Abacus Global Management, Inc. Annual Report 2005

FY2005 Annual Report · Abacus Global Management, Inc.

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Delivering Value from

Assets
People
Projects

Annual Report 2005

Barrick’s vision is to be the world’s best
gold mining company by ﬁnding, acquiring,
developing, and producing quality reserves
in a proﬁtable and socially responsible manner.

It has quality assets, an unrivalled pipeline
of projects and more than 20,000 dedicated
employees working on ﬁve continents to
deliver value.

In 2006, the Company will start to realize
the opportunities that are available as a result
of its new strength, breadth and scale.

Barrick shares are traded on the Toronto,
New York, London, Euronext-Paris and
Swiss stock exchanges.

Financial Highlights

(US$ millions, except per share data)
(US GAAP basis)

Gold sales
Net income for the year
Operating cash ﬂow
Cash and equivalents
Shareholders’ equity
Net income per share (diluted)
Operating cash ﬂow per share
Dividends per share

Operating Highlights
Gold production (thousands of ounces)
Average realized gold price per ounce
Total cash costs per ounce1
Total production costs per ounce

Gold reserves: proven and

probable (thousands of ounces) 2

2005

2,350
401
726
1,037
3,850
0.75
1.35
0.22

5,460
439
227
303

$
$
$

2004

1,932
248
509
1,398
3,574
0.46
0.95
0.22

4,958
391
214
300

$
$
$

2003

2,035
200
519
970
3,481
0.37
0.97
0.22

5,510
366
189
279

$
$
$

88,591

89,056

85,952

1. See page 44 for a discussion of total cash costs performance measures.
2. For the remainder of this report – for a breakdown of reserves and resources by category in respect of each of Barrick’s mines and development

projects, see page 126.

Table of Contents

Letter to Shareholders

Barrick and Placer Dome

Responsible Mining

Financial Strategy

Barrick Overview

North America

South America

Australia/Africa

Russia/Central Asia

29 Management’s Discussion

and Analysis

Regional Business Units

Financial Statements

82 Notes to Consolidated

Financial Statements

125 Mineral Reserves and Resources

131 Corporate Governance and

Committees of the Board

134 Shareholder Information

136 Corporate Information

Financial Highlights (cid:1) 1

Letter to Shareholders

Peter Munk, Chairman (left)
Gregory C. Wilkins, President and Chief Executive Ofﬁcer

The Company now deals from strength. Going forward, it will
enjoy the advantages of scale that are critical for continuing,
long-term success in our industry.

Dear Shareholders,

2005 was a transformative year for our Company.
We brought three new mines into production, met
or exceeded our ﬁnancial and other targets in almost
every area of our business, and launched a successful
bid to acquire Placer Dome Inc.

As a result, Barrick now holds a preeminent
position within the gold mining industry. We are one
of the very few with the strength, breadth and scale
to handle the challenges facing our sector, and seize
its equally signiﬁcant opportunities.

The Company now deals from strength. Going

forward, it will enjoy the advantages of scale that
are critical for continuing, long-term success in our
industry. We will discuss the transaction and its
value to shareholders at greater length later in this
letter, but ﬁrst want to take this opportunity to
welcome our new shareholders. The entire Barrick
team respects the skills of Placer Dome employees,

and looks forward to working with them in this
great new venture. Together, we are building a
much stronger enterprise that will create value for
shareholders, employees, and the communities
in which we live and work.

While the acquisition was certainly the biggest

news of 2005, it does not exist in isolation. It was
made possible by the success of the comprehensive
business plan that we initiated in 2003. We have been
methodically implementing it ever since, with a single
overriding objective: to create value for shareholders.
Indeed, Barrick shares outperformed the Philadelphia
Gold and Silver Sector Index from 2003 until we
launched our bid for Placer Dome. We expect that
they will provide superior value once again, as we
deliver on the strategic rationale of the acquisition.
In following our business plan, we reorganized

Barrick into the decentralized regional business

2 (cid:1) Letter to Shareholders

units that now serve our expanding global activities
so well, and we made a Company-wide commitment
to leadership, urgent action, accountability, and
results. We developed cost-mitigation strategies to
address industry-wide pressures, and we laid out
an aggressive schedule for bringing into production
six new mines between 2005 and 2009.

Three of those new mines came into production

in 2005, and a fourth project, Cowal, continued to
advance. Collectively, they came within 5% of our
overall $1.2 billion development budget, discussed
in the 2004 Letter to Shareholders. The new mines
helped drive rising production and proﬁtability
during the year, just as we anticipated in last year’s
annual report.

We posted excellent ﬁnancial results in 2005, and

our production and cash costs were in line with our
original guidance, in a difﬁcult cost environment.
We further strengthened our management team
during the year, and we maintained our strong
commitment to responsible mining through our
health and safety, environmental, and community
development programs.

With this strong year behind us, we are conﬁdent

that we will complete the integration of Placer
Dome quickly and effectively, and begin realizing the
synergies and potential of this powerful new company.

Gold Price, Industry Issues…
and the Barrick Strategy
We are now shaping Barrick to ensure we remain an
industry leader. Gold prices and the outlook for gold
are both strong, yet the industry continues to face
very signiﬁcant challenges. We will continue to address
those challenges and improve our competitive
position, while reaping gold-price beneﬁts.

Gold had an excellent year in 2005, with highs
that had not been seen since 1981. The rally, which
began in 2001 and was originally driven by a declining
US dollar, is now widely considered to be based on

fundamentals. Global investment demand more
than doubled in 2005; the combined gold holdings
of all gold ETFs (Exchange Traded Funds) rose
by 115%; and some central banks have suggested
that they may add to reserves.

Against this backdrop of growing demand, supply

is ﬂat. The industry’s overall lack of investment in
exploration and development, between 1998 and
2003, is now being felt. There are few new major
discoveries, and mine production rose by a modest
1% in 2005.

All of this is bullish for the gold price, but

it comes at a time of challenges for the industry.
Attractive deposits are in increasingly remote
locations; permitting and review is more rigorous
and time-consuming; capital and operating costs
are higher; social responsibility standards, rightly,
continue to rise; and the expertise needed to produce
gold is at a greater premium than ever before.

Few companies will be able to beneﬁt from
today’s opportunities, because few have the track
record and strength to handle this array of challenges.
Barrick is one of the few.

We have consistently maintained our
investment in exploration and development, and
have the new mines and pipeline of development
projects to show for it. We have the expertise,
ﬁnancial strength and corporate good citizenship
to meet the technical, regulatory, environmental,
and community requirements now associated with
producing gold – proﬁtably, and responsibly. All
this places us in a very strong competitive position.

Delivering Value in 2005
In 2005, net income increased 62% to $401 million and
cash ﬂow from operations rose 43% to $726 million.
Proﬁts increased, as production rose from
1.1 million ounces in the ﬁrst quarter to 1.65 million
ounces by year-end. The new generation of mines
drove these increases, and can be expected to

Letter to Shareholders (cid:1) 3

continue with their contribution in 2006, the ﬁrst
full year of production for all three.

Barrick was the only senior producer to be

in line with its original production and cash cost
guidance for 2005. We produced 5.46 million ounces
of gold and our total cash cost per ounce for the
year was $227.

We have an unrelenting focus on cost-mitigation.

Our currency and commodity hedging programs
help us avoid cost pressures in these areas, or greatly
reduce their impact.

We also continue to strengthen our continuous

improvement and supply chain management
programs.

The industry’s tire shortage is a good example
of the success of our approach. We are increasing
the life of our existing tires by as much as 25% and
we are using our purchasing power to ensure a more
dependable tire supply.

We are ﬁnding other innovative ways to manage

costs. For example, we commissioned our own
electric power facility at Goldstrike, the Western 102
Power Plant, in early November – the ﬁrst business
in Nevada to take advantage of the right to leave the
regulated grid.

As a result of these and other initiatives, Barrick

remained the lowest-cost senior producer in 2005.
Production increased each quarter throughout

the year, to meet our expectations for 2005 and
post a 10% increase over 2004.

During 2005, three development projects
achieved start-up and became producing mines:
(cid:1) Tulawaka (Tanzania) in Q1, a small but high-
return operation, which builds upon our
presence in Tanzania;

(cid:1) Lagunas Norte (Peru) in Q2, with proven and

probable gold reserves of 8.3 million ounces; and

(cid:1) Veladero (Argentina) in Q4, with proven and
probable reserves of 12.6 million ounces of
gold, marking the start of production from the
highly prospective Frontera District on the
Chile/Argentina border.

Our strong ﬁnancial results for 2005 reﬂect three
key factors: growth in production, due to the
contribution made by our three new mines; the
rising gold price; and our focus on keeping cash
costs low so as to expand our operating margins.

The Way Ahead
The Placer Dome acquisition will deliver value to
shareholders from the assets, people and projects of
the combined companies. Placer Dome’s key assets
lie in close proximity to Barrick’s, and our collective
projects comprise an unrivalled pipeline for growth.
The ﬁt is excellent.

We expect the acquisition to be accretive to
Net Asset Value, reserves, resources and production
per share, and to allow us to capture $200 million
worth of synergies a year, beginning in 2007. Yet
the ultimate importance of this transaction, and its
value to shareholders, goes beyond those numbers.
The power of this combination allows us to deal
from strength, in an environment where only the
best and the strongest will thrive. We did not acquire
Placer Dome to become the largest gold company
in the world. We acquired it to ensure that our
shareholders and employees will thrive.

Today Barrick can run operations, build and
ﬁnance projects, manage the supply chain, attract
and retain personnel, and in every area execute
our work better than before, because of this new
depth of talent and resources. We have the scale
and strength to address the challenges facing the
industry, and capitalize on its opportunities as well.

4 (cid:1) Letter to Shareholders

2005 was truly a landmark year for Barrick. It was the
culmination of years of planning and execution, and ﬁnancial
discipline, which positioned us for the great step forward –
the acquisition of Placer Dome.

Delivering Value: the Outlook for 2006
A core priority for 2006 is the effective and timely
integration of Placer Dome. We began to implement
the integration plan the day after we acquired control
of the company. We are approaching this objective
with the same rigor and urgency that characterize all
key corporate initiatives, such as our development
projects. We will focus all our energies on building
Barrick, capturing the synergies, and delivering value.
In 2006, we will beneﬁt from the ﬁrst full year
of production for each of the three mines brought
on-stream in 2005, and from our new Cowal Mine
as well. It will be the seventh mine we have brought
into production since 1996. Seven mines in ten years –
an unequalled track record. We are also making
progress with the East Archimedes project in
Nevada, where production is expected to begin
in 2007. With the approval of Pascua-Lama by the
Chilean authorities, the next milestone for the
project is approval in Argentina. With construction
expected to begin later this year, Pascua-Lama is
targeted to commence production in 2009.

With the acquisition of Placer Dome, we
are now applying our depth of exploration and
development expertise to the entire combined
pipeline of projects, which will drive growth and
create value for the Company well into the future.
In summary, 2005 was truly a landmark year

for Barrick. It was the culmination of years of
planning and execution, and ﬁnancial discipline,

which positioned us for the great step forward –
the acquisition of Placer Dome. We wish here to
pay tribute to our employees, for all this is truly
their achievement.

We also wish to pay tribute to Angus
MacNaughton, a valued colleague who joined
the Company’s Board of Directors in 1986, was
Vice-Chairman during a critical growth period, and
is now retiring. He has provided wise counsel over
the years and will be missed. At the same time, we
welcome three former Placer Dome directors to
our own Board: Donald J. Carty, John W. Crow
and Robert M. Franklin, and another independent
director, Brett Harvey. Their knowledge and support
will beneﬁt our Company and its combined
shareholders and dedicated employees.

On a more personal note, the two of us have been
close business associates and colleagues since bringing
Barrick into the gold mining business in 1983. From
that standing start, we have nurtured Barrick to
its current position of strength, scale and industry
leadership. Building on fundamental business
principles, we will continue to focus on performance
for the beneﬁt of all Barrick’s stakeholders.

Peter Munk
Chairman

Gregory C. Wilkins
President and Chief
Executive Ofﬁcer

Letter to Shareholders (cid:1) 5

Barrick and Placer Dome
The Combined Company: Value for Shareholders

▲ Donlin Creek

● Eskay Creek

● Golden

Sunlight

●
●
●●
●
▲
▲
●

● Hemlo

T A N Z A N I A

North Mara ●

▲ Kabanga

● Tulawaka

● Bulyanhulu

0 mi

100

▲ Buzwagi

● Plutonic

W E S T E R N
A U S T R A L I A

Lawlers ●

● Darlot

Granny Smith ●

● Turquoise Ridge

● Goldstrike

● Marigold

Cortez Hills ▲

● Cortez

● Bald
Mountain

East Archimedes ▲

N E V A D A

● Round Mountain

0 mi

100

Pueblo Viejo ▲

Lagunas
Norte

●
● Pierina

●

▲

●

Zaldívar ●

C H I L E

0 mi

100

A
R
G
E
N
T

N
A

Pascua-Lama
▲
●

Veladero

Barrick’s overriding objective is to create shareholder
value – value over time, even as the times change
and new opportunities and challenges arise.
This objective shapes our corporate culture and
organization, our ﬁnancial approach, the priorities
for our operations, our consistent investment in
exploration, and our strategy for acquisitions.

We have been assessing various acquisition
possibilities, weighing them against our value-creation
criteria for the environment in which gold companies
must now operate. Placer Dome met those criteria,
and we realized the company would be an excellent
ﬁt with our own assets, people and projects.

We announced our offer in late October 2005.
In late December, we negotiated a ﬁnal price that
allowed us to complete the deal on a friendly basis
with the support of Placer Dome’s Board of Directors,
management and employees. With this acquisition,
we have acquired 12 operating mines and three
projects, exploration properties all over the world,
and a rich pool of talented people. We expect the
transaction to be accretive to earnings and cash ﬂow
on a per-share basis in 2007 and beyond.

6 (cid:1) Barrick and Placer Dome

●
▲●▲
●

0 mi

100

Kanowna ● ● Kalgoorlie

Porgera
●

● South Deep

● Mine ▲ Project

Osborne ●

●
●●
●
●●

Cowal ▲

Henty ●

The combined Company is an industry leader,
operating with the strength and scale that the times
demand. We go forward in this environment with:
(cid:1) signiﬁcantly increased reserves, resources and

production;

(cid:1) low-cost production relative to our peer group;
(cid:1) clusters of operating assets in close proximity to each
other, on the world’s most prospective gold belts;
(cid:1) an unrivalled pipeline of projects, to which we can

apply our development expertise;

(cid:1) a world-class team with proven exploration success

and project-development expertise; and

(cid:1) the strongest ﬁnancial position in the industry.

The quality and geographic ﬁt of the assets, combined
with the skills of our people and our decentralized
business platform, give us conﬁdence that we will
capture an anticipated $200 million in annual
synergies, as of 2007.

Value from Projects and
Project-Development Expertise
Barrick has the industry’s best suite of projects and
properties through 2009 and beyond – and the skills
and ﬁnancial strength to realize these value-creation
opportunities to the full.

The combined assets will mesh in time, as well
as geographic proximity, to assure continuing growth.
The three acquired projects – Cortez Hills (Nevada),
Donlin Creek (Alaska), and Pueblo Viejo (Dominican
Republic) – overlap with our existing ones, to
extend the pipeline and provide lucrative growth
opportunities for Barrick into the future.

All these projects will be managed by one
highly skilled and experienced team, in a Company
that has brought seven new mines into production
in the last ten years. No other gold mining company
has this track record of speed, efﬁciency and success,
backed by the industry’s strongest balance sheet.
Experience has taught us how to handle the

challenges associated with designing, permitting,
ﬁnancing and building projects in today’s demanding
environment. All these skills are now focused on
creating value for shareholders from our larger, longer
pipeline of quality projects and the opportunities
that it presents.

Value from Exploration
Exploration is one of Barrick’s core strengths. We
have a track record of consistent exploration, and

considerable success. Lagunas Norte, for example,
now a producing mine in Peru, was the largest
greenﬁeld discovery in the industry in a decade. The
result of our exploration program has been a strong,
geographically diversiﬁed package of quality land
positions, which create value through additional
reserves, resources and, ultimately, production.

Now we are integrating a complementary suite

of exploration properties, focused on the same
multi-million-ounce gold districts in Nevada,
Frontera (Chile/Argentina), Tanzania and Australia.
The combined assets give us a signiﬁcant position
on the most prospective ground in all four regions.

Barrick in Nevada:
(cid:1) interests in six operating mines;
(cid:1) interests in two development projects,
East Archimedes and Cortez Hills;

(cid:1) over 34 million ounces of proven and probable
gold reserves and almost 10 million ounces
of measured and indicated gold resources; and

(cid:1) strong land positions on the region’s three
major trends – Carlin, Getchell, and Battle
Mountain-Eureka.

Crushing and processing facilities at the Zaldívar open-pit copper mine in Chile, one of the quality assets gained through the Placer Dome
acquisition. Zaldívar has 5.9 billion pounds of proven and probable copper reserves and an expected mine life of around 20 years.

Barrick and Placer Dome (cid:1) 7

Barrick in the Frontera District:
(cid:1) one operating mine (Veladero) and one
development project (Pascua-Lama);

(cid:1) over 30 million ounces of proven and probable
gold reserves and 2 million ounces of measured
and indicated gold resources;

(cid:1) a 3,000-square-kilometer position on this highly

prospective district straddling the Chile/Argentina
border; and

(cid:1) a ﬁrst-class exploration team, which is familiar with
the area and combines Barrick and Placer Dome
expertise in high-sulphidation and porphyry deposits.

Barrick in Tanzania:
(cid:1) three mines and two projects;
(cid:1) nearly 18 million ounces of proven and probable

gold reserves and over 3 million ounces of
measured and indicated gold resources;
(cid:1) an extensive suite of quality exploration

properties in the highly prospective Lake Victoria
Gold Belt; and

(cid:1) Tanzania’s best team of exploration geologists.

Barrick in Australia:
(cid:1) eight mines, six of them clustered in Western

Australia;

(cid:1) over 14 million ounces of proven and probable
gold reserves and 8 million ounces of measured
and indicated gold resources;

(cid:1) commanding land positions in the Kalgoorlie,
Laverton, Agnew and southern Yandal gold
belts; and

(cid:1) a strong, well-established team of exploration
personnel, positioned to deliver value from
all parts of Australasia.

We are combining our skills and our best practices
in exploration systems and technology, as well. We are
using this strength to prioritize and streamline projects
already in the exploration pipeline in order to add
ounces more effectively around existing operations
and development projects, and to enhance our success
in ﬁnding new ounces in emerging regions.

We are also combining R&D expertise, which

will lead to advances we can apply in underground
and open-pit mining, mineral processing, and
environmental management.

Value from Financial Strength
Barrick has the ﬁnancial strength to continually
invest in exploration, develop new mines, and run
its operations both proﬁtably and responsibly.

With the strongest balance sheet in the industry

and access to over $2 billion in capital resources
through existing cash and credit resources, we are
able to develop all our projects on the scale and with
the timelines they require – and to do so without
equity dilution.

The North Mara Mine lies on Tanzania’s rich Lake Victoria Gold Belt,
which also hosts Bulyanhulu, Tulawaka and Buzwagi.

A view of the ore conveyor at the Kanowna asset, which is located
close to the joint-venture Kalgoorlie Mine in Western Australia.

8 (cid:1) Barrick and Placer Dome

Barrick has the ﬁnancial strength to continually invest
in exploration, develop new mines, and run its operations
both proﬁtably and responsibly.

Value from Synergies
We see the opportunities for $200 million in annual
synergies, and we have the business platform and the
management capability to capture that value in full
as of 2007.

These synergies are anticipated in ﬁve key areas:

Operations, Exploration, Procurement, General
and Administrative (G&A), and Finance and Tax.
In Operations, we will optimize and share mining
and processing infrastructure in Nevada, Australia
and Tanzania; reduce energy costs and inventory
levels through joint infrastructure; and implement
combined best practices at all locations.

In Exploration, we will consolidate our land
positions on the most prospective belts and prioritize
our pipeline of exploration projects. In Procurement,
we expect to generate signiﬁcant savings from our
improved purchasing power as deployed by our
worldwide supply management group. The savings
in G&A will come from shared business practices,
and the elimination of duplication in ofﬁces and
overheads in all regions. With Finance and Tax,
we will realize jurisdictional tax synergies and
enjoy both debt optimization and a lower overall
cost of capital.

Finally, in addition to the areas factored
into the $200-million calculation above, we can
expect capital synergies. Through the sequential
development of our project pipeline, we will be able
to transfer development teams, equipment and
a comprehensive knowledge base from one project
to the next. This pipeline also allows for in-house
management of engineering, procurement and
contract management (“EPCM”) contracts.

The Placer Dome acquisition strengthens Barrick’s Nevada footprint
with three new mines (above, Cortez) and a development project.

Barrick has the management capability, enriched
by our experience with the Homestake acquisition, to
optimize the value of our combined assets, people and
projects. We also have the appropriate organizational
structure: an existing decentralized platform of
Regional Business Units, which allows us to integrate
the assets and welcome the people, quickly and well.

Value Now
The increased strength of this powerful combination is
already being felt. Throughout the integration period,
there has been a parallel emphasis on “business as
usual.” Our teams have continued to focus on their
exploration, development and production targets,
steadily generating value for the Company and
its shareholders.

With the completion of the integration process –
to be largely accomplished by mid-2006 – our people
will fully concentrate on the opportunities we now
have the strength and scale to seize.

In addressing our overriding corporate objective –

to create shareholder value – Barrick goes forward
with greater ﬁnancial strength, greater depth of
talent, and a pre-eminent suite of operating mines,
projects, and exploration properties.

Barrick and Placer Dome (cid:1) 9

Responsible Mining

Employee Development
Barrick believes in enabling employees to develop to
their full potential. We respect and value each of our
employees and observe the fundamental tenets of
human rights, safety, and non-discrimination in the
workplace. We fairly compensate our employees for
their contributions, provide meaningful performance
feedback to them, and offer them professional
development and training opportunities. Employee
involvement in issues affecting the workplace helps
improve safety and work conditions, as well as
our efﬁciency and our business overall.

Community Development
It is a fundamental tenet of Barrick’s business strategy
to contribute to the sustainable economic and social
development of the communities in which we work
and live. We share the beneﬁts associated with our
mining operations in many different ways, including
local hiring, local and regional buying, community
infrastructural investment, small business development,
and improved education and health services.

Local stakeholder consultation is the cornerstone
of Barrick’s responsible mining practice. Early in the
development of a community/sustainability program,
we conduct a socioeconomic assessment, which
provides a useful benchmark for our community
development efforts. Thereafter, we maintain
a dialogue with community leaders and other

Bugarama’s new secondary school, built by Barrick, is the ﬁrst-ever
for this Tanzanian ward. Housing for teachers will be added.

Avalanche preparedness (here, Veladero, Argentina) is just one
of the range of safety measures at high-altitude operations.

Responsible mining has always been an intrinsic
part of this Company’s business model, and is a key
element of our vision to be the world’s best gold
company. It involves sharing the beneﬁts of mining
with the countries and communities where we work,
establishing open dialogue and partnership in those
communities, and earning the trust of all those
with whom we interact by dealing fairly with them.
Our performance record travels before us, creating
opportunities to generate shareholder value and
sustainable development.

Safety and Health
At Barrick, we are committed to performing every
job in a safe and healthy manner, in order to achieve
our safety vision of “every person going home safe
and healthy every day.” The safety and health of all
workers is the top priority at all Barrick operations.
Key to the success of Barrick’s safety and health
commitment is leadership at every level of the
organization. Courageous Leadership, a Company-
wide safety program launched in 2004, is an example
of this commitment. It draws on safety-related best
practices, establishes clear roles and responsibilities
for all personnel, and holds individuals accountable
for their practices. By year-end 2005, Barrick’s
entire management and supervisory group had
received training and trainers were beginning to
work with hourly employees and contractors.

10 (cid:1) Responsible Mining

United Nations Global Compact
In 2005, Barrick joined the UN Global Compact,
an initiative to promote corporate citizenship by
directly involving business in addressing some
of the major social and environmental challenges
that arise from increasing globalization. The ten
principles of the Global Compact are based on
internationally recognized norms and conventions
in four critical areas: human rights, labor
standards, the environment, and anti-corruption.
By endorsing the Global Compact, Barrick has made
a commitment to incorporate the ten principles
into its culture, strategy, and day-to-day operations.
It has also committed to report on the key practical
actions it takes to support the ten Global Compact
principles and their expected outcomes.

Environment
Barrick has a responsibility to protect, reclaim, and
where possible enhance the environment on the
sites where we operate. We practice conscientious
environmental stewardship and diligently apply
proven management controls to achieve this goal.
In 2005, Barrick became one of the ﬁrst signatories
to the International Cyanide Management Code
for the Gold Mining Industry – a voluntary code
developed by a multi-stakeholder committee under
the auspices of the United Nations Environment
Program and the International Council on Metals
and the Environment. Signatories commit to follow
the principles and implement the standards of
practice of the Code, to have their relevant operations
undergo a third-party audit and to make public
the audit results.

Charitable Giving
Barrick’s Heart of Gold Fund is another way we
contribute to the communities where we work and
live. Barrick’s policy is to give one percent of annual
pre-tax income to charitable causes. Recipients range
from community outreach programs to hospitals
and schools, environmental programs, art and
cultural events and major research institutions.

Responsible Mining (cid:1) 11

Environmental stewardship – here, water sampling at Goldstrike,
Nevada – is a priority at every operation, worldwide.

stakeholders, which serves to prioritize these efforts,
monitor performance, and adjust the focus of
initiatives as appropriate. During 2005, for example,
our community/sustainability program in Peru
included ﬁnancial and in-kind support for schools,
health initiatives, small business, agricultural irrigation
systems, and water, septic and electriﬁcation systems –
all in partnership with the people, institutions and
local authorities of the communities concerned.

Partnerships
Wherever possible, Barrick draws on the skills and
expertise of other organizations to complement our
own community development programs. In 2005, we
continued our relationships with three international
non-governmental organizations (NGOs): CARE,
Habitat for Humanity, and World Vision. We have
also developed strong relationships with Indigenous
Peoples, including partnerships with the Tahltan
First Nations in British Columbia and the Wiradjuri
Condobolin Registered Native Title Claimants
Group in Australia. This type of multifaceted
collaboration helps ensure that our support and
programs are well-targeted and complementary
to existing initiatives.

Financial Strategy

“Barrick will continue to improve its ﬁnancial proﬁle and
maintain a conservative ﬁnancial philosophy as it moves
forward with its capital investment program.”

Moody’s Investor’s Service (January 2006)

Barrick continues its long tradition of operating
from a strong, prudent ﬁnancial base. In 2005,
the Company:
(cid:1) brought three new mines on-stream, and advanced
a fourth to near-completion, all without issuing
any equity to ﬁnance them;

(cid:1) managed cost pressures successfully;
(cid:1) remained the lowest cash-cost producer of the

senior gold mining companies; and

(cid:1) structured an innovative share and cash transaction
for the acquisition of Placer Dome, which included
the sale of certain assets to Goldcorp, in order to
maximize the resulting synergies.

Financing
In 2004, we stated that we would execute the
industry’s most aggressive growth plan without
the need to issue additional equity. In 2005 we
achieved that objective, bringing three new mines
into production and signiﬁcantly advancing a
fourth, which is scheduled to enter production
in the ﬁrst quarter of 2006.

In April, the Company’s wholly-owned subsidiary,
Minera Barrick Misquichilca S.A., issued $50 million
of bonds in the Peruvian capital markets. The issue,
which was at a 28-basis-point discount to Sovereign
debt, was one of the highest ever ratings in that
country. The money was used to partially fund
construction of the new Lagunas Norte Mine in
Peru, thereby making Peruvian investors our partners
in a project of great importance to their country.

Cost Control/Cost Management
2005 was another year of challenging cost pressures
for the entire mining sector. Many gold producers
revised their guidance signiﬁcantly during the year
to reﬂect the negative impact of these pressures on
both production and cash-cost metrics. Barrick, by
contrast, did not revise guidance and remained the
lowest cash-cost senior gold producer for the year.
This success is due to the range of highly
complementary cost-management programs in
place. These include currency hedging to mitigate
the impact of rising currencies in countries where
we operate; hedging of consumables such as fuel
costs; supply chain management; and continuous
improvement. The collaboration exists across
corporate functions and regions, and through the
extended enterprise to outside suppliers as well.
Individual initiatives reinforce each other and,
in combination, create leverage for the Company
as a whole.

For example, industry costs in 2005 were affected
by stronger currencies in many of the countries where
gold is mined. Barrick was less affected than many
other companies because 75% of our 2005 costs were
denominated in US dollars and we largely eliminated
currency exposure on the remaining 25% through
our currency hedging program. This allowed us to
beneﬁt from higher US-dollar gold prices and thus
mitigate the impact on our mining costs of currency
appreciation elsewhere.

12 (cid:1) Financial Strategy

Continuous improvement (CI) and supply
chain management (SCM) are two more important
examples of the way interrelated strategies provide
cost-mitigation leverage. The CI program helps
reduce Company costs by reducing the rate at which
materials of all kinds are consumed. Program
initiatives focus on improving operational efﬁciencies,
and also on embedding a culture of CI so that
improvements are sustained, and later enhanced
whenever possible.

While CI addresses consumption of materials,

SCM focuses on their cost – total cost, from
purchase through the item’s life cycle to eventual
salvage or safe disposal. The SCM group not only
coordinates Company purchase contracts to gain
the leverage of scale, it also ensures that each spend
category operates at its most cost-effective level.
We will continue to deploy our full range of
cost-containment strategies as part of our overall
focus on maintaining and, where possible, reducing
our costs in equipment, currencies, oil, interest rates
and other areas that affect industry proﬁt margins.

Gold Sales Contracts
During the year, we reduced our ﬁxed-price gold
sales contracts position by 1.0 million ounces.
The Company remains committed to its
policy of reducing existing gold sales contracts.
With the acquisition of Placer Dome, we will inherit
additional contracts, but will continue to reduce
the total number of contracts we hold, increasing
Barrick’s leverage to the gold price.

We have already begun to reduce these contracts.
All of Placer Dome’s outstanding call options as well as
some of their forward contracts have been eliminated,
representing a reduction of approximately 1.5 million
ounces. By mid-February 2006, the combined gold

sales commitments totaled 18.5 million ounces.
Of this, a total of 9.5 million ounces of the hedge
position has been allocated to the Pueblo Viejo
and Pascua-Lama development projects. The
remaining 9.0 million ounces of Corporate gold
sales commitments represent 8% of total reserves
excluding ounces allocated to development projects.
A more detailed discussion of our corporate gold

sales contracts can be found in the Management’s
Discussion and Analysis (“MD&A”) section on
page 61.

Placer Dome Acquisition
On October 31, 2005, we announced a bid for all
outstanding shares of Placer Dome for a combination
of Barrick shares and cash. We increased the bid on
December 22 and received the unanimous support
of the Board of Directors of Placer Dome.

The strategic rationale and opportunities
presented by this transaction are outlined earlier in
this report. We will issue additional shares in order
to complete the transaction, and in exchange we
will receive signiﬁcant value in the form of Placer
Dome operations, assets and development projects.
The cash necessary to complete the transaction is to
be recouped through our agreement to sell certain
assets of Placer Dome to Goldcorp, resulting in
no new debt for the combined Company. Barrick
remains the most highly rated gold company in the
world, with the industry’s only A-rated balance
sheet (as rated by Standard & Poor’s).

In the future as in the past, Barrick will

maintain a sound and prudent ﬁnancial foundation.
On this solid base, the Company will run existing
operations, fund exploration programs, and advance
development projects.

Financial Strategy (cid:1) 13

Barrick Overview
Building Mines, Delivering Value

It was a year of solid, proﬁtable achievement, capped
by the bid for Placer Dome. In 2005, Barrick:
(cid:1) increased gold production by 10%;
(cid:1) held total cash costs in line with guidance;
(cid:1) brought three new mines into production; and
(cid:1) launched the successful bid to acquire Placer Dome.

Barrick produced 5.46 million ounces of gold
in 2005, at total cash costs of $227 per ounce. This
strong production derives from both our existing
mines, such as Goldstrike (which produced over
2 million ounces), and the contribution from the
Company’s new mines, in particular Lagunas
Norte in Peru.

Average total cash costs of $227 per ounce
were in line with our original guidance for the year.
This achievement, in a year of extreme cost pressure,
is a tribute to our cost-mitigation initiatives and
supply chain management efforts, which include
close attention to operational detail and the
procurement of consumables and equipment on
the best possible terms, worldwide.

Three new mines entered production in 2005:

Tulawaka (Tanzania), Lagunas Norte (Peru) and
Veladero (Argentina). We also made excellent progress
with our development projects and exploration
targets. Cowal (Australia), East Archimedes (Nevada)

Barrick initiatives result in longer life for existing tires (here, Lagunas
Norte, Peru) and a more dependable supply of new ones.

14 (cid:1) Barrick Overview

and Pascua-Lama (Chile/Argentina) remained on
schedule for their anticipated start-ups in ﬁrst quarter
2006, 2007, and 2009, respectively. Exploration targets
at both Buzwagi (Tanzania) and South Arturo
(Nevada) yielded encouraging results.

In April, Barrick made Russia/Central Asia
the Company’s newest Regional Business Unit and
opened an ofﬁce there, laying the groundwork
for opportunities in this highly prospective part
of the world.

Finally, on December 22, 2005, Barrick reached

agreement with Placer Dome for a friendly transaction,
an achievement that positioned Barrick for its next
phase of value creation. Combining the talent and
physical assets of these two companies will create
an industry powerhouse beginning in 2006.

Exploration
Barrick has a motivated, discovery-driven team
of over 150 geoscientists exploring for gold in over
16 countries around the world. Reserve development
and replacement of production is a major priority
for all sites. The Company consistently funds its
exploration programs throughout all gold cycles,
and has a proven track record of ﬁnding ounces
at both greenﬁeld and brownﬁeld projects.
Exploration is focused on highly gold-endowed
districts where Barrick controls large land positions,
primarily the Goldstrike and Pipeline districts in
Nevada, the Frontera District in Chile/Argentina,
and the Lake Victoria District in Tanzania. In
addition, the Company is exploring earlier-stage
projects in Australia, Canada and West Africa,
as well as evaluating exploration opportunities
in emerging districts around the world.

Three key factors drive the Company’s exploration
success: the motivation and technical excellence of its
exploration team; the policy of consistently investing

2006 Company Performance Plan
As always, our focus is to deliver shareholder value.
We will do this by building the Company and
delivering proﬁtable business growth. To succeed
in this objective, we will focus our energies in
the following ﬁve key areas:

Integrate Placer Dome
(cid:1) integrate all corporate functions, establish the

combined organization

(cid:1) position Barrick to fully capture synergies as of 2007
(cid:1) strengthen the management team

Deliver Results
(cid:1) meet or outperform budgets for gold production

and total cash costs

(cid:1) further reduce corporate gold sales contracts
(cid:1) maintain our position as the lowest cash-cost

senior gold producer

Reinforce Social Responsibility
(cid:1) demonstrate leadership in health and safety
(cid:1) enhance community development programs
(cid:1) maintain high standards of environmental

performance

Strengthen the Organization
(cid:1) further develop leadership capacity, Company-wide
(cid:1) leverage our size and scale to enhance our

competitive position

Grow the Business
(cid:1) pursue new exploration opportunities
(cid:1) advance the pipeline of projects

Barrick Overview (cid:1) 15

Safety training, procedures and equipment make for safe work on the
100-kilometer power line supplying energy to Lagunas Norte (Peru).

in exploration; and the robust and balanced pipeline
of exploration projects. The Company’s disciplined
exploration strategy maximizes the chance of near-
term discovery by putting the best people on the best
projects and advancing the best projects more quickly
up the exploration pipeline.

Outlook for 2006
Based on our preliminary view of the Placer Dome
assets combined with those of Barrick, we expect
to produce 8.6 to 8.9 million ounces of gold at total
cash costs of between $275 and $290 per ounce in 2006.

We also expect to produce approximately
350 million pounds of copper at total cash costs
of approximately $0.75 per pound before the impact
of one-time purchase accounting adjustments
relating to the Placer Dome acquisition that will add
$0.35 to the costs per pound reported in 2006. This
is due to the revaluation of opening inventory at the
date of acquisition from historic cost to fair value.

Reserves and Resources as of December 31, 2005
With the acquisition of Placer Dome, Barrick’s
combined proven and probable gold reserves have
increased to 139 million ounces and measured
and indicated gold resources to 55 million ounces.
We also have proven and probable copper reserves

of 6.2 billion pounds and measured and indicated
copper resources of 1.2 billion pounds.

The following table summarizes Barrick’s and
Placer Dome’s reported gold and copper reserves
and resources by region as of December 31, 2005.

Gold (millions of ounces)
North America
South America
Australia3
Africa

Total

Barrick pro-forma

Copper (billions of pounds)

South America
Australia

Total

Barrick pro-forma

Proven and Probable Reserves
Placer Dome 2
Barrick 1

Measured and Indicated Resources
Placer Dome 2

Barrick 1

23
41
11
14

22
0
9
19

4
5
6
3

19
0
4
14

139

Proven and Probable Reserves
Placer Dome 2
Barrick 1

Measured and Indicated Resources
Placer Dome 2

Barrick 1

5.9
0.3

6.2

0.0

6.2

1.1
0.1

1.2

0.0

1.2

1. Calculated in accordance with National Instrument 43-101 as required by Canadian securities regulatory authorities. For United States reporting purposes,

Industry Guide 7 (under the Securities Exchange Act of 1934), as interpreted by the Staff of the SEC, applies different standards in order to classify mineralization
as a reserve. Accordingly, for US reporting purposes, Buzwagi is classiﬁed as mineralized material. Barrick is currently assessing the resolution issued by Chilean
regulatory authorities approving the environmental impact assessment for the Pascua-Lama project. It is possible that upon completion of this assessment, up to
1 million ounces of mineralization at the Pascua-Lama project may be reclassiﬁed from reserves to mineralized material for US reporting purposes but will remain
as reserves for Canadian reporting purposes. For additional information on reserves see the tables and related footnotes on pages 125–129.

2. For a breakdown of Placer Dome’s reserves and resources by category and additional information relating to such reserves and resources, see Placer Dome’s

press release of February 20, 2006. Such reserves and resources were calculated by employees of Placer Dome in accordance with National Instrument 43-101,
as required by Canadian securities regulatory authorities, and in accordance with Placer Dome’s previously established policies and procedures, and have not
been independently veriﬁed by Barrick Gold Corporation. Industry Guide 7 (under the Securities and Exchange Act of 1934), as interpreted by Staff of the SEC,
applies different standards to classify mineralization as a reserve. Based on a preliminary review, Barrick does not intend to report mineralization at the Pueblo
Viejo project as a reserve for US reporting purposes at this time.

