12893 Barrick 1999 Outs Cov E.s 4/3/00 9:52 AM Page 1 Annual Report ’99 BARRICK Gold Corporation 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 9 12893 Barrick 1999 Outs Cov E.s 4/3/00 9:53 AM Page 1 Barrick set RECORDS across the board in 1999 Earnings increased 10% to $331 million Cash flow rose 30% to $702 million Production increased 14% to 3.66 million ounces Total cash costs declined 26% to $134 per ounce Reserves expanded 15% to 59.3 million ounces 8 14 16 24 28 30 32 47 66 68 72 74 To Our Shareholders Objectives and Results Operations Overview Development and Exploration Social, Environmental and Employee Responsibility Leverage to Rising Gold Prices Management’s Discussion and Analysis of Financial Results Financial Results Reserve Information Premium Gold Sales Program Detail and Supplemental Information Shareholder Information Board of Directors and Officers 12893 Barrick 1999 Ins Cov E.s 4/3/00 9:55 AM Page 1 Corporate Profile Barrick Gold Corporation is a leading international gold producer with five low-cost mines in North and South America and three major mines under development. The Company’s shares trade under the symbol ABX on the Toronto, New York, London and Swiss stock exchanges and the Paris Bourse. Barrick entered the gold business in 1983. Earnings (millions of dollars) Operating Cash Flow (millions of dollars) Gold Production (millions of ounces) 331 301 262* 702 539 470 3.7 3.2 3.0 97 98 99 *before provision 97 98 99 97 98 99 12893 Barrick 1999 Ins Cov E.s 4/3/00 9:56 AM Page 1 Performance HIGHLIGHTS 1999 1998 change Financial Highlights (millions of US dollars, except per share data) Revenue from gold sales Net income for the year Operating cash flow Cash Shareholders’ equity Net income per share (fully diluted) Operating cash flow per share Dividends per share Operating Highlights $ 1,421 $ 1,287 331 702 500 4,154 $ 0.83 1.80 0.20 301 539 416 3,592 $ 0.79 1.43 0.18 Gold production (thousands of ounces) Total cash costs per ounce* Total production costs per ounce* 3,660 $ 134 $ 244 3,205 $ 180 $ 252 +10% +10% +30% +5% +26% +11% +14% –26% –3% Gold Reserves and Mineralization (thousands of ounces) Reserves: proven and probable Gold mineralized material 59,283 21,959 51,456 16,789 +15% +31% *Calculated in accordance with the Gold Institute Standard (see page 34) S T H G I L H G I H E C N A M R O F R E P (cid:2) 12893 Barrick 1999 pp1-15 E.s 4/3/00 9:59 AM Page 1 What’s in YOUR BASKET? Barrick is a compelling investment choice, for reasons that stand out in any diversified basket of stocks: For aggressive growth and financial strength that would make it a leader in any industry; and beyond that, for excellent leverage to rising gold prices. Barrick. The choice that offers: Rising profits, as production increases to 5 million ounces by 2003 at current low costs; Growing free cash flow, projected to total $1.5 billion over the next five years; Expanding reserves of high-quality ounces; Enhanced leverage to strengthening gold prices; A strong balance sheet with the industry’s only “A”credit rating and unparalleled financial resources; and An entrepreneurial culture focused on one central goal – making more money for our shareholders. 12893 Barrick 1999 pp1-15 E.s 4/3/00 4:04 PM Page 2 IncreasingPROFITABILITY F R OM L E F T TO R IGH T: J oh n Car r i ng to n , V ice Chairman and Chief Operati ng Of f icer; A m er ic o V i llaf uer te, Mine S uper intendent; Ig o r G o n zal es , General Manager 2 B a r r i c k G o l d C o r p o r a t i o n 1 9 9 9 A n n u a l R e p o r t 12893 Barrick 1999 pp1-15 E.s 4/3/00 4:04 PM Page 3 by expanding, LOW-COST production Barrick attained the highest profits and lowest costs in its history during 1999. The key was rising low-cost production from exceptional assets like the Pierina Mine in Peru, which produced 837,407 ounces of gold at just $42 per ounce during its first full year of production. B a r r i c k G o l d C o r p o r a t i o n 1 9 9 9 A n n u a l R e p o r t 3 12893 Barrick 1999 pp1-15 E.s 4/3/00 4:04 PM Page 4 GROWTH through large, F R OM L E F T TO R IGH T: Pa tr i c k Gar v er, E xecu ti ve V ice Pr esident and General Counsel ; A lan H i ll , E xecu ti ve V ice Pr esident, Development; Dav id He b er l e i n , E x ploration Manager, Chi le and A rgentina; A l e x Dav id s o n , S enior V ice Pr esident, E x ploration 4 B a r r i c k G o l d C o r p o r a t i o n 1 9 9 9 A n n u a l R e p o r t 12893 Barrick 1999 pp1-15 E.s 4/3/00 4:04 PM Page 5 HIGH-QUALITY projects in development With gold reserves of 17 million ounces and counting, the Pascua- Lama Project in Chile and Argentina will be a major driver of future production growth. New low-cost ounces from Pascua- Lama, Bulyanhulu in Tanzania and Rodeo at Goldstrike, should increase Barrick’s production to 5 million ounces by 2003. B a r r i c k G o l d C o r p o r a t i o n 1 9 9 9 A n n u a l R e p o r t 5 12893 Barrick 1999 pp1-15 E.s 4/3/00 4:04 PM Page 6 LEVERAGE to a rising gold price F R OM L E F T TO R IGH T: Jamie S ok alsk y , S enior V ice Pr esident and Chief Financial Of f icer; S y bi l Ve e n man , A ssociate General Counsel and S ecr etar y; J e f f S w i n oga , D i r ec tor, Tr eas ur y Finance; A m mar A l - J o u n d i , V ice Pr esident and Tr eas ur er 6 B a r r i c k G o l d C o r p o r a t i o n 1 9 9 9 A n n u a l R e p o r t 12893 Barrick 1999 pp1-15 E.s 4/3/00 4:04 PM Page 7 and PREDICTABLE cash flows Barrick is positioned to benefit from a rising gold price. Key changes to the Premium Gold Sales Program effectively halved the hedge position, and ensured early participation in a gold price rally. Regardless of the gold price, strong earnings and cash flow generated by the Program allow the Company to act opportunis- tically and grow with certainty. B a r r i c k G o l d C o r p o r a t i o n 1 9 9 9 A n n u a l R e p o r t 7 12893 Barrick 1999 pp1-15 E.s 4/3/00 4:04 PM Page 8 Rising profits create CORPORATE STRENGTH Fellow Investors, We are pleased to report that 1999 was another year of record profits for Barrick. Making more money for our shareholders is our main objective. It is the key to creating the kind of corporate strength that is inevitably recognized by the stock market, especially when coupled with dynamic growth. We achieved this objective during 1999 in four ways, which will continue to serve us well going forward. They are: By adding quality reserves and production through focused exploration and acquisitions; By optimizing our assets in order to produce more gold, more profitably; By generating strong, reliable revenues through financial strategies that are fine-tuned to the prevailing market; and By continuing to treat our corporate responsibilities to the wider community as a prerequisite to sustained profits. 8 B a r r i c k G o l d C o r p o r a t i o n 1 9 9 9 A n n u a l R e p o r t 12893 Barrick 1999 pp1-15 E.s 4/4/00 10:00 AM Page 9 Peter Munk Chairman Randall Oliphant President and CEO Our strong growth in earnings and cash flow in 1999 reflects the progress we are making on all four fronts, amid price swings that took the gold industry on another roller coaster ride. Investors watched as some companies got into trouble as gold prices fell, then watched as some others got into trouble as gold prices rallied. Despite this, Barrick emerged stronger than ever, with new profit levels, solid growth in production and reserves, and an outstanding outlook. As shareholders ourselves, we share your concern that our stock price did not reflect these accomplishments last year. We believe, however, that Barrick offers what so many investors are looking for – rising profits, leverage to higher gold prices and aggressive growth – and that the market will ultimately reward this kind of performance. We have a growth plan in place that should increase our production by 35% to 5 million ounces of gold by 2003 and increase earnings and cash flows to levels not seen in the industry. And this is a base case. If gold prices continue to rise, we will do even better, since we are positioned to benefit early and strongly from a gold price rally. Barrick is becoming an ever more compelling choice for investors, not only among gold stocks but also in the wider investment universe. B a r r i c k G o l d C o r p o r a t i o n 1 9 9 9 A n n u a l R e p o r t 9 12893 Barrick 1999 pp1-15 E.s 4/3/00 9:59 AM Page 10 1999 . . . A Y E A R OF R E C OR D E A R NING S A ND C A S H F LO W Your Company achieved a 10% increase in earnings and a 30% increase in cash flow last year. Even more gratifying, all our forecasts see continued profitability ahead, under a range of gold market scenarios. The reason for this is our ability to keep doing what we do best: grow (low-cost production), optimize (our assets) and maximize (our revenues). . . . S OLID GR O W T H IN LO W - C O S T P R OD U C T ION Once again, we achieved substantial growth in production and reserves during 1999. Our operations produced more gold at lower cost than ever before. In fact, at $134 per ounce, our total cash costs were the lowest in the industry and in the history of the Company. We expect to achieve a similar level of performance for production and costs this year. Then again, Barrick has arguably the best collection of assets – our gold mines and new projects – located in four of the major gold districts of the world. Our 1999 results benefited from an excellent performance from all our operations. The Goldstrike Property in Nevada, of course, was a key contributor. The remarkable thing about this Property is that its performance continues to strengthen, even after 13 years in operation. During 1999, Goldstrike again produced over 2 million ounces – for the 5th consecutive year – at the lowest total cash cost ever of $154 per ounce. For the future, we expect continued reserve growth, high levels of production and growing free cash flow. During the year, we made crucial progress toward enhancing this scenario. We completed an asset exchange with Newmont that is releasing value for both companies. For Barrick that includes operating synergies that will reduce unit mining costs, as well as provide added exploration potential on newly acquired land. We also kept our $330-million roaster at Goldstrike on schedule for start-up later this year. Another key contributor was the Pierina Mine in Peru, which had a great first year, making a strong contribution to production, earnings and cash flow. We now expect that Pierina will produce an average of 775,000 ounces a year at $60 per ounce during its first five years. 10 B a r r i c k G o l d C o r p o r a t i o n 1 9 9 9 A n n u a l R e p o r t 12893 Barrick 1999 pp1-15 E.s 4/3/00 9:59 AM Page 11 . . . S OLID GR O W T H IN R E S E R V E S Another basis for our future strength lies in our growing, high-quality reserves. They increased by 15% in 1999 to over 59 million ounces – even after record production. This is a testament to the effectiveness of our growth strategies, and to the quality of our portfolio of properties. We employ a two-tiered growth strategy. Tier One is our District Development Program; and Tier Two involves disciplined acquisitions. Rather than pursue high-risk grassroots exploration, Barrick uses an approach that offers the lowest risk and highest returns. Our District Development Program, which is underway at our major operations and development projects, involves focusing exploration on and around existing properties. The benefits of this strat- egy were made readily apparent during 1999. At Goldstrike, we announced a third mine on the Property – the Rodeo Mine – where we have started development of a 5-million ounce resource. More importantly, however, this District approach has transformed the Pascua-Lama Project in Chile and Argentina into what should become the world’s lowest-cost major gold producer. Last year alone, reserves increased to 17 million ounces of gold and 560 million ounces of silver. And there is still vast potential. The benefits of Tier Two – disciplined acquisitions – were illustrated by Barrick’s purchase last year of Sutton Resources, owners of the Bulyanhulu Project in Tanzania. Being disciplined means that in making acquisitions, we will not seek to become larger unless it can improve our financial performance – we will not mine more gold for lower profits. Bulyanhulu proves the point. Once in production, it will contribute 10% to earnings and cash flow annually. Both Pascua-Lama and Bulyanhulu are shaping into long-life, low-cost gold mines. Together, these two mines are targeted to add 1.5 million ounces of new production at an average cash cost of just $84 per ounce once in full production. The impact on our bottom line will be substantial: even at $300 gold these mines are highly accretive to both earnings and cash flow. Their low cost structure gives them exceptional leverage to higher gold prices. B a r r i c k G o l d C o r p o r a t i o n 1 9 9 9 A n n u a l R e p o r t 11 12893 Barrick 1999 pp1-15 E.s 4/3/00 9:59 AM Page 12 . . . S T R ONG P E R F OR M A NC E F R OM P R O V E N F IN A NC I A L S T R AT E G IE S Our Premium Gold Sales Program contributed $391 million in additional revenue in 1999. Over the past three years, the Program has contributed $1 billion in addi- tional revenue, and averaged a $100 premium over the spot price. It is a Program that is continually adjusted and refined to respond to prevailing market conditions. This is crucial for us to meet our objective of maximizing our revenues. With signs of strength in the gold price, we have again made key changes to our Premium Gold Sales Program to give us enhanced leverage in a rally. They are: Committed Position Effectively Halved The size of Barrick’s committed position was effectively reduced by one-half during the last quarter of 1999 to 9.8 million from 18.8 million ounces. In February of this year the Company indicated that it has no plans to increase its spot-deferred position in the current gold market. Call Program for Added Leverage We purchased 6.8 million call options to give us more participation, sooner, in gold price rallies. They provide full participation in gold price rallies above $319 in 2000 and $335 in 2001. Every dollar above these levels will now be added to Barrick’s assured floor price of $360 per ounce. Taken together with the fact that 84% of our reserves benefit in a rising gold mar- ket, this is our vote of confidence in the positive tone of the current gold market. While poised to benefit from a rise in gold prices, we are not dependent on it for profitable growth. Our Premium Gold Sales Program will continue to deliver strong, predictable earnings and generate the cash flow we can invest to grow this Company, without risk and debt leverage. T H E O U T LO O K : Barrick is a young company in an old industry. No wonder our outstanding financial performance reflects innovative and creative thinking. Consider also that more than 40% of our reserves are in development. We are proud of our record since our founding less than two decades ago. Although we are the youngest of the gold 12 B a r r i c k G o l d C o r p o r a t i o n 1 9 9 9 A n n u a l R e p o r t 12893 Barrick 1999 pp1-15 E.s 4/3/00 9:59 AM Page 13 majors, we have the highest capitalization, the best credit rating, and the most liquid shares. Our balance sheet, with cash of $500 million and $4.2 billion in share- holders’ equity, is unique among our peers. Even more importantly, we manage to earn the highest profit in the industry on a regular basis. This is a credit, more than anything, to Barrick’s outstanding group of employees. They are achieving the kind of performance that gives real meaning to the words dedication, commitment, creativity and vision. Our thanks to each of them for their individual contribution to our success. Some contributions can never be adequately described. Such is the impact that David Gilmour has had as a business partner on myself, Peter Munk, from our youth and as a director of this Company since its inception. David is retiring this year as a director of the Company but not as a friend and counselor to myself and senior management. Likewise, we owe a deep debt of gratitude to two other retiring directors: the Honourable Trevor Eyton and the Honorable Edward Ney. On behalf of the Company, we thank them for the wise counsel and breadth of perspective they brought to the Board. We are ready to achieve new levels of performance in the next three years. Production is targeted to rise 35% to 5 million ounces in 2003 at a $145 cost level, driven by new development projects. Earnings and cash flows are expected to rise to levels unseen in the gold indus- try, after reaching new records in 1999. Free cash flow will reach over $1.5 billion over the next five years, even after building three new mines. These are the kind of numbers that add up to investor confidence. Barrick delivers; shareholders can recognize that; and so, inevitably will the market. Peter Munk (signed) Chairman March 14, 2000 Randall Oliphant (signed) President and Chief Executive Officer B a r r i c k G o l d C o r p o r a t i o n 1 9 9 9 A n n u a l R e p o r t 13 12893 Barrick 1999 pp1-15 E.s 4/3/00 9:59 AM Page 14 1999 Produce 3.6 million ounces of gold, including 1 million ounces at Meikle and 835,000 ounces at Pierina. OBJECTIVES RESULTS Production increased 14% to a record 3.66 million ounces of gold. P R OD U C T ION Meikle contributed 977,356 ounces and Pierina produced 837,407 ounces in its first year of operation. C A S H C O S T S Reduce cash operating costs to $125 per ounce, with Meikle producing at $75 per ounce and Pierina at $45 per ounce. E A R N ING S A N D C A S H F LO W Increase earnings 10% and operating cash flow 30%, through higher production and lower cash costs. DE V E LOP M E N T Complete engineering at Pascua, with the objective of lowering capital costs and making a development decision. Continue exploration and engineering of the Goldstrike underground. Production at the Canadian and Chilean mines exceeded plan as well. Cash operating costs declined 23% to $124 per ounce, the lowest level in the history of the Company. All operations recorded lower costs, led by Pierina at $42 per ounce and Meikle at $75 per ounce. The Company has cut $150 million in cash costs since 1996, a 25% reduction, while increasing production by 16%. Earnings increased 10% to $331 million, breaking last year’s record, because of higher production and lower costs and the benefit of our Premium Gold Sales Program. Cash flow rose 30% to a record $702 million, with strong contributions from the low-cost Pierina and Meikle Mines. Capital costs at Pascua remain at $950 million with plans to expand production to over 1 million ounces per year at $60 per ounce for the first five years and $100 per ounce life-of-mine. Production of 800,000 ounces is planned for 2003. Construction began on the third mine at Goldstrike – the underground Rodeo Mine. Acquired and began construction of the Bulyanhulu underground mine in Tanzania. 