloyd Executive Vice President, Corporate Development Alexander J. Davidson Senior Vice President, Exploration Louis Dionne Senior Vice President, Underground Operations Gregory P. Fauquier Senior Vice President, United States Operations M. Isabel Mulligan Senior Vice President, Investor Relations Jamie C. Sokalsky Senior Vice President and Chief Financial Ofﬁcer Kenneth G. Thomas Senior Vice President, Technical Services M. Vincent Borg Vice President, Corporate Communications Michael J. Brown Vice President, United States Public Affairs and Public Relations André R. Falzon Vice President and Controller James Fleming Vice President, Communications John T. McDonough Vice President, Environment David W. Welles Vice President and Tax Counsel Sybil E. Veenman Associate General Counsel and Secretary INTERNATIONA L ADVISORY BOARD The International Advisory Board was established to provide advice to Barrick’s Board of Directors and Management as the Company expands internationally. M E M B E R S Senator Howard H. Baker, Jr., United States Partner, Baker, Donelson, Bearman & Caldwell C H A I R M A N The Right Honourable Brian Mulroney Former Prime Minister of Canada Honourable Paul G. Desmarais, Sr., Canada Director and Chairman of Executive Committee, Power Corporation of Canada Vernon E. Jordan, Jr., United States Senior Partner, Akin, Gump, Strauss, Hauer and Feld A. Andrónico Luksic, Chile Head of the Luksic Group Peter Munk, Canada Chairman, Barrick Gold Corporation and Chairman and Chief Executive Ofﬁcer, TrizecHahn Corporation Karl Otto Pöhl, Germany Senior Partner, Sal. Oppenheim Jr. & Cie. José E. Rohm, Argentina Managing Director, Banco General de Negocios 6 8 CORPORATE INFORM ATION C O R P O R A T E O F F I C E Barrick Gold Corporation Royal Bank Plaza, South Tower 200 Bay Street, Suite 2700 P.O. Box 119 Toronto, Canada M5J 2J3 Telephone: (416) 861-9911 Fax: (416) 861-2492 M I N I N G O P E R A T I O N S N O R T H A M E R I C A Goldstrike Property: Betze-Post Mine and Meikle Mine P.O. Box 29 Elko, Nevada 89803 Donald R. Prahl Vice President and General Manager Telephone: (775) 738-8043 Fax: (775) 738-7685 Holt-McDermott Mine P.O. Box 278 Kirkland Lake, Ontario P2N 3H7 John Haﬂidson Mine Manager Telephone: (705) 567-9251 Fax: (705) 567-6867 Bousquet Mine 2 Bousquet Road Route 395 Preissac, Quebec J0Y 2E0 Christian Pichette Mine Manager Telephone: (819) 759-3681 Fax: (819) 759-3663 S O U T H A M E R I C A Chilean Operations Av. Pedro de Valdivia 100 Piso 11, Providencia Santiago, Chile Sergio Jarpa Vice President, Operations Telephone: (56-2) 340-2022 Fax: (56-2) 233-0188 Pierina Mine Pasaje Los Delﬁnes, 159 3er Piso Urb. Las Gardenias Lima 33, Peru Raymond Threlkeld General Manager Telephone: (51-1) 275-0600 Fax: (51-1) 275-3733 C O R P O R A T E D A T A A U D I T O R S PricewaterhouseCoopers  Toronto, Canada I N V E S T O R R E L A T I O N S Contact: Belle Mulligan Senior Vice President, Investor Relations Telephone: (416) 307-7442 Fax: (416) 861-0727 Email: bmulligan@barrick.com Richard S. Young Director, Investor Relations Telephone: (416) 307-7431 Fax: (416) 861-0727 Email: ryoung@barrick.com Kathy Sipos Manager, Investor Relations Telephone: (416) 307-7441 Fax: (416) 861-0727 Email: ksipos@barrick.com Toll-free number within Canada and United States: 1-800-720-7415 Email: investor@barrick.com Web site: www.barrick.com W E A R E B A R R I C K Front cover from left to right: James Henry, Joel Kinder, Enrique Garay, Sharon Matijek, Brian Landers, Tom Owens, Jay A. Doke, Lise Boissonneault, Moe Connell, Jeannot Boutin, Christine Carroll, Peter Toth. Back cover from left to right: Robert Lee, Phan Tran, Wendy Peatross, Robert Deza, Pilar Valdivieso, Rodolfo Labbé, Normand Bédard, Claudia Flores, William Crowe, Colt Nelson, Alejandro Gonzalez, Dwight Trautmann, James Henry. F O R W A R D L O O K I N G S T A T E M E N T S Certain statements included in this report constitute “forward looking statements” within the meaning of the United States Private Securities Litigation Reform Act of 1995. Such forward looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of Barrick or of the gold mining industry to be mate- rially different from future results, performance or achievements expressed or implied by those forward looking statements. Barrick is subject to the effect of changes in the worldwide price of gold and the risks involved in mining operations. These factors are discussed in greater detail in the “Management’s Discussion and Analysis of Financial Results” section as well as Barrick’s Annual Information Form on ﬁle with the U.S. Securities and Exchange Commission and Canadian provincial securities regulatory authorities. a d a n a C n i d e t n i r P m o c . n g i s e d e v o . w w w . d t L s n o i t a c i n u m m o C & n g i s e D e v O : n g i s e D You can contac t us toll-fr e e wi thin Canada and the United States at 1-80 0-720-7415 email us at in vestor@barrick.com visi t our inv es to r r elati ons w eb si te at w w w.barrick.com B A R R I C K G O L D C O R P O R A T I O N A N N U A L R E P O R T 1 9 9 8

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