3. Includes Porgera which is located in Papua New Guinea.

16 (cid:1) Barrick Overview

The Regional Platform
Barrick’s Regional Business Units

The Company will integrate its assets and build its future on Barrick’s platform
of Regional Business Units, implemented in 2004. Barrick reorganized itself into
this decentralized structure in order to manage its business more effectively by
moving responsibility and decision-making capabilities closer to the operations
which they affect.

This model not only provides the necessary decentralization – it strengthens,
and depends on, the corporate culture of leadership at every level. Each regional
team, led by its own president, has two key responsibilities: to optimize its
current assets and to grow the business in that region. The Toronto corporate
ofﬁce continues to set policies and procedures, provide strategic guidance, and
direct the Company as a whole. Each region is responsible for all aspects of
its business, including strategy/sustainability, and for the management of all
aspects of mining operations, including exploration, development/construction,
production and closure.

The Company currently has four units: North America, South America, Australia/
Africa (which will be divided into two distinct units in 2006), and Russia/Central
Asia. In the ﬁrst three, which are affected by the integration process now underway,
most of the core assets are clustered in close proximity to each other – a factor that
will greatly facilitate the speed, efﬁciency and synergies of the integration.

The next few sections provide a brief overview of the activities that took place
in each of the Company’s business regions in 2005. A more detailed operational
review can be found in the Management’s Discussion and Analysis (“MD&A”)
that begins on page 29.

North America

Highlights

2 million ounces of gold

produced at Goldstrike

(cid:1) East Archimedes development project on schedule

for production starting in 2007;

(cid:1) The Western 102 Power Plant commissioned

in Nevada;

(cid:1) South Arturo zone discovered at Dee; and
(cid:1) Mine life extended at Round Mountain through

pit expansion.

2.9

million ounces
2005 Production

$244

per ounce
2005 Total Cash Costs

Regional Overview
In Nevada, the driving engine of the region, signiﬁcant
steps were taken during the year to contain costs.
Goldstrike produced 2 million ounces of gold at
total cash costs of $255 per ounce. The Company
also commissioned its own natural-gas-ﬁred electric
power generating facility, which is expected to reduce
cash costs and improve the reliability of electricity
supply over the life of the Goldstrike facilities.
The 115-megawatt Western 102 plant, which began
operation in early December, had a construction
capital cost of $96 million, and was completed
on schedule and on budget. It is one example of
Barrick’s innovative, effective approach to cost

18 (cid:1) Regional Business Units – North America

● Eskay Creek

C A N A D A

● Hemlo

U N I T E D S T A T E S

Marigold ●

● Goldstrike
▲ East Archimedes

Round Mountain ●

containment. The Company will use the experience
gained designing and building this project to
explore opportunities to reduce electricity costs
at other operations.

A pit expansion was approved at our Round

Mountain joint venture with Kinross Gold, which
will extend mine life from 2010 to 2015. Barrick’s
share (50%) of proven and probable gold reserves at
Round Mountain increased from 1.5 to 2.3 million
ounces after depletion.

Work at the East Archimedes development
project continued to proceed smoothly. During the
year required permits were received, the mining
ﬂeet arrived on site, and pre-strip activities began.
This project – an open-pit, heap-leach operation –
is on schedule to enter production in mid-2007 and
has 1.0 million ounces of proven and probable
gold reserves.

Exploration
In Nevada, exploration was carried out on 35 targets,
with most of the activity focused on the Goldstrike
Property, and on Rossi, Dee and REN, all on the
Carlin Trend. One of the exploration highlights of
2005 was the discovery of the South Arturo zone on
the Dee Property where Barrick has a 60% interest.
Twenty-eight holes were drilled to test this new
target and all holes intersected oxide mineralization.
Preliminary metallurgical results are favorable.
Follow-up drilling will resume early in 2006 and
will include in-ﬁll and extension holes. Deep drilling
beneath the North Post resource at Goldstrike
intersected a potentially signiﬁcant new zone. The
underground drill program continued in January.
In addition, drill programs at Dee and Rossi were
successful in upgrading the reserve/resource at
Storm, and production is scheduled for late 2006.
The Placer Dome acquisition will greatly expand
exploration opportunities in Nevada, with new
properties on the Battle Mountain-Eureka and the
Getchell trends.

2006 Opportunities
North America is Barrick’s original region of
operation and is still the largest, in terms of both
production and reserves. Even as our other regions
grow their contributions to the Company’s bottom

The Western 102 Power Plant, commissioned in early December
2005, is designed to lower energy costs at Goldstrike.

A 2005 exploration highlight: the new South Arturo zone,
discovered on the Dee Property in Nevada, adjacent to Goldstrike.

line, North America maintains its position as a
Barrick powerhouse. In 2006, we will capitalize
on the region’s strengths in order to seize its
opportunities, including those being presented
through the acquisition of Placer Dome.

The Placer Dome assets will strengthen our
Nevada footprint in particular, and extend our
substantial presence on its three great trends:
Carlin, Getchell, and Battle Mountain-Eureka.
Three of our four new operating mines are located
there (Cortez, Turquoise Ridge and Bald Mountain),
as well as one new development project (Cortez
Hills). The close proximity of these assets to our
existing operations will result in a powerful
combination of human and physical resources.
Highly skilled people are involved from both Barrick
and Placer Dome, who already know the terrain
and, to a large degree, know each other as well.

Regional Business Units – North America (cid:1) 19

South America

Highlights

550 thousand

ounces
produced at
Lagunas Norte

(cid:1) Lagunas Norte (Peru) entered production ahead of
schedule and produced 550,000 ounces at average
total cash costs per ounce of $110;

(cid:1) Veladero (Argentina) entered production in fourth

quarter and met production targets; and

(cid:1) Pascua-Lama (Chile/Argentina) continued to advance

in 2005 and received Chilean environmental
approval in early 2006.

1.2

million ounces
2005 Production

$126

per ounce
2005 Total Cash Costs

Regional Overview
In 2005, the earlier exploration and mine-building
in this region began to deliver signiﬁcant growth
and value. South America added two new mines,
one each in Peru and Argentina, and advanced the
sizeable Pascua-Lama development project. The
region expanded its community and environmental
programs during the year as well, further cementing
local trust and respect that in turn facilitate our
mining objectives.

Lagunas Norte, in the Alto Chicama District
in Peru, began operations in the second quarter. The
mine illustrates two core strengths of the Company:
its ability to ﬁnd signiﬁcant new deposits and its

20 (cid:1) Regional Business Units – South America

● Lagunas Norte

● Pierina

P E R U

C H I L E

A R G E N T I N A

Pascua-Lama
▲
● Veladero

ability to develop them. When discovered in 2002,
it was the largest grassroots ﬁnd in a decade. Within
three years, it was an operating mine – completed
within its $340-million budget and ahead of schedule.
The new Veladero mine, in Argentina, began
operations in the fourth quarter. This start-up marked
our ﬁrst production from the highly prospective
Frontera District straddling the Chile/Argentina
border, which is also home to our Pascua-Lama
development project. Barrick’s land position in this
district has over 30 million ounces of proven and
probable gold reserves, with approximately 880 million
ounces of contained silver.

The Pascua-Lama development project is
eight kilometers to the north-west of Veladero, and
will beneﬁt from experience gained during the
construction phase at Veladero. In early 2006, the
Chilean environmental authorities approved the
modiﬁcations to the project, and the next milestone
is expected to be approval of the environmental
impact study in Argentina. If permits are obtained
for Pascua-Lama in mid-2006, as expected,
construction will begin later in the year, with
production expected in 2009.

Exploration
Exploration activity in 2005 was focused on the
Frontera District in Chile and Argentina and on
the Alto Chicama District in Peru. Frontera is a core
district for exploration, with ﬁeld work resuming
mid-2004. Work in 2005 included an integrated
program to explore this 3,000-square-kilometer land
package that is now under one owner. Drill programs
were carried out on three targets close to Pascua/

Exploration tests further potential in the Frontera District,
which already has over 30 million ounces of proven and probable
gold reserves.

Veladero. Ground surveys delineated and prioritized
new targets for drill testing in the ﬁrst half of 2006
and regional work will continue to deﬁne targets for
detailed follow-up. Drilling will also be carried out
on targets north and south of Pascua/Veladero, which
were delineated during the regional ﬁeld work.

Lagunas Norte, Peru, illustrates Barrick’s ability to ﬁnd signiﬁcant new deposits and develop them quickly. In 2002, it was the largest
grassroots discovery in a decade; in 2005 (within budget, ahead of schedule), it became an operating mine.

Regional Business Units – South America (cid:1) 21

Infrastructure at Veladero, Argentina (left to right): the truck shop, the covered ore stockpile, the secondary crusher and the loadout bin,
where trucks collect crushed ore to haul to the valley-ﬁll leach facility. 2006 will be the mine’s ﬁrst full year of production.

In Peru, targets remain to be tested in the Alto

Chicama District, where the regional ﬁeld work will
be completed in 2006.

2006 Opportunities
In 2006, the region will make a signiﬁcantly greater
contribution to the Company’s ﬁnancial results,
from both existing assets and those gained through
the Placer Dome acquisition. For the same reasons,
the region has enhanced growth potential.

2006 will be the ﬁrst full year of operation for
Lagunas Norte and Veladero. They are both long-life,
low-cost mines, located in prospective gold districts
(Alto Chicama and Frontera, respectively). They will
contribute signiﬁcant production for many years to
come, and provide an excellent platform for future
growth in the region.

22 (cid:1) Regional Business Units – South America

Through the acquisition of Placer Dome,
the Zaldívar open-pit copper mine in Chile has
been added to the region’s assets, along with
hundreds of skilled, experienced people. Zaldívar
is a large, long-life, low-cost copper mine in the
north of Chile. It will generate substantial cash ﬂow
at current copper prices.

Preparing blast holes at Veladero, Argentina: the mine’s Q4 start-up
marked ﬁrst production from the rich Frontera District.

Australia/Africa

Highlights

1st quarter – Tulawaka

(Tanzania) entered
production on schedule

(cid:1) Cowal development project (Australia) remained on

schedule for ﬁrst quarter 2006;

(cid:1) Work began on the feasibility study at Buzwagi

(Tanzania); and

(cid:1) The Nyanzaga deposit was discovered in Tanzania.

1.3

million ounces
2005 Production

$280

per ounce
2005 Total Cash Costs

Regional Overview
Tulawaka, which commenced production in ﬁrst
quarter 2005, is a small but high-return mine that
adds to our presence in Tanzania. Buzwagi, an
advanced-stage exploration target, now has a proven
and probable reserve of 2.4 million ounces of gold.

In Australia, the Cowal development project
progressed well and is widely credited for establishing
new benchmarks in environmental management
and permitting standards. The two-year construction
phase was almost complete by year-end 2005,
and Cowal remained on schedule for its ﬁrst gold
production in late ﬁrst quarter 2006. Construction
costs are anticipated to be about 10% above the
prior $305 million guidance due to inﬂationary
cost pressures in Australia. However, we expect the
project to begin selling production at a much higher
gold price than we anticipated when we made the
construction cost estimate.

● Plutonic

Lawlers ● ● Darlot

● Kalgoorlie

A U S T R A L I A

Cowal ▲

▲ Kabanga

Tulawaka ●

● Bulyanhulu
▲ Buzwagi

T A N Z A N I A

Exploration
Tanzania is a signiﬁcant focus for exploration. Barrick
is the major landholder in the highly prospective Lake
Victoria Gold Belt and with the Placer acquisition
will have the most prospective land package in the
country. At Buzwagi, the 2005 drill program was
successful in upgrading and expanding the existing
resource. Engineering studies were carried out
and the pre-feasibility study completed.

Regional Business Units – Australia/Africa (cid:1) 23

Environmental staff monitor pore pressure on the water storage
dam wall at Tulawaka, our newest mine in Tanzania.

When Cowal (Australia) enters production, expected Q1 2006,
it will be Barrick’s fourth new mine on-stream within 12 months.

Barrick carried out a drill program to test the
Nyanzaga Property, located north-east of Bulyanhulu.
A zone of shallow mineralization has been deﬁned
over a strike length of 700 meters and remains open
along strike and at depth. Preliminary metallurgy
shows good recoveries for both the primary and
oxide mineralization. An inﬁll and extension drill
program will be carried out in 2006.

In Australia, Barrick carried out ﬁeld programs
on six properties. The exploration is predominantly
focused on targets in Western Australia, a more
mature district that still holds good potential for
new discoveries. Barrick’s exploration programs
will be augmented with the addition of prospective
Placer tenements.

2006 Opportunities
In the ﬁrst quarter of 2006, Cowal is scheduled to
enter production. The mine has proven and probable
gold reserves of 2.5 million ounces and measured
and indicated gold resources of 2.0 million ounces.
The minimum mine life is expected to be
approximately ten years. Once in full production,

Cowal is expected to be a signiﬁcant contributor
to gold production and cash ﬂow generated from
operations in this region.

At Buzwagi, the permitting process with
Tanzanian authorities is underway, and a feasibility
study has commenced in order to support a
production decision later in 2006.

In 2005, the Company entered into a joint-venture

agreement with Falconbridge Limited whereby
they acquired a 50% interest in the Kabanga project
for $15 million cash and a funding commitment.
Falconbridge will now be the operator of the project
and has begun a $50 million exploration and inﬁll
drilling program to update the resource model and
bring the project toward feasibility. In addition to the
$50 million exploration program, Falconbridge will
fund the next $95 million of any project development
expenditures for the project.

The acquisition of Placer Dome adds seven
producing mines to the existing six in the region and
two new countries, Papua New Guinea and South
Africa. As in other regions, most of these assets are
close to existing Barrick operations.

24 (cid:1) Regional Business Units – Australia/Africa

Russia/Central Asia

Highlights

50%

in the Taseevskoye and Sredne
Golgotaiskoye gold deposits

interest acquired

(cid:1) Russia/Central Asia established as the Company’s

newest region;

(cid:1) Ownership in Highland Gold increased to 20%;
(cid:1) Drilling program continued to expand the size of

the Federova palladium property; and

(cid:1) Exploration program in Russia expanded by acquiring

new license areas in three regions.

Russia/Central Asia has a long and rich history in
gold mining, and excellent geological potential for
the discovery of new deposits that meet our criteria
for quality and scale. The region also has a signiﬁcant
talent pool of well-trained mining professionals,
graduating more university students in relevant
disciplines each year.

Barrick has long recognized the potential of this
area, as well as the need to proceed in a methodical
and prudent manner. We began our ﬁrst exploration
programs here in 1996, continuing to build our
expertise and relationships, and to strengthen our
involvement as opportunities warrant.

In 2005, we judged it timely to establish a more
broadly-based presence. Our new regional business
unit is built, deliberately, on a modest scale but it
provides an excellent platform for assessing the range
of ways we might grow our business in the region.

Federova ■

■ Sovinoye
● Maiskoye

R U S S I A

MNV ●
Belaya Gora ■

Darasun ●
Taseevskoye ▲

■ Lubavinskoye

▲ Project ■ Exploration ● Highland Gold Asset

For example, in 2005 we increased our equity
interest in Highland Gold to 20 percent. We have
also obtained a 50% interest in the Taseevskoye and
Sredne Golgotaiskoye gold deposits. Taseevskoye
is a previously mined open pit and underground
mine that is now being re-evaluated in light of the
current strong gold price environment.

At the Federova palladium property in north-
west Russia, a drilling program carried out in 2005
continued to expand the size of the deposit, with
additional drilling planned for 2006. In addition,
Barrick acquired three new exploration properties
in Russia (Lyubov, Belaya Gora, and Maya-Inikan),
and has planned ﬁeld work for 2006.

We have stepped up our involvement in

Russia/Central Asia because of the potential we see
in this region. We are now better positioned than
ever to realize the value of that potential going
forward. We will continue to seek qualiﬁed partners
and invest in selected growth and exploration
opportunities.

Regional Business Units – Russia/Central Asia (cid:1) 25

Operational Summary

For year ending December 31

Operational Statistics
Tons mined

(thousands)

Tons Processed

(thousands)

Grade Processed

(ounces per ton)

Recovery Rate (%)

Gold Production

(thousands of ounces)

Mineral Reserves

(thousands of ounces)

2005
2004

Financial Statistics (Production costs per ounce)
Cash Operating Costs

2005
2004

Royalties, Production
Taxes and Accretion

Total Cash Costs

Amortization

Total Production Costs

Capex (US$ millions)

2005
2004

North America

Goldstrike

Open Pit

Under-
ground

Property
Total

Round
Mountain
Mine

Hemlo
Mine

Eskay
Creek
Mine

129,833
134,212

10,097
10,779

0.18
0.15

85.6
85.1

1,514
1,381

14,603
16,188

215
231

20
18

235
249

60
61

295
310

135
42

1,463
1,573

1,488
1,566

0.38
0.40

89.9
89.7

510
562

131,296
135,785

11,585
12,345

0.20
0.18

86.7
86.2

2,024
1,943

15,985
19,743

34,004
36,963

0.01
0.02

–
–

368
381

4,409
4,715

1,931
2,019

0.12
0.13

93.6
94.0

230
247

2,773
2,970

17,376
19,158

2,338
1,538

944
1,260

289
234

25
21

314
255

120
120

434
375

27
30

234
231

21
19

255
250

75
79

330
329

162
72

205
187

41
38

246
225

45
46

291
271

1
5

277
231

11
10

288
241

58
50

346
291

6
8

200
269

199
263

0.96
1.18

89.7
93.1

172
290

217
513

38
26

11
6

49
32

153
176

202
208

2
7

26 (cid:1) Operational Summary

South America

Australia

Africa

Kalgoorlie
Mine

Plutonic
Mine

Darlot
Mine

Lawlers
Mine

Bulyanhulu Tulawaka
Mine

Mine

Pierina
Mine

Lagunas
Norte
Mine

Veladero
Mine

46,884
40,225

15,965
16,746

0.05
0.03

–
–

628
646

23,653
–

63,514
–

14,269
–

0.06
–

–
–

550
–

4,513
–

0.02
–

–
–

56
–

43,532
45,459

3,644
13,722

7,314
7,142

2,004
2,662

0.07
0.07

85.4
86.6

417
444

0.14
0.13

90.2
90.0

251
305

808
896

859
861

0.16
0.17

96.0
95.8

135
140

1,916
2,508

8,266
9,123

12,641
12,849

4,894
5,181

2,399
2,512

914
1,048

134
106

5
5

139
111

115
165

254
276

20
8

95
–

15
–

110
–

53
–

163
–

141
182

–
–

266
284

237
223

11
11

248
234

49
44

297
278

12
10

252
214

11
9

263
223

39
34

302
257

20
15

250
203

9
7

259
210

66
53

325
263

9
7

2,327
3,365

888
866

0.15
0.13

96.4
96.1

131
110

472
405

261
238

10
8

271
246

53
53

324
299

9
5

1,011
1,118

1,045
1,123

0.34
0.35

88.5
88.4

311
350

10,732
10,596

342
270

16
14

358
284

112
100

470
384

37
46

6,758
–

322
–

0.27
–

95.8
–

87
–

377
382

233
–

20
–

253
–

138
–

391
–

8
48

Operational Summary (cid:1) 27

Financials

Table of Contents

29 Management’s Discussion

and Analysis

78 Financial Statements

82 Notes to Consolidated

Financial Statements

131 Corporate Governance and

Committees of the Board

125 Mineral Reserves and Resources

134 Shareholder Information

136 Corporate Information

Management’s Discussion
and Analysis (“MD&A”)

Contents

Our Business

Core Business
Vision and Strategy
Capability to Deliver Results
Key Economic Trends

Operations Review

Executive Overview and 2006 Outlook
Consolidated Gold Production and Sales
Total Cash Costs Performance Measures
Results of Operating Segments
Other Costs and Expenses
Quarterly Information

Liquidity, Capital Resources and Financial Position

Cash Flow
Liquidity
Financial Position
Contractual Obligations and Commitments
Financial Instruments
Off-Balance Sheet Arrangements

Critical Accounting Policies and Estimates
Cautionary Statement on Forward-Looking Information
Glossary of Technical Terms

55
55
57
58
59
60
61
65
73
74

30
30
31
32
34
40
40
43
44
45
50
54

This MD&A is intended to help the reader
understand Barrick Gold Corporation (“Barrick”,
“we”, or “the Company”), our operations and our
present business environment. Unless otherwise
speciﬁed, all references in this MD&A are to Barrick
excluding the impact of the 2006 acquisition of
Placer Dome Inc. (“Placer Dome”). It includes the
following sections:
(cid:1) Our Business – a general description of our core

business; our vision and strategy; our capability to
deliver results; and key economic trends in our
present business environment.

(cid:1) Operations Review – an analysis of our consoli-
dated results of operations for the last three years
focusing on our material operating segments and
the outlook for 2006.

(cid:1) Liquidity, Capital Resources and Financial

Position – an analysis of cash ﬂows; sources and
uses of cash; ﬁnancial instruments; off-balance
sheet arrangements; contractual obligations
and commitments; and our ﬁnancial position.

(cid:1) Critical Accounting Policies and Estimates –

a discussion of accounting policies that require
critical judgments and estimates.

This MD&A, which has been prepared as of
February 22, 2006, is intended to supplement and
complement our audited consolidated ﬁnancial
statements and notes thereto for the year ended
December 31, 2005 prepared in accordance
with United States generally accepted accounting
principles, or US GAAP (collectively, our “Financial
Statements”). You are encouraged to review our
Financial Statements in conjunction with your
review of this MD&A. Additional information

Barrick Annual Report 2005

Management’s Discussion and Analysis (cid:1) 29

relating to our Company, including our most recent
Annual Information Form, is available on SEDAR
at www.sedar.com and on EDGAR at www.sec.gov.
For an explanation of terminology used in our
MD&A that is unique to the mining industry, readers
should refer to the glossary on page 74. All dollar
amounts in our MD&A are in US dollars, unless
otherwise speciﬁed.

For the purposes of preparing our MD&A, we
consider the materiality of information. Information
is considered material if: (i) such information results
in, or would reasonably be expected to result in, a
signiﬁcant change in the market price or value of
our shares; or (ii) there is a substantial likelihood
that a reasonable investor would consider it impor-
tant in making an investment decision; or (iii) if it
would signiﬁcantly alter the total mix of information
available to investors. We evaluate materiality with
reference to all relevant circumstances, including
potential market sensitivity.

Our Business

Core Business
We are currently one of the world’s largest gold
companies in terms of market capitalization, annual
gold production and gold reserves. In early 2006,
we completed the acquisition of Placer Dome,
which will result in a signiﬁcant increase in the scale
of our mining operations. Details of the acquisition
can be found on page 41. Our operations in 2005
were concentrated in these regions: North America,
Australia/Africa and South America. In 2006, we
intend to divide the Australia/Africa region into
two separate regions. Each region receives direction

from the Corporate Ofﬁce, but has responsibility
for all aspects of its businesses including strategy/
sustainability and managing all aspects of mining
operations including exploration, development/
construction, production and closure.

Gold Ounces Produced by Region in 2005

23%

25%

South America

52%

North America

Australia/Africa

We generate revenue and cash ﬂow from the
production and sale of gold. We sell our gold pro-
duction in the world market through three primary
distribution channels: gold bullion is sold in the
gold spot market, gold bullion is sold under gold
sales contracts between ourselves and various third
parties, or gold concentrate is sold to independent
smelting companies.

30 (cid:1) Management’s Discussion and Analysis

Barrick Annual Report 2005

Vision and Strategy
Our vision is to be the world’s best gold company by
ﬁnding, developing and producing quality reserves
in a proﬁtable and socially responsible manner.

Our goal is to create value for our shareholders.

We reinvest cash ﬂow from our mines in explora-
tion, development projects and other investments to

work towards sustainable growth in gold production
and cash ﬂow. It can take a number of years for a
project to move from the exploration stage through
to mine construction and production. Our business
strategy reﬂects this long lead time, but shorter-term
priorities are also set for current areas of focus.

Long-term

Focus Areas

Strategy Elements

Measures

Growth in reserves

(cid:1) Growth at existing mine sites by ﬁnding new reserves and

(cid:1) Additions to and size of reserves

and production

converting mineralized material to reserves.

(cid:1) Growth through successful exploration focused principally in key
exploration districts (Goldstrike, Frontera, Lake Victoria and in

Russia/Central Asia).

(cid:1) Growth through targeted acquisitions.
(cid:1) Advance the development of Cowal, Pascua-Lama, East Archimedes

and mineralized material.
(cid:1) Consistent investment in

exploration and development.
(cid:1) Growth in annual gold production.
(cid:1) Construction progress versus

estimates.

and Buzwagi as well as newly acquired Placer Dome projects,

(cid:1) Actual construction costs versus

including Pueblo Viejo, Cortez Hills and Donlin Creek.
(cid:1) Continue to develop a business unit in Russia/Central Asia.

estimates.

Operational

excellence

(cid:1) Control costs.

– Global supply chain management.

– Continuous improvement initiatives.

(cid:1) Total cash costs per ounce.1
(cid:1) Amortization per ounce.1
(cid:1) Ore throughput and equipment

– Currency, interest rate and commodity hedge programs.

utilization statistics.

(cid:1) Improve productivity through continuous improvement initiatives.
(cid:1) Effective assessment and management of risk.
(cid:1) Effective capital allocation.
(cid:1) Secure efﬁcient sources of funding for capital needs.

(cid:1) Liquidity – operating cash ﬂow

and credit ratings.

(cid:1) Key balance sheet ratios.

Strengthen the

organization

(cid:1) Workforce – identify and develop talent.
(cid:1) Leadership development and succession planning.
(cid:1) Adopt best practices in corporate governance, including
strengthening internal controls over ﬁnancial reporting.

(cid:1) Talent review and performance

management.

(cid:1) Compliance with applicable

corporate governance legislation.

Responsible

mining

(cid:1) Reinforce health and safety culture.
(cid:1) Enhance environmental performance, including use of innovative

technology to protect the environment.

(cid:1) Maintain positive community and government relations.

(cid:1) Safety leadership and other

training initiatives.

(cid:1) Medical aid injury frequency.
(cid:1) Environmental performance.
(cid:1) Compliance with regulatory

requirements.

1. For more information on total cash costs per ounce performance measures, see pages 44–45.

Barrick Annual Report 2005

Management’s Discussion and Analysis (cid:1) 31

Capability to Deliver Results
Resources and processes provide us with the capa-
bility to execute our strategy and deliver results.
The critical ones are:

Experienced Management Team
and Skilled Workforce
We have an experienced management team that
has a proven track record in the mining industry.
Strong leadership and governance are critical to
the successful implementation of our core strategy.
We are focusing on leadership development for
key members of executive-level and senior
mine management.

A skilled workforce has a signiﬁcant impact on

the efﬁciency and effectiveness of our operations.
The remote nature of many of our mine sites pres-
ents challenges in maintaining a skilled workforce.
Competition for well-trained and skilled employees
is high in our industry, so we are focusing on
employee retention, recruiting skilled employees,
and positive labor relations. We maintain training
programs to develop the skills that certain employ-
ees need to fulﬁll their roles and responsibilities.
Priorities for our Human Resources group include
strengthening our workforce, developing employee
leadership skills and succession planning. We are
implementing Human Resource system solutions
to enhance our ability to analyze and manage labor
costs, productivity and other key statistics to help
us effectively manage the impact our workforce has
on our mining operations.

Environmental, Health and Safety
As part of our commitment to corporate responsi-
bility, we focus on continuously improving health
and safety programs, systems and resources to help
control workplace hazards. Continuous monitoring
and integration of health and safety into decision-
making enables us to operate effectively, while also
focusing on health and safety. In 2005, we continued
to focus on enhancing leadership and personal com-
mitment through the development of our health

and safety risk management guidelines, which
were successfully piloted at one of our mine sites;
training for all levels of supervision and manage-
ment through our “Courageous Safety Leadership”
program; and the full implementation of processes
at both corporate and regional locations that sup-
port governance and accountability measurements.
Key areas of focus for 2006 will include safety
leadership through training and health and safety
risk management practices; designing and enhancing
processes and programs to ensure safety require-
ments are met; and communicating a safety culture
as part of Barrick’s core values.

We are subject to extensive laws and regulations
governing the protection of the environment, endan-
gered and protected species, waste disposal and
worker safety. We seek to continuously implement
operational improvements to enhance environmen-
tal performance. We have environmental groups at
the corporate, regional business unit and operating
site levels to support our environmental efforts.
In 2005, we established an Environmental, Health,
Safety and Sustainability Committee to establish
policy direction for environmental performance.
We became a signatory to the International Cyanide
Management Code and committed to certiﬁcation
of all of our operations. In 2005, we also became
a signatory to the United Nations (“UN”) Global
Compact, which represents the world’s largest
voluntary corporate citizenship initiative. Among
its principles, the UN Global Compact encourages
businesses to support a precautionary approach
to environmental challenges, undertake initiatives
to promote greater environmental responsibility,
and encourage the development and diffusion of
environmentally friendly technologies. To provide
further guidance toward achieving our environmen-
tal objectives, we developed a new Environmental
Management System Standard in 2005. Each year,
we issue a Responsibility Report that outlines
our environmental, health and safety and social
responsibility performance for the year.

32 (cid:1) Management’s Discussion and Analysis

Barrick Annual Report 2005

Cost Control and Supply Sourcing
Successful cost control and supply sourcing depends
upon our ability to obtain and maintain adequate
quantities of equipment, consumables and supplies
as required by our operations at competitive prices.
Our Supply Chain group is focusing on improving
long-term cost control and sourcing strategies, for
major consumables and supplies used in our mining
activities, through global commodity purchasing
teams. It also facilitates knowledge sharing across
our global business and implementation of best
practices in procurement. We continue to develop
strategies to help us analyze and source consumables
and supplies at the lowest cost over the life of a mine,
including where appropriate, long-term alliances
with certain suppliers to ensure adequate supply
is maintained.

Maintenance represents a signiﬁcant compo-
nent of operating costs at our mines and impacts
the availability of plant and equipment. Our Global
Maintenance team is working to reduce mainte-
nance costs and increase equipment utilization
through an internal maintenance community.
Key areas of focus include setting business process
standards for maintenance to optimize usage of
mine equipment and enable cost-effective purchas-
ing of mine equipment. They are implementing
a global maintenance system, based on the princi-
ples of Total Production Maintenance, to facilitate
the sharing of best practices across the Company
and to track capital equipment statistics such
as utilization, availability and useful lives.

Information Management and Technology
Our Information Management and Technology
group provides focused and responsive support to
enable us to meet our current business objectives
and long-term strategy elements. It manages
signiﬁcant risks, such as information security; risks
relating to the implementation of new applications;
and the risk of failure of critical systems. We are

implementing strategies to mitigate these risks,
including monitoring operating procedures and the
effectiveness of system controls to safeguard data,
evaluating the effective use of technology and main-
taining disaster recovery plans. Other areas of focus
include working with other functional groups to
reduce technology diversity by standardizing system
solutions, and ongoing analysis of business needs
and the potential beneﬁts that can be gained from
system solution enhancements.

Continuous Improvement
Our Continuous Improvement (“CI”) group
is focused on instilling a continuous improvement
culture across the Company to increase shareholder
value by reducing costs, improving throughput/
productivity, and improving quality and safety.
Our CI group coordinates annual operational/busi-
ness reviews to identify and prioritize improvement
opportunities. The group also facilitates strategic
planning sessions to develop our business strategy.

Internal Controls Over Financial Reporting
and Disclosure
We maintain a system of internal controls over
ﬁnancial reporting designed to safeguard assets and
ensure ﬁnancial information is reliable. We under-
take ongoing evaluations of the effectiveness of
internal controls over ﬁnancial reporting and imple-
ment control enhancements, where appropriate,
to improve the effectiveness of controls. In 2005,
we focused on the design, testing and assessment of
the effectiveness of internal controls over ﬁnancial
reporting to enable us to meet the certiﬁcation
and attestation requirements of the Sarbanes-Oxley
Act (“SOA”) for 2006. We presently ﬁle management
certiﬁcations annually under Section 302 and
Section 906 of the SOA, and expect to comply with
the reporting requirements of Section 404 of the
SOA as required by law.

Barrick Annual Report 2005

Management’s Discussion and Analysis (cid:1) 33

We also maintain a system of disclosure controls

and procedures designed to ensure the reliability,
completeness and timeliness of the information we
disclose in this MD&A and other public disclosure
documents. Disclosure controls and procedures are
designed to ensure that information required to be
disclosed by Barrick in reports ﬁled with securities
regulatory agencies is recorded, processed, summa-
rized and reported on a timely basis, as required by
law, and is accumulated and communicated
to Barrick’s management, including our Chief
Executive Ofﬁcer and Chief Financial Ofﬁcer, as
appropriate, to allow timely decisions regarding
required disclosure.

exchange rates have become less important in deter-
mining gold prices. Other economic inﬂuences such
as supply and demand, oil prices, trade deﬁcits and
US interest rates are important factors in explaining
gold price movements. Demand for gold continues,
with reports that certain central banks are consider-
ing buying gold to add to their reserves, and strong
jewelry demand in China and India. The prospects
for gold as an investment remain favorable, particu-
larly in response to any global economic/political
uncertainty. The past few years have seen a resur-
gence in gold as an investment vehicle, with more
readily accessible gold investment opportunities
(such as gold exchange traded funds – “ETFs”).

Key Economic Trends
In 2005, there has been a continuation of the
trend of higher gold and silver prices which, while
beneﬁting gold revenues and by-product credits,
also leads to higher gold royalty expenses. A trend
of inﬂationary pressure on the cost of labor, other
commodities and consumables, such as oil, natural
gas and propane, has caused upward pressure on
production costs. We believe that other companies
in the gold mining industry are experiencing similar
trends. The Placer Dome acquisition will lead to a
general increase in the magnitude of the effect of
these economic factors on our business.

Gold, Silver and Copper Prices
Market gold prices have a signiﬁcant impact on
our revenue. Silver prices impact total cash costs
per ounce1 of gold as silver sales are recorded
as a by-product credit. These prices are subject to
volatile price movements over short periods of time,
and are affected by numerous industry and macro-
economic factors that are beyond our control.

Gold prices followed an upward trend in 2005,

closing the year at $513 per ounce. This trend
continued into 2006 with gold reaching a 25-year
high of $572 per ounce in early February 2006.
In contrast to 2004, the correlation between gold
prices and the Euro has lessened, which suggests that

1. Total cash costs per ounce excludes amortization, see pages 44–45

for further information on this performance measure.

Gold Prices (dollars per ounce)

550

500

450

400

350

300

2003

2004

2005

Average Spot Price

Average Barrick Realized Price

Over the last three years, our realized gold
sales prices have tracked the rising market gold
price. Periods when our average realized price was
below average market prices were primarily caused
by us voluntarily choosing to deliver into gold
sales contracts at dates earlier than the ﬁnal
contractual delivery date and at prices lower than
prevailing market prices to reduce outstanding
gold sales contracts.

34 (cid:1) Management’s Discussion and Analysis

Barrick Annual Report 2005

Spot Silver Prices (dollars per ounce)

10.00

9.00

8.00

7.00

6.00

5.00

4.00

2003

2004

2005

Spot Copper Prices (dollars per pound)

2.30

2.10

1.90

1.70

1.50

1.30

1.10

0.90

0.70

0.50

2003

2004

2005

Silver rallied along with gold at the end of 2005,
despite continued news that attrition in the US
photographic market would depress demand. Silver
prices have had support from industrial consumers
as technological advances continue to provide silver
with new uses, as well as robust jewelry demand
from India. The last three years have seen a decline
in our silver production, as reserves at our Eskay
Creek mine are depleted and the mine approaches
the end of its life. After Pascua-Lama begins produc-
tion, we expect that the quantities of silver we
produce will increase signiﬁcantly.

The acquisition of Placer Dome will lead to copper
prices having a more signiﬁcant effect on our results
due to copper production from the Zaldivar copper
mine and the Osborne gold and copper mine. In
2005, these mines combined produced 359 million
pounds of copper. Copper prices rose 67% in 2005
as a result of supply reductions, smelter bottlenecks,
and low global copper inventory levels, combined
with ongoing high levels of copper demand. In early
February 2006, copper prices reached a high of
$2.33 per pound. In 2006, we purchased put options
to protect revenue on approximately 300 million
pounds of expected 2006 copper production. These
options guarantee a minimum price of $2.00 per
pound, while allowing us to fully participate in
higher spot copper prices.

Barrick Annual Report 2005

Management’s Discussion and Analysis (cid:1) 35

Currency Exchange Rates

Monthly AUD$ Spot and Average Hedge Rates
(A$:US$ exchange rate)

Monthly Rand Spot Rates
(US$:ZAR$ exchange rate)

0.85

0.80

0.75

0.70

0.65

0.60

0.55

0.50

9.00

8.00

7.00

6.00

5.00

2003

2004

2005

2003

2004

2005

Spot Rate

Average Hedge Rate

Monthly CAD$ Spot and Average Hedge Rates
(C$:US$ exchange rate)

0.90

0.85

0.80

0.75

0.70

0.65

0.60

2003

2004

2005

Spot Rate

Average Hedge Rate

Results of our mining operations in Australia and
Canada, reported in US dollars, are affected by
exchange rates between the Australian and Canadian
dollars and the US dollar, because a portion of our
annual expenditures are based in local currencies.
Placer Dome has a mine located in South Africa that
will cause us to also have economic exposure to the
South African Rand in the future.

A weaker dollar would cause costs reported in
US dollars to increase. The Canadian dollar outper-
formed most major currencies in 2005, including
the US dollar, mainly due to sustained higher energy
prices and global investor interest in resource assets.
We expect the Canadian dollar to remain strong in
2006. The Australian dollar remains steady, mainly
due to higher commodity prices, and the exchange
rate with the US dollar was fairly stable in 2005. The
Rand has shown increased stability against the US
dollar in 2005 as compared to previous years, mainly
due to increased liquidity and continued strong
foreign direct investment in South Africa.

36 (cid:1) Management’s Discussion and Analysis

Barrick Annual Report 2005

We have a currency hedge position as part

of our strategy to control costs by mitigating the
impact of volatility in the US dollar on Canadian
and Australian dollar-based costs. Over the last three
years, our currency hedge position has provided
beneﬁts to us in the form of hedge gains when con-
tract exchange rates are compared to prevailing
market exchange rates as follows: 2005 – $100 mil-
lion; 2004 – $96 million; and 2003 – $58 million.
These gains are reﬂected in our operating costs.