14 B a r r i c k G o l d C o r p o r a t i o n 1 9 9 9 A n n u a l R e p o r t 12893 Barrick 1999 pp1-15 E.s 4/3/00 9:59 AM Page 15 2000 Produce 3.7 million ounces of gold, including a record 2.45 million ounces OBJECTIVES P R OD U C T ION from the Goldstrike Property and over 800,000 ounces from Pierina. C A S H C O S T S Maintain low total cash costs (including royalties and production taxes) of $145 per ounce, with Meikle and Pierina contributing 1.65 million ounces at $75 per ounce. E A R N ING S A N D C A S H F LO W Achieve earnings and cash flow that at least match the record 1999 levels. If gold prices rise above $319 per ounce, the Company will produce higher earnings and cash flow as it participates in every dollar increase in gold above that price. DE V E LOP M E N T At Pascua, begin construction in December 2000 for Phase I start-up in 2003. At Bulyanhulu and Rodeo, keep mine construction on schedule and on budget for 2001 start-up of both mines. B a r r i c k G o l d C o r p o r a t i o n 1 9 9 9 A n n u a l R e p o r t 15 12893 Barrick 1999 pp16-23 E.s 4/4/00 2:19 PM Page 16 OPERATIONS OVERVIEW Gold Production (millions of ounces) 3.7 3.7 3.2 3.1 3.0 96 97 98 99 00E 2.5 TOTA L C A S H C O S T S P E R O U NC E Barrick operations recorded a 26% decline in total cash costs, including royalties, to $134 per ounce, the low- est level in Company history. These outstanding results were primarily due to record low costs at the Goldstrike Property, the addition of the new Pierina Mine with total cash costs of $42 per ounce and lower costs at the Canadian and Chilean mines. GOLD P RODUC T ION – 1999 Gold production increased 14% to a record 3.66 million ounces. The key contribu- tors were Meikle, where production increased 15% to 977,356 ounces, and Pierina, which produced 837,407 ounces in its first full year of operation. The Canadian and Chilean mines also surpassed their targets, producing 638,482 ounces or 17% of the Company total. GOL D P R OD U C T ION – 20 0 0 Gold production is expect- ed to rise to 3.69 million ounces, benefiting from a record 2.45 million ounces at the Goldstrike Property and another 800,000-ounce contribution from Pierina. These performances will more than offset lower production from Other Properties resulting from the closure of the Bullfrog and Tambo Mines. Total Cash Costs (dollars per ounce) 1999 Cash Margins (dollars per ounce) 217 206 180 145 134 96 97 98 99 00E 343 251 231 205 y t r e p o r P e k i r t s d l o G s e i t r e p o r P r e h t O y t r e p o r P a n i r e i P l a t o T k c i r r a B 2000 Gold Production (estimate) Goldstrike Property (66%) (22%) Pierina Property (12%) Other Properties C A S H M A R G IN S Barrick recorded the highest cash margins in its history, at $251 per ounce. Low total cash costs, combined with a realized price of $385 per ounce sold through the Premium Gold Sales Program, generated the strong margins. 1999 marks the 12th consecu- tive year that cash margins have been at least $200 per ounce. For 2000, cash margins are estimated at $215. 16 B a r r i c k G o l d C o r p o r a t i o n 1 9 9 9 A n n u a l R e p o r t 12893 Barrick 1999 pp16-23 E.s 4/4/00 2:19 PM Page 17 2000 Capital Expenditures (estimate) Goldstrike Property (21%) (7%) Pierina Property Pascua-Lama Project (24%) (36%) Bulyanhulu Project Other Properties (2%) Reserve Development (10%) Under the Company’s District Development Program, exploration is focused around existing properties because that is where quality ounces are most quickly devel- oped and profitably produced. GOLD PRICE ASSUMPTION: (1998 & 1999 – $325; 1997– $350; 1995 & 1996 – $400) C A P I TA L E X P E N DI T U R E S Capital expenditures for 1999, including reserve development, totaled $620 million, higher than expected due to the acqui- sition and start of con- struction of Bulyanhulu. Goldstrike expenditures were $397 million, pri- marily for the new roaster. Sustaining capital was $97 million. For 2000, capital expenditures, including reserve develop- ment, are expected to be Gold Reserves (millions of ounces) 59 51 50 51 37 95 96 97 98 99 20 $565 million. Most of this will be for the development of Barrick’s three new mine projects: Bulyanhulu, Rodeo and Pascua-Lama. Sustaining capital is expect- ed to be $57 million. GOL D R E S E R V E S In 1999, Barrick reserves increased 15% to 59 mil- lion ounces, the highest level in Company history. The Company added 12 million ounces of gold in 1999 (8 million ounces after record production) through exploration at Pascua-Lama, Goldstrike and the acquisition of, and subsequent exploration success at, Bulyanhulu. Principal Properties Goldstrike Property Pierina Property Pascua-Lama Project Bulyanhulu Project Other Properties Gold Reserves Goldstrike Property (46%) (10%) Pierina Property Pascua-Lama Project (29%) Bulyanhulu Project (13%) (2%) Other Properties B a r r i c k G o l d C o r p o r a t i o n 1 9 9 9 A n n u a l R e p o r t 17 12893 Barrick 1999 pp16-23 E.s 4/4/00 2:19 PM Page 18 GOLDSTRIKE PROPERTY Carlin Trend, Nevada GOLDSTRIKE PROPERTY Barrick’s flagship property is situated on the rich Carlin Trend in north-central Nevada. It contains the Betze-Post open pit mine, the high- grade Meikle underground mine and the newly announced Rodeo underground mine just south of Meikle. The Goldstrike Property has already produced over 16 million ounces of gold in its 13-year history, including more than 2 million ounces a year for the last five consecutive years. In 1999, exploration again replaced production, with the result that reserves stand at 27.3 million ounces. Y E A R IN R E V IE W Goldstrike produced 2.1 million ounces of costs. The land acquired was incorporated gold in 1999, lower than the previous year due into the 1999 exploration program, with to lower grades processed. Total cash costs declined 8% to a record low of $154 per ounce, Rodeo and Betze-Post reserves increasing from the exchange. benefiting from low costs at both Betze-Post The $330-million roaster is on schedule and Meikle Mines. Completion of the asset for completion in the first half of 2000, which exchange in May 1999 with Newmont Mining will increase throughput and recovery rates, as Corporation expanded the exploration poten- tial of the Property and will lower future cash well as lower costs. Several major components have already been commissioned. GOL D S T R IK E P R OP E R T Y 98 99 00 E Tons mined (millions) Tons milled (thousands) Grade processed (ounces per ton) Recovery rate (%) Gold production (thousands of ounces) Total cash costs per ounce Total production costs per ounce Reserves (thousands of ounces) Mineralized material 162 6,033 0.42 91.5 2,346 $ 167 $ 220 27,333 156 5,798 0.40 90.8 2,108 $ 154 $ 216 27,251 146 9,211 0.29 91.3 2,452 $ 169 $ 219 — (thousands of ounces) 6,456 7,306 — O U T LO O K F OR 20 0 0 : Production is expected to reach a record 2.45 million ounces because of an increased contribution from Betze-Post. Total cash costs are expected to be $169 per ounce, with higher production from Betze-Post. The roaster will be completed and commissioned, increas- ing throughput and lowering processing costs by 10%. Capital expenditures are expected to decline to $121 million. The major items are completion of the roaster and construction of the new Rodeo Mine. 18 B a r r i c k G o l d C o r p o r a t i o n 1 9 9 9 A n n u a l R e p o r t 12893 Barrick 1999 pp16-23 E.s 4/4/00 2:19 PM Page 19 BETZE-POST MINE Meikle Rodeo BETZE-POST MINE Ne va da Betze-Post is the largest of Barrick’s mines. It produced 1.1 million ounces of gold in 1999, less than in previous years because of lower improved utilization of equipment and lower employee requirements. Mining costs are expected to decline by a further grades and throughput related to increased waste removal and harder ore. Unit-mining 5%-10%, with the continued replacement of the 75-truck mining fleet by 35 larger, costs have declined 17% since 1996, through more efficient trucks. GOL D S T R IK E P R OP E R T Y – E X PLOR AT ION The surface exploration pro- The 47,000-foot, 33-hole Meikle and Rodeo. The gram at the Goldstrike program will test targets 106,000-foot underground Property for 2000 emphasizes north of Meikle, north and drill program is primarily exploration for undiscovered west of Betze-Post and east focused south of Rodeo in ore bodies of one million of the Post Fault. Meanwhile, the Goldbug zone, acquired ounces or larger and expan- the underground program from Newmont in 1999, sion of the Betze-Post is designed to increase and at depth along the mile- pit to the north and west. reserves and resources at long Meikle corridor. BE T Z E - P OST MINE 98 99 00 E Tons mined (millions) Tons milled (thousands) Grade processed (ounces per ton) Recovery rate (%) Gold production (thousands of ounces) Total cash costs per ounce Total production costs per ounce Reserves (thousands of ounces) Mineralized material 161 5,176 0.32 89.2 1,499 $ 205 $ 255 21,213 155 4,763 0.27 88.2 1,130 $ 203 $ 266 20,709 145 8,049 0.22 89.1 1,610 $ 205 $ 255 — (thousands of ounces) 2,398 2,293 — O U T LO O K F OR 20 0 0 : Production is expected to rise to 1,610,000 ounces, with the commissioning of the roaster. Total cash costs are expected to remain at the $200- per-ounce level. A 17% reduction in processing grades will be offset by lower mining and processing costs. Mining costs are expected to fall by 7% with the addition of the sixteen, 320-ton haul trucks purchased late last year. Capital expenditures are expected to be $13 million before amortization of deferred stripping costs of $40 million. B a r r i c k G o l d C o r p o r a t i o n 1 9 9 9 A n n u a l R e p o r t 19 12893 Barrick 1999 pp16-23 E.s 4/4/00 2:19 PM Page 20 MEIKLE MINE Rodeo Betze-Post MEIKLE MINE Ne va da The high-grade Meikle Mine recorded its best results to date: production increased 15% to 977,356 ounces at total cash costs of $96 per Unit mining costs have declined 15% since 1997 through productivity improvements and are expected to continue to decline because ounce. A shaft-deepening and mine expansion program was completed in September, pro- of the shaft deepening. Exploration south of Meikle resulted in the decision to develop the viding access to the deeper reserves and a underground Rodeo Mine. platform for drilling deeper mineralization. RODEO MINE Construction began in of 350,000 ounces per year, 2000 and beyond expected to the fourth quarter of 1999 with total cash costs of $160 increase the reserve to 5 mil- on the $125-million Rodeo per ounce over an eight-year lion ounces. The Rodeo Mine underground mine, which mine life. Based on current illustrates the benefits of the incorporates the Rodeo, reserves the rate of return of Company’s District Develop- Goldbug and North Betze the new mine is 23%, using ment Program of exploration deposits. It is scheduled a $300 gold price. The current around its key properties. to begin production in the reserve base is 2.7 million second half of 2001 at the rate ounces, with exploration in ME IKLE MINE 98 99 00 E Tons milled (thousands) Grade processed (ounces per ton) Recovery rate (%) Gold production (thousands of ounces) Total cash costs per ounce Total production costs per ounce Reserves (thousands of ounces)* Mineralized material 857 1.03 95.9 847 $ 97 $ 155 4,729 1,035 1.00 94.0 978 $ 96 $ 157 3,816 1,162 0.76 95.9 842 $ 108 $ 160 — (thousands of ounces) 2,293 1,502 — *See Rodeo page 67 for reserves O U T LO O K F OR 20 0 0 : Production is expected to be 842,000 ounces, with higher mining rates partially offsetting the lower grades mined. Total cash costs are expected to be $108 per ounce, as the 25% reduction in grades processed is only partially offset by lower mining and processing costs. Mining costs are expected to decline by 6%, due to the completion of the shaft deepening in 1999. Capital expenditures are estimated at $13 million. The Rodeo development is an additional $60 million. 20 B a r r i c k G o l d C o r p o r a t i o n 1 9 9 9 A n n u a l R e p o r t 12893 Barrick 1999 pp16-23 E.s 4/4/00 2:19 PM Page 21 PIERINA PROPERTY PIERINA PROPERTY Barrick’s new low-cost Pierina Mine is located 185 miles north of Lima, Peru. The Company acquired Pierina as an advanced-stage exploration project in 1996, and fast-tracked exploration and mine development. Under Barrick’s District Development Program, the Company has acquired property or entered into joint ventures around the mine and along the belt, building a substantial land package. Systematic exploration is underway in the region to identify mineralization similar to the Pierina deposit. Y E A R IN R E V IE W Pierina exceeded all targets in its first full ounce for the first five years of operation. year of operation, producing 837,407 ounces This is two more years at this rate of produc- of gold at a total cash cost of $42 per ounce. tion than previously estimated. With the The Mine generated cash flow of $285 million, resulting in a one-year payback of the con- Mine now in production, the Company is focused on exploration on the Property. struction costs of $260 million. The Mine Exploration targets have been identified is expected to average 775,000 ounces of and drilling will begin in the first quarter gold at an average total cash cost of $60 per of 2000. P IE R IN A P R OP E R T Y 98 * 99 00 E Tons mined (thousands) Tons placed on pad (thousands) Grade processed (ounces per ton) Gold production (thousands of ounces) Total cash costs per ounce Total production costs per ounce Reserves (thousands of ounces) Mineralized material (thousands of ounces) *Production began in November 1998 2,708 1,506 0.25 57 $ 48 $ 244 7,244 21,591 8,140 0.12 837 $ 42 $ 252 6,146 30,403 12,465 0.08 805 $ 43 $ 251 – 782 782 – O U T LO O K F OR 20 0 0 : Production is estimated at 805,000 ounces, with the higher processing rate offsetting lower grades mined. Total cash costs are expected to remain at the 1999 level, despite the lower grades mined, due to the low mining and processing costs. Capital expenditures are estimated at $43 million, primarily for mine and heap leach expansions and construction of employee housing. An 8,000-meter drill program is planned to test new Property targets. B a r r i c k G o l d C o r p o r a t i o n 1 9 9 9 A n n u a l R e p o r t 21 12893 Barrick 1999 pp16-23 E.s 4/4/00 2:19 PM Page 22 OTHER PROPERTIES Chilean and other United States mines BULLFROG AND PINSON MINES Other Properties consist of the Company’s smaller Canadian mines and those mines designated for closure as part of the Company’s operating plan announced in September 1997 (El Indio, Tambo, Pinson and Bullfrog). Other Properties contributed 715,018 EL INDIO AND TAMBO MINES ounces of gold, or 20% of Company production at total cash costs of $180 per ounce, including 311,881 ounces of gold at $166 per ounce from the Canadian mines. Pinson ceased operations in January and Bullfrog in November 1999, while Tambo is scheduled to close in the second quarter of 2000. The Chilean and other United States proper- O U T LO O K F OR 20 0 0 : ties produced 403,137 ounces of gold in 1999 Production is expected to total 179,000 ounces, at an average total cash cost of $191 per ounce. All operations lowered their cash costs from the previous year. El Indio had its best year since 1996 in terms of production and cash costs. The Mine will remain in operation through at least 2001 due to both exploration success and lower costs. primarily from El Indio Mine, as Bullfrog closed in late 1999 and Tambo is slated to close in the second quarter 2000. Total cash costs are expected to remain low at $195 per ounce. The low costs reflect the benefits of the cost reduction program at El Indio. EL INDIO MINE 98 99 00 E TA MBO MINE 98 99 00 E Tons milled (thousands) Grade processed (ounces per ton) Recovery rate (%) Gold production (thousands of ounces) Total cash costs per ounce Total production costs per ounce Reserves (thousands of ounces) Mineralized material 596 0.19 85.4 99 $ 287 $ 351 111 391 0.40 91.3 144 $ 180 $ 222 192 401 0.39 90.0 139 $ 190 $ 190 – Tons milled (thousands) Grade processed (ounces per ton) Recovery rate (%) Gold production (thousands of ounces) Total cash costs per ounce Total production costs per ounce Reserves (thousands of ounces) Mineralized material 2,449 0.08 88.4 167 $ 273 $ 392 198 2,126 0.09 90.7 183 $ 192 $ 254 59 557 0.08 85.0 40 $ 205 $ 250 — (thousands of ounces) 1,260 630 – (thousands of ounces) 446 387 — 22 B a r r i c k G o l d C o r p o r a t i o n 1 9 9 9 A n n u a l R e p o r t 12893 Barrick 1999 pp16-23 E.s 4/4/00 2:19 PM Page 23 OTHER PROPERTIES Canadian mines CANADIAN PROPERTIES The Holt-McDermott Mine is an underground mine located on the Abitibi Belt in northeastern Ontario. Holt-McDermott produced 108,081 ounces of gold in 1999 at a total cash cost of $140 per ounce. Though production declined due to lower grades mined, lower mining and processing costs kept cash costs per ounce at a level similar to 1998. The shaft deepen- ing program was completed in June 1999. O U T LO O K F OR 20 0 0 : Production is expected to be 92,000 ounces, due to lower grades being mined in smaller stopes and an emphasis on development of the new lower zone. Total cash costs are expected to decline to $136 per ounce, with lower unit costs more than offsetting the lower grade being processed. Capital expenditures are expected to be $6 million for lateral development from the new shaft bottom to the lower ore zone. The Bousquet Mine is an underground mine O U T LO O K F OR 20 0 0 : located on the Abitibi Belt in northwestern Quebec. Bousquet had an excellent year, pro- ducing 203,800 ounces of gold – 16% above plan – at total cash costs of $180 per ounce – 10% lower than plan. The Mine benefited from higher mining rates, as the new 3-1 Zone began production in the first quarter, and from better grades. In addition, Bousquet continues to lower unit costs, which have declined 15% since 1997. Production is expected to decline to 165,000 ounces, with mining concentrated in the lower-grade portion of the 3-1 Zone. Total cash costs are expected to rise to $211 per ounce, with lower unit costs expected to partially offset the lower grade being processed. Capital expenditures are expected to be $4 million for development of the 3-1 Zone and the main ore body. HOLT - M CDE R MOT T MINE 98 99 00 E BO U S Q U E T MINE 98 99 00 E Tons milled (thousands) Grade processed (ounces per ton) Recovery rate (%) Gold production (thousands of ounces) Total cash costs per ounce Total production costs per ounce Reserves (thousands of ounces) Mineralized material (thousands of ounces) 548 0.26 96.4 134 $ 134 $ 229 611 555 0.20 96.1 108 $ 140 $ 234 497 520 0.18 96.0 92 $ 136 $ 229 – Tons milled (thousands) Grade processed (ounces per ton) Recovery rate (%) Gold production (thousands of ounces) Total cash costs per ounce Total production costs per ounce Reserves (thousands of ounces) Mineralized material 714 0.26 95.8 176 $ 194 $ 400 666 867 0.25 94.8 204 $ 180 $ 460 518 872 0.20 93.2 165 $ 211 $ 415 — 370 432 – (thousands of ounces) 776 306 — B a r r i c k G o l d C o r p o r a t i o n 1 9 9 9 A n n u a l R e p o r t 23 12893 Barrick 1999 pp24-27 E.s 4/4/00 2:20 PM Page 24 DEVELOPMENT and EXPLORATION Per u Boli v ia C h i l e A rg e n ti na PASCUA-LAMA PROJECT PA S C U A GOL D MINE PRO JE C T By 2003, Barrick expects to increase production 35% from 3.7 million to 5.0 million ounces with the contribution of three new mines now in development: Pascua-Lama, Bulyanhulu and Rodeo. These mining projects demonstrate the success of our two-tiered growth strategy: our District Development Program, which focuses exploration on and around core properties; and our acquisition strategy. Pascua-Lama and Bulyanhulu are expected to add 1.5 million ounces of gold production annually at total cash costs of $84 per ounce in the early years. 24 B a r r i c k G o l d C o r p o r a t i o n 1 9 9 9 A n n u a l R e p o r t 12893 Barrick 1999 pp24-27 E.s 4/4/00 2:20 PM Page 25 T H E PA S C U A - L A M A P R O J E C T Reserves increased to 17.1 million ounces of gold, up 20%, and 560 million ounces of silver in 1999. In addition, high-grade zones were delineated that will permit higher gold and silver production at lower cost in the early years. Estimated cash costs have been reduced to $60 per ounce in the first five years and $100 life-of-mine. The higher production and lower cash costs improve the rate of return to 14%, based on $300 gold and $5.25 silver. estimated at $950 million. Phase II, scheduled for 2005, will expand the process facilities to 44,000 tonnes per day, increasing production from 800,000 to 1 million ounces of gold per year. A Phase III expansion involving the reloca- tion of the Tambo mill is under consideration. This phase would process the oxide ores from satellite deposits, including Veladero, and could be operational as early as 2003, adding about 180,000 ounces of gold production annually. Construction is scheduled to begin in Other deposits discovered under the con- December 2000 on Phase I, a 33,000-tonnes- tinuing District Development Program would per-day process facility. Capital costs, including benefit from Pascua’s processing facilities the mining fleet and infrastructure, are and infrastructure. ARGENTINA CHILE Po r f ia da Tai l i ng s Dam Pr oc ess P lant Lama C e n tral C o n v e y or Mo r r o O este Pas c ua-Lama E x tensi on Cr usher Fe d er i c o No r te PENELOPE PENELOPE ARGENTINA CHILE PASCUA-LAMA PASCUA-LAMA 17.1 mil lion 17.1 m illion o u n c es o u n c es B a r r i c k G o l d C o r p o r a t i o n 1 9 9 9 A n n u a l R e p o r t 25 12893 Barrick 1999 pp24-27 E.s 4/4/00 2:20 PM Page 26 Development and Exploration C o ng o Uganda Lake Victoria K e n ya BULYANHULU PROJECT Tan zania Zambia Mo zam bi que T H E B U LYA N H U L U P R O J E C T Reserves increased from 3.6 million ounces at the time of acquisition in March 1999 to in the initial years, declining to $100 per ounce once the mine is at full capacity in 2005. 7.5 million ounces at year-end. The Project also has 2.9 million ounces of resources. The The process facilities are being constructed to permit phased expansion, which will accom- process facilities and associated infrastructure modate anticipated production from the four for Reef 1 are expected to be completed by other reefs already identified on the Property. the second quarter of 2001. Production will These reefs are scheduled for drilling in 2000, begin at 260,000 ounces in 2001, rising to as are several potential new reefs identified 400,000 ounces in 2005. It will continue to on the Property in 1999. Under the District rise to as much as 500,000 ounces, as mining Development Program, Barrick has acquired moves deeper into the higher-grade areas over 1,800 square kilometers of prospective of the ore body. Capital cost to bring the Mine into produc- tion is forecast at $280 million. Total cash costs are expected to average $160 per ounce ground in the Lake Victoria Greenstone Belt. Bulyanhulu is the hub for the entire district, with most properties located within trucking distance of the Mine’s process facilities. R e e f 1 1 k m . R e e f 3 R e e f 2 O P E N Shambani Reef Shambani Reef R e e f 1 Bl ue Reef BULYANHULU 7.5 m illio n ou nc es O P E N O P E N 26 B a r r i c k G o l d C o r p o r a t i o n 1 9 9 9 A n n u a l R e p o r t 12893 Barrick 1999 pp24-27 E.s 4/4/00 2:20 PM Page 27 Oregon Ida ho GOLDSTRIKE PROPERTY Neva da Calif ornia Utah GOL D S T R IK E P R OP E R T Y The benefits of a focused District Develop- ment Program are nowhere more apparent than at the Company’s flagship Goldstrike Property, where three mines have been dis- Meikle Mine. And now the Rodeo underground mine is being devel- oped between the Meikle and Betze-Post Mines. The new mine is expected to take covered so far. The Company discovered the just 18 months to build and cost $125 million, Betze mineralization in 1987, complementing generating a 23% rate of return based on the high-grade Post mineralization discovered $300 gold. The speed of development, the low in 1986. Together they form the prolific capital cost and high rate of return are only Betze-Post Mine. Subsequent exploration north of the open pit led to the discovery and possible because of Rodeo’s proximity to exist- ing infrastructure and process facilities. development of the high-grade underground With an aggressive exploration program underway, and a new roaster on the Property, the likelihood is high of discovering new ounces and being able to produce them quickly and profitably. The Company expects to repeat its Goldstrike success at its two development properties, Pascua-Lama in Chile and Argentina and Bulyanhulu in Tanzania through reserve and production expansions. B e t ze - Po st M i n e B e t ze - Po st M i n e 20.7 mi llio n ounc es 20.7 mi llion ounc es R oaster R o d e o M i n e 2.7 mi llion o u n c es Me ik le Mine 3. 8 m illio n o u n c es B a r r i c k G o l d C o r p o r a t i o n 1 9 9 9 A n n u a l R e p o r t 27 12893 Barrick 1999 pp28-29 E.s 4/4/00 2:21 PM Page 28 SOCIAL, ENVIRONMENTAL and EMPLOYEE RESPONSIBILITY Barrick believes that corporate leadership is measured in several dimensions – in profitability, in social responsibility, in environmental protection and in caring for employees. All are interdependent. We cannot prosper in isolation. Therefore, our business goals include building stronger communities, mini- mizing our impact on the environment and motivating employees. S O C I A L Barrick’s operations are members of the communities in which they operate and they act accordingly. As well as providing the economic benefits of development, they donate generously to community causes and charities. Barrick’s policy is to give 1% of annual pre-tax income to charitable endeavors. During 1999, Barrick donated $4 million to education, health care and other causes to strengthen the social fabric of communities. Examples: Barrick was named 1999 “Mining Advocate of the Year,” for community building efforts in Elko, Nevada, near the Goldstrike Property. Last year alone, Barrick donated more than $900,000 to local schools, camps for children and other charities. Near the Pierina Property in Peru, Barrick is building the “Robert M. Smith School” (left), named after the Company’s former President. This school is for local children, from toddlers to teenagers. Barrick also supports local causes ranging from health care and agricultural development to sports leagues. Building better communities with educational facilities 28 B a r r i c k G o l d C o r p o r a t i o n 1 9 9 9 A n n u a l R e p o r t 12893 Barrick 1999 pp28-29 E.s 4/4/00 2:21 PM Page 29 Ensuring air quality E N V IR ON M E N TA L Wherever Barrick operates, it applies world- class environmental standards through every stage of the mining life cycle. At new projects, such as Bulyanhulu and Pascua, cradle-to-grave environmental protection plans are completed before development even begins. During mining operations, superior environmental practices are integral to oper- Barrick operations have won seven major environmental awards in the past three years. In 1999, Barrick won the Earth Day Award for Environmental Partnership for the third year in a row. Presented by the Utah Department of Natural Resources, the award recognized Barrick’s funding for ating excellence. When mining is complete, abandoned mine reclamation work on natural ecosystems are restored to an equiva- public land near the Mercur Mine in Utah. lent of their original condition, or better. C A R ING F OR E M P LOY E E S Barrick employees are highly valued and receive attractive wages and benefits. These include competitive medical and performance incentive plans, as well as an outstanding scholarship program for their children. During 1999, Barrick awarded $1.2 million in scholarship funds to 674 students under the Robert M. Smith Scholarship Program. The program entitles the children of Barrick employees to receive funding for post- secondary education. Since its inception in 1986, the program has awarded about 3,330 scholarships with a total value of more than $7 million. Supporting higher learning B a r r i c k G o l d C o r p o r a t i o n 1 9 9 9 A n n u a l R e p o r t 29 12893 Barrick 1999 pp30-31 E.s 4/4/00 2:21 PM Page 30 LEVERAGE to rising GOLD PRICES During 1999, the Premium Gold Sales Program contributed $391 million in revenues or $293 million after tax. Over the past three years, the Program’s total contribution is $1 billion in revenue. This Program is designed to offer investors the best of both worlds: leverage to rising gold prices with explosive earnings potential; and strong, predictable revenues. E N H A NC E D L E V E R A GE Leverage is important to today’s gold investor. That is why Barrick has 84% of its reserves exposed to rising gold prices, while still providing investors the security of a floor price in a low gold price environment. Barrick moved in 1999 to enhance its leverage by making significant changes to its Program to provide more partici- pation, sooner in a gold price rally. The size of Barrick’s committed position was effectively halved in the last quarter of the year, to 9.8 million ounces, or only 16% of reserves in a rising gold market. This was primarily accomplished by the purchase of 6.8 million call options covering the next two years’ production. The calls were bought in December 1999 when the gold price was just above $280 per ounce. They give Barrick the right, but not the obligation, to purchase gold at $319 per ounce in 2000 and $335 in 2001. A rise in the gold price above those levels will result in a cash payment to Barrick. This will increase earnings and cash flow immediately. Leverage to Rising Gold Prices (millions of ounces) Uncommitted Reserves 49.5 Committed Reserves at $360/oz. 9.8 30 B a r r i c k G o l d C o r p o r a t i o n 1 9 9 9 A n n u a l R e p o r t 12893 Barrick 1999 pp30-31 E.s 4/4/00 2:21 PM Page 31 The purchased calls give the Company by 15-year trading lines; no margin calls additional positive earnings leverage of approximately 7 cents per share for each $10 move in the price of gold above the call strike price. The cost of the calls is $10 per ounce, which was funded from gains on the hedge position. In two more key adjustments, the Company spread out the delivery schedule of its spot deferred contracts over more years; and reduced the long-term written call program. F U N D A M E N TA L P R INC I P L E S R E M A IN IN TA C T The Premium Gold Sales Program remains based on two fundamental principles: 1. Providing predictable revenues; and 2. Earning contango on gold reserves in the ground. The Program’s strength and reliability derive from its unique flexibility, which itself is a reflection of the financial strength of the Company. Barrick’s Program is distinguished until gold reaches $800 per ounce; and margin requirements of only $72 million at $1,000 gold. Currently under the Premium Gold Sales Program, Barrick has 100% of the next two years’ production hedged at a minimum floor price of $360 per ounce, and about 25% of annual production hedged for several years beyond 2001. With the adjustments to enhance leverage in 1999, Barrick has once again demonstrated its ability to fine-tune its revenue management strategies to suit prevailing market conditions, while preserving their reliable revenue- generating power. These additional revenues allow Barrick to act opportunistically. During 1999, for instance, hedging revenues more than paid for the acquisition of the 10-million ounce Bulyanhulu Gold Project in Tanzania. (See page 68 for additional information on the Premium Gold Sales Program.) HO W T H E P U R C H A S E D C A L L S W OR K : A N E X A M P L E The calls give Barrick dollar-for-dollar participation as the gold price rises above $319 in 2000, and $335 in 2001. They involve a simple cash settlement. For example: Barrick’s Realized Gold Price (dollars per ounce) If gold rallies this year to $340 per ounce, Barrick would earn: The $360 per ounce floor price established by the spot deferred contracts in its Premium Gold Sales Program; plus An additional premium of $21 from the calls purchased. This represents the difference between the spot price of $340 and the call strike price of $319 per ounce. As a result, Barrick’s realized price would be $360 plus $21, or $381 per ounce. And if gold prices were to continue to rise, Barrick’s $381 realized price would rise as well. 381 21 340 21 360 319 250 As this example demonstrates, Barrick has the best of both worlds. The Company has a floor price of $360 per ounce for its gold, but will participate in a rally well before the spot price rises to that level – with a direct impact on earnings and cash flow. Additional Premium Call Strike Price Barrick’s Floor Price B a r r i c k G o l d C o r p o r a t i o n 1 9 9 9 A n n u a l R e p o r t 31 12893 Barrick 1999 MD&A E.s 4/3/00 10:07 AM Page 32 MANAGEMENT’S DISCUSSION and ANALYSIS of financial results Barrick had its best year in 1999, achieving record earnings, cash flow, production, cash costs and reserves. Net income in 1999 was $331 million, or 83 cents per share, 10% higher than the $301 million, or $0.79 per share, earned in 1998. Correspondingly, operating cash flow increased 30% to $702 million, or $1.80 per share, from the $539 million, or $1.43 per share, recorded in 1998. The record results were attributable to the highest production and lowest cash costs in the Company’s history, combined with the premium earned on gold sales. In 2000, the Company expects another strong year with marginally higher production and continued low cash costs. Barrick is also positioned to participate quickly in a gold price rally, with the result that the Company offers the best features of both hedged and unhedged gold producers. Earnings and Cash Flow (millions of dollars) 702 539 470 331 301 262* Earnings and Cash Flow per Share (dollars per share) 1.80 1.43 1.26 0.83 0.79 0.70* 97 98 99 97 98 99 Operating Cash Flow Net Income *before provision Operating Cash Flow Net Income *before provision 32 B a r r i c k G o l d C o r p o r a t i o n 1 9 9 9 A n n u a l R e p o r t 12893 Barrick 1999 MD&A E.s 4/3/00 10:07 AM Page 33 1999 GOL D S A L E S $391 million in additional revenue The Program was modified to participate sooner in gold rallies while providing a minimum floor price of $360 per ounce. G o ld sal es gold rallies above $319 per ounce in 2000 and Under its Premium Gold Sales Program, Barrick $335 in 2001. The result is that if gold prices realized $385 per ounce on its gold sales in 1999, remain at current levels of $300, the Company compared with $400 in 1998 ($420 in 1997). The will generate an additional $440 million in Company generated a $106-per-ounce premium revenue over the next two years. At the same over the average spot price of $279 per ounce for time, if gold prices rally above $319 and $335, the the year, resulting in $391 million in additional Company will realize higher gold prices than revenue in 1999. Over the past 10 years, Barrick the $360 minimum floor price for its gold sales. has realized $64 per ounce above the average In fact, Barrick will receive the higher of $360 per spot price of $351 per ounce during the period, ounce or the spot price plus $41 in 2000 and spot or $1.5 billion in additional revenues. plus $25 in 2001. (See pages 30 and 68 for further Revenue from gold sales of 3,692,764 ounces discussion of the Premium Gold Sales Program). was $1,421 million in 1999, 10% higher than the $1,287 million reported in 1998 on gold sales of 3,216,323 ounces ($1,284 million in 1997 on gold sales of 3,058,546 ounces). In 1999, the benefit of the 14% increase in gold production was partially offset by a 4% decrease in the realized price. The Company has modified its Program to participate sooner in gold price rallies. The Program now combines the protection of a mini- mum floor price of $360 per ounce for the next two years, with the ability to participate fully in Premium Gold Sales Revenue vs Spot Gold Price (dollars per ounce) 415 420 27 88 406 400 22 384 388 385 106 106 332 294 279 95 96 97 98 99 200 Premium Gold Sales Revenue Spot Gold Price B a r r i c k G o l d C o r p o r a t i o n 1 9 9 9 A n n u a l R e p o r t 33 12893 Barrick 1999 MD&A E.s 4/3/00 10:07 AM Page 34 1999 OP E R AT ING C O S T S All operations have lowered unit mining, processing and administrative costs per ton $150 million cut since 1996 over the past three years. OP E R AT ING C O S T S / P R OD U C T ION increasing production and lowering costs is a key O v e r v ie w The Company lowered operating costs by 13% to component of Barrick’s strategy of making more money for its shareholders. $516 million in 1999, compared with $595 million G old str ik e Pr o p er t y in 1998 ($655 million in 1997). On a per ounce The Goldstrike Property, which accounted for basis, total cash costs, at $134, were $3 lower than more than 58% of the Company’s gold production, plan and $46 lower than the $180 per ounce in- or 2.1 million ounces, reported total cash costs curred in 1998 ($206 per ounce in 1997). In total, of $154 per ounce, 8% lower than 1998 costs of the Company has cut $150 million in cash costs $167 per ounce. The record low cash costs were or 25% of cash costs from its operations since 1996. due to the best year to date for Meikle. The aver- Optimizing the Company’s existing asset base by age grade processed at the Property declined to Total Cash Costs (dollars per ounce) 217 24 193 198 18 180 206 24 180 182 20 160 134 10 124 95 96 97 98 99 Royalties and Production Taxes Cash Operating Costs F IN A NC I A L IN F OR M AT ION (dollars) Gold production – ounces (thousands) 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) GOL D S T R IK E P R OP E R T Y 1998 2,346 $ 400 $ 120 22 (1) 141 18 8 167 50 3 $ 220 $ 233 $ 114 $ 39 1999 2,108 $ 385 $ 168 (29) (1) 138 11 5 154 60 2 $ 216 $ 231 $ 337 $ 60 2000E 2,452 $ 360 $ 134 20 (1) 153 13 3 169 48 2 $ 219 $ 191 $ 161 $ (40) 34 B a r r i c k G o l d C o r p o r a t i o n 1 9 9 9 A n n u a l R e p o r t 12893 Barrick 1999 MD&A E.s 4/3/00 10:07 AM Page 35 1999 OP E R AT ION S C O S T S Goldstrike recorded the lowest costs in its history Lower mining and processing costs at Betze-Post will keep cash costs low over the next 10 years, despite declining grades. 