Our currency hedge position at the end of 2005

provides protection for our Canadian and Austra-
lian dollar-based costs for a signiﬁcant portion of
the next three years. The average hedge rates vary
depending on when the contracts were put in place.
For hedges in place for future years, average hedge
rates are higher because some of the contracts were
added over time as the US dollar weakened. The
average rates of currency contracts over the next
three years are $0.68 for Australian dollar contracts
and $0.76 for Canadian dollar contracts. Beyond
the next three years, most of our Canadian and
Australian dollar-based costs are subject to market
currency exchange rates, and consequently costs
reported in US dollars for our Australian operations
and our Canadian operations could increase if
currency exchange rates against the US dollar
remain at present levels.

Inﬂationary Cost Pressures
Our industry is experiencing signiﬁcant inﬂationary
cost pressures for many commodities and consum-
ables used in the production of gold, as well as, in
some cases, constraints on supply. These pressures
have led to a trend of higher production costs
reported by many gold producers, and we have
been actively seeking ways to mitigate these cost
pressures. In the case of diesel fuel and propane,
we put in place hedge positions that have been
successful in mitigating the impact of recent price
increases to a signiﬁcant extent. For other cost
pressures, we have been focusing on supply chain
management and continuous improvement initia-
tives to mitigate the impact on our business.

Fuel
We consume on average about 2 million barrels
of diesel fuel and approximately 24 million gallons
of propane annually across all our mines.

Crude Oil Market Price (WTI) (dollars per barrel)

2003

2004

2005

Diesel fuel is reﬁned from crude oil and is therefore
subject to the same price volatility affecting crude oil
prices. With global demand increasing and oil sup-
ply disruptions in 2005, oil prices rose from $43 per
barrel at the start of the year to $61 per barrel at
the end of the year. To help control the costs of fuel
consumption, we have a fuel hedge position totaling
2 million barrels, which represents about 25% of
our total estimated consumption in each of the next
four years. The fuel hedge contracts are primarily
designated for our Goldstrike, Round Mountain, and
Kalgoorlie mines. The average hedge rate of our
fuel contracts is $44 per barrel. In 2005, we realized
beneﬁts in the form of fuel hedge gains totaling
$9 million (2004: $4 million; 2003: nil), when
fuel hedge prices were compared to market prices.
These gains are reﬂected in our operating costs.
If the trend of high diesel fuel prices continues,
this could impact future gold production costs.

Barrick Annual Report 2005

Management’s Discussion and Analysis (cid:1) 37

Propane prices rose from $0.76 per gallon at the
start of 2005 to $1.04 at the end of the year. Propane
prices have increased mainly due to a substitution
of propane for natural gas by some consumers that
caused an increase in demand for propane. To help
control the costs of propane consumed at our mines,
we have a propane hedge position totaling 17 million
gallons, which represents about 70% of our estimated
future propane consumption through to the end
of 2006, at an average price of $0.79 per gallon.
We realized hedge gains totaling $1 million in 2005
(2004 and 2003: nil), when market prices were com-
pared to our propane hedge prices. These gains
are reﬂected in our operating costs.

Electricity
We purchase about 1.6–1.7 million megawatt hours
of electricity annually across all our mines. We buy
electricity from regional power utilities, and in addi-
tion at some mines we generate our own power.
Fluctuations in electricity prices are generally caused
by local economic factors and impact costs to produce
gold. Electricity prices have generally been rising
in recent years due to increases in the price of diesel
fuel, coal and natural gas, which are used by many
power generators, as well as excess demand for elec-
tricity. Natural gas prices rose in North America in
2005, as Hurricane Katrina and other factors caused
a tightening of supply that has not fully recovered yet.

To partially mitigate the impact of rising
electricity costs, we built a 115-megawatt natural
gas-ﬁred power plant that became operational in the
fourth quarter of 2005. This power plant provides
Goldstrike with the ﬂexibility to generate its own
power or buy cheaper power from other producers,
with the goals of minimizing the cost of power con-
sumed and enhancing the reliability of electricity
availability at the mine.

Consumables
With increasing demand for tires and limitations in
supply from tire manufacturers, costs have been ris-
ing and some companies have experienced difﬁculty
securing tires. We have been seeking to mitigate this
cost pressure by ﬁnding ways to extend tire lives and
looking at various alternatives for supply. In 2006,
our focus will be to complete a tire tender process
and sign long-term agreements with preferred
tire suppliers to ensure that we continue to receive
an adequate supply of tires for our mines and devel-
opment projects. The limited availability of tires
has not had a signiﬁcant impact on productivity
at our mines.

Prices for certain other consumables, such
as cyanide and explosives, have also been generally
increasing, which in turn leads to higher mining and
processing costs. In 2005, we beneﬁted from contract
pricing for cyanide that was below the prevailing
market price. For 2006, we expect to procure most
of our cyanide at market prices, with price increases
due to higher costs for caustic soda and natural
gas. For explosives, we experienced price increases
in 2005 because natural gas and ammonia are both
used in the production of ammonium nitrate
explosives. We are evaluating alternatives to reduce
consumables costs through supply chain and
continuous improvement initiatives.

Labor Costs
With high demand for experienced miners and
relatively inﬂexible supply, the industry has been
facing upward pressure on labor costs, as well as
higher turnover rates in some cases, due to the
strong demand. Labor cost pressures have been
most signiﬁcant in Australia.

38 (cid:1) Management’s Discussion and Analysis

Barrick Annual Report 2005

In response to the volatility in interest rates,
we have used interest rate swaps to alter the relative
amounts of variable-rate ﬁnancial assets and liabili-
ties and to mitigate the overall impact of changes in
interest rates. Management of interest-rate risk takes
into account the term structure of variable-rate ﬁnan-
cial assets and liabilities. On $425 million of our cash
balances, we have ﬁxed the interest rate through 2007
at 3.63% using interest rate swaps. These interest rate
swaps generated hedge gains, when rates under the
swaps are compared to market interest rates, totaling
$6 million in 2005; $19 million in 2004; and $18 mil-
lion in 2003. In the future, we may alter the notional
amounts of interest rate swaps outstanding as the
relative amounts of variable-rate assets and liabilities
change to manage interest rate risk.

US Dollar Interest Rates

Interest Rate (%)

5.5

5.0

4.5

4.0

3.5

3.0

2.5

2.0

1.5

1.0

0.5

2003

2004

2005

1 Year Interest Rates

2 Year Interest Rates

5 Year Interest Rates

Short-term US dollar interest rates rose in 2005
as the US Federal Reserve continued its tightening
cycle. We expect long-term interest rates to rise
as the front end of the curve rises due to inﬂation
risks. Volatility in interest rates mainly affects inter-
est receipts on our cash balances ($1 billion cash
at the end of 2005), and interest payments on vari-
able-rate debt ($0.6 billion of variable-rate debt
at the end of 2005). Based on the relative amounts
of these variable-rate ﬁnancial assets and liabilities,
rising interest rates would have an overall positive
impact on our results. The relative amounts of vari-
able-rate ﬁnancial assets and liabilities may change
in the future depending upon the amount of oper-
ating cash ﬂow we generate as well as amounts
invested in capital expenditures.

Barrick Annual Report 2005

Management’s Discussion and Analysis (cid:1) 39

We had earnings of $401 million ($0.75 per
share) and generated operating cash ﬂow of $726 mil-
lion ($1.35 per share) in 2005.

2005

2004

2003

5,460

4,958

5,510

Key Factors Affecting Earnings

For the years ended December 31
($ millions)

Refer
to page

Operations Review

Selected Annual Information

For the years ended December 31
($ millions, except per share
and per ounce data in dollars)

Gold production (000’s of ounces)
Gold sales

000’s of ounces
$ millions

Market gold price1
Realized gold price1
Total cash costs1, 2
Amortization1
Total production costs1
Net income
Net income per share

Basic
Diluted

Cash inﬂow (outﬂow)
Operating activities
Capital expenditures
Other investing activities
Financing activities

Cash position – end of year
Total assets
Total long-term ﬁnancial liabilities
Gold reserves

5,320
$ 2,350
444
439
227
76
303
401

4,936
$ 1,932
409
391
214
86
300
248

5,554
$ 2,035
363
366
189
90
279
200

0.75
0.75

0.47
0.46

0.37
0.37

726
(1,104)
(76)
93
1,037
6,862
$ 1,780

509
(824)
3
740
1,398
6,287
$ 1,707

519
(322)
(12)
(266)
970
5,345
$ 789

(millions of contained ounces)a

88.6

89.1

85.9

1. Per ounce weighted average.
2. Total cash costs per ounce statistics exclude amortization. Total cash costs
per ounce is a performance measure that is used throughout this MD&A.
For more information see pages 44–45.

Executive Overview and 2006 Outlook
In 2005, we produced 5.5 million ounces of gold
at average total cash costs of $227 per ounce, in line
with our original guidance for the year. The contri-
bution to gold production from three new mines,
Tulawaka, Lagunas Norte and Veladero, more than
offset slightly lower production from Eskay Creek
and Plutonic. Through our currency and commodity
hedge programs, and supply chain initiatives, we
were able to mitigate to some extent the impact of
inﬂationary cost pressures.

a. Calculated in accordance with National Instrument 43-101 as required

by Canadian securities regulatory authorities. For United States reporting
purposes, Industry Guide 7, (under the Securities and Exchange Act of
1934), as interpreted by Staff of the SEC, applies different standards in
order to classify mineralization as a reserve. Accordingly, for US reporting
purposes, Buzwagi is classiﬁed as mineralized material. Barrick is currently
assessing the implications of conditions contained in the resolution issued
by Chilean regulatory authorities approving the environmental impact
assessment for the Pascua-Lama project. It is possible that following the
completion of such assessment, up to 1 million ounces of mineralization
at the Pascua-Lama project may be reclassiﬁed from reserves to mineral-
ized material for US reporting purposes. For a breakdown of reserves
by category and additional information relating to reserves, see
pages 125–129 of this Annual Report.

Net income – 2004
Increase (decrease)

Higher realized gold prices
Higher sales volumes1
Higher total cash costs
Lower amortization rates per ounce
Lower interest expense
Higher income tax expense2
Special items3
Other

43
43
44
50
51
53
41
52

$ 255
35
(69)
53
12
(36)
(111)
14

Total increase

Net income – 2005

$ 248

$ 153

$ 401

1. Impact of changing sales volumes on margin between selling prices,

total cash costs and amortization.

2. Excluding the impact of the tax effects of special items.
3. Special items are post-tax and exclude the impact on the period

of deferred stripping accounting changes.

At year-end, on a pro forma basis, we had proven
and probable reserves, including reserves of 88.6 mil-
lion ounces at our existing properties and our acquired
interest in Placer Dome reserves of 50.1 million
ounces of goldb, of 138.7 million ounces of golda, b,
based on a $400 per ounce gold price assumption
and 6.15 billion pounds of copperb, after adjusting
for the anticipated sale of certain assets to Goldcorp.
We continued to effectively support and shape
our growth proﬁle, including a focus on Russia and
Central Asia, and to make signiﬁcant progress on
the development of our new generation of mines.
The Tulawaka, Lagunas Norte and Veladero mines
began production in 2005, and we expect our fourth
new mine, Cowal in Australia, to commence its ﬁrst
gold production in ﬁrst quarter 2006. We continued
work on advancing our other projects, including

b. For a breakdown of Placer Dome’s reserves and resources by category and
additional information relating to such reserves and resources, see Placer
Dome’s press release of February 20, 2006. Such reserves and resources
were calculated by employees of Placer Dome in accordance with National
Instrument 43-101, as required by Canadian securities regulatory authori-
ties, and in accordance with Placer Dome's previously established policies
and procedures, and have not been independently veriﬁed by Barrick Gold
Corporation. Industry Guide 7 (under the Securities and Exchange Act
of 1934), as interpreted by Staff of the SEC, applies different standards to
classify mineralization as a reserve. Based on a preliminary review, Barrick
does not intend to report mineralization at the Pueblo Viejo project as a
reserve for US reporting purposes at this time.

40 (cid:1) Management’s Discussion and Analysis

Barrick Annual Report 2005

Buzwagi and Kabanga in Tanzania, Pascua-Lama in
Chile/Argentina and East Archimedes in Nevada. We
have the capital resources to fund our development
projects without the need for any equity dilution.
In 2005, we issued $50 million of public debt in

Peru and drew down $129 million under our Peru
lease and Veladero project ﬁnancings. We continue
to have the gold mining industry’s only A credit
rating (A–), as rated by Standard & Poor’s.

Special Items – Effect on Earnings Increase (Decrease) ($ millions)

For the years ended December 31

Non-hedge derivative gains

Gains on sale of investments, interests in mining

properties and Kabanga transaction

Impairment charges on investments, long-lived

assets and royalty interest

Changes in asset retirement obligation cost

estimates at closed mines

Deferred stripping accounting changes

Cumulative effect
Impact on the period compared to previous policy

Resolution of Peruvian tax assessment

Outcome of tax uncertainties
Reversal of other accrued costs

Deferred tax credits

Change in Australian tax status
Release of valuation allowances

Refer to
page

65
65

53
53

2005

2004

2003

Pre-tax Post-tax

Pre-tax

Post-tax

Pre-tax

Post-tax

$ 6

$ 4

$ 5

$ 9

$ 71

$ 60

(16)

(144)

(99)

(16)

(14)

(15)

(11)

(22)

(17)

(10)

6
64

–
–

6
44

–
–

5
32

–
–

–
21

–
–

141
15

81
5

–
–

–
62

Total

$ 82

$ 99

$ (98)

$ 166

$ 85

$ 130

Cash Flow
In 2005, our cash position decreased by $361 mil-
lion. We generated $726 million of operating cash
ﬂow, $217 million higher than in 2004, mainly
because of higher gold sales volumes and realized
gold prices, partly offset by higher total cash costs.
Capital expenditures were $1.1 billion, $280 million
higher than in 2004, due to the levels of construction
activity at our development projects. We received
$93 million from ﬁnancing activities in 2005, includ-
ing $92 million in proceeds on the exercise of stock
options and $179 million in proceeds from various
ﬁnancing facilities used to fund construction at our
development projects, partly offset by $59 million
of scheduled repayments on ﬁnancing facilities
and dividend payments of $118 million.

Acquisition of Placer Dome
In early 2006, we completed the acquisition of
Placer Dome. We expect that the total cost of acqui-
sition will be about $10.1 billion. We will consolidate
Placer Dome’s results of operations from January 20,
2006. Placer Dome is one of the world’s largest gold
mining companies, with gold mineral reserves of
60.4 million ounces and copper reserves of 6.15 bil-
lion pounds at December 31, 2005. Placer Dome
produced 3.6 million ounces of gold and 359 million
pounds of copper in 2005. It has 12 producing mines
based in North America, South America, Africa and
Australia/New Guinea, and three signiﬁcant projects
that are in various stages of exploration/development.
Its most signiﬁcant mines are Cortez in the United
States, Zaldívar in Chile, Porgera in New Guinea,
North Mara in Tanzania and South Deep in South
Africa. The most signiﬁcant projects are Cortez Hills
and Donlin Creek in the United States, and Pueblo

Barrick Annual Report 2005

Management’s Discussion and Analysis (cid:1) 41

Viejo in the Dominican Republic. We plan to sell
Placer Dome’s Canadian mines to Goldcorp Inc.
(“Goldcorp”), as well as certain other interests in
mineral properties. As at February 17, 2006, Placer
Dome had a committed gold hedge position totaling
approximately 6.2 million ounces. We plan to focus
on reducing this acquired hedge position further
over time, consistent with the plans for our existing
gold hedge position.

We believe that the business combination between
Barrick and Placer Dome is a unique opportunity to
create a Canadian-based leader in the global gold
mining industry. This business combination further
strengthens our position in the industry, with respect
to reserves, production, our development pipeline
and balance sheet. We expect that the combination
will yield synergies from the combined companies
of approximately $200 million annually beginning
in 2007. We expect to realize the synergies in the
following areas:
(cid:1) Operations – through the optimization and

sharing of mining and processing infrastructure
in common jurisdictions, including Nevada,
Australia and Tanzania;

(cid:1) Exploration – by carefully assessing our exploration
spending and focusing on the most prospective
areas and reducing the overall exploration spend-
ing of the combined enterprise;

(cid:1) Administration – by eliminating duplication of

ofﬁces and overheads;

(cid:1) Procurement – through the improved purchasing

power of the larger enterprise; and

(cid:1) Finance and Tax – by realizing tax synergies in
certain jurisdictions, opportunities for debt
optimization and a lower overall cost of capital
resulting from a larger balance sheet.

Sale of Certain Placer Dome Operations to Goldcorp
Goldcorp has agreed, subject to certain conditions,
to acquire all of Placer Dome’s Canadian operations
(other than its ofﬁces in Vancouver and Toronto),
including all mining, reclamation and exploration
properties, Placer Dome’s interest in the La Coipa mine
in Chile, and a 40% interest in the Pueblo Viejo proj-
ect in the Dominican Republic, for cash consideration
of about $1.5 billion. We expect that the sale of these
operations to Goldcorp will close in the ﬁrst half of
2006. Until closing, we expect to consolidate the results
of these operations, and we do not expect to record
any signiﬁcant gain or loss on closing of the sale.

Selected Pro Forma Consolidated Financial Information (Unaudited)

As reported

($ millions, except per share data in dollars)

Barrick

Placer Dome

Income statement – For the year ended December 31, 2005

Pro forma
adjustments1

Pro forma
combined
Barrick/
Placer Dome

$ (251)

$ 3,557

–

(251)

(240)

(12)

308

(31)

(978)

7,221

–

998

520

4,077

3,394

580

489

0.57

2,225

1,449

8,181

7,221

1,107

2,828

2,530

$ 2,350

–

$ 1,458

520

2,350

1,853

455

401

0.75

1,037

711

5,114

–

560

1,721

731

1,978

1,781

113

0.18

880

769

4,045

–

546

1,107

801

Sales

Gold

Copper

Total sales

Costs and expenses

Income before income taxes and other items

Net income

Net income per share – basic and diluted

Balance sheet – As at December 31, 2005

Cash

Other current assets

Non-current assets

Unallocated purchase price

Current liabilities

Long-term debt

Other non-current liabilities

Net assets

1. Adjustments to reﬂect certain estimated effects of purchase accounting and the estimated effects of the sale of certain Placer Dome operations to Goldcorp.

See note 3 to the Financial Statements for details.

42 (cid:1) Management’s Discussion and Analysis

Barrick Annual Report 2005

$ 3,850

$ 3,240

$ 5,521

$ 12,611

The pro forma information has been presented for
illustrative purposes only to show the effect of the
acquisition of 100% of Placer Dome by Barrick as
though it had occurred on January 1, 2005 for the
pro forma unaudited selected income statement
information. The unaudited selected balance sheet
information as at December 31, 2005 was prepared
using the consolidated balance sheets of Barrick
and Placer Dome as at December 31, 2005. Certain
adjustments have been reﬂected in this pro forma
information to illustrate the effects of harmonizing
accounting policies and purchase accounting, and to
reﬂect the impact of the sale of certain Placer Dome
operations to Goldcorp, where the impact could
be reasonably estimated. We will complete an exer-
cise to value the identiﬁable assets and liabilities
acquired, including any goodwill that may arise
upon the acquisition.

This unaudited pro forma consolidated ﬁnancial
statement information is not intended to be indica-
tive of the results that would actually have occurred,
or the results expected in future periods. Results of
operations for Placer Dome could differ materially
from those recorded in 2005 due to the effects of
purchase accounting, the harmonization of Placer
Dome’s accounting policies with Barrick’s accounting
policies, and other factors such as the key economic
trends described on pages 34 to 39. As a result
of the bid process, Placer Dome’s 2005 income
statement reﬂects approximately $21 million of non-
recurring transaction-related costs. Any potential
synergies that may be realized, and integration costs
that may be incurred, have been excluded from the
pro forma information. The information prepared is
only a summary, and more details can be found in
note 3 to the Financial Statements.

2006 Outlook
In 2006, we expect to produce between 8.6 to
8.9 million ounces of gold at total cash costs of
$275 to $290 per ounce and approximately 350 mil-
lion pounds of copper at total cash costs of about
$1.10 per pound including the contribution from the
Placer Dome operations after adjusting for the sale
of certain operations to Goldcorp. Copper total
cash costs per pound include the impact of purchase
accounting fair value adjustments. Excluding these
one-time, non-cash accounting adjustments, copper

cash costs would be lower by approximately $0.35
per pound. The overall average total cash costs per
ounce of Placer Dome’s gold production is higher
than the average for the existing Barrick mines, and
consequently, we expect that the overall average total
cash costs per ounce of our gold production will
increase following the acquisition. We expect the
overall amortization expense may increase following
the completion of the purchase price allocation.

Consolidated Gold Production and Sales
By replacing gold reserves depleted by production
year over year, we can maintain production levels
over the long term. If depletion of reserves exceeds
discoveries over the long term, then we may not be
able to sustain gold production levels. Reserves can
be replaced by expanding known ore bodies, acquir-
ing mines or properties or locating new deposits.
Once a site with gold mineralization is discovered,
it may take several years from the initial phases
of drilling until production is possible, during which
time the economic feasibility of production may
change. Substantial expenditures are required to
establish proven and probable reserves and to con-
struct mining and processing facilities. Given that
gold exploration is speculative in nature, some
exploration projects may prove unsuccessful.

Our ﬁnancial performance is affected by our
ability to achieve targets for production volumes and
total cash costs. We prepare estimates of future pro-
duction and total cash costs of production for our
operations. These estimates are based on mine plans
that reﬂect the expected method by which we will
mine reserves at each mine, and the expected costs
associated with the plans. Actual gold production
and total cash costs may vary from these estimates
for a number of reasons, including if the volume
of ore mined and ore grade differs from estimates,
which could occur because of changing mining rates;
ore dilution; metallurgical and other ore characteris-
tics; and short-term mining conditions that require
different sequential development of ore bodies or
mining in different areas of the mine. Mining rates
are impacted by various risks and hazards inherent
at each operation, including natural phenomena
such as inclement weather conditions, ﬂoods, and
earthquakes and unexpected labor shortages or
strikes. Total cash costs per ounce are also affected

Barrick Annual Report 2005

Management’s Discussion and Analysis (cid:1) 43

by ore metallurgy that impacts gold recovery rates,
labor costs, the cost of mining supplies and services,
foreign currency exchange rates and stripping costs
incurred during the production phase of the mine.
In the normal course of our operations, we attempt
to manage each of these risks to mitigate, where pos-
sible, the effect they have on our operating results.
In the ﬁrst half of 2005, ounces produced and

sold were similar to the ﬁrst half of 2004. In the
second half of 2005 compared to the same period
in 2004, ounces produced increased by about 32%,
while ounces sold increased by 26% as production
and sales began at Lagunas Norte and increased
at the Goldstrike Open Pit while only production
began at Veladero.

In 2005, we sold most of our production at
market prices, and delivered approximately 0.8 mil-
lion ounces into gold sales contracts. We realized
an average gold sales price of $439 per ounce, $48
higher than in 2004, mainly due to higher market
gold prices. The price realized for gold sales in 2006
and beyond will depend on market conditions and
the selling prices of any gold sales contracts into
which we voluntarily deliver, which could be below
prevailing spot market prices.

Consolidated Total Cash Costs per Ounce2

(in dollars per ounce)
For the years ended December 31

Cost of gold sales1
Currency/commodity hedge gains
By-product credits
Royalties/mining taxes
Accretion/other costs

2005

2004

2003

$ 255
(21)
(25)
16
2

$ 248
(19)
(30)
13
2

$ 210
(12)
(21)
12
2

Total cash costs2

$ 227

$ 214

$ 191

1. At market currency exchange and commodity rates.
2. Total cash costs per ounce excludes amortization – see page 45.

Total cash costs for 2005 were in line with the
original full-year guidance, but higher than in 2004,
primarily due to inﬂationary cost pressures expe-
rienced in 2005, partly offset by the start-up of
low-cost production from Lagunas Norte, the avail-
ability of higher-grade ore at Goldstrike Open Pit,
and the impact of the change in accounting for
stripping costs (see page 65).

Total Cash Costs Performance Measures
Total cash costs include all costs absorbed into
inventory, including royalties, by-product credits,
mining taxes and accretion expense, except for
amortization. Total cash costs per ounce is calculated
by dividing the aggregate of these costs by gold
ounces sold. Total cash costs and total cash costs
per ounce are calculated on a consistent basis for
the periods presented. On our income statement we
present amortization separately from cost of sales.
Some companies include amortization in cost of
sales, which results in a different measurement
of cost of sales on the income statement. We have
provided below a reconciliation to illustrate the
impact of excluding amortization from cost of
sales and total cash costs per ounce statistics.

In managing our mining operations, we disag-
gregate cost of sales between amortization and the
other components of cost of sales. We use total
cash costs per ounce statistics as a key performance
measure internally to monitor the performance of
our mines. We use the statistics to assess how well
our mines are performing against internal plans, and
also to assess the overall effectiveness and efﬁciency
of our mining operations. We also use amortization
cost per ounce statistics to monitor business perfor-
mance. By disaggregating cost of sales into these two
components and separately monitoring them, we are
able to better identify and address key performance
trends. We believe that the presentation of these
statistics in this manner in our MD&A, together
with commentary explaining trends and changes
in the statistics, enhances the ability of investors to
assess our performance. These statistics also enable
investors to better understand year-on-year changes
in cash production costs, which in turn affect our
proﬁtability and ability to generate cash ﬂow.

The principal limitation associated with total
cash costs per ounce statistics is that they do not
reﬂect the total costs to produce gold, which in turn
impacts the earnings of Barrick. We believe that we
have compensated for this limitation by highlighting
the fact that total cash costs exclude amortization
as well as providing details of the ﬁnancial effect. We
believe that the beneﬁts of providing disaggregated
information outweigh the limitation in the method
of presentation of total cash costs per ounce statistics.

44 (cid:1) Management’s Discussion and Analysis

Barrick Annual Report 2005

Total cash costs per ounce statistics are intended

to provide additional information and should not
be considered in isolation or as a substitute for mea-
sures of performance prepared in accordance with
US GAAP. The measures are not necessarily indica-
tive of operating proﬁt or cash ﬂow from operations
as determined under US GAAP. Other companies
may calculate these measures differently.

Illustration of Impact of Excluding Amortization
from Total Cash Costs Per Ounce

($ millions, except per ounce
information in dollars)
For the years ended December 31

2005

2004

Cost of sales per Barrick income statement
Amortization at producing mines

$ 1,214
409

$ 1,047
425

Cost of sales including amortization
Ounces sold (thousands)

Total cash costs per ounce as reported
Amortization per ounce

Cost of sales (including amortization)

$ 1,623
5,320

$ 1,472
4,936

$ 227 $ 214
86

per ounce

$ 303 $ 300

Results of Operating Segments
In our Financial Statements, we present a measure
of historical segment income that reﬂects gold
sales at average consolidated realized gold prices,
less segment expenses and amortization of segment
property, plant and equipment. Our segments
mainly include producing mines and development
projects. We monitor segment expenses using
“total cash costs per ounce” statistics that represent
segment cost of sales divided by ounces of gold sold
in each period. The discussion of results for produc-
ing mines focuses on this statistic in explaining
changes in segment expenses, and should be read
in conjunction with the mine statistics presented
on pages 26–27.

Conducting mining activities in certain coun-
tries outside North America subjects us to various
risks and uncertainties that arise from carrying on
business in foreign countries including: uncertain
political and economic environments; war and
civil disturbances; changes in laws or ﬁscal policies;
interpretation of foreign taxation legislation; and

tax implications on repatriation of foreign earnings.
We monitor these risks on an ongoing basis and
mitigate their effects where possible, but events or
changes in circumstances could materially impact
our results and ﬁnancial condition.

For development projects, we prepare estimates

of capital expenditures, reserves and costs to pro-
duce reserves. We also assess the likelihood of
obtaining key governmental permits, land rights
and other government approvals. Estimates of capi-
tal expenditures are based on studies completed for
each project, which also include estimates of annual
production and production costs. Adverse changes
in any of the key assumptions in these studies or
other factors could affect estimated capital expen-
ditures, production levels and production costs,
and also the economic feasibility of a project. We
take steps to mitigate potentially adverse effects of
changes in assumptions or other factors. Prior to the
commencement of production, the segment results
for development projects reﬂect expensed mine
start-up costs.

North America
In 2005, the region produced 2,863,000 ounces
(2004: 2,963,000 ounces) at total cash costs of $244
per ounce (2004: $223 per ounce). Gold production
in 2005 was within full-year production guidance
and slightly lower than 2004 as higher production
at Goldstrike Open Pit was offset by slightly lower
production at Goldstrike Underground, the process-
ing of fewer tons at Eskay Creek in 2005 and the
cessation and sale of mining operations at Holt-
McDermott in 2004. In 2005, total cash costs per
ounce increased over 2004 due to lower production
levels at Goldstrike Underground and inﬂationary
cost pressures, partly offset by higher toll milling
credits and the impact of the change in accounting
for stripping costs (see page 65). Total cash costs
per ounce were slightly better than the full-year
guidance as a result of higher production at Goldstrike
Open Pit, partly offset by higher costs at Goldstrike
Underground and Round Mountain.

Barrick Annual Report 2005

Management’s Discussion and Analysis (cid:1) 45

Goldstrike Open Pit, United States
Production was higher in 2005 than 2004 as a result
of mining in areas of the pit with higher ore grades,
on completion of the ninth west layback in the
second half of the year, partly offset by lower tons
processed in the ﬁrst half of the year due to above
average rainfall that impacted mining rates, harder
ore encountered that impacted milling rates, and
higher toll milling volumes in 2005. Total cash costs
per ounce in 2005 were lower than both guidance
and 2004 due to the higher production levels and
higher toll milling credits, as well as the impact of
the change in accounting for stripping costs (see
page 65), partly offset by the impact of inﬂationary
cost pressures and higher royalties due to higher
market gold prices.

Goldstrike Underground, United States
In 2005, there was an increase in drift-and-ﬁll mining
due to mine sequencing changes to compensate for
difﬁcult ground conditions. Lower mining rates due
to the increase in drift-and-ﬁll mining, as well as a
temporarily plugged backﬁll raise, were partly offset
by a drawdown of stockpiles in the ﬁrst half of 2005,
resulting in lower gold production than guidance
and 2004. Lower production levels combined with
inﬂationary cost pressures, higher ground support
costs due to difﬁcult ground conditions, an increase
in drift-and-ﬁll mining, and higher royalty costs due
to higher market gold prices, resulted in higher total
cash costs per ounce in 2005 than in 2004, and
slightly higher than the guidance for 2005.

Western 102 Power Plant in Nevada, United States
The 115-megawatt natural gas-ﬁred power plant
in Nevada to supply our Goldstrike mine was com-
pleted and began operating in December 2005.
The construction cost was $96 million.

Eskay Creek, Canada
As the mine approaches the end of its reserve
life in 2008, lower availability of high-grade direct-
to-smelter ore resulted in the mining of more
lower-grade ore tons, leading to lower gold produc-
tion in 2005. Total cash costs per ounce in 2005 were
lower than the guidance for the year, but higher than
in 2004 due to the lower production levels and lower
silver by-product credits (volume-related), partly off-
set by lower smelter costs and higher silver prices.

Round Mountain (50% Owned), United States
In 2005, higher recoveries of gold from ore placed
on the leach pad were offset by slightly lower tons
placed on the pad, resulting in slightly lower pro-
duction in 2005 over 2004. Tons processed and
recovery rates each period do not necessarily corre-
late to the ounces produced in the period as there
is a time delay between placing tons on the leach
pad and producing gold. Total cash costs per ounce
were slightly lower than the guidance for 2005,
although higher than 2004, mainly due to the impact
of inﬂationary cost pressures and the change in
accounting for stripping costs (see page 65). The
joint venture partners have agreed to proceed with
a pit expansion project, resulting in an increase
in gold reserves, and an extension of the expected
mine life from 2010 to 2015.

East Archimedes, United States
In 2004, we made a decision to proceed with the
East Archimedes project in Nevada. The project
is an open-pit, heap leach operation exploiting the
East Archimedes deposit, a deeper continuation of
the ore mined previously at Ruby Hill. Construction
capital is estimated at about $75 million over an
expected two-year construction phase. Gold produc-
tion is expected to commence by mid-2007. Project
highlights include:
(cid:1) Construction capital costs of $35 million were

incurred in 2005.

(cid:1) The workforce is in place and all major equipment

is in service.

(cid:1) The remaining balance of the mining ﬂeet was

received in fourth quarter 2005.
(cid:1) Pre-strip activities are in progress.

46 (cid:1) Management’s Discussion and Analysis

Barrick Annual Report 2005

South America
The region produced 1,234,000 ounces in 2005
(2004: 646,000 ounces) at total cash costs of $126
per ounce (2004: $111 per ounce). After achieving
production start-up ahead of schedule in mid-June
2005, Lagunas Norte made a signiﬁcant contribution
to the region’s results in the second half of 2005.
Veladero had its ﬁrst gold pour in September 2005
and commenced full production in fourth quarter
2005. We expect these two mines to make a signiﬁ-
cant contribution to production for the region in
2006 and beyond. In 2005, gold production exceeded
guidance for the year due to higher than expected
production at Pierina, while total cash costs per
ounce were within the range of guidance provided
for the year. Total cash costs per ounce were higher
than 2004 due to higher total cash costs per ounce
at Pierina.

Pierina, Peru
Although mining at Pierina occurred in higher-
grade areas of the pit in 2005, lower quantities of
run-of-mine ore were placed on the leach pad than
in 2004, which led to slightly lower production in
2005. Total cash costs per ounce increased over 2004
due to the impact of inﬂationary cost pressures,
combined with the impact of higher equipment
maintenance, labor and ground support costs, partly
offset by higher silver by-product credits and the
positive impact of the change in accounting for
stripping costs (see page 65). Mining costs per ton
of ore were higher in 2005 as tons of waste mined
increased over 2004. Gold production and total
cash costs per ounce in 2005 were slightly higher
than guidance.

Lagunas Norte, Peru
The Lagunas Norte mine achieved start-up
in June 2005, ahead of schedule, with a capital
construction cost of $323 million. Lagunas Norte
produced 550,000 ounces in 2005, at total cash
costs of $110 per ounce, with the mining of higher-
grade near-surface ore. Both gold production and
total cash costs per ounce were within the range
of guidance for the year.

Veladero, Argentina
The Veladero mine had its ﬁrst gold pour, ahead
of schedule, in September 2005. Commissioning
activities are complete and the mine is ramping
up production levels. Capital construction costs for
the project were $547 million. The mine produced
56,000 ounces in 2005.

Pascua-Lama, Chile/Argentina
In 2004, we made a decision to proceed with the
development of the Pascua-Lama project in Chile/
Argentina, contingent on obtaining the necessary
permits, approvals and ﬁscal regimes. We recently
received approval of the environmental impact
assessment from Chilean environmental regulatory
authorities and we are committed to working within
the framework of the Resolution granted to us. The
Resolution, which was issued on February 17, 2006,
imposes certain conditions in connection with the
development of the project. We are currently assess-
ing the implications of such conditions and it is
possible that, following completion of such assess-
ment, reserves for US reporting purposes could be
reduced by up to 1 million ounces. It is expected
that reserves for Canadian reporting purposes would
remain unchanged. Approval of the environmental
impact assessment by Argentine regulatory authori-
ties is targeted for second quarter 2006. The timing
of receipt of such approval, as well as the resolution
of some of the other external issues, such as permit-
ting and licensing, cross-border operating issues
and ﬁscal, tax and royalty issues are largely beyond
our control.

Capital and operating cost estimates for the
Pascua-Lama project were based on the cost and
commodity price environment prevailing at the time
of the updated feasibility study, which was ﬁnalized
in June 2004. The design of the project has been
optimized in the course of the permitting process
to incorporate additional operating and construction
efﬁciencies, additional environmental mitigation
measures, and other project improvements. We are
in the course of updating cost estimates to reﬂect
such changes, inﬂationary cost pressures and higher
commodity prices. Although such factors will result

Barrick Annual Report 2005

Management’s Discussion and Analysis (cid:1) 47

in some increase in capital and operating cost esti-
mates, based on the current cost and commodity
price environment, and combined with other
efﬁciencies, we do not expect signiﬁcant changes
to the overall economics of the project.

Australia/Africa
The region produced 1,332,000 ounces in 2005
(2004: 1,349,000 ounces) at total cash costs of $280
per ounce (2004: $243 per ounce). Lower production
in 2005 was mainly due to the discontinuation of
open pit mining at Plutonic in second quarter 2005
and lower production at Kalgoorlie in the second half
of the year, partly offset by new production from
Tulawaka. Total cash costs per ounce were higher
in 2005 mainly because of inﬂationary cost pres-
sures, higher exchange rates under hedge contracts,
lower tons mined and produced at Bulyanhulu and
lower production levels at Plutonic after open-pit
mining ended in second quarter 2005.

Kalgoorlie (50% Owned), Australia
Mill throughput was higher in 2005 due to lower
maintenance downtime than in 2004; but gold
production was lower in 2005 than 2004. Lower pro-
duction was the result of mining in lower-grade
areas of the pit and lower recovery rates experienced
in the second half of 2005, partly offset by higher
mill throughput due to improved mill utilization
and the positive impact of ﬁner ore sizes. Total cash
costs per ounce were within the range of guidance
for 2005. The combined impact of lower production
levels, inﬂationary cost pressures and higher exchange
rates under hedge contracts, and the effect of
the change in accounting for stripping costs (see
page 65), resulted in higher total cash costs per
ounce in 2005 than in 2004. We are assessing process
changes, controls and other management measures

for the roaster facility to reduce mercury emissions.
Kalgoorlie has installed a ﬁrst-stage mercury scrubber
on its carbon kiln and is assessing the performance
of that unit to determine what additional steps
might be appropriate. The assessment is continuing,
after which we will be able to estimate any capital
requirements and operating cost impact associated
with such measures.

Plutonic, Australia
Gold production at Plutonic was lower in 2005, as
the mine processed fewer tons of ore after open-pit
mining ended in second quarter 2005, also resulting
in a higher proportion of ore feed from the under-
ground, which is of a higher grade than open-pit
ore. Total cash costs per ounce were higher in 2005
than 2004, mainly due to the combined effect of
the lower gold production levels, higher equipment
maintenance, higher exchange rates under hedge con-
tracts and inﬂationary cost pressures, partly offset by
lower operating costs related to cessation of open-pit
mining and the impact of the change in accounting
for stripping costs (see page 65). Total cash costs
per ounce were slightly higher than guidance while
gold production was within the guidance range.