0.40 ounces per ton (opt) in 1999 from 0.42 opt B e t ze - Po st M i n e in 1998. The lower average grade reflects lower Total cash costs per ounce were $203 per ounce grades at both mines on the Property. The average in 1999, similar to the past three years, even though grade of Meikle ore processed was 1.00 opt versus the grade processed declined 24% over the same 1.03 opt in 1998, while the average grade of period. Total cash costs are expected to be $205 Betze-Post ore processed declined to 0.27 opt per ounce in 2000, while the grade processed from 0.32 opt in 1998. Grades are expected to is expected to decline 17% to 0.22 opt. Reduced move toward reserve grade at both Betze-Post administrative and mining costs, as well as lower and Meikle over the next few years, but total royalties and production taxes have contributed to cash costs, including royalties and production cash costs remaining low. Total unit mining costs taxes, are anticipated to remain below $175 per at the Betze-Post Mine declined 10% to $1.01 per ounce for the next 10 years. ton in 1999 from $1.11 per ton in 1998 ($1.15 per P IE R IN A P R OP E R T Y OT H E R P R OP E R T IE S 1998 57 $ 400 $ 53 – (5) 48 – – 48 191 5 $ 244 $ 352 $ 248 – 1999 837 $ 385 $ 63 (6) (15) 42 – – 42 205 5 $ 252 $ 343 $ 26 6 $ 2000E 805 $ 360 $ 80 (20) (17) 43 – – 43 202 6 $ 251 $ 317 $ 28 $ 15 1998 802 $ 400 $ 272 – (50) 222 3 – 225 110 14 $ 349 $ 175 $ 18 – 1999 715 $ 385 $ 215 – (39) 176 4 – 180 119 16 $ 315 $ 205 $ 13 – 2000E 436 $ 360 $ 245 – (61) 184 4 – 188 101 3 $ 292 $ 172 $ 10 – 1998 3,205 $ 400 $ 155 18 (13) 160 14 6 180 67 5 $ 252 $ 220 $ 380 $ 39 1999 3,660 $ 385 $ 153 (18) (11) 124 7 3 134 104 6 $ 244 $ 251 $ 376 $ 66 TOTA L 2000E 3,693 $ 360 $ 136 9 (11) 134 9 2 145 88 4 $ 237 $ 215 $ 199 $ (25) B a r r i c k G o l d C o r p o r a t i o n 1 9 9 9 A n n u a l R e p o r t 35 12893 Barrick 1999 MD&A E.s 4/3/00 10:07 AM Page 36 1999 OP E R AT ING C O S T S Record production and costs at Meikle A shaft deepening completed in September 1999 provides access to Meikle’s deeper reserves and an exploration platform for deeper drilling. ton in 1997). These cost savings are primarily due Me ik l e M i n e to lower haulage costs. Major savings have been Total cash costs declined to $96 per ounce in 1999, realized through lower maintenance costs, longer the lowest amount in the mine’s four-year history. tire life and lower labor costs for the haul truck The Mine benefited from a 15% reduction in fleet. Mining costs are expected to decline in total unit mining and dewatering costs to $43 2000 with the addition of new larger 320-ton haul per ton. The lower mining costs were due to the trucks, which are 70% larger than the trucks in mining of larger stopes and lower backfill and the existing fleet. Since 1996, administrative costs ground support costs. Dewatering costs declined have declined 17% on a per ton basis and royalties by $2 per ton as a result of a reduced pumping and production taxes have declined by $21 per rate. The water table has been lowered below ounce due to lower gold prices and higher capital current reserves, as a result the pumping rate has costs with the construction of the roaster and been reduced by approximately 30%. Total cash the expansion of the underground operations. costs are expected to rise to $108 per ounce in 2000. Total Cash Costs by Property (dollars per ounce) 225 180 167 154 48 42 e k i r t s d o G l a n i r e i P r e h t O 98 99 98 99 98 99 A 25% reduction in the average grade processed will be partially offset by lower mining and pro- cessing unit costs. The lower grade is a result of mining the South Meikle and the Griffin zones, which both have grades lower than reserve grade. Mining costs are expected to decline by 5% in 2000, reflecting the continued mining of larger stopes and a full year’s benefit from the shaft deepening completed in September. The shaft deep- ening and new ore pass lower the cost of moving ore from the mining face to the process facilities. G old str ik e Pr o c ess D i v isi o n Processing costs in 1999 at the Property were $20.31 per ton, slightly lower than the $20.44 per ton in 1998. This was due to lower reagent costs, offset by lower throughput. Processing costs in 2000 are expected to decline by 12% to $17.91 per ton as a result of the commissioning of the roaster 36 B a r r i c k G o l d C o r p o r a t i o n 1 9 9 9 A n n u a l R e p o r t 12893 Barrick 1999 MD&A E.s 4/3/00 10:07 AM Page 37 1999 OP E R AT ING C O S T S Pierina – our lowest cost mine at $42/oz For 2000, Pierina is set to produce 805,000 ounces at $43 per ounce and over its first 5 years it should average 775,000 ounces at $60 per ounce. in the first half of the year. The roaster’s estimated cash costs following the mining of the high grade processing cost per ton is $15. The facilities pro- surface zone in 1999. Overall, the low cash costs cessed 15,844 tons per day in 1999, down from are due to the Mine’s high grades, low processing 16,528 tons per day in 1998. The lower throughput costs and low strip ratio (ore to waste). rates were due to processing a higher percentage of Meikle ore, which requires longer grinding time to enhance recovery rates, and the increased hardness of Betze-Post ore. With the addition of the roaster, the process facilities are expected to process an average of 25,236 tons of ore per day in 2000, a 59% increase over 1999. O th er Pr o p er ties Other Properties consist of the Company’s smaller Canadian mines and those mines designated for closure as part of the Company’s operating plan announced in September 1997 (El Indio, Tambo, Pinson and Bullfrog). Other Properties contrib- uted 715,018 ounces of gold or 20% of Company G old str ik e Pr o p er t y – O u t l o ok production at total cash costs of $180 per ounce. For 2000, the Property is expected to produce The Canadian Mines produced 311,881 ounces a record 2.45 million ounces of gold at total cash costs of $169 per ounce. Higher production of 1.61 million ounces is expected at Betze-Post, due to the commissioning of the roaster. Meikle production is expected to total 842,000 ounces of gold, a 12% increase in the mining rate partially offsetting the reduction in grade processed. P ier i na Pr o p er t y The Mine met all targets in its first full year of operation, producing 837,407 ounces of gold at total cash costs of $42 per ounce. Unit mining, processing and administrative costs were all in line with the development plan prepared in 1997. For 2000, the Property is expected to produce 805,000 ounces of gold at total cash costs of $43 per ounce. The Mine is increasing the mining and processing rate by 40% to maintain high production and low Depreciation by Property (dollars per ounce) 205 191 119 110 60 50 e k i r t s d o G l a n i r e i P r e h t O 98 99 98 99 98 99 B a r r i c k G o l d C o r p o r a t i o n 1 9 9 9 A n n u a l R e p o r t 37 12893 Barrick 1999 MD&A E.s 4/3/00 10:07 AM Page 38 1999 OP E R AT ING C O S T S Other Properties costs were only $180/oz Other Properties produced 20% of Company production at 20% lower costs than 1998 – 2000 should see continued low costs. of gold at an average total cash cost of $166 per the Goldstrike Property, where production is ounce in 1999, in line with 1998, and should pro- subject to a net smelter royalty (NSR) and a net duce 257,000 ounces at $184 per ounce in 2000. profits interest royalty (NPI). Royalty costs fluc- For their part, the mines scheduled for closure tuate with the average spot price of gold, changes produced 403,137 ounces of gold at $191 per ounce. in production, and operating and capital costs. All operations lowered unit mining and process- Total royalties at the Goldstrike Property, which ing costs from the previous year through cost have been declining steadily over the past three containment programs. The Bousquet Mine had years, were $11 per ounce in 1999 compared with an excellent year and produced 16% more gold $18 per ounce in 1998 (1997 – $24 per ounce) than plan at total cash costs of $180 per ounce, and are expected to increase in 2000 to $13 per 10% lower than plan. The mine benefited from ounce based on higher expected gold prices. higher mining rates, as the new 3-1 zone began The declining royalty costs reflect lower spot gold production in the first quarter, and from better prices, higher capital expenditures, and the grades. The El Indio Mine also recorded its best gradual migration of mining activity into claim year since 1996, producing 143,766 ounces of gold groups that have lower royalties. Production taxes at $180 per ounce with higher grades and lower at the Goldstrike Property in 1999 were $5 per costs than prior years. Pinson ceased operations ounce, lower than the $8 per ounce incurred in in January and Bullfrog in November 1999. 1998 ($7 per ounce in 1997). Production taxes in O th er Pr o p er ties – O u t l o ok In 2000, the Other Properties are expected to produce 436,000 ounces of gold at an average total cash cost of $188 per ounce. The lower production reflects the closure of Bullfrog in 1999, Tambo in the second quarter of 2000 and lower production from the Canadian mines. The El Indio Mine was originally scheduled for closure in mid-1998, but has remained in production by reducing costs significantly. R o yal ties an d Pr o d u c ti o n Ta x es Substantially all of the Company’s royalties and production tax expenses are incurred at 2000 are expected to decline to the $3-an-ounce level, reflecting the amortization of recent capital expenditures. DE P R E C I AT ION A ND A M OR T I Z AT ION Depreciation and amortization of $385 million in 1999 was 78% higher than the $216 million incurred in 1998. The higher depreciation was primarily due to a 14% increase in production with the start-up of the Pierina Mine. Fifty-nine percent, or $100 million, of the increase was due to the amortization of the purchase price of Pierina. Accordingly, depreciation of $104 per ounce was higher than the $67 per ounce in 1998 38 B a r r i c k G o l d C o r p o r a t i o n 1 9 9 9 A n n u a l R e p o r t 12893 Barrick 1999 MD&A E.s 4/3/00 10:07 AM Page 39 1999 DE PRE C I AT ION Depreciation increased to $104/oz For 2000, depreciation is declining to $88 per ounce with the closure of the Bullfrog and Tambo mines, and because of lower charges at Bousquet. (1997 – $62 per ounce), $27 per ounce was due roaster and Pascua. In 2000, interest is expected to to the purchase amortization of Pierina. In 2000, be approximately $50 million, of which $5 million depreciation is expected to decline to $88 per ounce, is to be expensed. The increase in interest costs primarily due to the closure of Bullfrog and Tambo. in 2000 is due to the $200 million Bulyanhulu As well, the sale of the El Coco Property in 1999 low- Project financing scheduled to close in the second ered the depreciation basis for the Bousquet Mine. quarter of 2000. The interest costs not expensed IN T E R E S T E X P E N S E In 1999, the Company incurred $41 million in interest expense ($43 million in 1998), relating will be capitalized to assets under construction, principally Pascua, the roaster, and Bulyanhulu. Capitalization of interest is discontinued when the assets are ready for their intended use. The primarily to the Company’s $500 million of deben- capitalized interest is amortized as the properties tures. Of that amount, $11 million was expensed and the balance was capitalized to the Goldstrike in development commence production or the assets under construction are completed. Depreciation per Ounce (dollars per ounce) 104 67 62 57 58 95 96 97 98 99 A DM IN I S T R AT ION Administration costs of $35 million in 1999 were marginally lower than 1998 costs of $36 million ($36 million in 1997). The Company has been able to maintain low administrative costs over the past five years despite the increasing size and geographic scope of its operations. Costs include World Gold Council and other industry membership fees of $5 million in 1999. In 2000, administration costs are expected to be slightly lower than in 1999. S A L E OF A N D P R O V I S ION F OR M IN ING P R OP E R T IE S In January 1998, the Company sold its 50% interest in the Doyon Mine for proceeds of $95 million, a 50% interest in the El Coco exploration property and a gold price participation right on future production above an average spot price of $375 B a r r i c k G o l d C o r p o r a t i o n 1 9 9 9 A n n u a l R e p o r t 39 12893 Barrick 1999 MD&A E.s 4/3/00 10:07 AM Page 40 1999 INCOM E TA X E S Barrick’s tax rate is declining in 2000 The lower tax rate is due to a higher portion of earnings being earned in a lower tax jurisdiction – as well as a new accounting standard for income taxes in 2000. per ounce. The Company recognized a pre-tax and Tambo Mines in Chile, and the Bullfrog, gain of $42 million, principally for the close-out Mercur and Pinson Mines in the United States. of the forward sales position on future Doyon production. However, a deferred tax provision of INC OM E TA X E S $42 million offset the gain. In September 1997, the Company took a non-cash provision of $431 million ($385 million net of tax) to cover the write-down of the carrying values associated with the phasing out of five mines. The five mines scheduled for closure were the El Indio Net Operating Income (dollars per ounce) 117 107 114 111 106 29 30 62 70 31 60 24 24 193 182 18 180 37 35 72 110 20 160 10 124 95 96 97 98 99 Net Operating Income Income Tax Depreciation and Reclamation Royalties and Production Taxes Cash Operating Costs The Company’s average effective tax rate, before the impact of disposals and provisions for mining properties, has been constant over the past three years at approximately 25%. It is expected to decline in 2000 to 18%, before the impact of the new accounting standard. The 7% decline from 1999 is primarily due to a higher portion of earn- ings being earned in a lower tax jurisdiction. The new Standard for Income Taxes, which will be implemented in 2000, is not expected to have a material effect on net income. The new standard requires that acquisitions be accounted for gross of underlying tax effects of treating non-deductible acquisition costs as temporary differences, with an offsetting credit to deferred income taxes. Accordingly, application of the standard will have the effect of increasing property, plant and equipment with an offsetting increase in deferring income taxes. As a result, depreciation and amortization expense will be higher and income tax expense lower. Reference is drawn to Note 7 to the Consolidated Financial Statements for a detailed income tax reconciliation and Accounting Policies Note 1J, for a description of the new accounting standard for income taxes. 40 B a r r i c k G o l d C o r p o r a t i o n 1 9 9 9 A n n u a l R e p o r t 12893 Barrick 1999 MD&A E.s 4/3/00 10:07 AM Page 41 1999 E X PLOR AT ION 1999 exploration – $112 million For 2000, total exploration is set at $91 million primarily through the Company’s District Development Program around its key properties. E X P LOR AT ION A N D R E S E R V E DE V E LOP M E N T and reserve development program for 2000, which In 1999, total exploration and reserve development includes work at the existing mines, two new mine expenditures were $112 million, compared with projects, Bulyanhulu and Pascua-Lama, and the $87 million in 1998 (1997 – $109 million). During Dee/Rossi Joint Venture Properties just north 1999, $44 million was expensed versus $50 million of Goldstrike. Approximately 37% or $34 million in 1998 (1997 – $64 million). Total expenditures of the expenditures are expected to be expensed. were $32 million higher than plan, $13 million Barrick’s District Development Program of which was due to the acquisition of Bulyanhulu focuses exploration around its existing properties. in March 1999, along with regional exploration The Company believes it has a higher probability in Tanzania that was not budgeted. The remaining of finding reserves around existing mines, where overage was due to additional work performed it can develop the new reserves more quickly and in Chile and Argentina on the El Indio Belt and a profitably because of its existing infrastructure. greater number of business development opportu- In 1999, the Company added 8 million nities. The level of expenditures in any particular ounces of gold to reserves, more than replacing year is a function of programs on existing the ounces produced during the year. The properties and new opportunities or initiatives reserves added were of a low-cost nature and are that present themselves during the period. The primarily located at Bulyanhulu, Pascua-Lama Company has planned a $91 million exploration and the Goldstrike underground. 