Bulyanhulu, Tanzania
Gold production was lower in 2005, mainly due to
a combination of lower tons mined and lower ore
grades. Tons mined were lower in 2005, mainly due
to reduced equipment availability, a hoist gearbox
failure and labor issues due to roster changes in
2005. Ore grades were also lower in 2005 as tons
were mined from lower-grade stopes. Total cash
costs per ounce in 2005 were higher than guidance
and 2004 due to the lower gold production levels,
inﬂationary cost pressures and higher administration
and underground maintenance costs.

48 (cid:1) Management’s Discussion and Analysis

Barrick Annual Report 2005

of the joint venture. In 2004, the Kabanga project
had an estimated inferred resource of 26.4 million
tonnes grading 2.6% nickel.1 This resource is
currently being updated, based on the ﬁeld work
to be completed in 2006.

Over the next several years, Falconbridge has
agreed to fund and conduct a further $50 million
work plan that will include additional exploration
and inﬁll drilling, and technical work to update the
resource model for Kabanga and bring the project
towards feasibility. Falconbridge has initiated the
establishment of a dedicated team in Tanzania to
coordinate and advance the work plan. After expen-
diture of $50 million, Falconbridge will decide on
whether to proceed with the project. If Falconbridge
proceeds with the project, they will fund the next
$95 million of any project development expendi-
tures to advance the Kabanga project. Thereafter,
Falconbridge and Barrick will share equally in joint-
venture revenues and expenditures.

Russia/Central Asia
In 2005, we continued to focus on developing our
operations in the region. In April 2005, we spent
$50 million to increase our ownership in Highland
Gold Mining PLC (“Highland Gold”) from 14% to
20%. Our 20% ownership interest is reﬂected in our
Financial Statements and production statistics on
an equity basis. We continue to work with Highland
Gold on projects where we have the option to acquire
a joint interest. We established a project ofﬁce in
Moscow and appointed a Regional Vice President to
lead the development of our business in the region.

Cowal, Australia
The Cowal project in Australia remains on schedule
for its ﬁrst gold production in ﬁrst quarter 2006.
Construction costs are anticipated to be about ten
per cent over the guidance of about $305 million as
a result of the impact of inﬂationary cost pressures
in Australia. We have been taking steps to mitigate
cost increases where possible. Project highlights
at the end of 2005 include:
(cid:1) Capitalized costs, including capitalized interest,

were $258 million in 2005.

(cid:1) Construction of the systems necessary to process

oxide ore were over 85% complete.

(cid:1) Pre-commissioning of the process plant started in
mid-December 2005 and the electrical transmis-
sion line was commissioned in January 2006.
(cid:1) Plant-site concrete and buildings were 98%

complete.

(cid:1) About one million tons of ore have been stock-

piled to date.

Buzwagi, Tanzania
The drill program at Buzwagi is substantially
complete and the results are being compiled. A pre-
feasibility study is complete and will be used to
support a reserve of 2.4 million ounces under
Canadian reporting standards.1 The permitting
process is underway with the Tanzanian authorities
and an engineering project consultant has been
assigned to initiate a feasibility study to support a
production decision.

Kabanga (50% Owned), Tanzania
In April 2005, we entered into a joint-venture agree-
ment with Falconbridge Limited (“Falconbridge”)
with respect to the Kabanga nickel deposit and
related concessions in Tanzania. Falconbridge
acquired a 50% indirect interest in respect of the
Kabanga project for $15 million cash and a funding
commitment. Falconbridge will be the operator

1. Calculated in accordance with National Instrument 43-101 as required

by Canadian securities regulatory authorities. For United States reporting
purposes, Industry Guide 7 (under the Securities Exchange Act of 1934),
as interpreted by the Staff of the SEC, applies different standards in order
to classify mineralization as a reserve. Accordingly, for US reporting
purposes, Buzwagi is classiﬁed as mineralized material. For additional
information on reserves see the tables on pages 126–129.

Barrick Annual Report 2005

Management’s Discussion and Analysis (cid:1) 49

Other Costs and Expenses

Exploration, Development and Business Development Expense

($ millions)
For the years ended December 31

2005

2004

2003

Comments on signiﬁcant trends and variances

Exploration

North America

Australia/Africa

South America

Russia/Central Asia

Other countries

Mine development

Non-capitalizable project costs

Business development/other

$ 29

$ 26

$ 19

2005 vs 2004 – Higher activity at Goldstrike. 2004 vs 2003 –
Higher activity at Goldstrike, Eskay Creek and Round Mountain.

–

2005 vs 2004 – Higher activity at Bulyanhulu. 2004 vs 2003 –
Higher activity in Tanzania, primarily at the Buzwagi project.

2005 vs 2004 – Higher activity to support development of the new
business unit.

2005 vs 2004 – In 2004, we expensed Lagunas Norte development
costs totaling $9 million until May 1, when the project achieved
the criteria to classify mineralization as a reserve for US reporting
purposes. 2004 vs 2003 – In 2003, we expensed development costs
at Lagunas Norte totaling $29 million, and at Veladero totaling
$18 million until October 2003 when the project achieved the criteria
to classify mineralization as a reserve for US reporting purposes.

–

Non-capitalizable costs mainly represent items incurred in the
development/construction phase that cannot be capitalized.

2005 vs 2004 – Decrease in overhead costs associated with the
administration of exploration and development programs.

Total

$ 141

$ 137

Amortization Expense

($ millions, except per
ounce amounts in dollars)
For the years ended
December 31

2005
Amount

Incr. (decr.)
due to

Sales

2005
volumes1 Other Amount Per ounce

2004

2004
Per ounce

Comments on other variances

Goldstrike Open Pit

$ 90

$ 3

$ 4

$ 83

$ 60

$ 61

Capital additions in 2005, partly offset by an
increase in reserves.

Goldstrike Underground

Eskay Creek

Round Mountain

Lagunas Norte

Pierina

Kalgoorlie

Plutonic

Bulyanhulu

Other mines

Sub total

Corporate assets

Total

409

$ 427

(6)

–

(21)

(4)

–

(2)

(33)

107

(3)

(2)

(25)

425

$ 452

1. For explanation of changes in sales volumes refer to page 43.

119

120

Capital additions in 2005, offset by an increase
in reserves.

153

176 Writedown of book value in 2004, partly offset by an
increase in amortization due to a decrease in reserves.

Capital additions in 2005, offset by an increase
in reserves.

115

113

–

165

Increase in reserves and transfer of certain assets
to Lagunas Norte in 2005.

Capital additions in 2005.

100

Capital additions in 2005.

50 (cid:1) Management’s Discussion and Analysis

Barrick Annual Report 2005

Amortization Expense (cont’d)

($ millions, except per
ounce amount in dollars)
For the years ended
December 31

Incr. (decr.)
due to

2004
Amount

Sales

2003
volumes1 Other Amount

2004
Per ounce

2003
Per ounce

Comments on other variances

Goldstrike Open Pit

$ 83

$ (4)

$ –

$ 87

$ 61

$ 53

Capital additions in 2004, partly offset by an
increase in reserves.

Goldstrike Underground

Eskay Creek

Round Mountain

Pierina

Kalgoorlie

Plutonic

Bulyanhulu

Other mines

Sub total

Corporate assets

Total

(6)

(1)

(8)

–

(3)

107

(48)

(11)

166

425

$ 452

–

(3)

(65)

(1)

(6)

(7)

497

$ 522

120

122

Increase in reserves, partly offset by capital additions
in 2004.

176

165

100

132

Decrease in reserves and capital additions in 2004.

Increase in reserves, and a decrease in property,
plant and equipment as amortization exceeds
capital additions in the year.

182

Increase in reserves.

Capital additions in 2004, partly offset by an
increase in reserves.

123

Capital additions at Hemlo and Marigold.

1. For explanation of changes in sales volumes refer to page 43.

Corporate Administration, Interest Income and Interest Expense

($ millions)
For the years ended December 31

2005

2004

2003

Comments

Corporate administration

$ 71

$ 73

Interest income

(38)

(25)

(31)

Interest costs

Incurred

125

Capitalized

(118)

(41)

(5)

Expensed

$ 7

$ 19

$ 44

2004 vs 2003 – Severance costs of $9 million in 2003, with higher
regulatory compliance costs in 2004.

2005 vs 2004 – Increase in the average cash balance, combined
with an increase in market interest rates. 2004 vs 2003 – Lower
average cash balances in 2004, combined with higher gains on
cash hedges in 2003.

Increase mainly due to new ﬁnancing put in place in 2004
and 2005. Average long-term debt outstanding increased from
$0.8 billion in 2003 to $0.9 billion in 2004 to $1.8 billion in 2005.

2005 vs 2004 – Increased amounts were capitalized in 2005 to
Pascua-Lama, Cowal, Veladero, and Lagunas Norte development
projects as construction costs were incurred and capitalized.
Capitalization at Lagunas Norte ceased in third quarter 2005, while
capitalization at Veladero ceased in fourth quarter 2005. Average
book value of these four projects was $1.3 billion in 2005 and
$0.6 billion in 2004. 2004 vs 2003 – Higher amounts were
capitalized at development projects due to construction costs
capitalized in 2004, and capitalization at Pascua-Lama from
July 1, 2004.

We expect interest expense to increase in 2006 over 2005 as
Lagunas Norte and Veladero started production and ceased interest
capitalization in third quarter and fourth quarter 2005, respectively.

Barrick Annual Report 2005

Management’s Discussion and Analysis (cid:1) 51

Impairment of Long-lived Assets

($ millions)
For the years ended December 31

2005

2004

2003

Comments

Impairment charge – Eskay Creek

$ –

$ 58

$ –

In 2004, we completed an impairment test for the Eskay Creek
mine, due to a downward revision to reserves, the continued
weakening of the US dollar that impacts Canadian dollar operating
costs, and upward revisions in asset retirement obligation costs.

Impairment charge – Peruvian

exploration properties

Impairment charge – other

–

We completed an impairment test in 2004 on a group of Peruvian
exploration-stage properties based on ﬁnalization of the exploration
program for the year and an updated assessment of future plans
for the property.

2004 includes writedown on various exploration-stage properties.

Total

$ –

$ 139

$ 5

Other (Income) Expense

($ millions)
For the years ended December 31

2005

2004

2003

Comments

Non-hedge derivative gains

$ (6)

$ (5)

$ (71)

Gains on asset sales

(5)

(36)

Gain on Kabanga transaction

Gains on investment sales

(15)

(17)

–

(6)

–

(4)

Impairment charges on investments

Changes in asset retirement
obligations at closed mines

Environmental remediation costs

Accretion expense

Currency translation (gains) losses

(3)

(2)

Other items

Total

$ 67

$ 43

(6)

The gains and losses arise primarily due to changes in commodity
prices, currency exchange rates and interest rates.

In 2005, we sold certain land positions in Australia. In 2004, we
sold various mining properties, including the Holt-McDermott mine
in Canada and certain land positions around our inactive mine sites
in the United States. In 2003, we sold various mining properties,
including several land positions around inactive mine sites in the
United States, as well as the East Malartic Mill and Bousquet mine
in Canada. The majority of these land positions were fully amortized
in prior years and therefore any proceeds generated gains on sale,
before selling costs and taxes.

Gain recorded in 2005 relates to the closing of a transaction
with Falconbridge.

2005 vs 2004 – $10 million of the gains in 2005 related to the sale
of investments held in a rabbi trust for a deferred compensation
plan. Other gains in all years mainly relate to the sale of various
other investments.

2005 impairment charge relates to the writedown of two
investments which were determined to be impaired.
2003 impairment charge relates mainly to investments
under a deferred compensation plan.

Charges relate to revisions to cost estimates at various closed mines.

In 2003, three North American mines shut down and two South
American mines had recently shut down, and as a result the
expenditures were very high in this year.

In 2005, gains reﬂect the strengthening of the Canadian dollar
on monetary assets.

Includes charges for World Gold Council fee, legal costs for major
litigation and certain costs incurred at our regional business units.

52 (cid:1) Management’s Discussion and Analysis

Barrick Annual Report 2005

Income Taxes

For the years ended December 31
($millions, except percentages)

Effective income tax rates
on elements of income

Income tax expense

2005

2004

2003

Pre-tax Effective
tax rate
income

Income tax
expense
(recovery)

Pre-tax
income

Effective
tax rate

Income tax
expense
(recovery)

Pre-tax
income

Effective
tax rate

Income tax
expense
(recovery)

before elements below

$ 455

21%

Change in Australian tax status
Outcome of tax uncertainties
Release of deferred

tax valuation allowances
recorded in prior years

$ 45

53%

$ 97
(5)
–

(32)

$ 60

$ 222

30%

$ 24
(81)
(141)

(5)

$ (203)

$ 67
–
–

(62)

$ 5

Income tax expense increased in 2005 in compari-
son to the tax recoveries in 2004, as the 2004 tax
recoveries arose primarily with respect to the change
in Australian tax status and the outcome of tax
uncertainties. Our underlying tax rate decreased
to 21% in 2005 in part due to the impact of a lower
amount of deliveries into gold sales contracts in a
low tax-rate jurisdiction at prices below the prevail-
ing spot market gold price than in 2004. A shift in
the geographic mix of gold production, and there-
fore income before taxes, towards jurisdictions with
lower tax rates also contributed to a reduction in
the underlying tax rate.

As gold prices increase, our underlying tax
rate also increases, reaching about 29% with market
prices at or above $475 per ounce. This expected
underlying rate excludes the effect of gains and
losses on non-hedge derivatives, the effect of deliver-
ing into gold sales contracts in a low tax-rate
jurisdiction at prices below prevailing market prices,
and any release of deferred tax valuation allowances.
We record deferred tax charges or credits if
changes in facts or circumstances affect the esti-
mated tax basis of assets and therefore the amount
of deferred tax assets or liabilities or because of
changes in valuation allowances reﬂecting changing
expectations in our ability to realize deferred tax

assets. In 2005, we released valuation allowances
totaling $32 million, of which $31 million related to
Argentina, in anticipation of higher levels of future
taxable income after production began at Veladero,
and also due to the impact of higher market gold
prices. In 2004, we recorded a tax credit of $141 mil-
lion on ﬁnal resolution of a Peruvian tax assessment
in our favor, as well as the reversal of other accrued
costs totaling $21 million ($15 million post-tax).
We also recorded credits of $81 million due to a
change in tax status in Australia following an elec-
tion that resulted in a revaluation of assets for tax
purposes; and also an election to ﬁle tax returns in
US dollars, rather than Australian dollars. In 2005,
we revised our estimate of the revaluation of assets
for tax purposes due to the change in status, and
recorded a further deferred tax credit of $5 million.
The interpretation of tax regulations and legisla-
tion and their application to our business is complex
and subject to change. We have signiﬁcant amounts
of deferred tax assets, including tax loss carry
forwards, and also deferred tax liabilities. Potential
changes to any of these amounts, as well as our abil-
ity to realize deferred tax assets, could signiﬁcantly
affect net income or cash ﬂow in future periods.
For more information on tax valuation allowances,
see page 71.

Barrick Annual Report 2005

Management’s Discussion and Analysis (cid:1) 53

Quarterly Information
($ million, except where indicated)

2005

2004

Gold sales
Net income
Net income per share – basic (dollars)
Net income per share – diluted (dollars)

$ 776
175
0.33
0.32

$ 627
113
0.21
0.21

$ 463
53
0.10
0.10

$ 484
60
0.11
0.11

$ 501
156
0.30
0.29

$ 500
32
0.06
0.06

$ 454
34
0.06
0.06

$ 477
26
0.05
0.05

Our ﬁnancial results for the last eight quarters
reﬂect the following general trends: rising spot gold
prices with a corresponding rise in prices realized
from gold sales; and rising gold production and sales
volumes as our new mines began production in
2005. These historic trends are discussed elsewhere
in this MD&A. The quarterly trends are consistent
with explanations for annual trends over the last
two years. Net income in each quarter also reﬂects
the timing of various special items that are pre-
sented in the table on page 54.

Fourth Quarter Results
In fourth quarter 2005, we produced 1.65 million
ounces at total cash costs of $221 per ounce1 com-
pared to 1.17 million ounces at total cash costs of
$223 per ounce in the prior-year quarter. Revenue
for fourth quarter 2005 was $776 million on gold
sales of 1.65 million ounces, compared to $501 mil-
lion in revenue on gold sales of 1.2 million ounces
for the prior-year quarter. Sales volumes increased
due to the contribution from new mines that began
production in 2005. During the quarter, spot gold
prices averaged $486 per ounce. We realized an
average price of $467 per ounce during the quarter
compared to $417 per ounce in the prior-year quar-
ter mainly due to higher spot gold prices. Earnings
for fourth quarter 2005 were $175 million ($0.32
per share on a diluted basis), $19 million ($0.03 per
share on a diluted basis) higher than the prior-year
quarter. The increase in earnings over the prior-
year quarter reﬂects higher gold sales volumes and
realized gold prices, partly offset by the impact
of special items.

1. Total cash costs per ounce excludes amortization – see pages 44–45.

Effect on Earnings Increase (Decrease)

($ millions)

Three months ended December 31

2005

2004

Pre-tax Post-tax

Pre-tax

Post-tax

Non-hedge derivative

gains (losses)

Gains on sales of investments

$ (1)

$ 6

and mining properties

Impairment charges on
long-lived assets
and investments

Change in asset retirement
obligation estimates

Deferred stripping

accounting changes
Impact on the period

compared to
previous policy

Resolution of Peruvian

tax assessment

Deferred tax credits

Change in Australian

tax status

Other

(13)

(135)

(93)

(2)

(3)

(19)

(15)

–

–
–

–

5
32

–

156

–
–

48
–

Total

$ 27

$ 52

$ (92)

$ 127

In fourth quarter 2005, we generated operating cash
ﬂow of $269 million compared to operating cash
ﬂow of $123 million in the prior-year quarter. Higher
operating cash ﬂow primarily relates to the com-
bined effect of higher gold sales volumes and higher
realized gold prices.

54 (cid:1) Management’s Discussion and Analysis

Barrick Annual Report 2005

Liquidity, Capital Resources and
Financial Position

Cash Flow

Cash Flow Components ($ millions)

1,000

500

–500

–1,000

–1,500

Cash inflow

Cash outflow

2005

2004

2003

Operating

Investing

Financing

Key Factors Affecting Operating Cash Flow

Operating Activities
Operating cash ﬂow increased by $217 million
in 2005 to $726 million. The key factors that
contributed to the year over year decrease are
summarized in the table below.

2005

2004

2003

Impact on comparative
operating cash ﬂows

2005 vs
2004

2004 vs
2003

Comments on signiﬁcant trends and variances

5,320

4,936

5,554

$ 68

$ (109)

See page 43.

($ millions)
For the years ended
December 31

Gold sales volumes

(000s oz)

Realized gold prices

($/oz)

$ 439

$ 391

$ 366

Total cash costs ($/oz)

227

214

189

255

(69)

254

123

See page 43.

(123)

See page 44.

(109)

Sub-total

Other inﬂows (outﬂows)

Income tax
payments

Increase in

inventories

Other non-cash

working capital

Interest expense

Cost of Inmet

settlement in 2003

Effect of other

factors

Total

(80)

(45)

(111)

(35)

2005 vs 2004 – Increased payments in 2005 relate
to higher gold prices and the start of Lagunas Norte
production. 2004 vs 2003 – Large payment in 2003
paid to Canadian tax authorities in relation to 2002
ﬁnal payment.

(151)

(51)

(1)

(100)

(50) Due to build-up of both ore and supplies inventory
at operating mines, particularly for mines that went
into production in 2005.

(65)

(45)

133

(20)

2005 vs 2004 – Increase in accounts payable in 2005
mainly due to timing of payments and for mines that
began production in 2005. 2004 vs 2003 – Increase
in taxes recoverable in 2004 relating to input taxes
on mine construction costs.

–

See page 51.

(47)

(8)

$ 217

$ (10)

Barrick Annual Report 2005

Management’s Discussion and Analysis (cid:1) 55

Investing Activities

($ millions)
For the years ended December 31

Growth capital expenditures1
Veladero

2005

2004

2003

Comments

$ 213

$ 284

$ 68

Costs mainly relate to construction activity. Production start-up in
fourth quarter 2005.

Lagunas Norte

100

182

Cowal

258

Tulawaka

Pascua-Lama

Western 102 Power Plant

East Archimedes

Sub-total

Sustaining capital expenditures

–

$ 789

$ 640

$ 106

–

Construction activity started in second quarter 2004. Production
start-up in second quarter 2005.

Construction activity started in second quarter 2004. Higher levels
of activity in 2005, leading up to production start-up expected in
ﬁrst quarter 2006.

Costs mainly relate to construction activity. Production start-up in
ﬁrst quarter 2005.

Higher levels of activity since decision in mid-2004 to proceed with
the project, as well as capitalized interest since mid-2004.

Construction activity started in ﬁrst quarter 2004. Higher levels
of activity in 2005 in lead-up to production start-up in the
fourth quarter.

Construction activity started in ﬁrst quarter 2005.

North America

$ 103

$ 86

$ 80

Australia/Africa

115

South America

Other

Sub-total

Total

114

$ 315

$ 184

$ 216

$ 1,104

$ 824

$ 322

1. Includes both construction costs and capitalized interest.

We plan to fund the expected capital expenditures
for 2006 from a combination of our $1 billion cash
position at the end of 2005, and operating cash ﬂow
that we expect to generate in 2006. We are consider-
ing putting in place project ﬁnancing for a portion
of the mine construction costs at Pascua-Lama.

On February 14, 2006, we entered into an agree-
ment with Antofagasta plc (“Antofagasta”) to acquire
50% of Tethyan Copper Company’s (“Tethyan”)
Reko Diq project and associated mineral interests
in Pakistan in the event that Antofagasta is successful
in its bid to acquire Tethyan. If Antofagasta’s bid is
successfully completed, we will reimburse Antofagasta

Higher sustaining capital expenditures at Goldstrike in 2005, in
particular, a 100-ton shovel purchase and higher budgeted
expenditures in general.

2003 was higher due to a transition to owner-mining at Plutonic
that resulted in equipment purchases.

Purchases of equipment at newly operational mines.

approximately $100 million in cash for 50% of the
acquisition, including the claw-back right to be
acquired or extinguished from BHP Billiton who has
a right to claw-back a material interest in certain
Tethyan’s mineral interests.

Financing Activities
The most signiﬁcant ﬁnancing cash ﬂows in 2005
were $179 million on issue of new long-term debt
obligations, $92 million received on the exercise of
employee stock options partly offset by dividend
payments made totaling $118 million. We also made
scheduled payments under our long-term debt
obligations totaling $59 million in 2005.

56 (cid:1) Management’s Discussion and Analysis

Barrick Annual Report 2005

Liquidity
Liquidity Management
Liquidity is managed dynamically, and factors
that could impact liquidity are regularly monitored.
The primary factors that affect liquidity include
gold production levels, realized gold sales prices,
cash production costs, future capital expenditure
requirements, scheduled repayments of long-term
debt obligations, our credit capacity and expected
future debt market conditions. Working capital
requirements have not historically had a material
effect on liquidity. Counterparties to the ﬁnancial
instruments and gold sales contracts that we hold
do not have unilateral and discretionary rights
to accelerate settlement of ﬁnancial instruments
or gold sales contracts, and we are not subject
to any margin calls.

Through the combination of a strong balance

sheet and positive operating cash ﬂows, we have
been able to secure ﬁnancing, as required, to fund
our capital projects. We had three new mines start
in 2005, with a fourth scheduled to start production
in ﬁrst quarter 2006. The costs of construction for
these projects were ﬁnanced through a combination
of operating cash ﬂows and the issuance of long-
term debt ﬁnancing. While we consider our liquidity
proﬁle to be sound with no reasonably foreseeable
trends, demands, commitments, events or circum-
stances expected to prevent us from funding the
capital needed to complete our projects and imple-
ment our strategy, no assurance can be given that
additional capital investments will not be required
to be made at these or other projects. If we are
unable to generate enough cash to ﬁnance such
additional capital expenditures through operating
cash ﬂow and we are unable or choose not to issue
common stock, we may be required to issue addi-
tional indebtedness. Any additional indebtedness
would increase our debt payment obligations, and
may negatively impact our results of operations.

Capital Resources
Adequate funding is in place or available for all
our development projects. We plan to put in place
project ﬁnancing for a portion of the expected con-
struction cost of Pascua-Lama; however, if we are
unable to do so because of unforeseen political or
other challenges, we expect to be able to fund the
capital required through a combination of existing

capital resources and future operating cash ﬂows. We
may also invest capital in Russia and Central Asia in
2006 to acquire interests in mineral properties as we
develop our business unit there. We expect that any
capital required will be funded from a combination
of our existing cash position and operating cash
ﬂow in 2006.

The total estimated acquisition cost of Placer

Dome is $10.1 billion of which approximately
$1.3 billion is the cash portion that is funded by
drawing upon our $1 billion credit facility, with
the balance from our cash position. We expect to
close the sale of certain Placer Dome operations to
Goldcorp in the ﬁrst half of 2006 and receive cash
consideration of about $1.5 billion from Goldcorp
that will be used to repay amounts borrowed, with
respect to the Placer Dome acquisition, on our
$1 billion credit facility.

Capital Resources1

($ millions)
For the years ended December 31

Opening capital resources
New sources

Operating cash ﬂow
New and increases to
ﬁnancing facilities2

Allocations

Growth capital3
Sustaining capital3
Dividends
Share buyback
Other

2005

2004

2003

$ 2,476

$ 1,970

$ 2,044

726

509

519

134

1,056

–

3,336

3,535

2,563

(789)
(315)
(118)
–
(30)

(640)
(184)
(118)
(95)
(22)

(106)
(216)
(118)
(154)
1

Closing capital resources

$ 2,084

$2,476

$ 1,970

Components of closing
capital resources
Cash and equivalents 5
Unutilized credit facilities 4, 5

Total

$ 1,037
1,047

$ 1,398 $ 970
1,000

1,078

$ 2,084

$ 2,476

$ 1,970

1. Capital resources include cash balances and sources of ﬁnancing that

have been arranged but not utilized.

2. In 2005, includes the $50 million Peruvian bond offering and $84 million

lease facility for Lagunas Norte. In 2004, includes the $250 million
Veladero project ﬁnancing, $750 million bond offering, and $56 million
lease facility for Lagunas Norte.

3. Growth capital represents capital invested in new projects to bring

new mines into production. Sustaining capital represents ongoing capital
required at existing mining operations. Sum of growth and sustaining
capital equals capital expenditures for the year.

4. Subsequent to December 31, 2005, we drew upon our $1 billion credit

facility to fund the Placer Dome acquisition. Amounts drawn will be repaid
upon closure of sales of speciﬁc Placer Dome operations to Goldcorp.
5. Excludes Placer Dome capital resources. At December 31, 2005, Placer
Dome had $880 million of cash and equivalents and $873 million of
undrawn bank lines of credit available of which $300 million was drawn
subsequent to year end.

Barrick Annual Report 2005

Management’s Discussion and Analysis (cid:1) 57

Credit Rating

At February 10, 2006 from major rating agencies:

Standard & Poor’s (“S&P”)
Moody’s
DBRS

A–
Baa1
A

In 2006, following the acquisition of Placer Dome,
our ratings were reviewed and conﬁrmed by
Moody’s and DBRS. S&P lowered our rating from
‘A’ to ‘A–’, reﬂecting Placer Dome’s lower rating.
Our ability to access unsecured debt markets and
the related cost of debt ﬁnancing is, in part, depen-
dent upon maintaining an acceptable credit rating.
A deterioration in our credit rating would not
adversely affect existing debt securities or the terms
of gold sales contracts, but could impact funding
costs for any new debt ﬁnancing. The key factors
that are important to our credit rating include
the following: our market capitalization; the strength
of our balance sheet, including the amount of
net debt and our debt-to-equity ratio; our net cash
ﬂow, including cash generated by operating
activities and expected capital expenditure require-
ments; the quantity of our gold reserves; and our
geo-political risk proﬁle.

Financial Position

Key Balance Sheet Ratios

As at December 31

Non-cash working capital ($ millions)1
Net debt ($ millions)2
Net debt:equity ratio3
Current ratio4

2005

2004

$ 151
$ 764
0.20:1
3.12:1

$ 141
$ 288
0.08:1
4.66:1

1. Represents current assets, excluding cash and equivalents, less

current liabilities.

2. Represents long-term debt less cash and equivalents.
3. Represents net debt divided by shareholders’ equity.
4. Represents current assets divided by current liabilities.

Non-cash working capital increased in 2005 mainly
due to increases in inventory levels to support new
mines that began production. Capital expenditures
exceeded operating cash ﬂow in 2005, resulting in a
higher net debt position at the end of 2005. Lower
cash balances, partly offset by higher inventory
balances, caused our current ratio to decrease at
the end of 2005.

Shareholders’ Equity
Outstanding Share Data
As at February 10, 2006, 827.7 million of our common
shares, one special voting share and 1.4 million
exchangeable shares (exchangeable into 0.7 million
of our common shares) were issued and outstand-
ing. As at February 10, 2006, options to purchase
20.2 million common shares were outstanding under
our option plans, as well as options to purchase
0.3 million common shares under certain option
plans inherited by us in connection with prior
acquisitions. We intend to acquire the remaining
6% interest in Placer Dome through a compulsory
acquisition procedure that would involve the issuance
of additional common shares. For further informa-
tion regarding the outstanding shares and stock
options, please refer to the Financial Statements and
our 2005 Management Information Circular and
Proxy Statement.

Dividend Policy
In each of the last four years, we paid a total cash
dividend of $0.22 per share – $0.11 in mid-June and
$0.11 in mid-December. The amount and timing
of any dividends is within the discretion of our
Board of Directors. The Board of Directors reviews
the dividend policy semi-annually based on the cash
requirements of our operating assets, exploration
and development activities, as well as potential
acquisitions, combined with our current and pro-
jected ﬁnancial position.

Comprehensive Income
Comprehensive income consists of net income
or loss, together with certain other economic gains
and losses that collectively are described as “other
comprehensive income” or “OCI”, and excluded
from the income statement.

In 2005, the other comprehensive loss of
$100 million mainly included gains of $23 million
on hedge contracts designated for future periods
caused primarily by changes in currency exchange
rates and fuel prices; offset by reclassiﬁcation adjust-
ments totaling $134 million for gains on hedge
contracts designated for 2005 that were transferred
to earnings in 2005; and a $8 million unrealized
decrease in the fair value of investments.

58 (cid:1) Management’s Discussion and Analysis

Barrick Annual Report 2005

Included in other comprehensive income
at December 31, 2005 were unrealized pre-tax gains
on currency hedge contracts totaling $171 million,
based on December 31, 2005 market foreign
exchange rates. The related hedge contracts are
designated against operating costs and capital
expenditures primarily over the next three years,

and are expected to help protect against the impact
of strengthening of the Australian and Canadian
dollar against the US dollar. The hedge gains are
expected to be recorded in earnings at the same time
as the corresponding hedged operating costs and
amortization of capital expenditures are also
recorded in earnings.

Contractual Obligations and Commitments1

Payments due

($ millions)

At December 31, 2005

Contractual obligations
Long-term debt (1)

Repayment of principal
Interest (1)

Asset retirement obligations (2)
Capital leases
Operating leases
Royalty arrangements and other

long-term liabilities (3)

Purchase obligations for supplies

and consumables
Capital commitments (4)

2006

2007

2008

2009

2010

2011 and
thereafter

Total

$ 62
102
37
19
13

109
85

$ 589
79
30
23
13

89
–

$ 79
56
24
19
13

53
–

$ 67
51
48
19
14

24
–

$ 28
49
33
16
14

17
–

$ 894
696
498
1
9

579

20
–

$ 1,719
1,033
670
97
76

931

312
85

Total

$ 506

$ 893

$ 311

$ 294

$ 222

$ 2,697

$ 4,923

1. Excludes any Placer Dome obligations and commitments.

Contractual Obligations and Commitments
(1) Long-term Debt and Interest
Our debt obligations do not include any subjective
acceleration clauses or other clauses that enable the
holder of the debt to call for early repayment, except
in the event that we breach any of the terms and
conditions of the debt or for other customary events
of default. The Bulyanhulu and Veladero ﬁnancings
are collateralized by assets at the Bulyanhulu and
Veladero mines, respectively. Other than this secu-
rity, we are not required to post any collateral under
any debt obligations. The terms of our debt obliga-
tions would not be affected by a deterioration in
our credit rating. Projected interest payments on
variable rate debt was based on interest rates in
effect at December 31, 2005. Interest is calculated
on our long-term debt obligations using both
ﬁxed and variable rates.

(2) Asset Retirement Obligations
Amounts presented in the table represent the undis-
counted future payments for the expected cost of
asset retirement obligations.

(3) Royalties and Other Long-term Liabilities
Virtually all of the royalty arrangements give rise to
obligations as we produce gold. In the event that we
do not produce gold at our mining properties, we
have no payment obligation to the royalty holders.
The amounts disclosed are based on expected future
gold production, using a gold price range assump-
tion of $450–$475 per ounce. The most signiﬁcant
royalty agreements are disclosed in note 6 to our
Financial Statements. Based on 2005 production lev-
els, an increase in market gold prices by $25 per
ounce would result in an annual increase in royalty
payments by approximately $8 million.

Barrick Annual Report 2005

Management’s Discussion and Analysis (cid:1) 59

Other long-term liabilities includes pension and

post-retirement beneﬁts funding in 2006. Funding
beyond 2006 is not included in this table as it cannot
be reasonably estimated given variable market con-
ditions and actuarial assumptions. In 2006, we expect
to make contributions to pension and post-retirement
beneﬁts plans totaling $6 million. Other long-term
liabilities include derivative liabilities. Payments
related to derivative contracts cannot be reasonably
estimated given variable market conditions. Refer
to note 16c to the Financial Statements.

(4) Capital Commitments
Purchase obligations for capital expenditures include
only those items where binding commitments
have been entered into. Commitments at the end
of 2005 mainly related to construction at our
development projects.

Capital Expenditures Not Yet Committed
We expect to incur capital expenditures during the
next ﬁve years for Barrick projects, Placer Dome
acquired projects and producing mines. The primary
Barrick project is Pascua-Lama (refer to page 47
for further details) and the signiﬁcant Placer Dome
projects include Pueblo Viejo, Cortez Hills and
Donlin Creek. We are currently in the process of
reviewing the capital requirements for the acquired
Placer Dome projects and producing mines.

Payments to Maintain Land Tenure and
Mineral Property Rights
In the normal course of business, we are required
to make annual payments to maintain title to certain
of our properties and to maintain our rights to mine
gold at certain of our properties. If we choose to
abandon a property or discontinue mining operations,
the payments relating to that property can be
suspended, resulting in our rights to the property

lapsing. The validity of mining claims can be uncer-
tain and may be contested. Although we have
attempted to acquire satisfactory title to our proper-
ties, some risk exists that some titles, particularly
title to undeveloped properties, may be defective.

Contingencies – Litigation
We are currently subject to various litigation as
disclosed in note 24 to the Financial Statements, and
we may be involved in disputes with other parties
in the future that may result in litigation. If we are
unable to resolve these disputes favorably, it may
have a material adverse impact on our ﬁnancial
condition, cash ﬂow and results of operations.

Financial Instruments
We use a mixture of cash and long-term debt to
maintain an efﬁcient capital structure and ensure
adequate liquidity exists to meet the cash needs
of our business. A discussion of our liquidity and
capital structure can be found on page 55. We use
interest rate contracts to mitigate interest rate risk
that is implicit in our cash balances and outstanding
long-term debt. In the normal course of business,
we are inherently exposed to currency and commodity
price risk. We use currency and commodity hedging
instruments to mitigate these inherent business
risks. We also hold certain derivative instruments
that do not qualify for hedge accounting treatment.
These non-hedge derivatives are described in note 16
to our Financial Statements. For a discussion of
certain risks and assumptions that relate to the use
of derivatives, including market risk, market liquidity
risk and credit risk, refer to notes 16e and 16f to our
Financial Statements. For a discussion of the methods
used to value ﬁnancial instruments, as well as any
signiﬁcant assumptions, refer to note 16d to our
Financial Statements.

60 (cid:1) Management’s Discussion and Analysis

Barrick Annual Report 2005

Summary of Financial Instruments1

As at and for the year ended December 31, 2005

Financial
Instrument

Principal/
Notional
Amount

Cash and equivalents

$1,037 million

Associated
Risks

Amounts Recorded
in Earnings

Amounts Not
Recorded in
Earnings

(cid:1) Interest rate
(cid:1) Credit

Interest income less hedge gains on cash
hedging instruments – 2005 – $32 million;
2004 – $6 million; 2003 – $13 million

Nil

Investments in available-
for-sale securities

$62 million

(cid:1) Market

Long-term debt

$1,721 million

(cid:1) Interest rate

Hedging instruments –
currency contracts

C$788 million
A$2,213 million
ARS 36 million

(cid:1) Market/Liquidity
(cid:1) Credit

Cash hedging instruments –
interest rate contracts

$425 million

(cid:1) Market/Liquidity
(cid:1) Credit

Debt hedging instruments –
interest rate contracts

$500 million

(cid:1) Market/Liquidity
(cid:1) Credit

Other income/expense – 2005 – $1 million
gain; 2004 – $1 million gain;
2003 – $7 million loss

$12 million gain
in OCI

Interest costs – 2005 – $7 million
expensed ($118 million capitalized);
2004 – $19 million expensed ($41 million
capitalized); 2003 – $44 million expensed
($5 million capitalized)

Hedge gains in cost of sales, corporate
administration and amortization –
2005 – $120 million; 2004 – $112 million;
2003 – $65 million

Fair value
greater than
carrying value
by $26 million

$171 million
gain in OCI

Hedge gains/losses in interest income –
2005 – $6 million gain; 2004 –
$19 million gain; 2003 – $18 million gain

$2 million loss
in OCI

Change in fair value recorded in earnings –
2005 – $13 million loss; 2004 – $2 million
gain; 2003 – $9 million gain

Nil

Hedging instruments – fuel
and propane contracts

Fuel –
2 million barrels
Propane –
17 million
gallons

Non-hedge derivatives

Various

(cid:1) Market/Liquidity
(cid:1) Credit

Hedge gains in cost of sales –
2005 – $10 million; 2004 – $4 million;
2003 – $nil

$38 million gain
in OCI

(cid:1) Market/Liquidity
(cid:1) Credit

Gains in other income/expense –
2005 – $6 million; 2004 – $5 million;
2003 – $71 million

Nil

1. Refer to pages 61–64 for information on gold and silver sales contracts.

Off-Balance Sheet Arrangements
Gold and Silver Sales Contracts
We have historically used gold and silver sales con-
tracts as a means of selling a portion of our annual
gold and silver production. The contracting parties
are bullion banks whose business includes entering
into contracts to purchase gold or silver from mining
companies. Since 2001, we have been focusing on
reducing the level of outstanding gold and silver
sales contracts. The terms of our ﬁxed-price gold
and silver sales contracts enable us to deliver gold
and silver whenever we choose over the primarily
ten-year term of the contracts. In 2005, we reduced
our ﬁxed-price gold sales contracts position by

1.0 million ounces through delivery of 0.8 million
ounces of our gold production and the conversion
of 0.2 million ounces to ﬂoating spot price contracts.

Project Gold Sales Contracts
In July 2004, we announced a decision to proceed
with the Pascua-Lama project (“Pascua-Lama”) sub-
ject to receiving required permits and clariﬁcation of
the applicable ﬁscal regimes from the governments
of Argentina and Chile.

In anticipation of building Pascua-Lama and in
support of any related ﬁnancing, we have 6.5 million
ounces of existing ﬁxed-price gold sales contracts
speciﬁcally allocated to Pascua-Lama (the “Project

Barrick Annual Report 2005

Management’s Discussion and Analysis (cid:1) 61

Gold Sales Contracts”). The allocation of these con-
tracts will help reduce gold price risk at Pascua-Lama
and is expected to help secure the ﬁnancing for its
construction. We expect the allocation of these
contracts to eliminate any requirement by lenders
to add any incremental gold sales contracts in the
future to support the ﬁnancing of Pascua-Lama.
The forward sales prices on our Project Gold Sales
Contracts have not been fully ﬁxed, and thus remain
sensitive to long-term interest rates. For these con-
tracts, increasing long-term interest rates in the
fourth quarter resulted in a higher expected realizable
sales price for these contracts. If long-term interest
rates continue to rise, we anticipate the expected
realizable sales price to increase.

As part of our Master Trading Agreements

(“MTAs”), Project Gold Sales Contracts are not
subject to any provisions regarding any ﬁnancial go-
ahead decisions with construction, or any possible
delay or change in the project.

Key Aspects of Pascua-Lama Gold Sales Contracts

(as of December 31, 2005)

Expected delivery dates.1

Future estimated average
realizable selling price.

Mark-to-market value at
December 31, 2005.

2009 –2018, the term of the
expected ﬁnancing.

$378/oz.2

($1,453) million.3

1. The contract termination dates are in 2016–2019 in most cases, but we

currently expect to deliver Pascua-Lama production against these contracts
starting in 2009, subject to the timing of receipt of approvals of the
environmental impact assessments, as well as the resolution of other
external issues, both of which are largely beyond our control. Refer to
page 47 for further details.

2. Upon delivery of production from 2009 –2018, the term of expected

ﬁnancing. Approximate estimated value based on current market US dollar
interest rates and on an average lease rate assumption of 0.75%.
3. At a spot gold price of $513 per ounce and market interest rates.

The allocation of 6.5 million ounces of gold sales
contracts to Pascua-Lama involves: i) the identiﬁ-
cation of contracts in quantities and for terms that
mitigate gold price risk for the project during the
term of the expected ﬁnancing (contracts were
chosen where the existing termination dates are
spread between the targeted ﬁrst year of production
and the expected retirement of ﬁnancing for the
project); ii) the segregation of these contracts from
the remaining non-project gold sales contracts
(the “Corporate Gold Sales Contracts”); and iii) the

eventual settlement of proceeds from these contracts
for the beneﬁt of production.

Through allocation of these gold sales contracts
to Pascua-Lama, we signiﬁcantly reduce capital risk.
It protects the gold price during the term of the
forecasted ﬁnancing, while leaving the remaining
reserves fully levered to spot gold prices. The con-
tracts represent just over 35% of the 18.3 million
ounces of gold reserves at Pascua-Lama. These con-
tracts do not impact any of the 684.7 million ounces
of silver contained in gold reserves at Pascua-Lama.

Corporate Gold Sales Contracts and Floating
Spot-Price Gold Sales Contracts
Fixed-price Corporate Gold Sales Contracts, which
at December 31, 2005 totaled 6.0 million ounces,
represent approximately one year of Barrick’s
expected future gold production (excluding Placer
Dome) and approximately 8.5% of our proven and
probable reserves, in each case excluding Pascua-
Lama and Placer Dome. At December 31, 2005, we
had ﬂoating spot-price gold sales contracts under
which we are committed to deliver 0.7 million
ounces of gold over the next ten years at spot prices,
less an average ﬁxed-price adjustment of $127 per
ounce. These ﬂoating spot-price contracts were pre-
viously ﬁxed-price contracts, for which, under the
price-setting mechanisms of the MTAs, we elected
to receive a price based on the market gold spot
price at the time of delivery adjusted based on the
difference between the spot price and the contract
price at the time of such election.

Key Aspects of Corporate Gold Sales Contracts

(as of December 31, 2005)

Current termination date
of contracts.

Average estimated realizable
selling price in 2015.

2015 in most cases.

$458/oz.1

Mark-to-market value at December 31, 2005.

Corporate Gold Sales Contracts.

($1,277) million.2

Floating Spot-Price Gold
Sales Contracts.

($89) million.2

1. Approximate estimated value based on current market US dollar interest
rates and an average lease rate assumption of 0.75%. Accelerating
gold deliveries would likely lead to reduced contango that would otherwise
have built up over time. Barrick may choose to settle any gold sales contract
in advance of this termination date at any time, at its discretion. Historically,
delivery has occurred in advance of the contractual termination date.

2. At a spot gold price of $513 per ounce, and market interest rates.

62 (cid:1) Management’s Discussion and Analysis

Barrick Annual Report 2005

In January 2006, we acquired the Pueblo Viejo
development project (“Pueblo Viejo”) as part of the
Placer Dome acquisition. Once the sale of certain
Placer Dome operations to Goldcorp closes, we will
have a 60% interest in the project. In anticipation
of ﬁnancing our share of this project, subsequent to
year end we allocated 3.0 million ounces of our
Corporate Gold Sales Contracts to this project. This
allocation does not impact any of the 40% interest
in Pueblo Viejo to be owned by Goldcorp.

We have an obligation to deliver gold by the
termination date (currently 2015 in most cases).
However, because we typically ﬁx the price of gold
under our gold sales contracts to a date that is earlier
than the termination date of the contract (referred
to as the “interim price-setting date”), the actual real-
ized price on the contract termination date depends
upon the actual gold market forward premium
(“contango”) between the interim price-setting date
and the termination date. Therefore, the $458/oz price
estimate could change over time due to a number
of factors, including but not limited to: US dollar
interest rates, gold lease rates, spot gold prices, and
extensions of the termination date. This price, which
is an average for the total Corporate Gold Sales
Contract position, is not necessarily representative of
the prices that may be realized each quarter for actual
deliveries into gold sales contracts, in particular, if
we choose to settle any gold sales contract in advance
of the termination date (which we have the right to
do at our discretion). If we choose to accelerate gold
deliveries, this would likely lead to reduced contango
that would otherwise have built up over time (and
therefore a lower realized price).

The gold market forward premium, or contango,

is typically closely correlated with the difference
between US dollar interest rates and gold lease rates.
An increase or decrease in US dollar interest rates
would generally lead to a corresponding increase or
decrease in contango, and therefore an increase or
decrease in the estimated future price of the contract
at the termination date. Furthermore, the greater the
time period between the interim price-setting date
and the termination date, the greater the sensitivity
of the ﬁnal realized price to US dollar interest rates.

A short-term spike in gold lease rates would not

have a material negative impact on us because we
are not signiﬁcantly exposed under our ﬁxed-price
gold sales contracts to short-term gold lease rate
variations. A prolonged rise in gold lease rates could
result in lower contango (or negative contango, i.e.
“backwardation”). Gold lease rates have historically
tended to be low, and any spikes short-lived, because
of the large amount of gold available for lending
relative to demand.

As a result of the Placer Dome acquisition,
Barrick’s gold sales contracts increased to 20 million
ounces on a pro forma basis as at December 31,
2005. Since year end, Placer Dome’s gold hedge
program has been reduced and simpliﬁed with all
outstanding sold call options eliminated. As of
February 22, 2006, the combined gold sales contracts
totaled 18.5 million ounces, a reduction of 1.5 million
ounces since year-end 2005. Of this total, 9.5 million
ounces are allocated as Project Gold Sales Contracts
in support of the Pascua-Lama and Pueblo Viejo
development projects. The remaining 9.0 million
ounces of Corporate Gold Sales Contracts represent
8% of total reserves excluding Pascua-Lama and
Pueblo Viejo. Further reductions may be expected
as we remain committed to reducing our gold sales
contracts in this favorable gold price environment.

Fixed-Price Silver Sales Contracts

(as of December 31, 2005)

Millions of silver ounces.

Current termination date of silver
sales contracts.

2015 in most cases.

Average estimated realizable selling
price at 2015 termination date.

$7.40/oz.1

Mark-to-market value at
December 31, 2005.

($43) million.2

1. Approximate estimated value based on current market contango of 2.5%.
Accelerating silver deliveries could potentially lead to reduced contango
that would otherwise have built up over time. Barrick may choose to settle
any silver sales contract in advance of this termination date at any time, at
its discretion. Historically, delivery has occurred in advance of the contrac-
tual termination date.

2. At a spot silver price of $8.83 per ounce.

Barrick Annual Report 2005

Management’s Discussion and Analysis (cid:1) 63

We also have ﬂoating spot-price silver sales contracts
under which we are committed to deliver 7.5 million
ounces of silver over the next ten years at spot prices,
less an average ﬁxed-price adjustment of $1.25 per
ounce. These ﬂoating spot-price contracts were pre-
viously ﬁxed-price contracts, for which, under the
price-setting mechanisms of the MTAs, we elected to
receive a price based on the market silver spot price
at the time of delivery adjusted by the difference
between the spot price and the contract price at the
time of such election.

Key Terms of Gold and Silver Sales Contracts
In all of our MTAs, which govern the terms of gold
and silver sales contracts with our 19 counterparties,
the following applies:
(cid:1) The counterparties do not have unilateral and

discretionary “right to break” provisions.
(cid:1) There are no credit downgrade provisions.
(cid:1) We are not subject to any margin calls – regardless

of the price of gold or silver.

(cid:1) We have the right to settle our gold and silver

sales contracts on two days notice at any time dur-
ing the life of the contracts, or keep these forward
gold and silver sales contracts outstanding for up
to 15 years.

(cid:1) At our option, we can sell gold or silver at the

market price or the contract price, whichever is
higher, up to the termination date of the contracts
(currently 2015 in most cases).

The MTAs with our counterparties do provide
for early close out of certain transactions in the
event of a material adverse change in our ability or
our principal hedging subsidiary’s ability to perform
our or its gold and silver delivery and other obliga-
tions under the trading agreements and related
parent guarantees or a lack of gold or silver market,
and for customary events of default such as covenant
breaches, insolvency or bankruptcy. The principal
ﬁnancial covenants are:
(cid:1) We must maintain a minimum consolidated

net worth of at least $2 billion; it was $3.9 billion
at year end. The MTAs exclude unrealized
mark-to-market valuations in the calculation
of consolidated net worth.

(cid:1) We must maintain a maximum long-term debt to
consolidated net worth ratio of 2:1; it was 0.5:1 at
year end.

In most cases, under the terms of the MTAs, the
period over which we are required to deliver gold is
extended annually by one year, or kept “evergreen”,
regardless of the intended delivery dates, unless oth-
erwise notiﬁed by the counterparty. This means that,
with each year that passes, the termination date of
most MTAs is extended into the future by one year.
As spot gold prices increase or decrease, the
value of our gold mineral reserves and amount of
potential operating cash inﬂows generally increases
or decreases. The unrealized mark-to-market loss
on our ﬁxed-price forward gold sales contracts also
increases or decreases. The mark-to-market value
represents the cancellation value of these contracts
based on current market levels, and does not repre-
sent an immediate economic obligation for payment
by us. Our obligations under the gold forward sales
contracts are to deliver an agreed upon quantity
of gold at a contracted price by the termination date
of the contracts (currently 2015 in most cases).
Gold sales contracts are not recorded on our balance
sheet. The economic impact of these contracts is
reﬂected in our Financial Statements within gold
sales based on selling prices under the contracts at
the time we record revenue from the physical deliv-
ery of gold and silver under the contracts.

Fair Value of Derivative Positions

($ millions)
As at December 31, 2005

Corporate Gold Sales Contracts
Pascua-Lama Gold Sales Contracts
Floating Spot-Price Gold Sales Contracts
Silver Sales Contracts
Floating Spot-Price Silver Sales Contracts
Foreign currency contracts
Interest rate contracts
Fuel contracts

Unrealized
Gain/(Loss)

$ (1,277)
(1,453)
(89)
(43)
(9)
128
30
42

$ (2,671)

64 (cid:1) Management’s Discussion and Analysis

Barrick Annual Report 2005

Critical Accounting Policies and Estimates

Management has discussed the development and
selection of our critical accounting estimates with
the Audit Committee of the Board of Directors, and
the Audit Committee has reviewed the disclosure
relating to such estimates in conjunction with its
review of this MD&A. The accounting policies and
methods we utilize determine how we report our
ﬁnancial condition and results of operations, and
they may require management to make estimates or
rely on assumptions about matters that are inher-
ently uncertain.

Our ﬁnancial condition and results of opera-
tions are reported using accounting policies and
methods prescribed by US GAAP. In certain cases,
US GAAP allows accounting policies and methods
to be selected from two or more alternatives, any
of which might be reasonable yet result in our
reporting materially different amounts. We exercise
judgment in selecting and applying our accounting
policies and methods to ensure that, while US GAAP
compliant, they reﬂect our judgment of an appro-
priate manner in which to record and report our
ﬁnancial condition and results of operations.

Accounting Policy Changes in 2005
This section includes a discussion of accounting
changes that were adopted in our 2005 Financial
Statements.

Emerging Issues Task Force Issue No. 04-6,
Accounting for Stripping Costs Incurred During
Production in the Mining Industry (“EITF 04-6”)
In 2005, we adopted EITF 04-6, which relates to
the accounting for stripping costs in the production
stage at a mine. The new accounting rules require
the actual stripping costs incurred each period
be reﬂected in the cost of ore mined for the same
period, and will likely lead to greater period-to-
period volatility in total cash costs. Previously,
stripping costs were deferred and amortized based
on a life-of-mine stripping ratio that smoothed the
costs over time. Results for periods prior to 2005
were not restated in accordance with the transition
rules of EITF 04-6. Cost of sales and related total
cash costs per ounce statistics for 2004 and prior
periods have not been restated, and are therefore not

comparable to current-year amounts. The impact
of this change in comparison to 2004 was to increase
net income for 2005 by $44 million ($0.08 per share)
and decrease cost of sales for 2005 by $64 million
($12 per ounce lower total cash costs). Results
for 2005 also include a $6 million post-tax credit
($0.01 per share) to reﬂect the cumulative effect
of the policy for periods prior to January 1, 2005.

Impact of EITF 04-6 on Total Cash Costs
Per Ounce Statistics

(dollars per ounce)

Increase (decrease)

Three months ended

Year ended

December 31, 2005

Goldstrike Open Pit
Round Mountain
Hemlo
Pierina
Lagunas Norte
Kalgoorlie
Plutonic
Lawlers
Tulawaka
Total cash costs
per ounce

$ (12)
1
19
(45)
(96)
67
–
9
11

$ (22)

$ (12)
16
11
(37)
(66)
9
(17)
8
48

$ (12)

Future Accounting Policy Changes
This section includes a discussion of future
accounting changes that may have a signiﬁcant
impact on our Financial Statements. On January 1,
2006, we adopted FASB Interpretation No. 47,
Accounting for Conditional Asset Retirement Obli-
gations (“FIN 47”) and FASB No. 151, Inventory
Costs (“FAS 151”). We do not expect that the adop-
tion of FIN 47 or FAS 151 will have a material effect
on our Financial Statements, and therefore a detailed
discussion of these accounting changes has not
been included.

FAS 123R, Share-Based Payment, a Revision
to FAS 123 and a Replacement of APB 25
and FAS 148
FAS 123R includes in its scope our stock options,
Restricted Share Units (RSUs) and Deferred Share
Units (DSUs). The adoption of FAS 123R will not
signiﬁcantly change how we account for RSUs and
DSUs. Historically we accounted for stock options
granted to employees using an intrinsic value
method. We recorded compensation cost for stock
options based on the excess of the market price
of the stock option at the grant date of an award

Barrick Annual Report 2005

Management’s Discussion and Analysis (cid:1) 65

over the exercise price. Historically, the exercise price
for stock options has equaled the market price of
stock at the grant date, resulting in no compensation
cost. FAS 123R requires the cost of all share-based
payment transactions with employees be recognized
as an expense starting in our 2006 ﬁscal year.

FAS 123R permits two possible transition meth-
ods: modiﬁed prospective or modiﬁed retrospective.
Under both methods the cost of share-based pay-
ments will be recorded in 2006, but the modiﬁed
retrospective method requires restatement of prior
year comparative amounts, whereas the modiﬁed
prospective method does not. Under either method,
we expect to record an expense of about $25 million
in 2006 for unvested stock options granted through
December 31, 2005. Under the modiﬁed retrospec-
tive method we would restate our income statement
for prior periods to reﬂect a compensation expense
of $29 million in 2004 and $26 million in 2005 and
an adjustment to opening 2004 retained earnings of
$183 million for years prior to 2004.

Exposure Draft,
Accounting for Uncertain Tax Positions
On July 14, 2005, the Financial Accounting Standards
Board (“FASB”) issued an exposure draft and later
issued some amendments of a proposed Interpreta-
tion, Accounting for Uncertain Tax Positions –
an Interpretation of FASB Statement No. 109. The
proposed Interpretation would require companies
to recognize the best estimate of an uncertain
tax position only if it is more likely than not of
being sustained on audit by the taxation authorities.
Subsequently, the tax beneﬁt would be derecognized
(by either recording a tax liability or decreasing a
tax asset) when the more likely than not threshold
is no longer met and it is more likely than not
that the tax position will not be sustained.

The proposed interpretation would be effective
starting in 2007 and treated as a change in account-
ing policy. It would require companies to assess
all uncertain tax positions and only those meeting
the more likely than not threshold at the transition
date would continue to be recognized. The differ-
ence between the amount previously recognized and
the amount recognized after applying the proposed
Interpretation would be recorded as a cumulative-
effect adjustment in the 2007 income statement
(restatement is not permitted). The comment period

ended on September 12, 2005. Subsequent to this
date FASB has issued and continues to issue redelib-
erations of certain aspects of the exposure draft. We
are presently evaluating the impact of this exposure
draft on our Financial Statements.

Critical Accounting Estimates and Judgments
Certain accounting estimates have been identiﬁed
as being “critical” to the presentation of our ﬁnancial
condition and results of operations because they
require us to make subjective and/or complex judg-
ments about matters that are inherently uncertain;
where there is a reasonable likelihood that materi-
ally different amounts could be reported under
different conditions or using different assumptions
and estimates.

Reserve Estimates Used to Measure Amortization
of Property, Plant and Equipment
We record amortization expense based on the esti-
mated useful economic lives of long-lived assets.
Changes in reserve estimates are generally calculated
at the end of each year and cause amortization
expense to increase or decrease prospectively. The
estimate that most signiﬁcantly affects the measure-
ment of amortization is quantities of proven and
probable gold reserves, because we amortize a large
portion of property, plant and equipment using the
units-of-production method. The estimation of
quantities of gold reserves, in accordance with the
principles in Industry Guide No. 7, issued by the
US Securities and Exchange Commission (“SEC”)
is complex, requiring signiﬁcant subjective assump-
tions that arise from the evaluation of geological,
geophysical, engineering and economic data for a
given ore body. This data could change over time as
a result of numerous factors, including new infor-
mation gained from development activities, evolving
production history and a reassessment of the viability
of production under different economic conditions.
Changes in data and/or assumptions could cause
reserve estimates to substantially change from period
to period. Actual gold production could differ
from expected gold production based on reserves,
and an adverse change in gold or silver prices could
make a reserve uneconomic to mine. Variations
could also occur in actual ore grade and gold and
silver recovery rates from estimates.

66 (cid:1) Management’s Discussion and Analysis

Barrick Annual Report 2005

A key trend that could reasonably impact reserve

estimates is rising market gold prices, because the
gold price assumption is closely related to the trailing
three-year average market price. As this assumption
rises, this could result in an upward revision to
reserve estimates as material not previously classiﬁed
as a reserve becomes economic at higher gold prices.
Following the recent trend in market gold prices
over the last three years, the gold price assumption
used to measure reserves has also been rising. The
gold price assumption was $400 per ounce in 2005
(2004: $375 per ounce; 2003: $325 per ounce).

The impact of a change in reserve estimates
is generally more signiﬁcant for mines near the end
of the mine life because the overall impact on

amortization is spread over a shorter time period.
Also, amortization expense is more signiﬁcantly
impacted by changes in reserve estimates at under-
ground mines than open-pit mines due to the
following factors:
(cid:1) Underground development costs incurred to

access ore at underground mines are signiﬁcant
and amortized using the units-of-production
method; and

(cid:1) Reserves at underground mines are often more

sensitive to gold price assumptions and changes
in production costs. Production costs at under-
ground mines are impacted by factors such as
dilution, which can signiﬁcantly impact mining
and processing costs per ounce.

Impact of Historic Changes in Reserve Estimates on Amortization

For the years ended December 31
($ millions, except reserves in millions of contained oz)

2005

2004

Reserves
increase
(decrease)1

Amortization
increase
(decrease)

Reserves
increase
(decrease)1

Amortization
increase
(decrease)

Goldstrike Open Pit
Goldstrike Underground
Round Mountain
Lawlers
Eskay Creek
Pierina
Hemlo
Plutonic
Kalgoorlie
Darlot
Marigold
Bulyanhulu

Total

2.1
0.1
0.4
0.1
(0.1)
0.3
(0.2)
0.2
(0.2)
0.1
0.1
0.1

3.0

$ (5)
(4)
(1)
(2)
6
(22)
2
(1)
–
–
(1)
–

$ (28)

1.5
0.2
0.2
–
(0.1)
0.3
(0.1)
0.5
0.9
–
0.1
(0.4)

3.1

(3)
(4)
(1)
–
5
(10)
1
(2)
(1)
–
(1)
1

$ (15)

1. Each year we update our reserve estimates as at the end of the year as part of our normal business cycle. Reserve changes presented were calculated at the

beginning of the applicable ﬁscal year and are in millions of contained ounces.

Impairment Assessments of Investments
Each reporting period we review all available-for-
sale securities whose fair value at the end of period
is below cost to determine whether an other-than-
temporary impairment has occurred. We consider all
relevant facts or circumstances in this assessment,
particularly: the length of time and extent to which
fair value has been less than the carrying amount;
the ﬁnancial condition and near term prospects of
the investee, including any speciﬁc events that have
impacted its fair value; both positive and negative
evidence that the carrying amount is recoverable
within a reasonable period of time; and our ability

and intent to hold the investment for a reasonable
period of time sufﬁcient for an expected recovery of
the fair value up to or beyond the carrying amount.
Changes in the values of these investments are caused
by market factors beyond our control and could be
signiﬁcant, and the amount of any impairment
charges could materially impact earnings. In 2005,
we reviewed two investments that were impaired,
and after concluding that the impairments were
other-than-temporary, we recorded an impairment
charge of $16 million (2004: $5 million, 2003:
$11 million).

Barrick Annual Report 2005

Management’s Discussion and Analysis (cid:1) 67

Impairment Assessments of Operating Mines,
Development Projects and Exploration
Stage Properties
We review and test the carrying amounts of assets
when events or changes in circumstances suggest
that the carrying amount may not be recoverable.
We group assets at the lowest level for which
identiﬁable cash ﬂows are largely independent of the
cash ﬂows of other assets and liabilities. We review
each mine and development project for recoverabil-
ity by comparing the total carrying value of the
assets of that mine or project to the expected future
cash ﬂows associated with that mine or project. If
there are indications that an impairment may have
occurred, we prepare estimates of expected future
cash ﬂows for each group of assets. Expected future
cash ﬂows are based on a probability-weighted
approach applied to potential outcomes. Estimates
of expected future cash ﬂow reﬂect:
(cid:1) Estimated sales proceeds from the production and
sale of recoverable ounces of gold contained in
proven and probable reserves;

(cid:1) Expected future commodity prices and currency
exchange rates (considering historical and current
prices, price trends and related factors);

(cid:1) Expected future operating costs and capital expen-

ditures to produce proven and probable gold
reserves based on mine plans that assume current
plant capacity, but exclude the impact of inﬂation;
(cid:1) Expected cash ﬂows associated with value beyond
proven and probable reserves, which includes the
expected cash outﬂows required to develop and
extract the value beyond proven and probable
reserves; and

(cid:1) Environmental remediation costs excluded from
the measurement of asset retirement obligations.

We record a reduction of a group of assets to
fair value as a charge to earnings if the discounted
expected future cash ﬂows are less than the carrying
amount. We generally estimate fair value by discount-
ing the expected future cash ﬂows using a discount
factor that reﬂects the risk-free rate of interest for
a term consistent with the period of expected
cash ﬂows.

Expected future cash ﬂows are inherently
uncertain and could materially change over time.
They are signiﬁcantly affected by reserve estimates,
together with economic factors such as gold and
silver prices, other commodity and consumables
costs and currency exchange rates, estimates of costs
to produce reserves and future sustaining capital. If a
signiﬁcant adverse change in the market gold price
occurred that caused us to revise the price assump-
tions downwards, the conclusions on the impairment
tests could change, subject to the effect of changes in
other factors and assumptions. The assessment and
measurement of impairment excludes the impact of
derivatives designated in a cash ﬂow hedge relation-
ship for future cash ﬂows arising from operating
mines and development projects.

Because of the signiﬁcant capital investment that
is required at many mines, if an impairment occurs,
it could materially impact earnings. Due to the long-
life nature of many mines, the difference between
total estimated undiscounted net cash ﬂows and fair
value can be substantial. Therefore, although the
value of a mine may decline gradually over multiple
reporting periods, the application of impairment
accounting rules could lead to recognition of the full
amount of the decline in value in one period. Due to
the highly uncertain nature of future cash ﬂows, the
determination of when to record an impairment
charge can be very subjective. We make this determi-
nation using available evidence taking into account
current expectations for each mining property.

For acquired exploration-stage properties, the
purchase price is capitalized, but post-acquisition
exploration expenditures are expensed. The future
economic viability of exploration-stage properties
largely depends upon the outcome of exploration
activity, which can take a number of years to com-
plete for large properties. We monitor the results of
exploration activity over time to assess whether an
impairment may have occurred. The measurement
of any impairment is made more difﬁcult because
there is not an active market for exploration proper-
ties, and because it is not possible to use discounted
cash ﬂow techniques due to the very limited infor-
mation that is available to accurately model future

68 (cid:1) Management’s Discussion and Analysis

Barrick Annual Report 2005

cash ﬂows. In general, if an impairment occurs at an
exploration-stage property, it would probably have
minimal value and most of the acquisition cost may
have to be written down. Impairment charges are
recorded in other income/expense and impact earn-
ings in the year they are recorded. Prospectively, the
impairment could also impact the calculation of
amortization of an asset.

In 2004, we completed impairment tests for the

Cowal project, the Eskay Creek mine and various
Peruvian exploration-stage properties. For Cowal,
an impairment test was completed, incorporating
upward revisions to estimated capital and operating
costs for the project and the impact of the US dollar
exchange rate on Australian dollar expenditures,
measured at market prices. On completion of this
test in 2004, we concluded that the project was not
impaired. On completion of the impairment test
for Eskay Creek, we concluded that the mine was
impaired, and we recorded a pre-tax impairment
charge of $58 million. On completion of the explo-
ration program for 2005 and updating assessments
of future plans, we concluded that a group of Peru-
vian exploration-stage properties were impaired at
the end of 2004 and we recorded a pre-tax impair-
ment charge of $67 million. Throughout 2005, we
updated our impairment assessments for the Eskay
Creek mine and Cowal project and we concluded
that they were not impaired at the end of 2005.

Production Start Date
We assess each mine construction project to deter-
mine when a mine moves into production stage. The
criteria used to assess the start date are determined
based on the unique nature of each mine construc-
tion project such as the complexity of a plant or its
location. We consider various relevant criteria to
assess when the mine is substantially complete and
ready for its intended use and moved into produc-
tion stage. Some of the criteria considered would
include, but, are not limited to, the following:
(cid:1) The level of capital expenditures compared to

construction cost estimates

(cid:1) Completion of a reasonable period of testing of

mine plant and equipment

(cid:1) Ability to produce gold in saleable form (within

speciﬁcations)

(cid:1) Ability to sustain ongoing production of gold

In 2005, we determined the production start dates
for three new mines: Tulawaka, Lagunas Norte and
Veladero. When a mine construction project moves
into the production stage, the capitalization of cer-
tain mine construction costs ceases and costs are
either capitalized to inventory or expensed, except
for capitalizable costs related to property, plant and
equipment additions or improvements, under-
ground mine development or reserve development.

Fair Value of Asset Retirement Obligations (AROs)
AROs arise from the acquisition, development, con-
struction and normal operation of mining property,
plant and equipment, due to government controls
and regulations that protect the environment and
public safety on the closure and reclamation of min-
ing properties. We record the fair value of an ARO
in our Financial Statements when it is incurred and
capitalize this amount as an increase in the carrying
amount of the related asset. At operating mines, the
increase in an ARO is recorded as an adjustment to
the corresponding asset carrying amount and results
in a prospective increase in amortization expense.
At closed mines, any adjustment to an ARO is
charged directly to earnings.

The fair values of AROs are measured by dis-
counting the expected cash ﬂows using a discount
factor that reﬂects the credit-adjusted risk-free
rate of interest. We prepare estimates of the timing
and amounts of expected cash ﬂows when an ARO
is incurred, which are updated to reﬂect changes
in facts and circumstances, or if we are required to
submit updated mine closure plans to regulatory
authorities. In the future, changes in regulations or
laws or enforcement could adversely affect our oper-
ations; and any instances of noncompliance with
laws or regulations that result in ﬁnes or injunctions
or delays in projects, or any unforeseen environ-
mental contamination at, or related to, our mining
properties could result in us suffering signiﬁcant
costs. We mitigate these risks through environmental

Barrick Annual Report 2005

Management’s Discussion and Analysis (cid:1) 69

and health and safety programs under which we
monitor compliance with laws and regulations and
take steps to reduce the risk of environmental con-
tamination occurring. We maintain insurance for
some environmental risks, however, for some risks
coverage cannot be purchased at a reasonable cost.
Our coverage may not provide full recovery for
all possible causes of loss. The principal factors that
can cause expected cash ﬂows to change are: the
construction of new processing facilities; changes in
the quantities of material in reserves and a corre-
sponding change in the life of mine plan; changing
ore characteristics that ultimately impact the envi-
ronment; changes in water quality that impact the
extent of water treatment required; and changes in
laws and regulations governing the protection of the
environment. In general, as the end of the mine life
becomes nearer, the reliability of expected cash ﬂows
increases, but earlier in the mine life, the estimation
of an ARO is inherently more subjective. Signiﬁcant
judgments and estimates are made when estimating
the fair value of AROs. Expected cash ﬂows relating
to AROs could occur over periods up to 40 years
and the assessment of the extent of environmental
remediation work is highly subjective. Considering
all of these factors that go into the determination
of an ARO, the fair value of AROs can materially
change over time.

At our operating mines, we continued to record
AROs based on disturbance of the environment over
time. It is reasonably possible that circumstances
could arise during or by the end of the mine life that
will require material revisions to AROs. In particular,
the extent of water treatment can have a material
effect on the fair value of AROs, and the expected
water quality at the end of the mine life, which is
the primary driver of the extent of water treatment,
can change signiﬁcantly. We periodically prepare
updated studies for our mines, following which it
may be necessary to adjust the fair value of AROs.

The period of time over which we have assumed
that water quality monitoring and treatment will be
required has a signiﬁcant impact on AROs at closed
mines. The amount of AROs recorded reﬂects the
expected cost, taking into account the probability
of particular scenarios. The difference between the
upper end of the range of these assumptions and the
lower end of the range can be signiﬁcant, and conse-
quently changes in these assumptions could have a
material effect on the fair value of AROs and future
earnings in a period of change.

At one closed mine, the principal uncertainty
that could impact the fair value of the ARO is the
manner in which a tailings facility will need to be
remediated. In measuring the ARO, we have con-
cluded that there are two possible methods that
could be used. We have recorded the ARO using the
more costly method until such time that the less
costly method can be proven as technically feasible
and approved.

In 2005, we recorded increases in ARO estimates
of $91 million (2004: $68 million; 2003: $10 million)
of which $47 million of this increase (2004: $14 mil-
lion; 2003: nil) related to new AROs at development
projects and mines that commenced production
during 2005. A further $29 million (2004: $32 mil-
lion; 2003: nil) relates to updates of the assessment
of the extent of water treatment and other assump-
tions at our operating mines. We recorded increases
in AROs of $15 million at our closed mines, which
were charged to earnings (2004: $22 million; 2003:
$10 million).

AROs at December 31, 2005

($ millions)

Operating mines
Closed mines
Development projects

Total

$ 280
154
12

$ 446

70 (cid:1) Management’s Discussion and Analysis

Barrick Annual Report 2005

Deferred Tax Assets and Liabilities
Measurement of Temporary Differences
We are periodically required to estimate the tax
basis of assets and liabilities. Where applicable tax
laws and regulations are either unclear or subject to
varying interpretations, it is possible that changes in
these estimates could occur that materially affect the
amounts of deferred income tax assets and liabilities
recorded in our Financial Statements. Changes in
deferred tax assets and liabilities generally have a
direct impact on earnings in the period of changes.
The most signiﬁcant such estimate is the tax basis
of certain Australian assets following elections in
2004 under new tax regimes in Australia. These
elections resulted in the revaluation of certain assets
in Australia for income tax purposes. Part of the
revalued tax basis of these assets was estimated
based on a valuation completed for tax purposes.
This valuation is under review by the Australian Tax
Ofﬁce (“ATO”) and the amount ﬁnally accepted by
the ATO may differ from the assumption used to
measure deferred tax balances at the end of 2004.

Valuation Allowances
Each period, we evaluate the likelihood of whether
some portion or all of each deferred tax asset will
not be realized. This evaluation is based on historic
and future expected levels of taxable income, the
pattern and timing of reversals of taxable temporary
timing differences that give rise to deferred tax lia-
bilities, and tax planning initiatives. Levels of future
taxable income are affected by, among other things,
market gold prices, production costs, quantities
of proven and probable gold reserves, interest rates
and foreign currency exchange rates. If we determine
that it is more likely than not (a likelihood of more
than 50%) that all or some portion of a deferred tax
asset will not be realized, then we record a valuation
allowance against the amount we do not expect to
realize. Changes in valuation allowances are recorded
as a component of income tax expense or recovery
for each period. The most signiﬁcant recent trend
impacting expected levels of future taxable and
valuation allowances has been rising gold prices.

A continuation of this trend could lead to the release
of some of the valuation allowances recorded, with
a corresponding effect on earnings in the period
of release.

In 2005, we released valuation allowances total-

ing $32 million, which mainly included amounts
totaling $31 million in Argentina, relating to the
effect of the higher gold price environment and
start-up of production at Veladero in 2005. We
released valuation allowances totaling $5 million in
2004 and $62 million in 2003. In 2004, the release
was as a consequence of an election to consolidate
our Australian operations into one tax group.
Valuation allowances released in 2003 mainly
included: $21 million in North America following a
corporate reorganization of certain subsidiaries that
enabled us to utilize certain previously unrecognized
tax assets; $16 million in Australia realized in 2003
due to an increase in taxable income from higher
gold prices; and $15 million in Argentina after the
approval to begin construction of our new Veladero
mine and classiﬁcation of mineralization as a proven
and probable reserve.

The Placer Dome acquisition may cause us to
reconsider that some of our deferred tax assets, to
which valuation allowances have been applied, are
now more likely than not to be realized. If we deter-
mine that, as a direct result of the Placer Dome
acquisition, some or all of the valuation allowances
can be released, any amounts that we release may
be reﬂected as an adjustment to goodwill in the
purchase price allocation.

Valuation allowances at December 31

($ millions)

United States
Chile
Argentina
Canada
Tanzania
Australia
Other

2005

2004

$ 209
124
46
63
204
2
8

$ 195
129
75
73
146
3
8

$ 656

$ 629

Barrick Annual Report 2005

Management’s Discussion and Analysis (cid:1) 71

We determine expected future volatility by
taking into consideration both historical volatility
of our US dollar share price and the implied vola-
tility of our US dollar market traded stock options.
Under the Black-Scholes valuation model, the term
assumption takes into consideration expected rates
of employee turnover and represents the estimated
average length of time stock options remain out-
standing before they are either exercised or forfeited.
Under the Lattice valuation model, the expected
term assumption is derived from the option valuation
model and is in part based on expected exercise
behavior of option holders based on multiple share
price paths. When reviewing the historical behavior
of option holders, we segregate the population
into groups with similar characteristics.

Stock option expense is impacted by estimated

forfeiture rates for stock options. We estimate
forfeiture rates by considering trends in historical
forfeiture rates. If actual forfeiture rates differ from
estimated rates, we adjust our stock option expense
to reﬂect revised expectations. For assumptions used
in stock option valuation, we apply any updated
assumptions to the valuation of future grants. Our
option fair value has changed at each grant date
as we update our historical data used to calculate
speciﬁc assumptions, namely; the expected volatility
and expected term of the option. With each grant
date, we incorporate the current market stock price
and interest rates into our valuation model, both
of these assumptions change on an ongoing basis.

United States: most of the valuation allowances
relate to the full amount of Alternative Minimum
Tax credits, which have an unlimited carry-forward
period. Increasing levels of future taxable income
due to higher gold selling prices and other factors
and circumstances may result in our becoming a
regular taxpayer under the US regime, which may
cause us to release some, or all, of the valuation
allowance on the Alternative Minimum Tax credits.

Chile and Argentina: the valuation allowances
relate to the full amount of tax assets in subsidiaries
that do not have any present sources of gold pro-
duction or taxable income. In the event that these
subsidiaries have sources of taxable income in the
future, we may release some or all of the allowances.

Canada: substantially all of the valuation allowances
relate to capital losses that will only be utilized if
any capital gains are realized.

Tanzania: considering the local ﬁscal regime applica-
ble to mining companies and expected levels of
future taxable income from the Bulyanhulu and
Tulawaka mines, a valuation allowance exists against
a portion of the deferred tax assets. If we conclude
that expected levels of future taxable income from
Bulyanhulu and Tulawaka will be higher, we may
release some or all of the valuation allowance.