1999 Exploration (millions of dollars) 2000 Exploration (millions of dollars) 1999 Reserve Development (millions of dollars) 2000 Reserve Development (millions of dollars) North America South America Business Development and Other 12 17 15 North America South America Business Development and Other 8 13 13 Goldstrike Property 9 Pascua-Lama Project 46 13 Tanzania Projects Goldstrike Property 10 Pascua-Lama Project 39 8 Tanzania Projects B a r r i c k G o l d C o r p o r a t i o n 1 9 9 9 A n n u a l R e p o r t 41 12893 Barrick 1999 MD&A E.s 4/3/00 10:07 AM Page 42 1999 C A P I TA L E X PENDI T U RE S 1999 capital expenditures – $620 million Goldstrike accounted for $397 million, primarily for the roaster. 2000 capital expenditures are set at $565 million, including $201 million for Bulyanhulu. C A P I TA L E X P E NDI T U R E S 1999 $39 million was incurred for engineering work and Barrick’s capital and reserve development infrastructure work. The remaining $45 million expenditures of $620 million in 1999, including was incurred primarily at Pierina for the mine and $68 million for reserve development, were higher heap leach expansion, as well as at the Canadian than expected due to the acquisition of Bulyanhulu Properties for underground development. and the subsequent commencement of mine con- struction. At the Goldstrike Property, $397 million C A P I TA L E X P E NDI T U R E S 20 0 0 was spent primarily on: 1) construction of the roaster facility; 2) replacement of one third of the mobile equipment fleet; and 3) increasing long- term ore stockpiles at Betze-Post. In addition, $46 million was spent for shaft deepening and development at Meikle and Rodeo. A total of $71 million was spent at the newly acquired Bulyanhulu Mine project in Tanzania, principally for the development plan and initial construc- tion of the underground facilities. At Pascua-Lama, 1999 Capital Expenditures (millions of dollars) 2000 Capital Expenditures (millions of dollars) Goldstrike Property 397 Bulyanhulu Project 71 Pascua-Lama Project 39 32 Pierina Property 13 Other Properties Reserve Development 68 Bulyanhulu Project 201 Pascua-Lama Project 133 Goldstrike Property 121 43 Pierina Property 10 Other Properties Reserve Development 57 For 2000, capital expenditures are estimated at $565 million, including reserve development of $57 million. The largest component of the program is the $201 million planned for the Bulyanhulu Mine project for construction of the underground, surface and infrastructure for the second quarter 2001 start-up. Of the $121 million planned for the Goldstrike Property, $73 million is for construction of the new Rodeo Mine and underground development at Meikle and $65 million is for the completion of the roaster facility, which will be offset by the $40 million amortization of deferred stripping and replace- ment of mine equipment at Betze-Post. At Pierina, $43 million is to be spent on the second expansion of the heap leach pad, on additional mine equipment required for an expansion of the Mine and on deferred stripping. As well, the Company is building homes to be sold to employees in Hauraz. At Pascua-Lama, $133 million is to be spent on engineering, ordering long lead-time mill components and infrastructure work. Con- struction is expected to begin in December 2000. The remaining expenditures of $10 million are 42 B a r r i c k G o l d C o r p o r a t i o n 1 9 9 9 A n n u a l R e p o r t 12893 Barrick 1999 MD&A E.s 4/3/00 10:07 AM Page 43 1999 C A S H F LO W 1999 cash flow surpassed $700 million Barrick has generated free cash flow every year, even after building Meikle, Pierina and the Goldstrike roaster and with Pascua-Lama and Bulyanhulu under development. for the Canadian underground mines. The 2000 instruments are used solely for hedging purposes capital expenditure programs will be funded from related to the Company’s specific exposures and cash flow from operations, existing cash balances not for trading purposes. and the $200 million Bulyanhulu project financing scheduled to close in the second quarter 2000. C A S H F LO W Cash flow provided by operating activities was $702 million, the highest in the Company’s history, compared with $539 million in 1998 (1997 – $470 million). Operating cash flow is expected to remain above $700 million in 2000, with pro- duction of 3.7 million ounces, continued low total cash costs of $145 an ounce and the reduction in the tax rate. The Company will continue to benefit from its Premium Gold Sales Program, which has locked in a minimum realized price of $360 per ounce for its 2000 and 2001 production. DI V IDE ND S During 1999 the Company paid dividends of $0.20 per share compared with $0.18 per share in 1998 and $0.16 per share in 1997. R I S K M A N A GE M E N T F i nan c ial R isk 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 Operati onal 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 stan- dards, emphasis on employee training, and the risk management and loss-control programs in place at each mine site. The Company also main- tains adequate insurance at all times to cover normal business risks. Further, operational risk Operating Cash Flow (millions of dollars) 702 82 620 539 32 507 502 117 463 470 89 98 385 374 372 95 96 97 98 99 Free Cash Flow Capital Expenditure B a r r i c k G o l d C o r p o r a t i o n 1 9 9 9 A n n u a l R e p o r t 43 12893 Barrick 1999 MD&A E.s 4/3/00 10:07 AM Page 44 R I S K M A N A GE M E N T Barrick is geographically diversified Reserves and production are well diversified among four key properties on three continents. is minimized through both asset and reserve industry-wide contact with appropriate regula- diversification. Currently, approximately 47% tory bodies. Barrick draws on the expertise of of the Company’s assets and 48% of its reserves its management team, Board of Directors and are in North America, the balance being in International Advisory Board, along with a broad South America and Tanzania. range of financial advisors to help assess risk before The political risks of operating in Chile, making an investment in a particular country. Peru and Tanzania were assessed and, where appropriate, political risk insurance has been acquired. In each country where it has operations, Year 2000 The Year 2000 Issue (Y2K) passed without incident at any of the Company’s properties. Barrick is subject to various levels of government C o m p e ti ti v e E n v i r o n m e n t control and regulation, and is thus exposed to the Barrick competes with other mining companies risk of potentially adverse changes. The Company for exploration properties, for joint-venture endeavors to ensure that it is at all times in com- agreements and for the acquisition of attractive pliance with current laws, and it seeks to foster an gold companies. Such competition could increase equitable future climate through both direct and the difficulty of concluding a negotiation on 1999 Production by Property 1999 Reserves by Property Goldstrike Property (57%) (23%) Pierina Property (20%) Other Properties Goldstrike Property (46%) (10%) Pierina Property Pascua Project (29%) Bulyanhulu Project (13%) (2%) Other Properties terms that the Company considers acceptable. However, a number of factors strengthen Barrick’s competitive position. It is an entrepreneurial company, with the financial and operational strength required to move quickly and effectively as the situation warrants. Barrick also operates from a position of strength through the quality of its people. The Company seeks out the best people from around the world, and retains them through high corporate standards of operation, the professional opportunities that it provides, and excellent remuneration. Barrick has one of the lowest turnover rates in the industry. 44 B a r r i c k G o l d C o r p o r a t i o n 1 9 9 9 A n n u a l R e p o r t 12893 Barrick 1999 MD&A E.s 4/3/00 10:07 AM Page 45 O U T LO O K Production, earnings and cash flow rising Production is expected to rise 35% to 5 million ounces by 2003 at the same low cost, with three new mines under development – Rodeo, Bulyanhulu and Pascua-Lama. O U T LO O K 2. By optimizing its existing asset base; and While the gold industry is old, Barrick is young 3. By managing its revenue through the and entering a new phase of growth – more than Premium Gold Sales Program. 40% of the Company’s reserves are in development. The District Development Program is designed The Company is developing three new mines and to expand reserves and production around the production should rise to 5 million ounces at Company’s existing properties. The probability $145 per ounce by 2003, a 35% increase in just of discovery is high and the finding cost of new three years. All three new mines, Rodeo, Bulyanhulu ounces around its existing properties is low. In and Pascua-Lama, have the potential to produce addition, with the infrastructure in place the new more than their current production targets through ounces can be developed quickly and produced phased expansions as reserves continue to grow. profitably at today’s gold price of $300. Rodeo at Barrick’s objective is to make more money for its the Goldstrike Property is a good example of the shareholders, which it does in three ways: plan at work. Rodeo will be in production in 1. By increasing quality reserves and only 18 months at a capital cost of just $125 mil- production through its District Develop- lion. It will achieve a 23% rate of return based ment Programs and acquisitions; on $300 gold. OU TLOOK Q U ICK FA C T S 1999 2000 E change C OM M E N T ON 20 0 0 Production (millions of ounces) 3.66 3.69 +1% Realized gold price per ounce $ 385 $ 360 –6% Total cash costs per ounce $ 134 $ 145 +8% Depreciation per ounce $ 104 $ 88 –15% Exploration expense (millions) $ 44 $ 34 –23% Tax rate 25% 18% –28% Higher production from Goldstrike offsetting declining production from Other Properties with the closure of Bullfrog and Tambo. Re-designation of spot deferred contracts resulted in an average price of $360 and purchased call options on 2000 and 2001 production. Higher percentage of production from Betze-Post increasing the overall weighted average costs. (See page 40 for impact of new accounting standard.) Reflects the closure of Bullfrog and Tambo, as well as lower depreciation at Bousquet with the sale of the El Coco property. The higher 1999 expense is a result of the cost of the 15 joint ventures entered into during the year. A higher portion of earnings is expected to be generated in a lower tax jurisdiction. (See page 40 for impact of new accounting standard.) B a r r i c k G o l d C o r p o r a t i o n 1 9 9 9 A n n u a l R e p o r t 45 12893 Barrick 1999 MD&A E.s 4/3/00 10:07 AM Page 46 O U T LO O K Cash balance of $500 million Barrick has a strong balance sheet, with the industry’s only “A” credit rating, virtually no net debt and no debt payments due until 2007. In making acquisitions, the Company will price and the spot gold price increased to over not seek to become larger without improvements $100 per ounce. As a result the Company modified to its financial measures – the Company will the program to retain the benefit of protection not produce more gold for lower profits. Every and contango, but added a new dimension to acquisition will be made on a realistic gold price increase participation in rising gold prices. The assumption, which currently is $300. The Sutton Company will realize a minimum of $360 per acquisition, which gave Barrick Bulyanhulu, cost ounce in 2000 and 2001 and if gold prices rise the Company a 5% increase in shares outstanding above $319 in 2000 and $335 in 2001, the realized but is expected to add 10% to production, earn- price, earnings and cash flow will rise accordingly. ings and cash flow. The Company is fully hedged for the next The Company will optimize its asset base two years and 25% hedged on production for sev- by producing more gold for lower costs. The cost eral years beyond 2001. The Company does not containment programs underway since 1996 have anticipate increasing its spot deferred program eliminated 25% of cash costs at the same time as above current levels and will consider purchasing production has increased 16%. This is the result of call options on 2002 production and beyond if focusing on key properties and lowering unit costs the gap between the Company’s realized price per ton across the board at all of the Company’s and the spot price remains large. operations. This program will continue in 2000 The Premium Gold Sales Program is backed and beyond. by the strongest trading lines and balance sheet in The Company has two fundamental principles the gold industry. Barrick has the industry’s only of revenue management. They are to: “A” credit rating, $500 million in cash and no debt 1. Provide predictable revenues; and payments due until 2007. 2. Take advantage of contango to increase Barrick’s future is bright, with the right strate- those revenues. gies, outstanding projects that will drive earnings The Company augments this strategy to and cash flow to new levels and a great team best suit the current environment. In the past two of people in place with the talents and desire to years, the gap between the Company’s realized grow Barrick. 46 B a r r i c k G o l d C o r p o r a t i o n 1 9 9 9 A n n u a l R e p o r t 12893 Barrick 1999 Financ E.s 4/3/00 10:09 AM Page 47 Consolidated Statements of Income Barrick Gold Corporation for the years ended December 31, 1999, 1998 and 1997 (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 (note 4) Gain on sale of and 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 1999 1998 1997 $ 1,421 11 1,432 $ 1,287 11 1,298 $ 1,284 10 1,294 516 385 35 44 11 – 991 441 (110) 595 216 36 50 – (42) 855 443 (142) 655 188 36 64 – 431 1,374 (80) (43) $ 331 $ 301 $ (123) $ 0.85 $ 0.83 $ 0.80 $ 0.79 $ (0.33) $ (0.33) Consolidated Statements of Retained Earnings Barrick Gold Corporation for the years ended December 31, 1999, 1998 and 1997 (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. 1999 1998 1997 $ 1,193 331 (79) $ 1,445 $ 960 301 (68) $ 1,193 $ 1,143 (123) (60) $ 960 B a r r i c k G o l d C o r p o r a t i o n 1 9 9 9 A n n u a l R e p o r t 47 12893 Barrick 1999 Financ E.s 4/3/00 10:09 AM Page 48 Consolidated Statements of Cash Flow Barrick Gold Corporation for the years ended December 31, 1999, 1998 and 1997 (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 and provision for mining properties Other Cash provided by (reinvested in) working capital Bullion settlements and other receivables Inventories and deferred expenses Accounts payable and accrued liabilities Cash provided by operating activities Cash provided by (used in) development activities Property, plant and equipment Purchase and sale of mining properties (notes 8 and 9) Other Cash (used in) development activities Cash provided by (used in) financing activities Capital stock (note 6) Long-term obligations Proceeds Repayments Dividends Cash (used in) financing activities Increase 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. 1999 1998 1997 $ 331 $ 301 $(123) 385 35 – 5 756 (30) (54) 30 702 (620) 30 (8) (598) 29 25 5 (79) (20) 84 416 216 57 (42) 5 537 (10) (14) 26 539 (507) 170 (25) (362) 35 – (20) (68) (53) 124 292 188 (42) 431 5 459 37 (5) (21) 470 (372) – 4 (368) 6 500 (501) (60) (55) 47 245 $ 500 $ 416 $ 292 $ 12 488 $ 500 $ 21 395 $ 416 $ 11 281 $ 292 48 B a r r i c k G o l d C o r p o r a t i o n 1 9 9 9 A n n u a l R e p o r t 12893 Barrick 1999 Financ E.s 4/3/00 10:09 AM Page 49 Consolidated Balance Sheets Barrick Gold Corporation As at December 31, 1999 and 1998 (in millions of United States dollars) Assets Current assets Cash and equivalents Bullion settlements and other receivables Inventories and deferred expenses (note 2) Property, plant and equipment (note 3) Other assets Liabilities Accounts payable and accrued liabilities – current 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 11) See accompanying notes to consolidated financial statements. Signed on behalf of the Board 1999 1998 $ 500 133 111 744 4,488 121 $ 416 89 106 611 3,991 53 $ 5,353 $ 4,655 $ 304 525 133 237 1,199 2,709 1,445 4,154 $ 233 500 128 202 1,063 2,399 1,193 3,592 $ 5,353 $ 4,655 Peter Munk (signed) Director C. William D. Birchall (signed) Director B a r r i c k G o l d C o r p o r a t i o n 1 9 9 9 A n n u a l R e p o r t 49 12893 Barrick 1999 Financ E.s 4/3/00 10:09 AM Page 50 Notes to Consolidated Financial Statements Barrick Gold Corporation (tabular dollar amounts in millions of United States dollars) 1. Accounting Policies These consolidated financial statements are prepared in accordance with generally accepted accounting prin- ciples (“GAAP”) in Canada. As described in note 12, these principles differ in certain respects from principles and practices generally accepted in the United States. Summarized below are those policies considered par- ticularly 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 AT U R E OF OP E R AT ION S The Company is engaged in the production of gold and related activities including exploration, development, mining and processing. The activities are conducted principally in the United States, Peru, Chile, Argentina, Canada and Tanzania. B. U S E OF E S T IM AT E S The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions. These estimates 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 OF C ON S OLID AT ION These consolidated financial statements include the accounts of the Company and its subsidiaries. D. T R A N S L AT ION OF FOR E IGN C U R R E NC IE 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 VA L E N T S Cash and equivalents comprise cash, term deposits and treasury bills, with original maturity dates of less than 90 days. IN V E N TOR IE S F. Gold in process and mine operating supplies are valued at the lower of average cost and net realizable value. G. P R OP E R T Y, PL A N T A N D E Q U IP M E N T (i) Property 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) Buildings 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. 50 B a r r i c k G o l d C o r p o r a t i o n 1 9 9 9 A n n u a l R e p o r t 12893 Barrick 1999 Financ E.s 4/3/00 10:09 AM Page 51 (iii) Deferred stripping costs Mining costs associated with waste rock removal are initially deferred and subsequently charged to operating costs over the life of the mine. (iv) Properties in development Costs incurred on properties in development and major capital projects are capitalized until the assets are put in service, at which time the capitalized costs are depre- ciated 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 spe- cific borrowings for these projects, while the projects are actively being prepared for 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. (vi) Property evaluations The Company reviews and evaluates the recoverability of costs for 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 from a property, on an undiscounted basis, 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 may occur which could affect the recoverability of the Company’s properties. H . DE R I VAT I V E F IN A NC I A L IN S T R U M E N T S (i) Commodity and foreign exchange contracts Derivative financial instruments are contracts or agree- ments whose values are derived from changes in com- modity prices, or foreign exchange or interest rates. The Company enters into derivative financial instruments to manage the risk associated with price volatility of the commodities and currencies to which it is exposed. The instruments used include spot deferred contracts, commodity options and currency swaps. The Company does not use derivative financial instruments for trading purposes. Derivative financial instruments may be designated as hedges of financial risk exposures of antic- ipated transactions or of foreign currency exposures, if, both at the inception of the hedge and throughout the hedge period, the changes in fair value of the derivative financial instrument substantially offset the effect of commodity price and exchange rate changes on the anticipated transactions and if it is probable that the transactions will occur. The Company regularly monitors its commodity and currency exposures and ensures that contracted amounts do not exceed the amounts of underlying exposures. The Company enters into spot deferred contracts, which establish sales prices for future gold and silver pro- duction and qualify as effective hedges. Realized prices under spot deferred contracts are recognized in gold sales and by-product credits as the designated production is delivered to meet commitments. The realized price under these contracts is primarily based on a risk free interest rate component. Where the interest return includes a non-risk free component, this component is accounted for in a manner similar to a long-term investment, with gains and losses recognized upon realization, except for an other than temporary impairment, which is rec- ognized in the period it is determined. Written call options are possible future sales commit- ments. Providing that uncommitted production exists to meet these commitments, no mark-to-market gain or loss is accrued prior to their expiry date. Premiums received for written call options are recognized in gold sales at their expiry date. Purchased call options that are matched with spot deferred contracts, which combined mimic the terms, cash flows, risks and rewards of real put options, are B a r r i c k G o l d C o r p o r a t i o n 1 9 9 9 A n n u a l R e p o r t 51 12893 Barrick 1999 Financ E.s 4/3/00 10:09 AM Page 52 accounted for in the same manner as real instruments. The option premium paid is deferred and recognized in gold sales, together with any realized gains, at expiry of the options. In the event of early settlement or redesignation of hedging transactions, gains or losses are deferred and brought into income at the delivery dates originally designated. Where the anticipated transactions are no longer expected to occur, with the effect that the risk that was hedged no longer exists, unrealized gains or losses are recognized in income at the time such a determina- tion is made. Cash flows arising in respect of hedging transactions are recognized under cash flow from operating activities. (ii) Other derivative financial instruments The Company enters into derivative financial instruments to manage the interest return component of its Premium Gold Sales Program. The instruments, which primarily comprise a portfolio of total return swaps, are accounted for in a manner similiar to long-term portfolio invest- ments, 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. R E V E N U E R E C O GNI T ION I . 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. Inventories and Deferred Expenses Gold in process Mine operating supplies Purchased call options premium (notes 1H(i) and 11A(i)) INC OM E TA X E S J. 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 account- ing standard SFAS No. 109. The new standard, which will be implemented in 2000, is not expected to have a material effect on net income. K . R E C L A M AT ION A N D C LO S U R E C O S T S 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 recoverable ounces of gold. 1999 $ 56 32 23 $ 111 1998 $ 73 33 – $ 106 Gold in process excludes $172 million (1998 – $206 million) of stockpiled ore which is not expected to be processed in the following twelve months. This amount is included in property, plant and equipment. 52 B a r r i c k G o l d C o r p o r a t i o n 1 9 9 9 A n n u a l R e p o r t 12893 Barrick 1999 Financ E.s 4/3/00 10:09 AM Page 53 3. Property, Plant and Equipment 1999 Accumulated Depreciation Cost Net Cost Accumulated Depreciation Property acquisition and deferred mine costs Buildings and equipment Properties in development Deferred stripping costs and ore in stockpiles Exploration properties $ 2,413 1,351 1,237 346 241 $ 650 450 – – – $ 1,763 901 1,237 346 241 $ 2,440 1,042 803 306 227 $ 461 366 – – – 1998 Net $ 1,979 676 803 306 227 $ 5,588 $ 1,100 $ 4,488 $ 4,818 $ 827 $ 3,991 4. Long-Term Debt A . 71⁄2% DE BE N T U R E S 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. B. VA R I A BL E R AT E BON D S On June 9, 1999, a wholly-owned subsidiary of the Company issued $25 million of variable rate, tax-exempt bonds which mature June 1, 2029. During 1999, the rate of interest on the bonds, payable weekly, varied from 2.85% to 3.85%. The Company has the option to convert the bonds to a fixed rate and to redeem them early. C . R E V OLV ING C R E DI T FA C ILI T Y 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 three 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, 1999 and December 31, 1998, no amounts were drawn under the Credit Agreement. IN T E R E S T D. Interest of $41 million was incurred during the year (1998 – $43 million, 1997 – $44 million). Of this amount $30 million was capitalized to properties in development and construction projects (1998 – $43 million, 1997 – $44 million). 5. Reclamation and Closure Liabilities The Company has estimated future site reclamation obligations, which it believes will meet current regulatory requirements, to be $230 million, $143 million of which has been accrued to December 31, 1999 (1998 – $130 mil- lion). Closure costs are estimated at $40 million, $20 million of which has been accrued to December 31, 1999 (1998 – $18 million). A total of $30 million of these accrued amounts is included in accounts payable and accrued liabilities at December 31, 1999 (1998 – $20 million). The Company expects to spend $30 million in 2000, $25 million in 2001 and 2002 and $10 million in 2003 and 2004 on these activities. Future changes, if any, in regulations and cost estimates may be significant and will be recognized when applicable. B a r r i c k G o l d C o r p o r a t i o n 1 9 9 9 A n n u a l R e p o r t 53 12893 Barrick 1999 Financ E.s 4/3/00 10:09 AM Page 54 6. Capital Stock I S S U E D A N D O U T S TA N DING S H A R E S A . Details of issued and outstanding shares are as follows: Common shares (millions) 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 Issued during 1999 In full consideration for all the outstanding shares of Sutton Resources Ltd. (note 9) For cash Outstanding at December 31, 1999 B. A U T HOR I Z E D C A P I TA 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 HOL DE R R IGH T S PL A N In 1998, the Company adopted a Shareholder Rights Plan (the “Plan”) which will be in effect until the 2002 share- holders’ meeting. 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 with- out 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. Issued 373 – 373 4 377 17 2 396 Amount $ 2,358 6 2,364 35 2,399 281 29 $ 2,709 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 shareholders to tender. D. C OM MON S H A R E P U R C H A S E OP T ION S There are common share purchase options outstanding, expiring at various dates to December 6, 2009. The options have an exercise price of the Company’s market closing share price on the day prior to the date of grant. They 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. 54 B a r r i c k G o l d C o r p o r a t i o n 1 9 9 9 A n n u a l R e p o r t 12893 Barrick 1999 Financ E.s 4/3/00 10:09 AM Page 55 As at December 31, 1999, 7 million (1998 – 9 million, 1997 – 13 million) common shares, beyond those out- standing at year end, were available for granting of (shares in millions) options. The following is a summary of common share purchase options: Outstanding at beginning of year Granted at an average price of C$26.32 per share (1998 – C$29.34, 1997 – C$25.08) Exercised at an average price of C$25.71 per share (1998 – C$13.98, 1997 – C$22.76) Cancelled Outstanding at end of year 1999 20 3 (1) (1) 21 1998 20 5 (4) (1) 20 1997 17 4 – (1) 20 Outstanding and exercisable share purchase options at December 31, 1999 consisted of 15 million and 7 million shares respectively with an exercise price range of C$22.55 to C$33.88, and 6 million and 5 million shares respectively with a price range of C$34.00 to C$44.25. The weighted average remaining term of the outstanding options at December 31, 1999 was 6 years (1998 – 6 years, 1997 – 5 years). The Company is obligated to issue approximately 1.1 million shares of its common stock in connection with outstanding Sutton stock options that were assumed by the Company as part of the acquisition. The options have an average exercise price of C$19.57 and an average remaining term of 6 years. E . N E T INC OM 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 outstanding for the year, which amounted to 390 million shares (1998 – 376 million shares, 1997 – 373 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, 1999. The num- ber of shares for the fully diluted net income per share calculation was 410 million shares (1998 – 390 million shares, 1997 – 373 million shares). In 1999, interest of $12 million, net of tax, on funds which would have been received had the options been exercised has been imputed at a rate of 5%. F. DI V IDE N D S In 1999, the Company declared and paid dividends in United States dollars totaling $0.20 per share (1998 – $0.18, 1997 – $0.16 per share). B a r r i c k G o l d C o r p o r a t i o n 1 9 9 9 A n n u a l R e p o r t 55 12893 Barrick 1999 Financ E.s 4/3/00 10:09 AM Page 56 7. Income Taxes 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 and provision for mining properties Operating losses and 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 1999 $ 168 1998 $ 168 (47) (35) – 10 13 1 (54) (47) 30 38 9 (2) 1997 $ (31) (56) 60 30 31 7 2 $ 110 $ 142 $ 43 $ 33 4 (1) (1) $ 35 $ 72 2 1 75 36 6 (7) 35 $ 33 33 7 (16) $ 57 $ 78 6 1 85 8 54 (5) 57 $ 9 (32) (3) (16) $ (42) $ 82 2 1 85 (23) (5) (14) (42) $ 110 $ 142 $ 43 56 B a r r i c k G o l d C o r p o r a t i o n 1 9 9 9 A n n u a l R e p o r t 12893 Barrick 1999 Financ E.s 4/3/00 10:09 AM Page 57 8. Segment Information 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 comprehensive evaluation of its mining properties, on the basis set out in note 1G(ii), the Com- pany 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 Pierina Property Canadian Properties Other Properties Operating costs Goldstrike Property Pierina Property Canadian Properties Other Properties Depreciation and amortization Goldstrike Property Pierina Property Canadian Properties Other Properties Gain on sale of and (provision for) mining properties – Other Properties Segment income (loss) before income taxes Goldstrike Property Pierina Property Canadian Properties Other Properties Exploration Interest Corporate expenses, net Income taxes Net income (loss) 1999 1998 1997 $ 822 322 120 157 1,421 $ 941 23 124 199 1,287 $ 920 – 120 244 1,284 335 40 53 88 516 127 172 66 20 385 – 360 110 1 49 520 (44) (11) (24) (110) 399 3 54 139 595 117 11 47 41 216 42 425 9 23 61 518 (50) – (25) (142) 408 – 51 196 655 96 – 25 67 188 (431) 416 – 44 (450) 10 (64) – (26) (43) $ 331 $ 301 $ (123) B a r r i c k G o l d C o r p o r a t i o n 1 9 9 9 A n n u a l R e p o r t 57 12893 Barrick 1999 Financ E.s 4/3/00 10:09 AM Page 58 Gold sales by geographic area United States Peru Canada Chile Segment capital expenditures Goldstrike Property Pierina Property Canadian Properties Pascua Property Tanzanian Properties Other Properties Identifiable assets by geographic area United States Peru Chile Tanzania Canada Other countries Segment assets Goldstrike Property Pierina Property Canadian Properties Pascua Property Tanzanian Properties Other Properties Total assets for reportable segments Exploration properties Cash and equivalents Other 9. Property Acquisition 1999 1998 1997 $ 852 322 120 127 $ 1,421 $ 405 32 13 85 77 8 $ 620 $ 2,282 1,093 1,079 366 236 297 $ 5,353 $ 1,937 1,086 129 905 356 22 4,435 241 500 177 $ 1,032 23 124 108 $ 1,287 $ 158 248 17 79 – 5 $ 507 $ 2,013 1,217 1,034 – 270 121 $ 4,655 $ 1,615 1,212 235 822 – 50 3,934 230 416 75 $ 1,036 – 160 88 $ 1,284 $ 118 103 12 65 – 74 $ 372 $ 1,886 933 1,023 – 429 35 $ 4,306 $ 1,546 930 207 733 – 246 3,662 231 292 121 $ 5,353 $ 4,655 $ 4,306 On March 26, 1999, the Company acquired Sutton Resources Ltd. (“Sutton”), an exploration company, at a cost of $281 million. Each outstanding common share of Sutton was exchanged for 0.463 of a common share of the Company, resulting in 17 million common shares being issued. The Company has assigned a value of $281 million to the common shares issued as required by generally accepted accounting principles, based upon the quoted market price for the shares less a 5% discount which represents the issue costs that would otherwise have been incurred. The acquisition has been accounted for as a purchase. The assigned values of total assets and liabilities acquired, including $30 million in cash, amounted to $307 million and $26 million respectively. 58 B a r r i c k G o l d C o r p o r a t i o n 1 9 9 9 A n n u a l R e p o r t 12893 Barrick 1999 Financ E.s 4/3/00 10:09 AM Page 59 10. Supplemental Cash Flow Information Cash provided by operating activities includes the following cash payments: Interest, net of amounts capitalized Income taxes 1999 $ 11 95 1998 $ – 62 1997 $ – 84 11. Commitments and Contingencies A . DE R I VAT I V E F IN A NC I A L IN S T R U M E N T S The Company utilizes privately negotiated over-the- counter (“OTC”) contracts. OTC contracts are executed between two counterparties who negotiate specific agreement terms, including the underlying instrument, notional amount, exercise price, maturity and premium to be paid. In this context, the underlying instrument may include commodities, interest rates, foreign exchange rates or bond indices with diversified credit exposure. The Company does not enter into derivatives which it would consider to be leveraged. The principal types of contracts used by the Company are described below. (i) Commodity and foreign exchange contracts Gold As part of its Premium Gold Sales Program, the Com- pany has entered into spot deferred contracts with several major financial institutions under which it has commitments to deliver 13.6 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 reference to a LIBOR-based interest rate less the gold lease rate except for a portion of the posi- tion representing approximately 1.3 million ounces where the interest return is based on bond indices with diversified credit exposure. The Company has fixed the lease rates for substantially all of the contracts scheduled for delivery in 2000 and a portion of 2001. The weighted average lease rate on the total spot deferred position was 2.17% at December 31, 1999. The spot deferred contracts had an average value of $310 per ounce at December 31, 1999. The Company has purchased a series of gold call options for $67 million, under which it has the right, but not the obligation, to buy 3.1 million ounces of gold in 2000 and 3.7 million ounces in 2001. The options have an average strike price of $319 per ounce in 2000 and $335 per ounce in 2001. The options are matched with spot deferred contracts designated for 2000 and 2001, such that the combination of the two instruments creates a synthetic put option that closely mimics the terms, cash flows, risks and rewards of a real purchased put option. In addition to the minimum prices to be realized through the delivery against the spot deferred contracts, these options provide the Company with the ability to fully participate above gold prices of $319 per ounce on 100% of its anticipated production from March 2000 to December 2000 and above $335 per ounce for 100% of 2001 anticipated production. Written call options are contracts in which the writer, for a fee (premium), sells the purchaser the right, but not the obligation, to buy on a specified future date a stipulated quantity of gold at a stated price. The Com- pany held written long-term gold call options in respect of 2.7 million ounces at December 31, 1999. The options, which have an average strike price of $363 