Stock-Based Compensation
We calculate and disclose in our Financial Statements
pro forma compensation expense for employee
stock options. Commencing in ﬁrst quarter 2006,
we will record compensation expense in earnings
for employee stock options, based on the estimated
fair market value of employee stock options on their
grant date. The most signiﬁcant assumptions involv-
ing judgment that affect a stock option’s fair value
include, but are not limited to: expected volatility,
expected term and expected exercise behavior of
option holders.

72 (cid:1) Management’s Discussion and Analysis

Barrick Annual Report 2005

Cautionary Statement on
Forward-Looking Information

Certain information contained or incorporated
by reference in this Annual Report 2005, including
any information as to our future ﬁnancial or oper-
ating performance, constitutes “forward-looking
statements”. All statements, other than statements
of historical fact, are forward-looking statements.
The words “believe”, “expect”, “anticipate”, “contem-
plate”, “target”, “plan”, “intends”, “continue”, “budget”,
“estimate”, “may”, “will”, “schedule” and similar
expressions identify forward-looking statements.
Forward-looking statements are necessarily based
upon a number of estimates and assumptions that,
while considered reasonable by us, are inherently
subject to signiﬁcant business, economic and com-
petitive uncertainties and contingencies. Known
and unknown factors could cause actual results to
differ materially from those projected in the forward-
looking statements. Such factors include, but are
not limited to: ﬂuctuations in the currency markets
(such as the Canadian and Australian dollars versus
the US dollar); ﬂuctuations in the spot and forward
price of gold or certain other commodities (such
as silver, copper, diesel fuel and electricity); changes
in US dollar interest rates or gold lease rates that
could impact the mark-to-market value of outstand-
ing derivative instruments and ongoing payments/
receipts under interest rate swaps and variable rate
debt obligations; risks arising from holding deriva-
tive instruments (such as credit risk, market liquidity
risk and mark-to-market risk); changes in national
and local government legislation, taxation, controls,
regulations and political or economic developments
in Canada, the United States, Dominican Republic,
Australia, Papua New Guinea, Chile, Peru, Argentina,
South Africa, Tanzania, Russia or Barbados or other
countries in which we do or may carry on business

in the future; business opportunities that may be
presented to, or pursued by, us; our ability to success-
fully integrate acquisitions, including our recent
acquisition of Placer Dome; operating or technical
difﬁculties in connection with mining or develop-
ment activities; the speculative nature of gold
exploration and development, including the risks of
obtaining necessary licenses and permits; diminish-
ing quantities or grades of reserves; adverse changes
in our credit rating; and contests over title to prop-
erties, particularly title to undeveloped properties.
In addition, there are risks and hazards associated
with the business of gold exploration, development
and mining, including environmental hazards,
industrial accidents, unusual or unexpected forma-
tions, pressures, cave-ins, ﬂooding and gold bullion
losses (and the risk of inadequate insurance, or
inability to obtain insurance, to cover these risks).
Many of these uncertainties and contingencies
can affect our actual results and could cause actual
results to differ materially from those expressed
or implied in any forward-looking statements made
by, or on behalf of, us. Readers are cautioned that
forward-looking statements are not guarantees of
future performance. All of the forward-looking
statements made in this Annual Report 2005 are
qualiﬁed by these cautionary statements. Speciﬁc
reference is made to Barrick’s most recent Form 40-F/
Annual Information Form on ﬁle with the SEC and
Canadian provincial securities regulatory authorities
for a discussion of some of the factors underlying
forward-looking statements.

We disclaim any intention or obligation to
update or revise any forward-looking statements
whether as a result of new information, future
events or otherwise, except to the extent required
by applicable laws.

Barrick Annual Report 2005

Management’s Discussion and Analysis (cid:1) 73

Glossary of Technical Terms

AUTOCLAVE: Oxidation process in which high
temperatures and pressures are applied to convert
refractory sulphide mineralization into amenable
oxide ore.

BACKFILL: Primarily waste sand or rock used
to support the roof or walls after removal of ore
from a stope.

BY-PRODUCT: A secondary metal or mineral
product recovered in the milling process such as
copper and silver.

CONCENTRATE: A very ﬁne, powder-like product
containing the valuable ore mineral from which
most of the waste mineral has been eliminated.

CONTAINED OUNCES: Represents ounces in the
ground before reduction of ounces not able to be
recovered by the applicable metallurgical process.

CONTANGO: The positive difference between the spot
market gold price and the forward market gold
price. It is often expressed as an interest rate quoted
with reference to the difference between inter-bank
deposit rates and gold lease rates.

DEVELOPMENT: Work carried out for the purpose of
opening up a mineral deposit. In an underground
mine this includes shaft sinking, crosscutting, drift-
ing and raising. In an open pit mine, development
includes the removal of overburden.

DORÉ: Unreﬁned gold and silver bullion bars
usually consisting of approximately 90 percent
precious metals that will be further reﬁned to
almost pure metal.

EXPLORATION: Prospecting, sampling, mapping,
diamond-drilling and other work involved in
searching for ore.

GRADE: The amount of metal in each ton of ore,
expressed as troy ounces per ton or grams per tonne
for precious metals and as a percentage for most
other metals.

Cut-off grade: the minimum metal grade at
which an orebody can be economically mined
(used in the calculation of ore reserves).

Mill-head grade: metal content of mined ore
going into a mill for processing.

Recovered grade: actual metal content of ore
determined after processing.

Reserve grade: estimated metal content of an
orebody, based on reserve calculations.

HEAP LEACHING: A process whereby gold is extracted
by “heaping” broken ore on sloping
impermeable pads and continually applying to the
heaps a weak cyanide solution which dissolves the
contained gold. The gold-laden solution is then
collected for gold recovery.

HEAP LEACH PAD: A large impermeable foundation or
pad used as a base for ore during heap leaching.

DILUTION: The effect of waste or low-grade ore
which is unavoidably included in the mined ore,
lowering the recovered grade.

LIBOR: The London Inter-Bank Offered Rate
for deposits.

74 (cid:1) Management’s Discussion and Analysis

Barrick Annual Report 2005

MILL: A processing facility where ore is ﬁnely ground
and thereafter undergoes physical or
chemical treatment to extract the valuable metals.

MINERAL RESERVE: See page 125 – “Gold Mineral
Reserves and Mineral Resources.”

MINERAL RESOURCE: See page 125 – “Gold Mineral
Reserves and Mineral Resources.”

MINING CLAIM: That portion of applicable mineral
lands that a party has staked or marked out in
accordance with applicable mining laws to acquire
the right to explore for and exploit the minerals
under the surface.

MINING RATE: Tons of ore mined per day or even
speciﬁed time period.

OPEN PIT: A mine where the minerals are mined
entirely from the surface.

ORE: Rock, generally containing metallic or
non-metallic minerals, which can be mined and
processed at a proﬁt.

ORE BODY: A sufﬁciently large amount of ore that
can be mined economically.

OUNCES: Troy ounces of a ﬁneness of 999.9 parts
per 1,000 parts.

RECLAMATION: The process by which lands dis-
turbed as a result of mining activity are modiﬁed
to support beneﬁcial land use. Reclamation activity
may include the removal of buildings, equipment,
machinery and other physical remnants of mining,
closure of tailings storage facilities, leach pads and
other mine features, and contouring, covering and
re-vegetation of waste rock and other disturbed areas.

RECOVERY RATE: A term used in process metallurgy
to indicate the proportion of valuable material phys-
ically recovered in the processing of ore. It is generally
stated as a percentage of the material recovered
compared to the total material originally present.

REFINING: The ﬁnal stage of metal production in
which impurities are removed from the molten metal.

ROASTING: The treatment of ore by heat and air,
or oxygen enriched air, in order to remove sulphur,
carbon, antimony or arsenic.

STRIPPING: Removal of overburden or waste rock
overlying an ore body in preparation for mining by
open pit methods. Expressed as the total number of
tons mined or to be mined for each ounce of gold.

TAILINGS: The material that remains after
all economically and technically recoverable
precious metals have been removed from the
ore during processing.

Barrick Annual Report 2005

Management’s Discussion and Analysis (cid:1) 75

Management’s Responsibility

Management’s Responsibility for Financial Statements

The accompanying consolidated ﬁnancial statements 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 United States generally accepted
accounting principles 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 LLP, Chartered Accountants.

Their report outlines the scope of their examination and opinion on the consolidated ﬁnancial statements.

Jamie C. Sokalsky
Executive Vice President
and Chief Financial Ofﬁcer
Toronto, Canada
February 21, 2006

76 (cid:1) Management’s Responsibility

Barrick Annual Report 2005

Auditors’ Report

To the Shareholders of Barrick Gold Corporation

We have audited the consolidated balance sheets of Barrick Gold Corporation as at December 31, 2005 and 2004 and
the consolidated statements of income, cash ﬂows, shareholders’ equity and comprehensive income for each of the years
in the three-year period ended December 31, 2005. These ﬁnancial statements are the responsibility of the Company’s
Management. Our responsibility is to express an opinion on these ﬁnancial statements based on our audits.

We conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards
require that we plan and perform an audit to obtain reasonable assurance whether the ﬁnancial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures
in the ﬁnancial statements. An audit also includes assessing the accounting principles used and signiﬁcant estimates
made by Management, as well as evaluating the overall ﬁnancial statement presentation.

In our opinion, these consolidated ﬁnancial statements present fairly, in all material respects, the ﬁnancial
position of the Company as at December 31, 2005 and 2004 and the results of its operations and its cash ﬂows for each
of the years in the three-year period ended December 31, 2005 in accordance with United States generally accepted
accounting principles.

Chartered Accountants
Toronto, Canada
February 21, 2006

Comments by Auditors for US Readers On Canada-US Reporting Differences

In the United States, reporting standards for auditors require the addition of an explanatory paragraph (following the
opinion paragraph) when there is a change in accounting principles that has a material effect on the comparability of
the Company’s ﬁnancial statements, such as the changes described in Note 2 to these consolidated ﬁnancial statements.
Our report to the shareholders dated February 21, 2006 is expressed in accordance with Canadian reporting standards
which do not require a reference to such a change in accounting principles in the Auditors’ report when the change is
properly accounted for and adequately disclosed in the ﬁnancial statements.

Chartered Accountants
Toronto, Canada
February 21, 2006

Barrick Annual Report 2005

Auditors’ Report (cid:1) 77

Consolidated
Statements of Income

Barrick Gold Corporation
For the years ended December 31 (in millions of United States dollars, except per share data)

Gold sales (notes 4 and 5)

Costs and expenses
Cost of sales1 (note 6)
Amortization (note 4)
Corporate administration
Exploration, development and business development

Other (income) expense
Interest income
Equity in investees (note 11)
Interest expense (note 16b)
Impairment of long-lived assets (note 7a)
Other (note 7b)

Income before income taxes and other items
Income tax (expense) recovery (note 8)

Income before cumulative effect of changes in accounting principles
Cumulative effect of changes in accounting principles (note 2e)

2005

2004

2003

$ 2,350

$ 1,932

$ 2,035

1,214
427
71
141

1,853

(38)
6
7
–
67

455
(60)

395
6

1,047
452
71
141

1,711

(25)
–
19
139
43

176

45
203

248
–

1,069
522
73
137

1,801

(31)
–
44
5
(6)

222
(5)

217
(17)

Net income for the year

401

248

200

Earnings per share data (note 9)
Income before cumulative effect of changes in accounting principles

Basic
Diluted
Net income
Basic
Diluted

1. Exclusive of amortization (note 6).
The accompanying notes are an integral part of these consolidated ﬁnancial statements.

$
$

0.74
0.73

0.75
0.75

$
$

0.47
0.46

$
$

0.40
0.40

0.37
0.37

78 (cid:1) Financial Statements

Barrick Annual Report 2005

Consolidated
Statements of Cash Flow

Barrick Gold Corporation
For the years ended December 31 (in millions of United States dollars)

2005

2004

2003

Operating Activities
Net income
Amortization (note 4)
Deferred income tax recovery (notes 8 and 19)
Inmet litigation settlement (note 7b)
Impairment of long-lived assets (note 7a)
Gains on sale of long-lived assets (note 7b)
Other items (note 10)

Net cash provided by operating activities

Investing Activities
Property, plant and equipment
Capital expenditures (note 4)
Sales proceeds

Cash receipt from Kabanga transaction (note 7b)
Purchase of equity method investments (note 11)
Available-for-sale securities (note 11)

Purchases
Sales proceeds

Other investing activities

401
427
(30)
–
–
(5)
(67)

726

(1,104)
8
15
(58)

(31)
10
(20)

248
452
(225)
–
139
(36)
(69)

509

(824)
43
–
(40)

(7)
9
(2)

200
522
(49)
(86)
5
(36)
(37)

519

(322)
40
–
(46)

(14)
8
–

Net cash used in investing activities

(1,180)

(821)

(334)

Financing Activities
Capital stock

Proceeds from shares issued on exercise of stock options
Repurchased for cash (note 20a)

Long-term debt (note 16b)

Proceeds
Repayments
Dividends (note 20a)
Other ﬁnancing activities

Net cash provided by (used in) ﬁnancing activities

Effect of exchange rate changes on cash and equivalents
Net (decrease) increase in cash and equivalents
Cash and equivalents at beginning of year (note 16a)

92
–

179
(59)
(118)
(1)

–
(361)
1,398

49
(95)

973
(41)
(118)
(28)

740

–
428
970

29
(154)

–
(23)
(118)
–

(266)

7
(81)
1,044

Cash and equivalents at end of year (note 16a)

$ 1,037

$ 1,398

970

The accompanying notes are an integral part of these consolidated ﬁnancial statements.

Barrick Annual Report 2005

Financial Statements (cid:1) 79

Consolidated
Balance Sheets

Barrick Gold Corporation
At December 31 (in millions of United States dollars)

Assets
Current assets

Cash and equivalents (note 16a)
Accounts receivable (note 12)
Inventories (note 12)
Other current assets (note 12)

Available-for-sale securities (note 11)
Equity method investments (note 11)
Property, plant and equipment (note 13)
Capitalized mining costs (note 2e)
Non-current ore in stockpiles (note 12)
Other assets (note 14)

Total assets

Liabilities and Shareholders’ Equity
Current liabilities

Accounts payable
Current part of long-term debt (note 16b)
Other current liabilities (note 15)

Long-term debt (note 16b)
Asset retirement obligations (note 17)
Other long-term obligations (note 18)
Deferred income tax liabilities (note 19)

Total liabilities

Shareholders’ equity
Capital stock (note 20)
Deﬁcit
Accumulated other comprehensive income (loss) (note 21)

Total shareholders’ equity

Contingencies and commitments (notes 8 and 13d)

Total liabilities and shareholders’ equity

The accompanying notes are an integral part of these consolidated ﬁnancial statements.

Signed on behalf of the Board,

2005

2004

$ 1,037
54
402
255

$ 1,398
58
215
288

1,748

62
138
4,146
–
251
517

1,959

61
86
3,391
226
65
499

$ 6,862

$ 6,287

386
80
94

560

1,721
409
208
114

3,012

4,222
(341)
(31)

3,850

335
31
54

420

1,655
334
165
139

2,713

4,129
(624)
69

3,574

$ 6,862

$ 6,287

Gregory C. Wilkins, Director

Steven J. Shapiro, Director

80 (cid:1) Financial Statements

Barrick Annual Report 2005

Consolidated Statements
of Shareholders’ Equity

Barrick Gold Corporation
For the years ended December 31 (in millions of United States dollars)

Common shares (number in millions)
At January 1

Issued on exercise of stock options (note 22a)
Repurchased (note 20a)

At December 31

Common shares
At January 1

Issued on exercise of stock options (note 22a)
Repurchased (note 20a)

At December 31

Deﬁcit
At January 1

Net income
Dividends (note 20a)
Adjustment on repurchase of common shares (note 20a)

At December 31

Accumulated other comprehensive income (loss) (note 21)

Total shareholders’ equity at December 31

2005

2004

2003

534
4
–

538

535
3
(4)

534

542
2
(9)

535

$ 4,129
93
–

$ 4,115
49
(35)

$ 4,148
34
(67)

$ 4,222

$ 4,129

$ 4,115

(624)
401
(118)
–

(341)

(31)

(694)
248
(118)
(60)

(624)

(689)
200
(118)
(87)

(694)

$ 3,850

$ 3,574

$ 3,481

Consolidated Statements
of Comprehensive Income

Barrick Gold Corporation
For the years ended December 31 (in millions of United States dollars)

Net income
Other comprehensive income (loss), net of tax (note 21)

Comprehensive income

The accompanying notes are an integral part of these consolidated ﬁnancial statements.

2005

401
(100)

301

2004

2003

248
9

257

200
185

385

Barrick Annual Report 2005

Financial Statements (cid:1) 81

Notes to Consolidated
Financial Statements

Barrick Gold Corporation. Tabular dollar amounts in millions of United States dollars, unless otherwise shown. References to C$, A$, €
and ARS are to Canadian dollars, Australian dollars, Euros, and Argentinean pesos, respectively.

1 (cid:1) Nature of Operations

Barrick Gold Corporation (“Barrick” or the “Company”)
engages in the production and sale of gold from
underground and open-pit mines, including related
activities such as exploration and mine development.
Our operations are mainly located in North America,
South America, Australia, Africa and Russia/Central
Asia. Our gold is sold into the world market.

2 (cid:1) Signiﬁcant Accounting Policies

a) Basis of Preparation
These ﬁnancial statements have been prepared under
United States generally accepted accounting principles
(“US GAAP”). To ensure comparability of ﬁnancial
information, certain prior-year amounts have been
reclassiﬁed to conform with the current year presentation.

b) Consolidation
These ﬁnancial statements reﬂect consolidation of
entities in which we have a controlling ﬁnancial interest.
The usual condition for a controlling ﬁnancial interest
is ownership of a majority of the voting interests of
an entity. A controlling ﬁnancial interest may also exist
through arrangements that do not involve voting inter-
ests, where an entity is a variable interest entity (“VIE”).
Intercompany balances and transactions are eliminated
on consolidation.

A VIE is an entity that either lacks enough equity

investment at risk to permit the entity to ﬁnance its
activities without additional subordinated ﬁnancial sup-
port from other parties; has equity owners who are
unable to make decisions about the entity; or has equity
owners that do not have the obligation to absorb the
entity’s expected losses or the right to receive the entity’s
expected residual returns. VIEs can arise from a variety
of contractual arrangements or other legal structures.

Where a VIE exists, the variable interest holder
who is the primary beneﬁciary consolidates the VIE.
The primary beneﬁciary is the entity that, after
evaluating all expected transactions between the VIE
and the variable interest holders, expects to absorb
a majority of the expected losses of the VIE, receive
a majority of the residual returns of the VIE, or both.

We hold a 70% interest in an unincorporated joint
venture that owns the Tulawaka mine. This joint venture
was originally formed to share in the risks and rewards
of exploring for gold and developing any mines on a
signiﬁcant land position in Tanzania. Until June 2004,
we used the proportionate consolidation method for our
70% joint venture interest. In June 2004, upon entering
into an agreement to ﬁnance the other joint venture
partner’s share of mine construction costs, we concluded
that the joint venture had become a VIE and that we are
the primary beneﬁciary. From June 2004 onwards, we
began consolidating 100% of the joint venture, recording
a non-controlling interest for the interest held by the
other joint venture partner. The carrying value of assets
that are collateral for the VIEs obligations are property,
plant and equipment of $63 million and working capital
of $24 million. The creditors of the joint venture have
recourse only to the assets of the joint venture and not
to any other assets of Barrick.

We hold our interests in the Round Mountain,
Hemlo, Marigold and Kalgoorlie mines through unin-
corporated joint ventures under which we share joint
control of operating, investing and ﬁnancing decisions
with the other joint venture partners. We use the propor-
tionate consolidation method to account for our interests
in these unincorporated joint ventures. For further
information refer to note 25.

82 (cid:1) Notes to Consolidated Financial Statements

Barrick Annual Report 2005

c) Foreign Currency Translation
The functional currency of all our operations is the
US dollar. We translate non-US dollar balances into US
dollars as follows:
(cid:1) non-monetary assets and liabilities using historical rates;
(cid:1) monetary assets and liabilities using closing rates with
translation gains and losses recorded in earnings; and

(cid:1) income and expenses using average exchange rates,

except for expenses that relate to non-monetary assets
and liabilities measured at historical rates.

d) Use of Estimates
The preparation of these ﬁnancial statements requires us
to make estimates and assumptions. The most signiﬁcant
ones are: quantities of proven and probable gold reserves;
the value of mineralized material beyond proven and
probable reserves; future costs and expenses to produce
proven and probable reserves; future commodity prices
and foreign currency exchange rates; the future cost
of asset retirement obligations; the amounts of contin-
gencies; and assumptions used in the accounting for
employee stock options such as volatility, expected term
and forfeiture rates for unvested options. Using these
estimates and assumptions, we make various decisions
in preparing the ﬁnancial statements including:
(cid:1) the treatment of mine development costs as either

an asset or an expense;

(cid:1) whether long-lived assets are impaired, and if so,
estimates of the fair value of those assets and any
corresponding impairment charge;

(cid:1) our ability to realize deferred income tax assets;
(cid:1) the useful lives of long-lived assets and the measure-

ment of amortization;

(cid:1) the fair value of asset retirement obligations;
(cid:1) the likelihood of loss contingencies occurring and

the amount of any potential loss;

(cid:1) whether investments are impaired; and
(cid:1) the amount of stock option expense included in

pro forma stock option disclosures.

As the estimation process is inherently uncertain,
actual future outcomes could differ from present esti-
mates and assumptions, potentially having material
future effects on our ﬁnancial statements.

e) Accounting Changes
Cumulative Effect of Accounting Changes on Earnings

Earnings increase (decrease)

For the years ended December 31

2005

2004

2003

Adoption of FAS 143 1
Underground mine

development costs 2
Adoption of EITF-04-6 3

Total

$ –

$ 4

–
6

–
–

(21)
–

$ 6

$ –

$ (17)

1. On adoption of FAS 143 on January 1, 2003, we recorded an increase
in property, plant and equipment of $39 million; an increase in other
long-term obligations of $32 million; and an increase in deferred income
tax liabilities of $3 million; as well as a $4 million credit in earnings for
the cumulative effect of this change.

2. On January 1, 2003, we changed our accounting policy for amortization
of underground mine development costs to exclude estimates of future
underground development costs. On January 1, 2003, we recorded a
decrease in property, plant and equipment of $19 million; an increase in
deferred income tax liabilities of $2 million; and a $21 million charge to
earnings for the cumulative effect of this change.

3. In second quarter 2005, we adopted EITF 04-6 and changed our

accounting policy for stripping costs incurred in the production phase.
Prior to adopting EITF 04-6, we capitalized stripping costs incurred in
the production phase, and we recorded amortization of the capitalized
costs as a component of the cost of inventory produced each period.
Under EITF 04-6, stripping costs are recorded directly as a component of
the cost of inventory produced each period. Using an effective date of
adoption of January 1, 2005, we recorded a decrease in capitalized mining
costs of $226 million; an increase in the cost of inventory of $232 million;
and a $6 million credit to earnings for the cumulative effect of this change.
For the year ended December 31, 2005, the effect of adopting EITF 04-6
compared to the prior policy was an increase in net income of $44 million
($0.08 per share), excluding the cumulative effect on prior periods.

FSP FAS 115-1 and FAS 124-1, The Meaning
of Other-Than-Temporary Impairment
and its Application to Certain Investments
FSP FAS 115-1 and FAS 124-1 was issued in November
2005 to provide further guidance to determine when an
investment is considered impaired, whether the impair-
ment is other than temporary, and the measurement of
an impairment loss. We prospectively adopted this FSP in
fourth quarter 2005. Our accounting policy for assessing
the impairment of investments is described in note 11.
The adoption of FSP FAS 115-1 and FAS 124-1 in 2005
had no effect on our ﬁnancial statements.

Barrick Annual Report 2005

Notes to Consolidated Financial Statements (cid:1) 83

FIN 47, Accounting for Conditional Asset
Retirement Obligations (AROs)
FIN 47 was issued in March 2005 and is effective for
our 2005 ﬁscal year. It relates to the accounting for
a legal obligation to perform an asset retirement activity,
when the timing or method of settlement is conditional
on a future event, which may not be within our control.
Under FIN 47, a liability for the fair value of a condi-
tional ARO is recorded if the fair value can be reasonably
estimated. FIN 47 was issued because of diversity in
practice in applying FAS 143. Some entities recorded
AROs prior to the retirement of an asset, while other
entities recorded the ARO only when it was either
probable that the asset would be retired or when the
asset was actually retired. The adoption of FIN 47
in 2005 had no signiﬁcant effect on the amount of
AROs recorded in our ﬁnancial statements.

f) Accounting Developments
FAS 123R, Accounting for Stock-Based Compensation
FAS 123R is applicable to transactions in which an entity
exchanges its equity instruments for goods and services.
It focuses primarily on transactions in which an entity
obtains employee services in share-based payment trans-
actions. The principal reason for issuing FAS 123R was
to address concerns of users of ﬁnancial statements,
including institutional and individual investors that using
an intrinsic value method results in ﬁnancial statements
that do not faithfully represent the economic effect of the
receipt and consumption of employee services in exchange
for equity instruments. FAS 123R addresses these concerns
by requiring an entity to recognize the cost of employee
services received in share-based payment transactions,
thereby reﬂecting the economic consequences of those
transactions in the ﬁnancial statements. A further reason
was to improve the comparability of reported ﬁnancial
information by eliminating alternative accounting
methods. By requiring the fair-value-based method for
all public entities, FAS 123R eliminates an alternative
accounting method; consequently, similar economic
transactions will be accounted for similarly. FAS 123R
requires that the fair value of such equity instruments
be recorded as an expense as services are performed.
Equity instruments included under the scope of
FAS 123R are our stock options, restricted share units
(RSUs) and deferred share units (DSUs). Prior to

FAS 123R, a company could elect to account for the cost
of employee stock options using an intrinsic value
approach based on the excess of the market price at
the date of grant over the exercise price, and provide
pro forma disclosures of the effect of accounting
for employee stock options using a fair value approach.
The adoption of FAS 123R will not have a signiﬁcant
impact on how we account for RSUs and DSUs. We
intend to adopt FAS 123R for our ﬁrst quarter 2006
ﬁnancial statements. FAS 123R permits different transi-
tion methods including retroactive adjustment of prior
periods as far back as 1995 to give effect to the fair-value-
based method of accounting for awards granted in those
prior periods; or a modiﬁed prospective application
beginning in 2006. For further information see note 22.

FAS 151, Inventory Costs
FAS 151 speciﬁes the general principles applicable to
the pricing and allocation of certain costs to inventory.
FAS 151 is the result of a broader effort by the Financial
Accounting Standards Board (FASB) to improve the
comparability of cross-border ﬁnancial reporting by
working with the International Accounting Standards
Board (IASB) toward development of a single set
of high-quality accounting standards. As part of that
effort, the FASB and the IASB identiﬁed opportunities
to improve ﬁnancial reporting by eliminating certain
narrow differences between their existing accounting
standards. The accounting for inventory costs, in
particular, abnormal amounts of idle facility expense,
freight, handling costs, and spoilage, is one such narrow
difference that the FASB decided to address by issuing
FAS 151. As currently worded in ARB 43, Chapter 4,
the term “abnormal” was not deﬁned and its application
could lead to unnecessary noncomparability of ﬁnancial
reporting. FAS 151 eliminates that term. Under FAS 151,
abnormal amounts of idle facility expense, freight,
handling costs and wasted materials are recognized as
current period charges rather than capitalized to inven-
tory. FAS 151 also requires that the allocation of ﬁxed
production overhead to the cost of inventory be based
on the normal capacity of production facilities. FAS 151
will be effective beginning in ﬁrst quarter 2006.

84 (cid:1) Notes to Consolidated Financial Statements

Barrick Annual Report 2005

FAS 154, Accounting Changes and Error Corrections,
a replacement of APB Opinion No. 20 and FAS 3
FAS 154 relates to the accounting for and reporting of a
change in accounting principle and applies to all volun-
tary changes in accounting principles. The reporting of
corrections of an error by restating previously issued
ﬁnancial statements is also addressed by this statement.
FAS 154 applies to authoritative pronouncements in the
event they do not include speciﬁc transition provisions.
When an authoritative pronouncement includes speciﬁc
transition provisions, those provisions should be fol-
lowed. FAS 154 requires retrospective application to prior
periods’ ﬁnancial statements of changes in accounting
principle, unless the period-speciﬁc effects or cumulative
effects of an accounting change are impracticable to
determine, in which case the new accounting principle
is required to be applied to the assets and liabilities
as of the earliest period practicable, with a corresponding
adjustment made to opening retained earnings. Prior
to FAS 154, most accounting changes were recorded
effective at the beginning of the year of change, with the
cumulative effect at the beginning of the year of change
recorded as a charge or credit to earnings in the period
a change was adopted. FAS 154 will be effective for
accounting changes and corrections of errors occurring
in 2006 onwards. FAS 154 does not change the transition
provisions of any existing accounting pronouncements,
including those that are in the transition phase as of
the effective date of FAS 154.

Exposure Draft, Accounting for Uncertain Tax Positions
In July 2005, the FASB issued an exposure draft on
Accounting for Uncertain Tax Positions – an Interpretation
of FASB Statement No. 109. The interpretation has been
developed because of diversity in practice for accounting
for uncertain tax positions. Some entities record tax
beneﬁts for uncertain tax positions as they are ﬁled on the
income tax return, while others use either gain contin-
gency accounting or a probability threshold.

The exposure draft requires companies to record the
best estimate of the beneﬁts of an uncertain tax position
only if it is probable of being sustained on audit by the
taxing authority based solely on the technical merits of
the position. Under the draft Interpretation, beneﬁts
from tax positions that previously failed to meet the
recognition threshold would be recognized in any subse-
quent period in which that threshold is met. Previously
recognized tax beneﬁts from positions that no longer

meet a more-likely-than-not recognition threshold
would be de-recognized by recording an income tax lia-
bility or eliminating a deferred tax asset in the period in
which it is more likely than not that the tax position will
not be sustained. The requirement to assess the need for
a valuation allowance for deferred tax assets based on the
sufﬁciency of future taxable income would be unchanged
by the ﬁnal Interpretation. The ﬁnal Interpretation will
also provide guidance on disclosure, accrual of interest
and penalties, and accounting in interim periods and
transition. In November 2005, the FASB decided to
change the initial recognition threshold proposed in the
exposure draft from “probable” to “more-likely-than-not”.
The FASB expects to issue a ﬁnal Interpretation in 2006
that would be effective for our ﬁscal 2007 ﬁnancial state-
ments. After the ﬁnal Interpretation is issued, we intend
to complete our assessment of the impact on our ﬁnan-
cial statements.

g) Changes in Estimates
Gold Mineral Reserves
At the end of each ﬁscal year we update estimates
of proven and probable gold mineral reserves at each
mineral property. Following the update, we prospectively
revise calculations of amortization of property, plant
and equipment beginning in the ﬁrst quarter of the next
ﬁscal year. The effect of changes in reserve estimates
at the end of 2004 on amortization expense for the
ﬁscal year ended December 31, 2005 was a decrease
of $28 million (2004: $15 million decrease; 2003:
$14 million decrease).

Asset Retirement Obligations (AROs)
Each period we update cost estimates for AROs
at each of our mineral properties to reﬂect new events,
changes in circumstances and any new information
that is available. The changes in these cost estimates
generally have a corresponding impact on the fair value
of the ARO. For closed mines any change in the fair
value of AROs is included as a charge or credit within
environmental remediation costs in other expense.
An expense of $15 million was recorded in 2005 for
changes in cost estimates for AROs at closed mines
(2004: $22 million expense; 2003: $10 million expense).

Tax Valuation Allowances
For a description of changes in valuation allowances
refer to note 8.

Barrick Annual Report 2005

Notes to Consolidated Financial Statements (cid:1) 85

h) Other Signiﬁcant Accounting Policies

Note

Page

Business combinations
Segment information
Revenue and gold sales contracts
Cost of sales
Other (income) expense
Income tax (recovery) expense
Earnings per share
Operating cash ﬂow – other items
Investments
Accounts receivable, inventories

and other current assets
Property, plant and equipment
Other assets
Other current liabilities
Financial instruments
Asset retirement obligations
Other long-term obligations
Deferred income taxes
Capital stock
Other comprehensive income (loss)
Stock-based compensation
Post-retirement beneﬁts
Litigation and claims
Joint ventures

3
4
5
6
7
8
9
10
11

12
13
14
15
16
17
18
19
20
21
22
23
24
25

86
93
95
96
96
98
99
100
100

102
103
105
105
106
114
114
115
116
117
118
121
123
124

3 (cid:1) Business Combinations

a) Acquisition of Placer Dome Inc.
(“Placer Dome”)
Placer Dome Offer and Acceptance
On October 31, 2005 we announced a proposed acquisi-
tion of Placer Dome. In early 2006, we offered to acquire
all of the outstanding common shares of Placer Dome
for either US$22.50 in cash or 0.8269 of a Barrick
common share plus US$0.05 in cash per Placer Dome
common share, subject in each case to pro ration of a
maximum cash amount of $1,344 million. Funding for
the maximum cash amount will be from our $1 billion

credit and guarantee agreement, with any excess from
our existing cash position. By February 3, 2006, 419 mil-
lion common shares of Placer Dome had been validly
deposited to our offer. We took up and accepted for
payment all of such shares, which represented about 94%
of the common shares of Placer Dome. For the common
shares tendered by February 3, 2006, the aggregate cash
consideration was US$1,161 million and the aggregate
number of Barrick common shares issued was 304 mil-
lion shares.

Placer Dome is one of the world’s largest gold min-
ing companies, and produced 3.6 million ounces of gold
and 359 million pounds of copper in 2005 (unaudited).
It has 12 producing mines based in North America,
South America, Africa and Australia/New Guinea, and
four projects that are in various stages of exploration/
development. Its most signiﬁcant mines are Cortez in the
United States, Zaldívar in Chile, Porgera in New Guinea,
North Mara in Tanzania and South Deep in South Africa.
The most signiﬁcant projects are Cortez Hills and
Donlin Creek in the United States, and Pueblo Viejo in
the Dominican Republic. We plan to sell Placer Dome’s
Canadian mines to Goldcorp Inc. (“Goldcorp”), as well
as certain other interests in mineral properties. Placer
Dome had a gold hedge position totaling 7.2 million
ounces at the date of acquisition. Furthermore, Placer
Dome has gold lease rate swaps where the obligation was
expressed in ounces. We plan to focus on reducing this
acquired hedge position over time, consistent with the
plans for our existing gold hedge position.

We believe that the business combination between

ourselves and Placer Dome is a unique opportunity to
create a Canadian-based leader in the global gold mining
industry. This business combination strengthens our
position, including in respect of reserves, production,
growth opportunities, and balance sheet strength.

86 (cid:1) Notes to Consolidated Financial Statements

Barrick Annual Report 2005

Accounting for the Placer Dome Acquisition
The Placer Dome acquisition will be accounted for
as a purchase business combination, with Barrick as the
accounting acquirer. We secured control of Placer Dome
on January 19, 2006, which is the accounting acquisition
date with the results of operations of Placer Dome
consolidated from January 20, 2006. Assuming 100%
of the outstanding common shares of Placer Dome are
acquired, the purchase cost is estimated at $10.1 billion,
including all the consideration issued in the form of
cash, Barrick common shares, and direct costs related
to the acquisition.

Value of 322.8 million Barrick common

shares at $27.14 per share

Cash
Transaction costs

Condensed Balance Sheet at Acquisition1

Cash
Other current assets
Property, plant and equipment
Goldcorp assets
Other assets
Unallocated purchase price

Total assets

Current liabilities
Goldcorp liabilities
Long-term debt
Other long-term obligations

Total liabilities

Net assets acquired

$ 880
738
2,371
298
696
8,652

13,635

522
77
1,107
1,799

3,505

$ 10,130

$ 8,761
1,344
25

$ 10,130

1. For the purposes of presenting a summary of assets and liabilities acquired,
the balance sheet of Placer Dome at December 31, 2005 has been used
as a proxy for the balance sheet on January 19, 2006. We do not expect
any material differences between the balance sheet at January 19, 2006
and the balance sheet at December 31, 2005.

The measurement of the purchase consideration will be
based on a Barrick common share price of $27.14, repre-
senting the average closing price on the New York Stock
Exchange for the two days prior to and two days after the
public announcement of our ﬁnal offer for Placer Dome.
The purchase cost will be allocated to the underlying

assets acquired and liabilities assumed based upon their
estimated fair values at the date of acquisition. We will
determine the estimated fair values based on independent
appraisals, discounted cash ﬂows, quoted market prices,
and estimates made by management. To the extent that
the purchase cost exceeds the fair value of the net
identiﬁable tangible and intangible assets acquired, such
excess will be allocated to goodwill. The following table
summarizes the current allocation of the Placer Dome
purchase cost to assets and liabilities. It reﬂects only cer-
tain limited fair value adjustments for identiﬁable assets
and liabilities acquired, including an adjustment for the
fair value of derivatives at acquisition. The purchase price
allocation is preliminary and subject to adjustment
following completion of the valuation process and analysis
of tax effects. The difference between the cost of acquisi-
tion and the values of net assets acquired has been
presented as “unallocated purchase price”.

b) Sale of Operations to Goldcorp
Goldcorp has agreed, subject to conditions to acquire
from us, all of Placer Dome’s Canadian properties
and operations (other than Placer Dome’s ofﬁces in
Vancouver and Toronto), including all mining, reclama-
tion and exploration properties, Placer Dome’s interest
in the La Coipa mine in Chile, 40% of Placer Dome’s
interest in the Pueblo Viejo project in the Dominican
Republic, certain related assets and, at the option
of Goldcorp, our share in Agua de la Falda S.A., which
includes our interest in the Jeronimo project (collectively,
the ‘‘Goldcorp Assets’’). Goldcorp will be responsible
for all liabilities relating solely to the Goldcorp Assets,
including employment commitments and environmental,
closure and reclamation liabilities (collectively, the
‘‘Goldcorp Liabilities’’).

The estimated sales proceeds from Goldcorp are

about $1,500 million, subject to certain adjustments on
closing that are deﬁned in the sale agreement. The results
of operations will be consolidated into Barrick until the
closing of the sale of operations to Goldcorp. On closing
of the sale, the assets and liabilities relating to those oper-
ations, as well as a portion of the unallocated purchase
price will be removed from our balance sheet. We do not
expect to record a signiﬁcant gain or loss on closing of
the sale. At December 31, 2005, the carrying amount of
assets was about $298 million and liabilities was about
$77 million relating to the operations that will be
sold to Goldcorp.