per ounce, expire on various dates over the period from 2002 to 2010. In addition, short-term written call options in respect of 300,000 ounces of gold were outstanding at December 31, 1999 with an average strike price of $300 and expiring in 2000. In the event that they are exercised at their expiry dates, the Company has the ability to deliver production to meet the commitment and has the intent and ability to convert them into spot deferred contracts at the strike price. B a r r i c k G o l d C o r p o r a t i o n 1 9 9 9 A n n u a l R e p o r t 59 12893 Barrick 1999 Financ E.s 4/3/00 10:09 AM Page 60 Silver The Company has entered into spot deferred contracts to deliver 14.3 million ounces of silver over the next five years, which had an average value of $4.95 per ounce at December 31, 1999. Copper As at December 31, 1999, the Company had purchased put options on 30.9 million pounds of copper at an average strike price of $0.74 per pound with various expiry dates over the next two years. To pay for the cost of these put options the Company has written an equal number of call options with the same expiry dates at an average strike price of $0.87 per pound. Canadian Dollars The Company utilizes cross currency interest rate swaps, in which the Company and counterparties exchange principal and interest flows in Canadian and United States dollars over a period of time. These contracts are used to manage currency exposures, as a portion of the Company’s operating costs and capital expenditures are denominated in Canadian dollars. As at December 31, 1999 the Company had entered into contracts to purchase C$90 million in 2000 at the exchange rate of $0.69 for each Canadian dollar, and an additional C$83 million in the following two years at $0.69 for each Canadian dollar. In addition the Company has purchased Canadian dollar call options at an average price of $0.68 and has sold an equal number of Canadian dollar put options at an average strike price of $0.65. The options, which expire over the next two years, allow the Company to purchase C$127 million at a maximum price of $0.68 and a minimum price of $0.65. (ii) Other derivative financial instruments In connection with the management of the interest return component of its gold spot deferred contracts, the Company has entered into total return swaps with a total notional amount of $715 million or approximately 17% of the value of the notional amount of the spot deferred contract position of $4.3 billion. Total return swaps represent the contractual exchange of LIBOR- based interest payments for a return equivalent to the future performance of a specified investment instrument calculated on a fixed notional amount and for a pre- determined period. The underlying investments are bond indices with diversified credit exposure. The Com- pany has an investment grade weighted average rating on its total return swaps of A-. (iii) Fair value of derivative financial instruments Fair values of financial instruments and OTC contracts are determined based on estimates using net present value, Black-Scholes and other valuation techniques. The estimates are significantly affected by the assumptions used, including current market and contractual prices of the underlying instruments, as well as time value, and by yield curve and volatility factors underlying the positions. The carrying amounts for cash, bullion settlements and other receivables, and accounts payable and accrued liabilities on the balance sheets approximate fair value. The fair value of long-term debt approximated its carry- ing value at December 31, 1999 (1998 – $543 million). The aggregate favourable fair value of the Com- pany’s commodity and foreign exchange contracts as at December 31, 1999 at a spot gold price of $288 per ounce amounted to approximately $165 million (1998 – $735 million). The fair value of the Company’s portfolio of total return swaps was $10 million (unfavourable) at December 31, 1999. (iv) Credit and market risks The Company is subject to margin calls on only 3% of the 13.6 million ounce spot deferred contract position and there are no margin requirements until the gold price reaches $800 per ounce. At a spot price of $1,000 per ounce, the cash deposit required is approximately $72 million. While notional principal is the most commonly used volume measure in the derivative financial instrument markets, it is not a useful measure of credit or market risk. The notional principal typically does not change hands, but is simply a quantity upon which interest and other payments are calculated. The possible credit and market loss associated with the Company’s derivative financial instruments is significantly less than the notional princi- pal amounts. Credit risk represents the maximum potential loss due to non-performance by obligors and counterparties under the terms of their contracts. Derivative financial instruments expose the Company to credit loss if changes in market rates affect a counterparty’s position unfavour- ably and the counterparty defaults on payment. Accord- ingly, credit risk of derivative financial instruments is represented by the positive fair value of the instruments. The Company manages credit risk by dealing only with financial institutions that meet its credit rating standards; by limiting arrangements with individual counterparties; 60 B a r r i c k G o l d C o r p o r a t i o n 1 9 9 9 A n n u a l R e p o r t 12893 Barrick 1999 Financ E.s 4/3/00 10:09 AM Page 61 and by entering into master netting arrangements which incorporate the right of set-off and provide for the simultaneous close-out and net settlement of contracts with the same counterparty in the event of default or other cancellation under the agreement. Under these master netting arrangements, the credit risk associated with favourable contracts is eliminated to the extent that unfavourable contracts with the same counterparty are not settled before favourable contracts. The Company’s overall exposure to credit risk on deriv- ative financial instruments subject to a master netting arrangement can change substantially within a short period since it is affected by each transaction subject to the arrangement. The aggregate credit risk amounted to $240 million at December 31, 1999. The Company’s weighted average rating of the total notional value of the spot deferred contracts and total return swap position equates to AA-. Concentrations of credit risk exist if a number of counterparties are engaged in similar activities, are located in the same geographic region or have com- parable economic characteristics such that their ability to meet contractual obligations would be similarly affected by changes in economic, political or other conditions. Concentrations of credit risk indicate the relative sensitivity of the Company’s performance to developments affecting a particular industry or geo- graphic region. Based on the location of the ultimate counterparty, 74% of this credit risk amount relates to the United States and 26% to Europe. Management believes that the concentrations described are appro- priate for the Company. Derivative financial instruments, in the absence of any compensating upfront payments, generally have no market value at inception. They obtain value, positive or negative, as relevant commodity prices, interest rates, bond indices or exchange rates change such that the previously contracted transactions have become more or less favourable than what can be negotiated under current market conditions for contracts with the same remaining period to maturity or expiry. The potential for derivatives to increase or decrease in value as a result of the foregoing factors is generally referred to as a market risk. Market risk associated with the Company’s derivative financial instruments principally arises in connection with fluctuations in gold and silver spot prices, LIBOR-based interest rates, gold lease rates, bond indices values and the exchange rate existing between the United States and Canadian dollars. B. R O YA LT IE 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 IR ON M E N TA 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 IM S On April 30, 1998, the Company was added as a defen- dant in a class action lawsuit initiated against Bre-X Minerals Ltd., certain of its directors and officers or for- mer 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 and operate the Busang gold deposit in East Kalimantan, Indonesia were materially false and misleading 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. On July 13, 1999, the Court dismissed the claims against the Company and several other defendants on the grounds that the plaintiffs had failed to state a claim under United States securities laws. On August 19, 1999, the plaintiffs filed an amended complaint restating their claims against the Company and certain other defendants. The Company has filed a motion to dismiss the amended complaint on the basis that the plaintiffs have once again failed to state a claim. The motion to dismiss is pending before the Court. The amount of potential loss, if any, from these claims is not currently determinable. B a r r i c k G o l d C o r p o r a t i o n 1 9 9 9 A n n u a l R e p o r t 61 12893 Barrick 1999 Financ E.s 4/3/00 10:09 AM Page 62 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 there- of, will have a material adverse effect on the financial condition or future results of operations of the Company. 12. Differences from United States Accounting Principles These consolidated financial statements have been prepared in accordance with accounting principles gen- erally 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 ION S 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. 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 SFAS No. 109, with an offset- ting credit to deferred income taxes. This method of accounting has had no effect on the Company’s reported net income for the year. The Sutton acquisition (see note 9), which has been accounted for as a purchase under Canadian GAAP, represents a pooling of interest for US GAAP purposes. Accordingly, the assets and liabilities and shareholders’ equity of Sutton have been combined with the Company’s US GAAP recorded values. Comparative figures have been restated for all periods presented prior to the acqui- sition to include the combined statements of income and balance sheets of the merged entities, adjusted to conform with the Company’s accounting policies. 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 earn- ings to write down the carrying value associated with the potential of mineral exploration properties which had been carried at higher amounts under US GAAP as set out above. B. S TO C K- B A S E D C OM P E N S AT ION 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 that were granted in 1999 was $16 million (1998 – $35 million). This fair value was estimated using the Black-Scholes model with assumptions of a 41⁄2- to 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 1.02%. Under US GAAP the cost of stock compensation for the year ended December 31, 1999 would be $26 million (1998 – $22 mil- lion). The resulting pro forma net income and income per share for the year ended December 31, 1999 is $300 million and $0.76 respectively (1998 – $271 million and $0.69 per share respectively). C . W R I T T E N C A LL OP T ION S Written call options are possible future sales commit- ments. In accordance with Canadian GAAP, providing that uncommitted production exists to meet these commitments, no mark-to-market gain or loss is accrued prior to their expiry. For US GAAP purposes, the Com- pany includes in the income statement the change in the fair value of its written call option position. The fair value is included in other assets on the balance sheet. D. DE F E R R E D TA X L I A BIL I T IE S The amount of unrecognized deferred tax liability for temporary differences related to the Company’s investments in the United States and Chile, which are essentially permanent in duration, is $84 million (1998 – $94 million). 62 B a r r i c k G o l d C o r p o r a t i o n 1 9 9 9 A n n u a l R e p o r t 12893 Barrick 1999 Financ E.s 4/3/00 10:09 AM Page 63 Net deferred tax assets include $47 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 $713 million, of which $461 million do not expire and $252 million expire at various times over the next 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 1999 1998 (restated) $ 75 51 66 32 $ 75 25 72 26 224 198 (32) (28) (58) (3) (32) (20) (50) (3) (121) (105) (218) (168) (75) (86) (547) (177) (116) (72) (100) (465) Total deferred income tax liability $ (444)( $ (372) E . C OM P R E H E N S I V E INC OM E There are no significant differences between the Company’s US GAAP net income as reported and its comprehensive income; accordingly, a separate state- ment of comprehensive income has not been presented. F. N E W S TA N D A R D S In June 1998, the Financial Accounting Standards Board issued SFAS No. 133, “Accounting for Derivative Instru- ments and Hedging Activities,” which will be effective for the Company’s 2001 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 their fair values will be presented as a component of comprehensive income to the extent that they are 100% effective in offsetting anticipated future cash flows. Any ineffective component of the change in fair value of those derivatives will be recognized immedi- ately in earnings together with the change in fair value of any derivatives that do not represent effective hedges 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. B a r r i c k G o l d C o r p o r a t i o n 1 9 9 9 A n n u a l R e p o r t 63 12893 Barrick 1999 Financ E.s 4/3/00 10:09 AM Page 64 G. B A L A NC 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: Cash Bullion settlements and other receivables Property, plant and equipment Other assets Accounts payable and accrued liabilities Deferred income taxes Shareholders’ equity 1999 United States GAAP $ 500 133 4,447 120 304 444 3,905 Canadian GAAP $ 500 133 4,488 121 304 237 4,154 1998 (restated) United States GAAP $ 458 90 4,164 53 241 372 3,630 Canadian GAAP $ 416 89 3,991 53 233 202 3,592 INC OM E S TAT E M E N T S H . The following summary sets out the adjustment to the Company’s reported net income (loss) in order to conform to accounting principles generally accepted in the United States: Net income (loss) for the year – Canadian GAAP Provision for exploration properties Net income (loss) for the year based on US GAAP as previously reported Sutton pre-acquisition costs and expenses Change in fair value of written calls 1999 $ 331 – 3331 (4) (1) 1998 (restated) $ 301 – 301 (8) – 1997 (restated) $ (123) (340) (463) (14) – Net income (loss) for the year based on US GAAP as restated $ 326 $ 293 $ (477) Net income (loss) per share for the year (dollars) Basic Fully diluted $ 0.83 $ 0.82 $ 0.75 $ 0.74 $ (1.24) $ (1.24) C A S H F LO W S TAT E M E N T S I . The following summarizes the cash flow amounts in accordance with US GAAP where different from the amounts reported under Canadian GAAP: Operating activities Development activities Financing activities Opening cash Closing cash 1999 $ 699 (637) (20) 458 500 1998 (restated) $ 534 (399) (10) 333 458 1997 (restated) $ 459 (378) (13) 265 333 64 B a r r i c k G o l d C o r p o r a t i o n 1 9 9 9 A n n u a l R e p o r t 12893 Barrick 1999 Financ E.s 4/3/00 10:09 AM Page 65 M A N A GE M E N T R E S P ON S IBILI T Y FOR F IN A NC I A L S TAT 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 14, 2000 A U DI TOR S ’ R E P OR T TO T H E S H A R E HOL DE R S OF B A R R IC K GOL D C OR P OR AT ION We have audited the consolidated balance sheets of Barrick Gold Corporation as at December 31, 1999 and 1998 and the consolidated statements of income, retained earnings and cash flow for each of the three years in the period ended December 31, 1999. These financial statements are the responsibility of the Company’s man- agement. 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 rea- sonable assurance whether the financial statements are free of material misstatement. An audit includes examin- ing, 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, 1999 and 1998 and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1999 in accordance with accounting principles generally accepted in Canada. PricewaterhouseCoopers LLP (signed) Chartered Accountants Toronto, Canada January 31, 2000 B a r r i c k G o l d C o r p o r a t i o n 1 9 9 9 A n n u a l R e p o r t 65 12893 Barrick 1999 Suppl E.s 4/3/00 10:10 AM Page 66 Reserves and Gold Mineralized Material 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 (1998 – $325 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, Pascua and Bulyanhulu Properties, which rep- resent 87% of the Company’s estimated total contained ounces as at December 31, 1999, have been audited by Pincock, Allen & Holt, a division of Hart Crowser, Inc., an independent international mineral consulting firm. The Company has carefully prepared and verified the ore reserve figures and believes that its method of esti- mating reserves has been verified by mining experience. These figures are estimates, however, and no assur- ance 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 miner- alization 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 profitability in any particular accounting period. Definitions C ON TA INE D O U NC E S : represents ounces in the ground without the reduction of ounces not recovered by the applicable metallurgical process. R E S E R V E GR A DE : estimated metal content of an ore body, based on reserve calculations. R E S E R V E S : 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 reasonable 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. GOL D M INE R A L I Z E D M AT E R I A L : mineralization based on geological evidence and assumed continuity. May or may not be supported by samples but is supported by geological, 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. 