Barrick Annual Report 2005

Notes to Consolidated Financial Statements (cid:1) 87

c) Pro Forma Information (Unaudited)

Pro Forma Consolidated Statement of Income

For the year ended December 31, 2005
($ millions of US dollars,
except per share data in dollars)

Sales

Costs and expenses
Cost of sales3
Amortization
Corporate administration
Exploration, development

and business development

Other (income) expense
Interest income
Equity in investees
Interest expense
Impairment of long-lived assets
Other

Income before income taxes

and other items
Income tax expense
Minority interest

Income before cumulative
effect of changes in
accounting principles
Cumulative effect of changes
in accounting principles,
net of tax

As reported

Barrick

Placer Dome

$ 2,350

$ 1,978

Pro forma
purchase
adjustments1

1,214
427
71

141

1,853

(38)
6
7
–
67

455
(60)
–

1,271
264
68

178

1,781

(44)
(4)
92
–
40

113
(21)
2

(5)

(21)

(22)
10

(a)

(b)

(c)

(d)

395

(12)

(14)

Net income

$ 401

$ 80

$ (12)

Earnings per share data:
Net income

Basic and diluted

$ 0.75

$ 0.18

Pro forma
consolidated
Barrick before
sale of certain
operations to
Goldcorp

Pro forma
adjustments for
sale of certain
operations to
Goldcorp2

Pro forma
consolidated
Barrick

$ 4,328

$ (251)

(e)

$ 4,077

2,485
691
139

319

3,634

(87)
2
147

148

546
(71)
2

477

(8)

$ 469

(177)
(35)

(e)
(e)

(28)

(e)

(240)

4
(49)

(e)
(b)

(f)

(45)

34
(14)

$ 20

2,308
656
139

291

3,394

(87)
6
98

103

580
(85)
2

497

(8)

$ 489

$ 0.57

1. Adjustments to reﬂect certain estimated effects of purchase accounting.
2. Adjustments to reﬂect the estimated effects of the sale of certain Placer Dome operations to Goldcorp.
3. Exclusive of amortization.

88 (cid:1) Notes to Consolidated Financial Statements

Barrick Annual Report 2005

Pro Forma Consolidated Balance Sheet

As at December 31, 2005
($ millions of US dollars)

As reported

Barrick

Placer Dome

Pro forma
purchase
adjustments1

Pro forma
consolidated
Barrick before
sale of certain
operations to
Goldcorp

Pro forma
adjustments for
sale of certain
operations to
Goldcorp2

Pro forma
consolidated
Barrick

Assets
Current assets

Cash and equivalents

$ 1,037

$ 880

152

(g)

$ 2,069

Restricted cash
Accounts receivable
Inventories
Other current assets

Available-for-sale securities
Equity method investments
Property, plant and equipment
Capitalized mining costs
Non-current ore in stockpiles
Other assets
Goodwill
Unallocated purchase price

Total assets

Liabilities and

shareholders’ equity

Current liabilities

Accounts payable
Short-term debt
Current portion of
long-term debt
Other current liabilities

Long-term debt
Asset retirement obligations
Other long-term obligations
Deferred income tax liabilities

Total liabilities

Shareholders’ equity
Capital stock

54
402
255

1,748
62
138
4,146
–
251
517
–
–

6,862

386
–

80
94

560
1,721
409
208
114

3,012

150
152
310
157

1,649
22
33
2,592
240
63
641
454
–

5,694

305
–

152
89

546
1,107
294
260
247

2,454

4,222

2,555

Retained earnings (deﬁcit)
Accumulated other

comprehensive income

Contributed surplus

(341)

(31)
–

624

(12)
73

152

(240)

(17)
(454)
8,500

7,941

(h)

(i)
(j)
(k)

25
1,344

(l)
(m)

1,369

1,051

(n)

2,420

152
(2,707)
8,761
(624)

12
(73)

(g)
(o)
(p)
(q)

(r)
(s)

Total shareholders’ equity

3,850

3,240

5,521

Total liabilities and

$ 1,500
(1,344)

(6)
(25)

125

(33)
(221)

(11)
(2)

(t)
(u)

(v)
(v)

(1,279)

(w)

$ 2,225
150
200
687
412

3,674
84
138
6,517
–
303
1,139
–
7,221

150
206
712
412

3,549
84
171
6,738
–
314
1,141
–
8,500

20,497

(1,421)

19,076

716
1,344

232
183

2,475
2,828
703
1,519
361

7,886

12,983
(341)

(31)
–

12,611

(24)
(1,344)

(v)
(u)

(1,368)

(21)
(32)

(v)
(v)

(1,421)

692
–

232
183

1,107
2,828
682
1,487
361

6,465

12,983
(341)

(31)
–

12,611

shareholders’ equity

$ 6,862

$ 5,694

7,941

$ 20,497

$ (1,421)

$ 19,076

1. Adjustments to reﬂect certain estimated effects of purchase accounting.
2. Adjustments to reﬂect the estimated effects of the sale of certain Placer Dome operations to Goldcorp.

Barrick Annual Report 2005

Notes to Consolidated Financial Statements (cid:1) 89

Basis of Presentation
This unaudited pro forma consolidated ﬁnancial state-
ment information has been prepared by us for illustrative
purposes only to show the effect of the acquisition of
Placer Dome by Barrick. The unaudited pro forma con-
solidated statement information assumes that Barrick
will acquire all of Placer Dome’s outstanding shares and
exchange any outstanding Placer Dome stock options
for equivalent Barrick stock options. The unaudited
pro forma consolidated ﬁnancial statement information
assumes that all in-the-money Placer Dome stock
options will be exercised and included in the outstanding
Placer Dome shares to be acquired by Barrick. Barrick
has entered into an agreement with Goldcorp that
will result in the sale of certain operations and projects
of Placer Dome, including the Canadian operations, the
La Coipa mine and a 40% interest in the Pueblo Viejo
project. Barrick will receive about $1,500 million in cash
from Goldcorp for the sale of these operations (assuming
no adjustments are required). This unaudited pro forma
consolidated ﬁnancial statement information assumes
that there will be no tax consequences to Barrick for
the sale of these operations to Goldcorp. Pro forma
adjustments for the assumed effect of the sale of these
operations to Goldcorp on the results of operations of
Barrick have been reﬂected in this unaudited pro forma
consolidated ﬁnancial statement information.

The unaudited pro forma consolidated ﬁnancial
statement information is not intended to be indicative
of the results that would actually have occurred, or
the results expected in future periods, had the events
reﬂected herein occurred on the dates indicated. Actual
amounts recorded upon ﬁnalization of purchase price
adjustments and subsequent sale of certain Placer
Dome operations to Goldcorp will likely differ from
those recorded in this unaudited pro forma consolidated
ﬁnancial statement information. Any potential synergies
that may be realized and integration costs that may
be incurred have been excluded from the unaudited
pro forma ﬁnancial statement information, including
Placer Dome transaction costs and amounts payable
under change of control agreements to certain members
of management that are estimated at a combined total
of $93 million. The information prepared is only
a summary.

In preparing the unaudited pro forma consolidated

ﬁnancial statement information, an initial review was
undertaken to identify Placer Dome accounting policy

differences where the impact was potentially material
and could be reasonably estimated. Further accounting
policy differences may be identiﬁed. In particular,
we adopted EITF 04-6, Accounting for Stripping Costs
Incurred during Production in the Mining Industry,
effective January 1, 2005, whereas Placer Dome has not
yet adopted EITF 04-6. Estimates concerning the impact
of Placer Dome applying EITF 04-6 in the unaudited
pro forma consolidated ﬁnancial statement information
have not yet been ﬁnalized and no adjustment has been
recorded. The effects on the Placer Dome mines of
adopting EITF 04-6 could be signiﬁcant.

The unaudited pro forma consolidated statement

of income for the year ended December 31, 2005 has
been prepared from the statements of income for each
of Barrick and Placer Dome for the period after giving
pro forma effect to the acquisition of Placer Dome
by Barrick and subsequent sale of certain operations
to Goldcorp as if both transactions had occurred
on January 1, 2005 based on the assumptions below.
The unaudited pro forma consolidated balance
sheet as at December 31, 2005 has been prepared from
the consolidated balance sheets of Barrick and Placer
Dome as at December 31, 2005, after giving pro forma
effect to the acquisition of Placer Dome by Barrick and
subsequent sale of certain operations to Goldcorp as if
both transactions had occurred on December 31, 2005
based on the assumptions below.

Pro Forma Assumptions and Adjustments
The acquisition of Placer Dome will be accounted
for using the purchase method of accounting. Certain
adjustments have been reﬂected in this unaudited pro
forma consolidated statement of income to illustrate
the effects of purchase accounting and to reﬂect the
impact of the sale of certain Placer Dome operations
to Goldcorp, where the impact could be reasonably
estimated. In 2006, we will complete an exercise to value
the identiﬁable assets and liabilities acquired, including
any goodwill that may arise in the acquisition.

On December 31, 2005, Placer Dome had certain
convertible debt and stock options outstanding, which
if converted/exercised would result in an increase in
Placer Dome common shares outstanding by approxi-
mately 22.7 million shares. This unaudited pro forma
consolidated ﬁnancial statement information reﬂects the
issuance by Placer Dome of approximately 10.1 million
shares on exercise of in-the-money stock options

90 (cid:1) Notes to Consolidated Financial Statements

Barrick Annual Report 2005

of Placer Dome at December 31, 2005, but excludes
the impact of 12.6 million potential shares that could
theoretically be issued due to the conversion/exercise of
Placer Dome’s convertible debt and other stock options.
We have not yet determined the fair value of all
identiﬁable assets and liabilities acquired, the amount of
the purchase price that may be allocated to goodwill, or
the complete impact of applying purchase accounting on
the income statement. Therefore, after reﬂecting the pro
forma purchase adjustments identiﬁed to date, the excess
of the purchase consideration over the adjusted book
values of Placer Dome’s assets and liabilities has been
presented as “unallocated purchase price”. In 2006, the
fair value of all identiﬁable assets and liabilities acquired
as well as any goodwill arising upon the acquisition will
be determined. On completion of valuations, with a cor-
responding adjustment to the historic carrying amounts
of property, plant and equipment, or on recording of any
ﬁnite life intangible assets on acquisition, these adjust-
ments will impact the measurement of amortization
recorded in our consolidated income statement for periods
after the date of acquisition. We estimate that a $100 mil-
lion adjustment to the carrying amount of property,
plant and equipment of Placer Dome would result in
a corresponding adjustment to amortization expense in
the pro forma statement of income by approximately
$6 million for the year ended December 31, 2005. No pro
forma adjustments have been reﬂected for any changes
in deferred tax assets or liabilities that would result from
recording Placer Dome’s identiﬁable assets and liabilities
at fair value as the process of estimating the fair value
of identiﬁable assets and liabilities is not complete.

Pro Forma Adjustments
The unaudited pro forma consolidated statement
of income reﬂects the following adjustments as if the
acquisition of 100% of Placer Dome and subsequent
sale of certain operations to Goldcorp had occurred on
January 1, 2005:
(a) An increase in interest income by $5 million for

the year ended December 31, 2005 to reﬂect interest
income earned on the cash proceeds generated by
the assumed exercise of Placer Dome stock options.

(b) An increase in interest expense by $48 million for
the year ended December 31, 2005 to reﬂect the
interest costs (net of amounts that would have been
capitalized to Barrick development projects) relating
to the cash component of the Offer that will be

ﬁnanced through temporary credit facilities.
A decrease in interest expense by $49 million for
the year ended December 31, 2005 to reﬂect the
assumed avoidance of interest on the temporary
ﬁnancing for the cash component of the Offer
assuming the repayment of such ﬁnancing from
the receipt of cash proceeds from the sale of certain
Placer Dome operations to Goldcorp.

(c) A decrease in other expense by $21 million to de-
recognize non-recurring transaction costs recorded
by Placer Dome relating to the Barrick offer.
(d) A credit to tax expense of $10 million for the year
ended December 31, 2005 to reﬂect the tax effect
of the pro forma purchase adjustments in (a)
through (c).

(e) Adjustments to de-recognize the revenues and
expenses for the year ended December 31, 2005
relating to the Placer Dome operations that
will be sold to Goldcorp.

(f) Adjustments to de-recognize income tax expense for

the operations that will be sold to Goldcorp for the
year ended December 31, 2005 and to record the tax
effect of other pro forma adjustments relating to the
sale of certain Placer Dome operations to Goldcorp.

The unaudited pro forma consolidated balance sheet
reﬂects the following adjustments as if the acquisi-
tion of 100% of Placer Dome and subsequent sale of
certain operations to Goldcorp had occurred on
December 31, 2005:
(g) An increase in cash and equivalents by $152 million
with a corresponding increase in Placer Dome’s
capital stock, to reﬂect the proceeds received by
Placer Dome on exercise of 10.1 million in-the-
money Placer Dome stock options.

(h) A reduction in capitalized mining costs by $240 mil-
lion to de-recognize this asset of Placer Dome,
which will not be recorded as a separate identiﬁable
asset on acquisition.

(i) A reduction in other assets by $17 million to de-

recognize deferred debt issue costs of Placer Dome
that will not be recorded as a separate identiﬁable
asset on acquisition.

(j) The de-recognition of goodwill of $454 million that
was recorded by Placer Dome for previous business
combinations.

(k) An adjustment of $8,500 million to reﬂect the

unallocated purchase price.

Barrick Annual Report 2005

Notes to Consolidated Financial Statements (cid:1) 91

(l) An increase in accounts payable by $25 million
to record estimated transaction costs relating
to the acquisition of Placer Dome.

(m) An increase in short-term debt by $1,344 million
to reﬂect temporary ﬁnancing by Barrick for the
cash component of the Offer.

(n) An increase in other long-term obligations by
$1,051 million to record the estimated fair
value of Placer Dome’s metal sales contracts
at December 31, 2005.

(o) A reduction in capital stock of $2,707 million to
de-recognize Placer Dome’s historic capital stock
(including the adjustment for the assumed exercise
of in-the-money stock options).

(p) An increase in capital stock by $8,761 million

to record the value of common shares of Barrick
issued in respect of the assumed share component
of the Offer.

(q) An adjustment of $624 million to de-recognize
Placer Dome’s historic retained earnings.
(r) An adjustment of $12 million to de-recognize
Placer Dome’s historic accumulated other
comprehensive income.

(s) An adjustment of $73 million to de-recognize
Placer Dome’s historic contributed surplus.

(t) An increase in cash and equivalents by $1,500 mil-
lion to record the assumed cash receipts by
Barrick for the sale of the Placer Dome operations
to Goldcorp.

(u) A decrease in cash and equivalents by $1,344 million
and a corresponding decrease in short-term debt
to reﬂect the assumed repayment of the temporary
ﬁnancing used to fund the cash component of the
Offer upon the receipt of the cash proceeds from
Goldcorp relating to the sale of certain Placer
Dome operations.

(v) Adjustments to de-recognize the estimated carrying
amount of the Placer Dome assets and liabilities
included in the Placer Dome operations that will be
sold to Goldcorp.

(w) A reduction in the unallocated purchase price by

$1,279 million to adjust for the unallocated purchase
price relating to the sale of Placer Dome operations
to Goldcorp.

Pro Forma Earnings Per Share

For the year ended December 31, 2005
(millions of shares or US dollars, except per share data in dollars)

Actual weighted average number of Barrick

common shares outstanding

Assumed number of Barrick common shares

issued to Placer Dome shareholders

Pro forma weighted average number

of Barrick common shares outstanding

Pro forma net income

Pro forma earnings per share – basic

Pro forma weighted average number

of Barrick common shares outstanding

Dilutive effect of stock options

Pro forma weighted average number of Barrick

common shares outstanding – diluted

536

323

859

$ 489

$ 0.57

859
2

861

Pro forma earnings per share – diluted

$ 0.57

d) Summary Historical Placer Dome
Financial Information (Unaudited)

While there are publicly-traded shares of Placer Dome
outstanding, we are required to present certain summary
consolidated ﬁnancial information relating to Placer
Dome. This information has been prepared on a historical
cost basis in accordance with the US GAAP accounting
policies of Placer Dome, which in certain respects differ
from the accounting policies of Barrick.

For the years ended December 31

2005

2004

Income statement information
Total revenues
Net income

Balance sheet information
Current assets
Non-current assets
Current liabilities
Non-current liabilities

Net assets

$ 1,978
$ 1,888
$ 80 $ 284

$ 1,649
4,045
546
1,908

$ 1,636
3,908
453
1,927

$ 3,240

$ 3,164

e) Acquisition of Mineral Interest in Pakistan
On February 14, 2006, we entered into an agreement
with Antofagasta plc (“Antofagasta”) to acquire 50% of
Tethyan Copper Company’s (“Tethyan”) Reko Diq proj-
ect and associated mineral interests in Pakistan in the
event that Antofagasta is successful in its bid to acquire
Tethyan. Upon successful completion of the bid, we will
reimburse Antofagasta approximately $100 million in
cash for 50% of the acquisition, including the claw-back
right to be acquired/extinguished from BHP Billiton who
have a right to claw back a material interest in certain
Tethyan’s mineral interests.

92 (cid:1) Notes to Consolidated Financial Statements

Barrick Annual Report 2005

4 (cid:1) Segment Information

Our operations are managed on a regional basis.
Our four regional business units are North America,
Australia/Africa, South America and Russia/Central
Asia. Financial information for each of our mines and
our exploration group is reviewed regularly by our
chief operating decision maker.

Segment income for operating segments comprises

segment revenues less segment operating costs and
segment amortization in the format that internal manage-
ment reporting is presented to the chief operating
decision maker. For internal management reporting
purposes, we measure segment revenues and income

using the average consolidated realized gold selling price
for each period. Segment expenses represent our internal
presentation of costs incurred to produce gold at each
operating mine, and exclude the following costs that we
do not allocate to operating segments: environmental
remediation costs at closed mines; regional business
unit overhead; amortization of corporate assets; business
development costs; administration costs; impairments
of long-lived assets; other income/expense; and the costs
of ﬁnancing their activities. Segment expenses for devel-
opment projects and the exploration group represent
expensed exploration, mine development and mine
start-up costs.

Income Statement Information

Gold sales

Segment expenses1

Segment income (loss)

For the years ended December 31

2005

2004

2003

2005

2004

2003

2005

2004

2003

Goldstrike
Round Mountain
Eskay Creek
Other producing mines

$ 877 $ 745 $ 813
139
130
148

164
72
136

148
112
135

North America

1,249

1,140

1,230

$ 510 $ 478 $ 533
68
18
90

85
9
79

93
8
84

$ 217
54
38
32

$ 118
46
52
34

$ 120
51
65
33

695

101
66
108
97
9

381

87
62
5
6
–

160

109

651

109
69
96
60
1

335

72
12
5
4
3

709

341

250

269

88
62
74
55
–

279

79
29
18
–
–

126

56
33
(13)
37
(9)

104

114
157
(5)
(6)
–

260

(109)

54
42
5
27
(1)

45
48
(2)
24
–

127

115

72
(12)
(5)
(4)
(3)

(96)

87
(29)
(18)
–
–

(67)

177
109
129
165
–

580

273
248
–
–
–

521

–

183
122
135
101
–

541

251
–
–
–
–

251

–

153
120
109
91
–

473

332
–
–
–
–

332

–

Kalgoorlie
Plutonic
Bulyanhulu
Other producing mines
Cowal

Australia/Africa

Pierina
Lagunas Norte
Veladero
Pascua-Lama
Other

South America

Exploration group

Segment total

$ 2,350

$ 1,932

$ 2,035

$ 1,345

$ 1,178

$ 1,181

$ 596

$ 329

$ 357

1. In 2005, we revised our internal deﬁnition of segment expenses to include accretion expense. Segment information for all the years presented reﬂects this

change in the measurement of segment expenses.

Barrick Annual Report 2005

Notes to Consolidated Financial Statements (cid:1) 93

Geographic Information

Reconciliation of Segment Income

Assets

Gold sales

For the years ended December 31

2005

2004

2003

For the years ended
December 31

2005

2004

2005

2004

2003

United States
Canada

$ 1,991
531

$ 1,976
406

$ 1,073
176

911
229

970
260

North America

2,522

2,382

1,249

1,140

1,230

Australia
Tanzania

1,010
787

838
774

Australia/Africa

1,797

1,612

Peru
Argentina
Chile

675
1,001
222

811
645
120

South America

1,898

1,576

Other

645

717

401
179

580

521
–
–

521

–

406
135

541

251
–
–

251

–

364
109

473

332
–
–

332

–

$ 6,862

$ 6,287

$ 2,350

$ 1,932

$ 2,035

Segment income
Other expenses at producing mines
Amortization of corporate assets
Business development costs
Corporate administration
Equity in investees
Interest income
Interest expense
Impairment of long-lived assets
Other income (expense)

Income before income taxes

and other items

$ 596
–
(18)
(10)
(71)
(6)
38
(7)
–
(67)

$ 329
8
(27)
(18)
(71)
–
25
(19)
(139)
(43)

$ 357
(8)
(25)
(17)
(73)
–
31
(44)
(5)
6

$ 455

$ 45

$ 222

Asset Information

Segment assets

Amortization1

Segment capital expenditures

For the years ended December 31

2005

2004

2005

2004

2003

2005

2004

2003

Goldstrike
Round Mountain
Eskay Creek
East Archimedes
Other operating segments

$ 1,395
52
66
36
82

$ 1,290
67
91
–
91

$ 150
17
26
–
20

$ 149
17
51
–
22

$ 160
20
47
–
25

$ 162
1
2
35
18

North America

1,631

1,539

213

239

252

Plutonic
Kalgoorlie
Cowal
Bulyanhulu
Tulawaka
Other operating segments

106
354
412
574
80
93

92
277
130
566
70
89

Australia/Africa

1,619

1,224

Pierina
Lagunas Norte
Veladero
Pascua-Lama

South America

Segment total
Cash and equivalents
Other items not allocated to segments

236
384
783
389

269
220
443
286

1,792

1,218

5,042
1,037
783

3,981
1,398
908

10
20
–
34
15
16

72
29
–
–

101

409
–
18

11
20
–
34
–
14

107
–
–
–

107

425
–
27

10
20
–
37
–
12

166
–
–
–

166

497
–
25

218

20
12
258
37
8
18

353

20
141
266
98

525

1,096
–
8

$ 72
5
7
–
20

104

15
10
73
46
48
12

204

8
182
284
35

509

817
–
7

$ 51
6
5
–
18

44
14
24
36
1
21

140

17
4
68
9

318
–
4

Enterprise total

$ 6,862

$ 6,287

$ 427

$ 452

$ 522

$ 1,104

$ 824

$ 322

1. Includes amortization on assets under capital lease.

94 (cid:1) Notes to Consolidated Financial Statements

Barrick Annual Report 2005

5 (cid:1) Revenue and Gold Sales Contracts

For the years ended December 31

2005

2004

2003

Gold bullion sales
Spot market sales
Gold sales contracts

Concentrate sales

$ 1,940
300

$ 1,111
709

$ 426
1,504

2,240
110

1,820
112

1,930
105

$ 2,350

$ 1,932

$ 2,035

We record revenue when the following conditions are
met: persuasive evidence of an arrangement exists; deliv-
ery and transfer of title have occurred under the terms of
the arrangement; the price is ﬁxed or determinable; and
collectability is reasonably assured.

Bullion Sales
We record revenue from gold and silver bullion sales
at the time of physical delivery, which is also the date that
title to the gold or silver passes. The sales price is ﬁxed at
the delivery date based on either the terms of gold sales
contracts or the gold spot price. Incidental revenues from
the sale of by-products such as silver are classiﬁed within
cost of sales.

At December 31, 2005, we had ﬁxed-price gold sales

contracts with various customers for a total of 12.5 mil-
lion ounces of future gold production and ﬂoating-price
gold sales contracts for 0.7 million ounces. In 2005,
we allocated 6.5 million ounces of ﬁxed-price gold sales
contracts speciﬁcally to Pascua-Lama. The allocation
of these contracts will help reduce gold price risk at
Pascua-Lama and will help secure ﬁnancing for its
construction. In addition to the gold sales contracts
allocated to Pascua-Lama, we have 6 million ounces
of Corporate gold sales contracts that we intend to settle
through delivery of future gold production from our
operating mines and development projects, excluding
Pascua-Lama. The terms of the contracts are governed by
master trading agreements (MTAs) that we have in place
with the customers. The contracts have ﬁnal delivery
dates primarily over the next 10 years, but we have
the right to settle these contracts at any time over this
period. Contract prices are established at inception
through to an interim date. If we do not deliver
at this interim date, a new interim date is set. The price
for the new interim date is determined in accordance
with the MTAs which have contractually agreed price
adjustment mechanisms based on the market gold price.
The MTAs have both ﬁxed and ﬂoating price mechanisms.
The ﬁxed-price mechanism represents the market price
at the start date (or previous interim date) of the contract

plus a premium based on the difference between the
forward price of gold and the current market price. If at
an interim date we opt for a ﬂoating price, the ﬂoating
price represents the spot market price at the time of
delivery of gold adjusted based on the difference between
the previously ﬁxed price and the market gold price
at that interim date. The ﬁnal realized selling price under
a contract primarily depends upon the timing of the
actual future delivery date, the market price of gold at
the start of the contract and the actual amount of the
premium of the forward price of gold over the spot price
of gold for the periods that ﬁxed selling prices are set.
The mark-to-market value of the ﬁxed-price gold
sales contracts (at December 31, 2005) was negative
$1,453 million for the Pascua-Lama gold sales contracts
and negative $1,277 million for the Corporate gold
sales contracts.

The difference between the forward price of gold
and the current market price, referred to as contango,
can be expressed as a percentage that is closely correlated
to the difference between US dollar interest rates and
gold lease rates. Historically short-term gold lease rates
have been lower than longer-term rates. We use gold
lease rate swaps to achieve a more economically optimal
term structure for gold lease rates implicit in contango.
Under the swaps we receive a ﬁxed gold lease rate, and
pay a ﬂoating gold lease rate, on a notional 1 million
ounces of gold spread from 2005 to 2013. The swaps are
associated with ﬁxed-price gold sales contracts with
expected delivery dates beyond 2006. Lease rate swaps
are classiﬁed as non-hedge derivatives (note 16c) and
had a fair value of $66 million at December 31, 2005
(2004: $74 million).

Floating spot price sales contracts were previously
ﬁxed-price forward sales contracts for which, in accor-
dance with the terms of our MTAs, we have elected
to receive ﬂoating spot gold and silver prices, adjusted
based on the difference between the spot price and
the contract price at the time of such election. Floating
prices were elected for these contracts so that we could
economically regain spot gold price leverage under
the terms of delivery into these contracts. Furthermore,
ﬂoating price mechanisms were elected for these con-
tracts at a time when the then current market price was
higher than the ﬁxed price in the contract. The mark-to-
market value of these contracts (at December 31, 2005)
was negative $89 million, which equates to an average
reduction to the future spot sales price of approximately
$127 per ounce, when we deliver gold at spot prices
against these contracts.

At December 31, 2005, one customer made up 11% of
the ounces committed under gold bullion sales contracts.

Barrick Annual Report 2005

Notes to Consolidated Financial Statements (cid:1) 95

Concentrate Sales
Our Eskay Creek and Bulyanhulu mines produce
gold in concentrate form. Our Pascua-Lama mine will
also produce gold in concentrate form. Under the terms
of concentrate sales contracts with independent smelting
companies, gold sales prices are set on a speciﬁed future
date after shipment based on market prices. We record
revenues under these contracts at the time of shipment,
which is also when title passes to the smelting companies,
using forward market gold prices on the expected date
that ﬁnal sales prices will be ﬁxed. Variations between the
price recorded at the shipment date and the actual ﬁnal
price set under the smelting contracts are caused by
changes in market gold prices, and result in an embedded
derivative in the accounts receivable. The embedded
derivative is recorded at fair value each period until ﬁnal
settlement occurs, with changes in fair value classiﬁed as
a component of revenue. The notional amount typically
outstanding is between ten and ﬁfteen thousand ounces.

6 (cid:1) Cost of Sales

For the years ended December 31

2005

2004

2003

Cost of goods sold1
By-product revenues 2
Royalty expense
Mining taxes

$ 1,265
(132)
63
18

$ 1,128
(146)
53
12

$ 1,118
(114)
50
15

Royalties
Certain of our properties are subject to royalty arrange-
ments based on mineral production at the properties.
The most signiﬁcant royalties are at the Goldstrike and
Bulyanhulu mines and the Pascua-Lama and Veladero
projects. The primary type of royalty is a net smelter
return (NSR) royalty. Under this type of royalty we pay
the holder an amount calculated as the royalty percentage
multiplied by the value of gold production at market
gold prices less third-party smelting, reﬁning and trans-
portation costs. Most Goldstrike production is subject to
an NSR or net proﬁts interest (NPI) royalty. The highest
Goldstrike royalties are a 5% NSR and a 6% NPI royalty.
Bulyanhulu is subject to an NSR-type royalty of 3%.
Pascua-Lama gold production from the areas located in
Chile is subject to a gross proceeds sliding scale royalty,
ranging from 1.5% to 10%, and a 2% NSR on copper
production. For areas located in Argentina, Pascua-Lama
is subject to a 3% NSR on extraction of all gold, silver
and other minerals. Production at Veladero is subject to
a 3.75% NSR on extraction of all gold, silver and other
minerals. Production at Lagunas Norte is subject to a
2.51% NSR on extraction of all gold and other minerals.
Royalty expense is recorded at the time of sale of

gold production, measured using the applicable royalty
percentage for NSR royalties or estimates of NPI amounts.

$ 1,214

$ 1,047

$ 1,069

7 (cid:1) Other (Income) Expense

1. Cost of goods sold includes accretion expense at producing mines of

$11 million (2004: $11 million; 2003: $10 million). The cost of inventory
sold in the period reﬂects all components capitalized to inventory, except
that, for presentation purposes the component of inventory cost relating
to amortization of property, plant and equipment is classiﬁed in the
income statement under “amortization”. Some companies present this
amount under “cost of sales”. The amount presented in amortization
rather than cost of sales was $409 million in 2005; $425 million in 2004
and $497 million in 2003. In 2004, cost of goods sold includes the
reversal of $15 million of accrued costs on resolution of the Peruvian
tax assessment (see note 8).

2. We use silver sales contracts to sell a portion of silver produced as a

by-product. Silver sales contracts have similar delivery terms and pricing
mechanisms as gold sales contracts. At December 31, 2005, we had ﬁxed-
price commitments to deliver 14.8 million ounces of silver at an average
price of $5.92 per ounce and ﬂoating spot price silver sales contracts for
7.5 million ounces over periods primarily of up to 10 years. The mark-to-
market on silver sales contracts (at December 31, 2005) was negative
$52 million.

a) Impairment of Long-lived Assets

For the years ended December 31

2005

2004

2003

Eskay Creek1
Peruvian exploration properties2
Other

$ –
–
–

$ –

$ 58
67
14

$ 139

$ –
–
5

$ 5

1. The asset group that comprises the Eskay Creek mine was tested for
impairment effective December 31, 2004. The principal factors that
caused us to test this asset group for impairment included: downward
revisions to proven and probable reserves; the impact of the continued
strengthening of the C$ against the US$ and upward revisions to expected
asset retirement costs in the fourth quarter of 2004. An impairment
charge of $58 million was recorded, which represents the amount by
which the carrying amount of the asset group exceeds its estimated fair
value. Fair value was estimated using the method described in note 13c.

2. At the end of 2004, upon completion of the exploration program for

the year, we assessed the results and updated our future plans for various
exploration properties in Peru that were originally acquired through the
Arequipa acquisition in 1996. We concluded that the results and future
potential did not merit any further investment for these properties.
The assets were tested for impairment, and an impairment charge of
$67 million was recorded that reﬂects the amounts by which their carrying
amounts exceed their estimated fair values. The fair value of this group
of assets was judged to be minimal due to the unfavorable results of
exploration work on the properties.

96 (cid:1) Notes to Consolidated Financial Statements

Barrick Annual Report 2005

b) Other

For the years ended December 31

2005

2004

2003

Non-hedge derivative gains

(note 16c)

Gains on sale of mining property,

plant and equipment1

Gains on sale of investments

(note 11)

Gain on Kabanga transaction
Environmental remediation costs2
Accretion expense at closed

mines (note 17)

Impairment charges on
investments (note 11)
World Gold Council fees
Inmet settlement
Legal costs for major litigation
Currency translation (gains) losses
Pension expense (note 23b)
Peruvian tax assessment
Severance at closed mines
Other items3

$ (6)

$ (5)

$ (71)

(5)

(36)

(17)
(15)
28

16
10
–
8
(3)
1
–
–
40

(6)
–
36

5
9
–
5
1
–
(6)
4
29

(4)
–
48

11
10
16
3
(2)
4
–
–
8

$ 67

$ 43

$ (6)

1. In 2005, we sold some land positions in Australia. In 2004 we sold

various mining properties, including the Holt-McDermott mine in Canada
and certain land positions around our inactive mine sites in the United
States. In 2003 we sold various mining properties, including several land
positions around inactive mine sites in the United States, as well as the
East Malartic Mill and Bousquet mine in Canada. The majority of these
land positions were fully amortized in prior years and therefore any
proceeds generate gains on sale, before selling costs and taxes.

2. Includes costs at development projects and closed mines and changes

in the expected costs of AROs at closed mines.

3. Includes certain costs incurred at regional business units that are not

direct or indirect production costs.

Kabanga Transaction
In April 2005, we ﬁnalized a joint-venture agreement with
Falconbridge Limited (“Falconbridge”) for the Kabanga
nickel deposit and related concessions located in Tanzania.
Under the terms of the agreement, Falconbridge acquired
a 50% indirect joint venture interest for $15 million cash
and a funding commitment and has agreed to be the
operator of the joint venture. On closing of the transac-
tion with Falconbridge we recorded a gain of $15 million.
Over the next several years, Falconbridge will fund

and conduct a further $50 million work plan that will
include additional exploration and inﬁll drilling, and
technical work to update the resource model for Kabanga

and bring the project towards feasibility. Falconbridge
has initiated the establishment of a dedicated team in
Tanzania to coordinate and advance the work plan. After
expenditures of $50 million, Falconbridge will decide
on whether to proceed with the project. If Falconbridge
proceeds with the project, they will fund the next
$95 million of any project development expenditures
to advance the Kabanga project. Thereafter, Falconbridge
and Barrick will share equally in joint-venture revenues
and expenditures. Until Falconbridge has fully funded its
commitment under the agreement, we are not obligated
to share in any revenues and expenditures and none of
the expenditures on the project will be recorded in
our ﬁnancial statements.

Environmental Remediation Costs
During the production phases of a mine, we incur
and expense the cost of various activities connected with
environmental aspects of normal operations, including
compliance with and monitoring of environmental regu-
lations; disposal of hazardous waste produced from
normal operations; and operation of equipment designed
to reduce or eliminate environmental effects. In limited
circumstances, costs to acquire and install plant and
equipment are capitalized during the production phase
of a mine if the costs are expected to mitigate risk or
prevent future environmental contamination from
normal operations.

When a contingent loss arises from the improper

use of an asset, a loss accrual is recorded if the loss is
probable and reasonably estimable. Amounts recorded
are measured on an undiscounted basis, and adjusted
as further information develops or if circumstances
change. Recoveries of environmental remediation costs
from other parties are recorded as assets when receipt
is deemed probable.

Inmet Settlement
In November 2003, we paid Inmet C$111 million
(US$86 million), in full settlement of the Inmet
litigation. The settlement resulted in an expense of
US$14 million in fourth quarter 2003, combined with
post-judgment interest of $2 million in the ﬁrst nine
months of 2003.

Barrick Annual Report 2005

Notes to Consolidated Financial Statements (cid:1) 97

8 (cid:1) Income Tax Expense (Recovery)

For the years ended December 31

2005

2004

2003

Current

Canada
International

Deferred

Canada
International

Income tax expense before

elements below1

Outcome of tax uncertainties
Change in tax status in Australia
Net release of beginning of year

$ (3)
93

$ 19
24

$ 90

$ 43

$ 40
14

$ 54

$ (15)
22

$ (26)
7

$ (32)
45

$ 7

$ (19)

$ 13

$ 97
–
(5)

$ 24
(141)
(81)

$ 67
–
–

valuation allowances

(32)

(5)

(62)

Total expense (recovery)

$ 60

$ (203)

$ 5

1. All amounts are deferred tax items except for a $21 million portion

of the $141 million recovery on resolution of the Peruvian tax assessment
in 2004, which is a current tax item.

Outcome of Tax Uncertainties
Peruvian Tax Assessment
On September 30, 2004, the Tax Court of Peru issued
a decision in our favor in the matter of our appeal of a
2002 income tax assessment of $32 million, excluding
interest and penalties. The 2002 income tax assessment
related to a tax audit of our Pierina Mine for the 1999
and 2000 ﬁscal years. The assessment mainly related to
the validity of a revaluation of the Pierina mining con-
cession, which affects its tax basis. Under the valuation
proposed by the Peruvian tax agency, SUNAT, the
tax basis of the Pierina mining concession would have
changed from what we previously assumed with a resulting
increase in current and deferred income taxes. The
full life-of-mine effect on current and deferred income
tax liabilities totaling $141 million was fully recorded
at December 31, 2002, as well as other related costs
of about $21 million ($15 million post-tax).

In January 2005, we received conﬁrmation in writing
that there would be no appeal of the September 30, 2004
Tax Court of Peru decision. The conﬁrmation concluded
the administrative and judicial appeals process with
resolution in Barrick’s favor. In 2004, we recorded
a $141 million reduction in current and deferred income
tax liabilities and a $21 million reduction in other

accrued costs in 2004, $15 million of which is classiﬁed
in cost of sales and $6 million of which is classiﬁed in
other (income) expense. Notwithstanding the favorable
Tax Court decision we received in 2004 on the 1999 to
2000 revaluation matter, on audit, SUNAT has reassessed
us on the same issue for 2001 to 2003. We and our
advisors believe that the audit reassessment has no merit,
that we will prevail, and accordingly no provision has
been booked.

Changes in Tax Status in Australia
A tax law was enacted in Australia in 2002 that allows
wholly owned groups of companies resident in Australia
to elect to be treated as a single entity and to ﬁle consoli-
dated tax returns. This regime is elective and the election
is irrevocable. Under certain circumstances, the rules
governing the election allow for a choice to reset the tax
cost basis of certain assets within a consolidated group.
Our election, which was effective for our 2004 ﬁscal year,
resulted in an estimated upward revaluation of the tax
basis of our assets in Australia, by $110 million, with
a corresponding $33 million adjustment to deferred taxes.
In 2005, based on additional facts and reﬁnements, the
adjustment was increased by $5 million.