66 B a r r i c k G o l d C o r p o r a t i o n 1 9 9 9 A n n u a l R e p o r t 12893 Barrick 1999 Suppl E.s 4/3/00 10:10 AM Page 67 December 31, 1999 December 31, 1998 Tons (thousands) Grade (ounce per ton) Contained Ounces (thousands) Tons (thousands) Grade (ounce per ton) Contained Ounces (thousands) 135,619 23,279 5,898 3,288 5,847 13,025 104,926 61,020 2,822 2,014 2,444 2,777 17,049 3,261 289,456 195,478 1,361 78,273 0.153 0.099 0.647 0.457 0.466 0.270 0.059 0.013 0.184 0.152 0.204 0.156 0.439 0.885 0.059 0.034 0.184 0.047 20,709 2,293 123,097 30,157 3,816 1,502 2,726 3,511 6,146 782 518 306 497 432 7,484 2,885 6,637 5,043 2,856 5,847 114,301 61,020 3,237 4,386 3,022 2,444 – – 17,136 6,606 241,981 200,221 251 3,642 8,055 15,670 59,283 21,959 0.172 0.080 0.713 0.455 0.487 0.302 0.063 0.013 0.206 0.177 0.202 0.151 – – 0.058 0.033 0.198 0.111 21,213 2,398 4,729 2,293 1,391 1,765 7,244 782 666 776 611 370 – – 14,008 6,659 1,594 1,746 51,456 16,789 GOL D S T R IK E P R OP E R T Y Betze-Post Mine Proven and probable Mineralized material Meikle Mine Proven and probable Mineralized material Rodeo Projects Proven and probable Mineralized material P IE R IN A P R OP E R T Y Proven and probable Mineralized material C A N A DI A N P R OP E R T IE S Bousquet Mine Proven and probable Mineralized material Holt-McDermott Mine Proven and probable Mineralized material B U LYA N H U L U P R OP E R T Y Proven and probable Mineralized material PA S C U A P R OP E R T Y Proven and probable Mineralized material OT H E R P R OP E R T IE S Proven and probable Mineralized material TOTA L Proven and probable Mineralized material B a r r i c k G o l d C o r p o r a t i o n 1 9 9 9 A n n u a l R e p o r t 67 12893 Barrick 1999 Suppl E.s 4/3/00 10:10 AM Page 68 Premium Gold Sales Program Detail As at December 31, 1999 2000 2001 2002 2003 2004 2005 2006+ Totals Spot deferred contracts Ounces (000) Average price ($/oz.) Call options (purchased) Ounces (000) Average strike ($/oz.) Long-term call options sold Ounces (000) Average strike ($/oz.) Short-term call options sold Ounces (000) Average strike ($/oz.) 3,700 360 3,700 360 1,800 360 900 360 900 360 500 361 2,100 366 13,600 361 (3,100) 319 (3,700) 335 (6,800) – – 300 300 – – – – 100 340 – – 300 382 – – 450 355 – – 400 358 – – 1,450 365 2,700 363 – – 300 300 Barrick’s committed position stands at 9.8 million ounces at year-end and its expected realized floor price for the years 2000 and 2001 has decreased from $385/oz. to $360/oz. as a result of two factors: 1. A decrease of $19/oz. in 2000 and $13/oz. in 2001 with the redesignation of certain spot deferred con- tracts to future years. The expected realized prices of spot deferred contracts beyond 2001 will increase by an equivalent amount. 2. A further decrease of $6/oz. in 2000 and $12/oz. in 2001 representing the amortization of the cost to purchase 3.1 million call options at an average strike of $319/oz. in 2000 and 3.7 million call options at an average strike of $335/oz. in 2001. A total of 6.8 mil- lion ounces were purchased at an average cost of $10/oz. These call options provide Barrick with the right but not the obligation to purchase gold at the applicable strike prices. Barrick can sell its pro- duction at a minimum floor price of $360/oz. through its spot deferred program, but can now also realize further gains on any rise in the spot price above $319/oz. from March 1 to December 31, 2000 and above $335/oz. for all of 2001. These call options also mitigate the impact of higher gold prices on Barrick’s mark-to-market position. The average price of the spot deferred contracts reflects the expected future value, incorporating an average contango of 4.5%, and an average lease rate assumption of 2%. Barrick has minimal floating lease rate exposure for contracts scheduled for delivery in 2000 and has extended lease rates further into 2001 on a portion of its position designated past 2000. The weighted average lease rate on the total spot deferred position is 2.17%. S P OT DE F E R R E D IN V E S T M E N T Barrick’s total spot deferred position has a notional asset value of approximately $4.3 billion on which it earns an interest return. The Company achieves a return on this asset based on LIBOR and the credit rating associated with this return is that of its hedging counterparties (average “AA”). The Company has conservatively diversi- fied this investment by exchanging its LIBOR return for a return based on a professionally managed diversified basket of bond funds/indices. At year-end the Com- pany had 25% or the equivalent of 3.4 million ounces ($1.1 billion) of its spot deferred positions in a basket of bond funds/indices with an average credit rating of “A-”. Professional third-party investment managers at the leading investment management firms in the industry manage this basket, containing a mix of over 1,000 cor- porate and government bonds. This basket is managed to ensure that there is minimal interest rate exposure. There are no equity investments in the program. 75% of the position or the equivalent of 10.2 million ounces ($3.2 billion) remains invested with the “AA” hedging counterparties. The credit quality on the entire hedge position asset of $4.3 billion, including the effect of these investments, is “AA-”. 68 B a r r i c k G o l d C o r p o r a t i o n 1 9 9 9 A n n u a l R e p o r t 12893 Barrick 1999 Suppl E.s 4/3/00 10:10 AM Page 69 C A L L OP T ION S S OL D These sold call options can only be exercised by the counterparties on the expiry date and can be converted, at Barrick’s option, into spot deferred contracts and rolled forward for up to 15 years. There is no requirement for Barrick to cash settle these transactions. The premiums generated from the sale of the contracts that expire unexercised are recognized at the expiry date. T R A DING C R E DI T L INE S Barrick is subject to minimal margin calls on only 3% of the ounces in the hedge position. There are no margin requirements until the gold price reaches $800/oz. At $1,000/oz. the Company’s total margin call/cash deposit required would equal $72 million. S E N S I T I V I T Y A N A LY S I S The following tables show the sensitivity of the Company’s forecasted realized gold price over the next ten years to 1) changes in gold spot prices, 2) changes in gold lease rates and 3) changes in U.S.$ interest rates, and assumes a constant hedge position. The tables incorporate the impact of the call options purchased and sold. Realized Prices (1) Gold Spot 250 300 350 400 450 500 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 360 360 386 434 484 534 360 360 376 425 475 525 316 346 376 439 502 558 310 358 405 453 531 589 310 358 400 461 531 589 306 357 408 470 531 589 306 357 408 472 531 589 306 357 409 472 531 589 307 357 409 472 531 589 309 358 409 472 531 589 (1) At 2.0% lease rate and 6.5% interest rate ($ per ounce) Realized Prices (2) Lease Rate 1% 2% 3% 4% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 360 360 360 360 363 360 358 356 354 346 339 331 369 358 346 335 370 358 345 334 370 357 345 332 370 357 344 331 370 357 344 330 372 357 343 333 374 358 343 333 (2) At $300 spot and 6.5% interest rate ($ per ounce) Realized Prices (3) Interest Rate 6.5% 7.5% 8.5% 9.5% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 360 360 360 360 360 360 360 360 346 351 355 359 358 367 377 387 358 367 377 387 357 367 378 389 357 367 378 389 357 367 378 389 357 367 378 388 358 367 378 388 (3) At $300 spot and 2.0% lease rate ($ per ounce) B a r r i c k G o l d C o r p o r a t i o n 1 9 9 9 A n n u a l R e p o r t 69 12893 Barrick 1999 Suppl E.s 4/3/00 10:10 AM Page 70 Supplemental Information E L E V E N - Y E A R H I S TOR IC A L R E V IE W * 1999 1998 1997 1996 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) $ 1,432 331 702 620 $ 0.83 $ 0.20 $ 500 5,353 440 525 4,154 11% 3,660 $ 124 385 279 59,283 $ 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 *Information has been derived from audited financial statements, except as indicated. Q U A R T E R LY D ATA (unaudited) (in millions except per share data) 1999 March 1998 1999 June 1998 September 1998 1999 December 1998 1999 Revenues Gold sales Interest and other income Costs and expenses Operating Depreciation and amortization Administration Exploration Interest Gain on sale of mining property Income before taxes Income taxes $ 390 2 $ 302 3 $ 373 3 $ 293 3 $ 326 5 $ 324 3 $ 332 1 $ 368 2 392 305 376 296 331 327 333 370 133 117 8 14 3 – 275 117 (30) 135 49 10 11 – (42) 163 142 (67) 139 104 9 10 3 – 265 111 (27) 141 46 7 13 – – 207 89 (22) 120 88 8 6 3 – 225 106 (27) 154 51 8 12 – – 225 102 (26) 124 76 10 14 2 – 226 107 (26) 165 70 11 14 – – 260 110 (27) Net income for the period $ 87 $ 75 $ 84 $ 67 $ 79 $ 76 $ 81 $ 83 Net income per share Fully diluted $ 0.23 $ 0.20 $ 0.20 $ 0.18 $ 0.20 $ 0.20 $ 0.20 $ 0.21 70 B a r r i c k G o l d C o r p o r a t i o n 1 9 9 9 A n n u a l R e p o r t 12893 Barrick 1999 Suppl E.s 4/3/00 10:10 AM Page 71 1995 1994 1993 1992 1991 1990 1989 $ 1,307 292 502 385 $ 0.82 $ 0.120 $ 284 3,556 285 100 2,948 3% 3,141 $ 180 406 384 36,539 $ 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 Q U A R T E R LY D ATA (unaudited) (in millions except per share data) 1999 March 1998 1999 June 1998 September 1998 1999 December 1998 1999 Operating activities Net income Depreciation and other non-cash items Working capital changes Development activities Property, plant and equipment Purchase and sale of mining properties Other Financing activities Capital stock Long-term obligations Dividends $ 87 $ 75 $ 84 $ 67 $ 79 $ 76 $ 81 $ 83 127 (4) 210 53 7 135 113 (23) 174 51 (9) 109 96 25 200 55 15 146 89 (52) 118 77 (11) 149 (103) (113) (142) (161) (166) (121) (209) (112) 30 (1) (74) 1 1 – 2 90 17 (6) 21 (3) – 18 – (17) 60 (27) – 23 – (10) – (13) (159) (128) (143) (131) (222) 7 28 (39) (4) 11 554 4 (1) (34) (31) (50) 439 20 (2) – 18 75 565 3 (5) – (2) 13 389 1 3 (40) (36) (140) 640 20 (5) (97) 7 (11) (34) (38) 14 402 Increase (decrease) in cash Cash beginning of period 138 416 147 292 Cash at end of period $ 554 $ 439 $ 565 $ 389 $ 640 $ 402 $ 500 $ 416 B a r r i c k G o l d C o r p o r a t i o n 1 9 9 9 A n n u a l R e p o r t 71 12893 Barrick 1999 Shareh E.s 4/3/00 10:11 AM Page 72 Shareholder Information S H A R E S T R A DE D ON F I V E M A J OR IN T E R N AT ION A L S TO C K E X C H A NGE S London New York Toronto Paris Swiss INDE X L I S T ING S S&P 500 Index S&P/TSE 60 S&P Global 1200 TSE 100 TSE 300 TSE Gold & Precious Minerals Index FT of London Gold Index Philadelphia Gold/Silver Index S H A R E T R A DING IN F OR M AT ION T o r o n to S to c k E x c hang e Quarter First Second Third Fourth N e w Y o r k S to c k E x c hang e Quarter First Second Third Fourth T ICK E R S Y MBOL ABX 1999 DI V IDE N D P E R S H A R E US 20¢ N U M BE R OF S H A R E HOL DE R S 13,359 C OM M ON S H A R E S (millions) Outstanding at December 31, 1999 Weighted average Basic Fully diluted 396 390 410 The Company’s shares were split on a two-for-one basis in 1987, 1989 and 1993. V OL U M E OF S H A R E S T R A DE D (millions) NYSE TSE 1999 381 413 1998 365 409 C LO S ING P R IC E OF S H A R E S December 31, 1999 NYSE TSE US$ 17.69 C$ 25.75 Share Volume (millions) 1999 1998 1999 124 98 89 102 413 107 93 97 112 409 C$ 32.85 34.20 38.20 35.90 High 1998 C$ 31.65 34.00 32.60 35.95 Low 1998 C$ 21.65 24.50 20.10 27.90 1999 C$ 24.80 24.00 25.00 24.90 Share Volume (millions) 1999 1998 1999 High 1998 79 102 93 107 381 104 81 82 98 365 US$ 21.81 23.44 25.81 24.44 US$ 22.25 26.69 21.56 23.63 Low 1998 US$ 15.13 16.63 12.88 17.94 1999 US$ 19.25 17.19 16.75 16.94 72 B a r r i c k G o l d C o r p o r a t i o n 1 9 9 9 A n n u a l R e p o r t 12893 Barrick 1999 Shareh E.s 4/3/00 10:11 AM Page 73 DI V IDE N D PAY M E N T S In 1999, the Company paid a cash dividend of $0.20 per share – $0.10 on June 15 and $0.10 on December 15. A cash dividend of $0.18 per share was paid in 1998 – $0.09 on June 15 and $0.09 on December 15. DI V IDE ND P OLIC 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 ING The Annual General Meeting of Shareholders will be held on Tuesday, May 16, 2000 at 10:00 a.m. in the Canadian Room, Royal York Hotel, Toronto, Ontario. F OR M 4 0 - F 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. OT H E R L A NG U A GE R E P OR T S French and Spanish versions of this annual report are available from Investor Relations at the Corporate Office. DI V IDE N D R E IN V E S T M E N T P R O GR 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 S H A R E HOL DE R C ON TA C T S 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 GE 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 B a r r i c k G o l d C o r p o r a t i o n 1 9 9 9 A n n u a l R e p o r t 73 12893 Barrick 1999 Shareh E.s 4/3/00 10:11 AM Page 74 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. 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, Premdor Inc. Prior to January 1993, Mr. Crossgrove was Vice Chairman and Acting Chief Executive Officer of Placer Dome Inc. He has been a Director of Barrick since 1993. The Honourable J. Trevor Eyton, ., ..(1) Caledon, Ontario Chairman, Group Advisory Board 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 (1) Palm Beach, Florida Chairman, Fiji Water, Mr. 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 Mr. 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. The Honorable Edward N. Ney(1) New York, New York Chairman Emeritus, Young & Rubicam Advertising From 1989 to 1992, Mr. 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. Mr. 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. (1) note – not standing for re-election at the Company’s annual general meeting on May 16, 2000. 74 B a r r i c k G o l d C o r p o r a t i o n 1 9 9 9 A n n u a l R e p o r t 12893 Barrick 1999 Shareh E.s 4/3/00 10:11 AM Page 75 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 appropriate and responsive to chang- ing circumstances. BO A R D M A N D AT E Barrick’s management is respon- sible for the Company’s day-to-day operations, for proposing its strategic direction and presenting budget and business plans to the Board of Directors for approval. All major acquisitions, dispositions and invest- ments, 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. Committees of the Board A U DI T C OM M I T T E E (H.L. Beck, P.A. Crossgrove, J.L. Rotman) Responsible for reviewing the Company’s financial statements with management and the external audi- tors. 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 OM M I T T E E (A.A. MacNaughton, B. Mulroney, P. Munk, R. Oliphant, 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 management and direction of business during intervals between Board meetings. BO A R D C ON S T I T U T ION Barrick’s Board of Directors is currently 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. BO A R D OP E R AT ION S The Board of Directors has estab- lished five committees, including the Audit, Executive, Compensation and Corporate Governance, Environ- mental, Occupational Health and Safety and Finance Committees. The mandates of these Committees are described below. The Audit and Compensation and Corporate Governance Committees are com- prised entirely of unrelated directors. 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 signif- icant 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 Information Circular. C OM P E N S AT ION A N D C OR P OR AT E GO V E R N A NC E C OM 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. In addition, the Committee reviews corporate governance poli- cies and practices. It also considers 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. E N V IR ON M E N TA L , O C C U PAT ION A L H E A LT H A N D S A F E T Y C OM 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 regula- tory issues. F IN A NC E C OM M I T T E E (C.W.D. Birchall, A.A. MacNaughton, R. Oliphant, G.C. Wilkins) Reviews the Company’s investment strategies, gold price hedging pro- gram and debt and equity structure. B a r r i c k G o l d C o r p o r a t i o n 1 9 9 9 A n n u a l R e p o r t 75 12893 Barrick 1999 Shareh E.s 4/3/00 10:11 AM Page 76 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 John Butler Senior 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 Ammar Al-Joundi Vice President and Treasurer M. Vincent Borg Vice President, Corporate Communications Michael J. Brown Vice President, United States Public Affairs 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 International Advisory Board The International Advisory Board was established to provide advice to Barrick’s Board of Directors and Management as the Company expands internationally. ME MBER S Senator Howard H. Baker, Jr., United States Partner, Baker, Donelson, Bearman & Caldwell C H A IR 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 Managing Director, Lazard Freres & Co., and Of Counsel to Akin, Gump, Strauss, Hauer & 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 76 B a r r i c k G o l d C o r p o r a t i o n 1 9 9 9 A n n u a l R e p o r t 12893 Barrick 1999 Ins Cov E.s 4/3/00 9:56 AM Page 1 Corporate Information C OR P OR AT E OF F IC 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 IN ING OP E R AT ION S North America 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 Brian Grebenc 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 South America 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 Igor Gonzales General Manager Telephone: (51-1) 275-0600 Fax: (51-1) 275-3733 East Africa Bulyanhulu Mine International House, Level 2 Shaaban Robert Street/ Garden Avenue P.O. Box 108 Dar es Salaam, Tanzania Ray Threlkeld Vice President and General Manager Telephone: (255-51) 123-181 Fax: (255-51) 123-180 C OR P OR AT E D ATA Auditors PricewaterhouseCoopers Toronto, Canada Investor Relations 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 Sandra Prashad Investor Relations Officer Telephone: (416) 307-7440 Fax: (416) 861-0727 Email: sprashad@barrick.com Toll-free number within Canada and United States: 1-800-720-7415 Email: investor@barrick.com Web site: www.barrick.com F OR W A R D LO O K ING S TAT 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 materially 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 fac- tors 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. S T H G I L H G I H E C N A M R O F R E P 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 12893 Barrick 1999 Outs Cov E.s 4/3/00 9:51 AM Page 1 You can contact us toll-free within Canada and the United States at 1-800-720-7415 email us at investor@barrick.com visit our investor relations web site at www.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 9