Also in 2004, we ﬁled an election to use the
US dollar as the functional currency for Australian
tax calculations and tax returns, whereas previously
the Australian dollar was used. Prior to this election,
the favorable impact of changes in the tax basis of
non-monetary assets caused by changes in the US$:A$
exchange rate were not recorded, as their realization
was not certain. The election in 2004 created certainty
about the realization of these favorable tax temporary
differences and resulted in our recognition of these as
deferred tax assets amounting to $48 million. The impact
of the change in tax status was to increase the amount
of deductible temporary differences relating to non-
monetary assets by $48 million.

Release of Beginning of Year Valuation Allowances
In 2005, we released valuation allowances totaling
$31 million in Argentina, relating to the effect of the
higher gold price environment and the anticipated
commencement of sales in 2006. We released valuation
allowances of $2 million in Canada reﬂecting utilization
of capital losses.

98 (cid:1) Notes to Consolidated Financial Statements

Barrick Annual Report 2005

In 2004, we released valuation allowances totaling

9 (cid:1) Earnings per Share

$5 million relating to the consolidated tax return election
in Australia. Valuation allowances released in 2003
mainly included: $21 million in North America following
a corporate reorganization of certain subsidiaries that
enabled us to utilize certain previously unrecognized tax
assets; $16 million in Australia realized in 2003 due to
an increase in taxable income from higher gold prices;
and $15 million in Argentina after the approval to begin
construction of our new Veladero mine and classiﬁcation
of mineralization as a proven and probable reserve.

For the years ended December 31
($ millions, except shares in millions
and per share amounts in dollars)

Income before cumulative
effect of changes in
accounting principles
Cumulative effect of changes
in accounting principles

Income available to common

2005

2004

2003

$ 395

$ 248

$ 217

–

(17)

stockholders

$ 401

$ 248

$ 200

Reconciliation to Canadian Federal Rate

For the years ended December 31

2005

2004

2003

Weighted average shares

outstanding
Basic
Effect of dilutive stock options

$ 173

$ 17

$ 84

Diluted

At 38% statutory federal rate
Increase (decrease) due to:

Allowances and special tax

deductions1

Impact of foreign tax rates 2
Expenses not tax-deductible
Release of beginning of year

valuation allowances

Impact of changes in tax status

in Australia

Valuation allowances set up

against current year
tax losses

Outcome of tax uncertainties
Mining taxes
Other items

(92)
(51)
9

(32)

(70)
(5)
10

(47)
(42)
11

(5)

(62)

(5)

(81)

–

59
–
1
(2)

65
(141)
5
2

53
–
9
(1)

Income tax expense (recovery)

$ 60

$ (203)

$ 5

1. We are able to claim certain allowances and tax deductions unique

to extractive industries that result in a lower effective tax rate.
2. We operate in multiple foreign tax jurisdictions that have tax rates

different than the Canadian federal rate.

Income Tax Returns
Our income tax returns for the major jurisdictions
where we operate have been fully examined through the
following years: Canada – 2001, United States – 2001,
and Peru – 2003.

Earnings per share

Income before cumulative
effect of changes in
accounting principles

Basic
Diluted
Net income
Basic
Diluted

536
2

538

533
1

534

539
–

539

$ 0.74
$ 0.73

$ 0.47
$ 0.46

$ 0.40
$ 0.40

$ 0.75
$ 0.75

$ 0.47
$ 0.46

$ 0.37
$ 0.37

Earnings per share is computed by dividing net income
available to common shareholders by the weighted
average number of common shares outstanding for the
period. Diluted earnings per share reﬂects the potential
dilution that could occur if additional common shares
are assumed to be issued under securities that entitle
their holders to obtain common shares in the future.
The number of additional shares for inclusion in diluted
earnings per share calculations is determined using the
treasury stock method, whereby stock options, whose
exercise price is less than the average market price
of our common shares, are assumed to be exercised and
the proceeds are used to repurchase common shares at
the average market price for the period. The incremental
number of common shares issued under stock options
and repurchased from proceeds is included in the
calculation of diluted earnings per share.

On January 19, 2006 and February 3, 2006, together,

we issued 304 million shares to acquire a 94% interest
in the outstanding common shares of Placer Dome. We
intend to acquire the remaining 6% interest through
a compulsory acquisition procedure.

Barrick Annual Report 2005

Notes to Consolidated Financial Statements (cid:1) 99

10 (cid:1) Operating Cash Flow – Other Items

For the years ended December 31

2005

2004

2003

Income statement items:
Currency translation

(gains) losses

(Gains) losses on investments

(note 11)

Gain on Kabanga transaction
Impairment charges
on investments

Accounting changes (note 2e)
Equity in investee
Accretion expense (note 17)
Non-hedge derivative gains

(note 16c)

Inmet litigation (note 7b)
ARO charges at closed

mines (note 17)

Amortization of debt issue costs
Write-downs of inventory (note 12)

Changes in:

Accounts receivable
Inventories
Capitalized mining costs
Goods and services taxes
Accounts payable
Other assets and liabilities

Other items

$ (3)

$ 1

$ 5

(17)
(15)

16
(6)
(6)
21

(6)
–

15
2
15

4
(151)
–
(16)
80
–
–

(6)
–

5
–
–
18

(5)
–

22
3
9

(2)
(51)
9
(68)
4
(8)
–

(4)
–

11
17
–
17

(71)
16

10
1
3

3
(1)
37
(14)
4
(75)
4

Other net operating activities

$ (67)

$ (69)

$ (37)

Available-for-sale securities are recorded at fair value
with unrealized gains and losses recorded in other
comprehensive income (“OCI”). Realized gains and
losses are recorded in earnings when investments mature
or on sale, calculated using the average cost of securities
sold. If the fair value of an investment declines below its
carrying amount, we undertake an assessment of whether
the impairment is other-than-temporary. We consider
all relevant facts or circumstances in this assessment,
particularly: the length of time and extent to which fair
value has been less than the carrying amount; the ﬁnan-
cial condition and near-term prospects of the investee,
including any speciﬁc events that have impacted its fair
value; both positive and negative evidence that the carry-
ing amount is recoverable within a reasonable period of
time; and our ability and intent to hold the investment
for a reasonable period of time sufﬁcient for an expected
recovery of the fair value up to or beyond the carrying
amount. We record in earnings any unrealized declines
in fair value judged to be other than temporary. Total
proceeds from the sale of investments were $10 million
in 2005 (2004: $9 million; 2003: $8 million).

Gains (Losses) on Investments
Recorded in Earnings

For the years ended December 31

2005

2004

2003

Realized on sale

Gains
Losses

Impairment charges

$ (30)
(80)
(20)
(112)

$ (33)
(45)
(22)
(57)

$ (40)
(111)
(23)
(48)

$ 17
–

17
(16)

$ 6
–

6
(5)

$ 1

$ 5
(1)

4
(11)

$ (7)

Operating cash ﬂow includes
net receipts (payments) for:
Asset retirement obligations
Income taxes
Pension plan contributions
Interest

11 (cid:1) Investments

Available-for-sale Securities

At December 31

2005

2004

Fair Gains in
OCI

value

Fair Gains in
OCI

value

Beneﬁt plans:1

Fixed-income
securities
Equity securities
Other investments:
Equity securities2

Restricted cash

$ 4
17

38
3

$ –
1

11
–

$ 11
19

29
2

$ –
10

11
–

$ 62

$ 12

$ 61

$ 21

1. Under various beneﬁt plans for certain former Homestake executives,

a portfolio of marketable ﬁxed-income and equity securities are held in
a rabbi trust that is used to fund obligations under the plans.

2. At December 31, 2005, there were no available-for-sale securities in an

unrealized loss position.

Investment in Celtic Resources Holdings PLC (“Celtic”)
On January 5, 2005, we completed a subscription
for 3,688,191 units of Celtic for a price of $7.562 per
unit for a total cost of $30 million. Each unit consisted
of one ordinary share of Celtic and one-half of one share
purchase warrant. On June 1, 2005, the number of war-
rants held increased under the terms of the subscription
agreement by 922,048 warrants to 2,766,143 warrants.
Each whole warrant entitles us to acquire one ordinary
share of Celtic for $7.562, expiring on December 31, 2007.
We allocated $25 million to the ordinary shares and
$5 million to the share purchase warrants based on their
relative fair values at acquisition. At December 31, 2005,
we held a 9% combined direct and indirect interest
in Celtic’s outstanding common shares. The investment
in common shares is classiﬁed as an available-for-sale
security. In the second half of 2005, the fair value of the

100 (cid:1) Notes to Consolidated Financial Statements

Barrick Annual Report 2005

investment in common shares declined below cost and
at the end of 2005 we concluded that the impairment
was “other-than-temporary” and recorded a $12 million
impairment charge. We concluded that the share pur-
chase warrants are derivative instruments as deﬁned by
FAS 133. The warrants, which are classiﬁed as non-hedge
derivatives, are recorded at their estimated fair value in
the balance sheet with changes in fair value recorded
in non-hedge derivative gains/losses. The fair value of
the share purchase warrants was $0.5 million at
December 31, 2005.

At the time of the initial subscription, Celtic granted
us the right to acquire 50% of any interest in any mineral
property in Kazakhstan that Celtic acquires in the future
for a period of 12 months after any such acquisition for
an amount equal to 50% of the cost to Celtic of its inter-
est in the mineral property. No such rights have been
exercised since the initial subscription.

Equity Method Investments

2005

2004

Fair Carrying
value1 amount

Highland Gold Mining PLC
Diamondex Resources Ltd.

$ 134
6

$ 131
7

$ 140

$ 138

$ 75
–

$ 75

$ 86
–

$ 86

1. Based on the closing market stock price.

Under the equity method we record our equity share
of the income or loss of equity investees each period.
On acquisition of an equity investment the underlying
identiﬁable assets and liabilities of an equity investee are
recorded at fair value and the income or loss of equity
investees is based on these fair values. If the cost of any
equity investment exceeds the total amount of the fair
value of identiﬁable assets and liabilities, any excess is
accounted for in a manner similar to goodwill, with the
exception that an annual goodwill impairment test is
not required. The carrying amount of each investment
in an equity investee is evaluated for impairment using
the same method as an available-for-sale security.

Highland Gold Mining PLC (“Highland”)
We hold a 20% interest in Highland that was acquired
for cash in three tranches: 11.1 million common shares
for a cost of $46 million in 2003; 9.3 million common
shares for a cost of $40 million in 2004; and 11 million
common shares in 2005 for a cost of $50 million.

Following the increase in our ownership to 20% in
2005, we re-evaluated the accounting method used for
this investment and concluded that the equity method is
the most appropriate. Previously the investment was
classiﬁed as an available-for-sale security. We have
recorded our equity share of income or loss of Highland
each period based on our actual ownership interest for
the period from fourth quarter 2003. Under a transition
to equity accounting, US GAAP requires ﬁnancial state-
ments for prior periods to be revised to reﬂect the equity
accounting treatment.

The difference between the cost of our investment

in Highland and the underlying historic cost of net
assets was $108 million at April 30, 2005. After ﬁnalizing
valuations for the assets and liabilities of Highland in
fourth quarter 2005, the difference between the cost
of our investment and the underlying fair value of assets
and liabilities, representing goodwill, was $85 million.
On completion of the valuations, we revised our equity
pick up to reﬂect accounting based on the fair values
of Highland’s assets and liabilities.

We have participation agreements with Highland,
under which we have the right to participate for up to
50% in any acquisition made by Highland in Russia,
with a similar right for Highland on any acquisition
made by us in certain regions in Russia, excluding
Irkutsk. We have a right of ﬁrst refusal with respect
to any third-party investment in Highland’s Mayskoye
property in the Chukotka region, Russia, and we plan to
pursue discussions with Highland regarding Mayskoye.

On June 29, 2005, we entered into a purchase agree-
ment with Highland pursuant to which we purchased a
50% interest in the Taseevskoye deposit (“Taseevskoye”).
The purchase price was $13 million. Highland currently
holds Taseevskoye through a subsidiary that owns other
assets and liabilities. Highland has agreed to restructure
the ownership of Taseevskoye into a separate Russian
company. In connection with the purchase, Highland
issued to us a warrant which entitles us to apply the
purchase price as payment for an equivalent number
of Highland shares, based on a price of $3.10 per share,
subject to adjustment under certain circumstances,
if Highland does not restructure the ownership
of Taseevskoye prior to June 1, 2006.

During the period between the signing of the
Taseevskoye purchase agreement and the time that the
ownership of Taseevskoye is restructured, we agreed to
fund our proportionate share of any expenditures relating
to Taseevskoye. Highland agreed to deliver to us a warrant

Barrick Annual Report 2005

Notes to Consolidated Financial Statements (cid:1) 101

that entitles us to apply the amount of interim expen-
ditures paid by us as payment for an equivalent number
of Highland shares based on a price of $3.10 per share,
subject to adjustment in certain circumstances, if
Highland does not complete the restructuring by June 1,
2006. By December 31, 2005, we had funded interim
expenditures totaling $0.5 million, and we had received
a warrant for the same amount.

Diamondex Resources Limited (“Diamondex”)
We completed a subscription for 11,111,111 units of
Diamondex for $8 million in 2005. Each unit consists
of one ordinary share of Diamondex and one share pur-
chase warrant. We hold a 14% interest in the outstanding
common shares of Diamondex (25% assuming exercise
of the share purchase warrants). We allocated the cost as
follows: $7 million to the ordinary shares and $1 million
to the share purchase warrants. We record our equity share
of the income or loss of Diamondex each period based
on our total 14% interest in outstanding common shares.

12 (cid:1) Accounts Receivable, Inventories

and Other Current Assets

At December 31

Accounts receivable

Amounts due from concentrate sales
Other receivables

Inventories

Ore in stockpiles1
Ore on leach pads
Gold in process
Gold doré/bullion
Gold concentrate
Mine operating supplies

Non-current ore in stockpiles2

Other current assets

Derivative assets (note 16c)
Taxes recoverable
Prepaid expenses
Other

2005

2004

$ 18
36

$ 29
29

$ 54

$ 58

$ 360
34
47
32
47
133

$ 107
17
33
20
21
82

653
(251)

280
(65)

$ 402

$ 215

$ 128
101
23
3

$ 165
104
17
2

$ 255

$ 288

1. Effective January 1, 2005, an amount of $232 million was reclassiﬁed

to ore in stockpiles from capitalized mining costs in connection with our
adoption of EITF 04-6. See note 2e.

2. Ore that we do not expect to process in the next 12 months is classiﬁed

in non-current ore in stockpiles.

Inventories
Material extracted from our mines is classiﬁed as either
ore or waste. Ore represents material that can be mined,
processed into a saleable form, and sold at a proﬁt. Ore
is recorded as an asset that is classiﬁed within inventory
at the point it is extracted from the mine. Ore is accumu-
lated in stockpiles that are subsequently processed into
gold in a saleable form under a mine plan that takes into
consideration optimal scheduling of production of our
reserves, present plant capacity, and the market price of
gold. Gold in process represents gold in the processing
circuit that has not completed the production process,
and is not yet in a saleable form.

Stockpiles are measured by estimating the number

of tons added and removed from the stockpile, the num-
ber of contained ounces or pounds (based on assay data)
and the estimated metallurgical recovery rates (based on
the expected processing method). Stockpile ore tonnages
are veriﬁed by periodic surveys. Costs are allocated to
a stockpile based on relative values of material stockpiled
and processed using current mining costs incurred up
to the point of stockpiling the ore, including applicable
overhead, depreciation, depletion and amortization
relating to mining operations, and removed at each
stockpile’s average cost per recoverable unit.

The recovery of gold from certain oxide ores is
achieved through the heap leaching process. Our Pierina,
Lagunas Norte, and Veladero mines all are using a heap
leaching process. Under this method, ore is placed on
leach pads where it is treated with a chemical solution,
which dissolves the gold contained in the ore. The
resulting “pregnant” solution is further processed in a
plant where the gold is recovered. For accounting pur-
poses, costs are added to ore on leach pads based on
current mining costs, including applicable depreciation,
depletion and amortization relating to mining opera-
tions. Costs are removed from ore on leach pads as
ounces are recovered based on the average cost per
recoverable ounce of gold on the leach pad.

Estimates of recoverable gold on the leach pads are
calculated from the quantities of ore placed on the leach
pads (measured tons added to the leach pads), the grade
of ore placed on the leach pads (based on assay data) and
a recovery percentage (based on ore type). In general,
leach pads recover between 50% and 95% of the recover-
able ounces in the ﬁrst year of leaching, declining each
year thereafter until the leaching process is complete.

102 (cid:1) Notes to Consolidated Financial Statements

Barrick Annual Report 2005

Although the quantities of recoverable gold placed

on the leach pads are reconciled by comparing the
grades of ore placed on pads to the quantities of gold
actually recovered (metallurgical balancing), the nature
of the leaching process inherently limits the ability to
precisely monitor inventory levels. As a result, the metal-
lurgical balancing process is constantly monitored and
estimates are reﬁned based on actual results over time.
Historically, our operating results have not been materi-
ally impacted by variations between the estimated and
actual recoverable quantities of gold on its leach pads.
At December 31, 2005 and 2004, the weighted-average
cost per recoverable ounce of gold on leach pads was $164
and $153 per ounce (unaudited), respectively. Variations
between actual and estimated quantities resulting from
changes in assumptions and estimates that do not result
in write-downs to net realizable value are accounted for
on a prospective basis.

The ultimate recovery of gold from a leach pad will

not be known until the leaching process is concluded.
Based on current mine plans, we expect to place the last
ton of ore on our current leach pads at dates ranging
from 2007 to 2021 (unaudited). Including the estimated
time required for residual leaching, rinsing and reclama-
tion activities, we expect that our leaching operations
will terminate within approximately six years (unaudited)
following the date that the last ton of ore is placed
on the leach pad.

The current portion of ore inventory on leach pads

is determined based on estimates of the quantities of
gold at each balance sheet date that we expect to recover
during the next 12 months.

Signiﬁcant Ore in Stockpiles

At December 31

Goldstrike

Ore that requires roasting
Ore that requires autoclaving

Kalgoorlie

2005

2004

$ 182
98
53

$ 23
17
46

At Goldstrike, we expect to fully process the auto-

clave stockpile by 2008 (unaudited) and the roaster
stockpile by 2023 (unaudited). At Kalgoorlie, we expect
to fully process the stockpile by 2016 (unaudited).

We record gold in process, gold doré and gold in
concentrate form at average cost, less provisions required
to reduce inventory to market value. Average cost is
calculated based on the cost of inventory at the begin-
ning of a period, plus the cost of inventory produced
in a period. Costs capitalized to inventory include direct
and indirect materials and consumables; direct labor;
repairs and maintenance; utilities; amortization of prop-
erty, plant and equipment; stripping costs; and local
mine administrative expenses. Costs are removed from
inventory and recorded in cost of sales and amortization
expense based on the average cost per ounce of gold
in inventory.

Mine operating supplies are recorded at purchase
cost, less provisions to reduce slow-moving and obsolete
supplies to market value. We recorded provisions to
reduce the cost of slow moving and obsolete supplies
inventory to market value as follows: 2005 – $12 million
in cost of sales and $3 million in expensed development
costs; 2004 – $9 million in cost of sales; 2003 – $3 million
in cost of sales.

13 (cid:1) Property, Plant and Equipment

At December 31

2005

2004

Acquired mineral properties and capitalized

mine development costs

Buildings, plant and equipment1

Accumulated amortization2

$ 4,792
4,124

$ 4,489
3,289

8,916
(4,770)

7,778
(4,387)

$ 4,146

$ 3,391

1. Includes $122 million (2004: $44 million) of assets under capital leases.
2. Includes $18 million (2004: $1 million) of accumulated amortization for

assets under capital leases.

a) Acquired Mineral Properties and Capitalized

Mine Development Costs

Exploration and Development Stage Properties
We capitalize the cost of acquisition of land and mineral
rights. The cost is allocated between proven and probable
reserves and mineralization not considered proven and
probable reserves at the date of acquisition, based on
relative fair values. If we later establish that some miner-
alization meets the deﬁnition of proven and probable
gold reserves, we classify a portion of the capitalized
acquisition cost as relating to reserves.

Barrick Annual Report 2005

Notes to Consolidated Financial Statements (cid:1) 103

After acquisition, various factors can affect the
recoverability of the capitalized cost of land and mineral
rights, particularly the results of exploration drilling. The
length of time between the acquisition of land and min-
eral rights and when we undertake exploration work
varies based on the prioritization of our exploration proj-
ects and the size of our exploration budget. If we
conclude that the carrying amount of land and mineral
rights is impaired, we reduce this carrying amount to
estimated fair value through an impairment charge.

We capitalize costs incurred at development projects

that meet the deﬁnition of an asset after mineralization
is classiﬁed as proven and probable gold reserves
(as deﬁned by United States reporting standards). Before
classifying mineralization as proven and probable gold
reserves, costs incurred at development projects are con-
sidered exploration costs and are expensed as incurred.
Effective May 1, 2004, we determined that mineralization
at Lagunas Norte met the deﬁnition of proven and
probable reserves for United States reporting purposes.
Following this determination, we began capitalizing costs
that meet the deﬁnition of an asset at Lagunas Norte
prospectively for future periods. At new mines, the cost
of start-up activities such as recruiting and training is
expensed as incurred.

At December 31, 2005 the following assets were
in an exploration, development or construction stage and
amortization of the capitalized costs had not yet begun.

Carrying
amount at
December 31,
2005

Targeted timing
of production
start-up
(unaudited)

$ 406
35
340
102

$ 883

2006
2007
2009
–

Development projects

Cowal
East Archimedes
Pascua-Lama

Buzwagi exploration project

Total

In 2005, amortization of property, plant and equipment
at our Tulawaka, Lagunas Norte, and our Veladero mines
began after the mines moved from construction into the
production phase. Amortization also began in 2005 at the
Nevada Power Plant that was built to supply power for
the Goldstrike mine as it moved from construction into
the production phase.

Interest cost is considered an element of the historical

cost of an asset when a period of time is necessary
to prepare it for its intended use. We capitalize interest
costs to assets under development or construction while
activities are in progress. We stop capitalizing interest
costs when construction of an asset is substantially
complete and it is ready for its intended use. We measure
the amount capitalized based on cumulative capitalized
costs, exclusive of the impact, if any, of impairment
charges on the carrying amount of an asset.

Producing Mines
We start amortizing capitalized mineral property
acquisition and mine development costs when pro-
duction begins. Amortization is calculated using the
“units-of-production” method, where the numerator
is the number of ounces produced and the denominator
is the estimated recoverable ounces of gold contained
in proven and probable reserves.

During production at underground mines, we incur
development costs to build new shafts, drifts and ramps
that will enable us to physically access ore underground.
The time over which we will continue to incur these costs
depends on the mine life, and in some cases could be up
to 25 years. These underground development costs are
capitalized as incurred. Costs incurred and capitalized to
enable access to speciﬁc ore blocks or areas of the mine,
and which only provide an economic beneﬁt over the
period of mining that ore block or area, are attributed to
earnings using the units-of-production method where
the denominator is estimated recoverable ounces of gold
contained in proven and probable reserves within that
ore block or area. If capitalized underground develop-
ment costs provide an economic beneﬁt over the entire
mine life, the costs are attributed to earnings using the
units-of-production method, where the denominator is
the estimated recoverable ounces of gold contained in
total accessible proven and probable reserves.

104 (cid:1) Notes to Consolidated Financial Statements

Barrick Annual Report 2005

b) Buildings, Plant and Equipment
We record buildings, plant and equipment at cost.
We capitalize costs that extend the productive capacity
or useful economic life of an asset. Costs incurred that
do not extend the productive capacity or useful economic
life of an asset are considered repairs and maintenance
and expensed as incurred. We amortize the capitalized
cost of assets less any estimated residual value, using the
straight-line method over the estimated useful economic
life of the asset based on their expected use in our
business. The longest estimated useful economic life for
buildings and equipment at ore processing facilities is
25 years and for mining equipment is 15 years.

In the normal course of our business, we have
entered into certain leasing arrangements whose condi-
tions meet the criteria for the leases to be classiﬁed as
capital leases. For capital leases, we record an asset and
an obligation at an amount equal to the present value at
the beginning of the lease term of minimum lease pay-
ments over the lease term. In the case of all our leasing
arrangements, there is transfer of ownership of the leased
assets to us at the end of the lease term and therefore we
amortize these assets on a basis consistent with our other
owned assets.

c) Impairment Evaluations – Operating Mines

and Development Projects

We review and test the carrying amounts of assets when
events or changes in circumstances suggest that the carry-
ing amount may not be recoverable. We group assets
at the lowest level for which identiﬁable cash ﬂows are
largely independent of the cash ﬂows of other assets and
liabilities. For operating mines and development projects,
all assets are included in one group. If there are indica-
tions that an impairment may have occurred, we prepare
estimates of expected future cash ﬂows for each group of
assets. Expected future cash ﬂows are based on a proba-
bility-weighted approach applied to potential outcomes.
Estimates of expected future cash ﬂow reﬂect:
(cid:1) Estimated sales proceeds from the production and sale
of recoverable ounces of gold contained in proven and
probable reserves;

(cid:1) Expected future commodity prices and currency
exchange rates (considering historical and current
prices, price trends and related factors);

(cid:1) Expected future operating costs and capital expendi-
tures to produce proven and probable gold reserves
based on mine plans that assume current plant capacity,
and exclude the impact of inﬂation;

(cid:1) Expected cash ﬂows associated with value beyond
proven and probable reserves, which includes the
expected cash outﬂows required to develop and extract
the value beyond proven and probable reserves; and
(cid:1) Environmental remediation costs excluded from the

measurement of asset retirement obligations.

We record a reduction of a group of assets to fair

value as a charge to earnings if expected future cash
ﬂows are less than the carrying amount. We estimate
fair value by discounting the expected future cash ﬂows
using a discount factor that reﬂects the risk-free rate
of interest for a term consistent with the period of
expected cash ﬂows.

d) Capital Commitments
At December 31, 2005, we had capital commitments of
$85 million that principally relate to construction activi-
ties at our development projects.

14 (cid:1) Other Assets

At December 31

Derivative assets (note 16c)
Goods and services taxes recoverable
Deferred income tax assets (note 19)
Debt issue costs
Deferred share-based compensation (note 22b)
Other

2005

2004

$ 177
46
141
35
13
105

$ 257
50
97
38
5
52

$ 517

$ 499

Debt Issue Costs
Additions to debt issue costs in 2005 of $4 million prin-
cipally relate to new debt ﬁnancings put in place during
the year. Amortization of debt issue costs is calculated
using the interest method over the term of each debt
obligation, and classiﬁed as a component of interest cost.

15 (cid:1) Other Current Liabilities

At December 31

2005

2004

Asset retirement obligations (note 17)
Derivative liabilities (note 16c)
Post-retirement beneﬁts (note 23)
Deferred revenue
Other

$ 37
42
6
8
1

$ 94

$ 33
11
2
5
3

$ 54

Barrick Annual Report 2005

Notes to Consolidated Financial Statements (cid:1) 105

16 (cid:1) Financial Instruments

Financial instruments include cash; evidence of owner-
ship in an entity; or a contract that imposes an obligation
on one party and conveys a right to a second entity
to deliver/receive cash or another ﬁnancial instrument.
Information on certain types of ﬁnancial instruments

is included elsewhere in these ﬁnancial statements
as follows: accounts receivable – note 12; investments –
note 11; restricted share units – note 22b.

a) Cash and Equivalents
Cash and equivalents include cash, term deposits and
treasury bills with original maturities of less than 90 days.

b) Long-Term Debt

2005

2004

2003

December 31 Proceeds Repayments

At
December 31 Proceeds

Repayments

At
December 31 Proceeds

Repayments

71/2% debentures1
54/5% notes2
47/8% notes3
Veladero ﬁnancing4
Bulyanhulu ﬁnancing5
Variable-rate bonds6
Capital leases
Peru lease facilities
First facility7
Second facility8

Peruvian bonds9

Less: current part

$ 490
397
348
237
119
63
4

76
17
50

1,801
(80)

$ –
–
–
39
–
–
–

73
17
50

179
–

$ –
–
–
–
31
–
1

27
–
–

59
–

$ 495
397
348
198
150
63
5

30
–

–

1,686
(31)

$ –
397
348
198
–
–
–

30
–
–

973
–

$ –
–
–
–
24
17
–

–
–
–

41
–

$ 501
–
–
–
174
80
5

–
–
–

760
(41)

$ –
–
–
–
–
–
–

–
–
–

–
–

$ –
–
–
–
23
–
–

–
–
–

23
–

$ 1,721

$ 179

$ 59

$ 1,655

$ 973

$ 41

$ 719

$ –

$ 23

1. The 71/2% debentures have a principal amount of $500 million and mature on May 1, 2007. The debentures have been designated in a fair value hedge

relationship and consequently the carrying amount at December 31, 2005 represents the estimated fair value at each balance sheet date.

2. On November 12, 2004, we issued $400 million of debentures at a $3 million discount that mature on November 15, 2034.
3. On November 12, 2004, we issued $350 million of debentures at a $2 million discount that mature on November 15, 2014.
4. One of our wholly owned subsidiaries, Minera Argentina Gold S.A. in Argentina has a variable-rate limited recourse amortizing loan facility for $250 million.
We have guaranteed the loan until completion occurs, after which it will become non-recourse. The loan is insured for political risks by branches of the
Canadian and German governments.

5. One of our wholly owned subsidiaries, Kahama Mining Corporation Ltd. in Tanzania, has a variable-rate recourse amortizing loan for $119 million. The loan
is insured for political risks equally by branches of the Canadian government and the World Bank. In second quarter 2005, the terms of the ﬁnancing were
amended, with the lender having recourse in return for a reduction in the spread over Libor on the ﬁnancing, and the loan convenants were also simpliﬁed.

6. Certain of our wholly owned subsidiaries have issued variable-rate, tax-exempt bonds of $25 million (due 2029) and $38 million (due 2032) for a total of

$63 million.

7. By December 31, 2005, a total of $103 million had been drawn down under a $110 million build to suit facility held by one of our wholly owned subsidiaries,
Minera Barrick Misquichilca (MBM). We repaid $23 million on September 30, 2005, with the remaining $80 million repayable in 20 equal quarterly installments
of $4 million commencing in fourth quarter 2005. The lease facility has an implied interest rate of Libor plus 2.5% for the ﬁrst 12 installments and Libor plus
2.6% for the last 8 installments.
In 2005, MBM ﬁnalized a second build to suit lease facility for $30 million, which is being used to ﬁnance the extension of the leach pad at the Lagunas
Norte mine.
In second quarter 2005, MBM issued $50 million of public debt securities in the Peruvian capital markets. The net proceeds were used to partially fund the
construction of the Lagunas Norte mine. The securities bear interest at Libor plus 1.72%, and mature in 2013.

10. We have a credit and guarantee agreement with a group of banks (the “Lenders”), which requires the Lenders to make available to us a credit facility of

up to $1 billion or the equivalent amount in Canadian currency. The credit facility, which is unsecured, matures in April 2010 and has an interest rate of Libor
plus 0.27% to 0.35% when used, and an annual fee of 0.08%. As at December 31, 2005, we had not drawn any amounts under the credit facility. In ﬁrst
quarter 2006, we drew down $1 billion under this credit facility to fund a portion of the cash consideration for the acquisition of Placer Dome – see note 3a.

106 (cid:1) Notes to Consolidated Financial Statements

Barrick Annual Report 2005

b) Long-Term Debt (cont’d)

71/2% debentures
54/5% notes
47/8% notes
Veladero ﬁnancing
Bulyanhulu ﬁnancing
Variable-rate bonds
Peruvian bonds
Peru lease facilities
Australia capital leases
Other interest

Less: interest capitalized

Cash interest paid
Amortization of debt issue costs
Hedge (gains) losses
Increase (decrease) in interest accruals

Interest cost

For the years ended December 31

2005

2004

2003

Interest Effective
rate1

cost

Interest Effective
rate1

cost

Interest Effective
rate1

cost

8.2%
6.0%
5.0%
8.6%
7.5%
2.3%
5.0%
6.0%
7.1%

6.9%

$ 41
24
18
20
10
1
2
5
1
3

125
(118)

$ 7

$ 112
2
5
6

$ 125

6.1%
6.0%
5.0%
7.5%
8.0%
1.2%
–
–
–

6.0%

$ 31
3
2
4
14
1
–
–
–
5

60
(41)

$ 19

$ 57
3
(2)
2

$ 60

6.1%
–
–
–
7.7%
1.1%
–
–
–

6.2%

$ 31
–
–
–
15
1
–
–
–
2

49
(5)

$ 44

$ 48
1
(1)
1

$ 49

1. The effective rate includes the stated interest rate under the debt agreement, amortization of debt issue costs, and the impact of interest rate contracts

designated in a hedging relationship with long-term debt.

Scheduled Debt Repayments

71/2% debentures
54/5% notes
47/8% notes
Veladero ﬁnancing
Bulyanhulu ﬁnancing
Variable-rate bonds
Peruvian bonds

Minimum payments under capital leases

2006

$ –
–
–
28
34
–
–

$ 62

$ 19

2007

$ 500
–
–
55
34
–
–

$ 589

$ 23

2008

2009

2010 and
thereafter

$ –
–
–
45
34
–
–

$ 79

$ 19

$ –
–
–
50
17
–
–

$ 67

$ 19

$ –
400
350
59
–
63
50

$ 922

$ 17

Barrick Annual Report 2005

Notes to Consolidated Financial Statements (cid:1) 107

c) Use of Derivative Instruments (“Derivatives”)

in Risk Management

In the normal course of business, our assets, liabilities and
forecasted transactions are impacted by various market
risks including:

Item
(cid:1) Cost of sales

Impacted by

(cid:1) Consumption of diesel
fuel and propane

(cid:1) Prices of diesel fuel

and propane

(cid:1) Local currency
denominated
expenditures
(cid:1) Administration costs in

local currencies

(cid:1) Capital expenditures in

local currencies

(cid:1) Currency exchange rates –
US dollar versus A$, C$,
and ARS

(cid:1) Currency exchange rates –
US dollar versus A$ and C$
(cid:1) Currency exchange rates –
US dollar versus A$, C$,
ARS, and €

(cid:1) Interest earned on cash
(cid:1) Fair value of ﬁxed-rate debt

(cid:1) US dollar interest rates
(cid:1) US dollar interest rates

Under our risk management policy we seek to mitigate
the impact of these market risks to control costs and enable
us to plan our business with greater certainty. The time-
frame and manner in which we manage these risks varies
for each item based upon our assessment of the risk and
available alternatives for mitigating risk. For these particu-
lar risks, we believe that derivatives are an effective means
of managing risk.

The primary objective of the hedging elements of

our derivative positions is that changes in the values
of hedged items are offset by changes in the values
of derivatives. Most of the derivatives we use meet the
FAS 133 hedge effectiveness criteria and are designated
in a hedge accounting relationship. Some of the derivative
positions are effective in achieving our risk management
objectives but they do not meet the strict FAS 133
hedge effectiveness criteria, and they are classiﬁed as
“non-hedge derivatives”.

Our use of derivatives is based on established practices

and parameters, which are subject to the oversight of the
Finance Committee of the Board of Directors. A Com-
pliance Function independent of the Corporate Treasury
Group monitors derivative transactions and has responsi-
bility for recording and accounting for derivatives.

Accounting Policy for Derivatives
We record derivatives on the balance sheet at fair value
except for gold and silver sales contracts, which are
excluded from the scope of FAS 133, because the obliga-
tions will be met by physical delivery of our gold and
silver production and they meet the other requirements
set out in paragraph 10(b) of FAS 133. In addition, our
past sales practices, productive capacity and delivery
intentions are consistent with the deﬁnition of a normal
sales contract. Accordingly, we have elected to designate
our gold and silver sales contracts as “normal sales con-
tracts” with the result that the principles of FAS 133 are
not applied to them. Instead we apply revenue recogni-
tion accounting principles as described in note 5.
On the date we enter into a derivative that is
accounted for under FAS 133, we designate it as either
a hedging instrument or a non-hedge derivative.
A hedging instrument is designated in either:
(cid:1) a fair value hedge relationship with a recognized asset

or liability; or

(cid:1) a cash ﬂow hedge relationship with either a forecasted
transaction or the variable future cash ﬂows arising
from a recognized asset or liability.

At the inception of a hedge, we formally document all
relationships between hedging instruments and hedged
items, including the related risk-management strategy.
This documentation includes linking all hedging instru-
ments to either speciﬁc assets and liabilities, speciﬁc
forecasted transactions or variable future cash ﬂows.
It also includes the method of assessing retrospective
and prospective hedge effectiveness. In cases where we
use regression analysis to assess prospective effectiveness,
we consider regression outputs for the coefﬁcient of
determination (R-squared), the slope coefﬁcient and
the t-statistic to assess whether a hedge is expected
to be highly effective. Each period, using a dollar offset
approach, we retrospectively assess whether hedging
instruments have been highly effective in offsetting
changes in the fair value of hedged items and we measure
the amount of any hedge ineffectiveness. We also assess
each period whether hedging instruments are expected
to be highly effective in the future. If a hedging instrument
is not expected to be highly effective, we stop hedge
accounting prospectively. In this case accumulated gains
or losses remain in OCI until the hedged item affects
earnings. We also stop hedge accounting prospectively if:
(cid:1) a derivative is settled;
(cid:1) it is no longer highly probable that a forecasted

transaction will occur; or

(cid:1) we de-designate a hedging relationship.

108 (cid:1) Notes to Consolidated Financial Statements

Barrick Annual Report 2005

If we conclude that it is probable that a forecasted

Changes in the fair value of derivatives each period

transaction will not occur in the originally speciﬁed
time frame, or within a further two-month period,
gains and losses accumulated in OCI are immediately
transferred to earnings. In all situations when hedge
accounting stops, a derivative is classiﬁed as a non-hedge
derivative prospectively. Cash ﬂows from derivative
transactions are included under operating activities,
except for derivatives designated as a cash ﬂow hedge
of forecasted capital expenditures, which are included
under investing activities.

Summary of Derivatives at December 31, 2005 1

are recorded as follows:
(cid:1) Fair value hedges: recorded in earnings as well as

changes in fair value of the hedged item.

(cid:1) Cash ﬂow hedges: recorded in OCI until earnings

are affected by the hedged item, except for any hedge
ineffectiveness which is recorded in earnings
immediately.

(cid:1) Non-hedge derivatives: recorded in earnings.

Notional amount by term to maturity

Accounting classiﬁcation
by notional amount

Fair value

(US$ millions)

Within
1 year

$ –
–

$ –

2 to 5
years

Total

Cash ﬂow
hedge

Fair value
hedge

Non-
hedge

US dollar interest rate contracts
Receive-ﬁxed swaps (millions)
Pay-ﬁxed swaps (millions)

Net notional position

Currency contracts
C$:US$ contracts (C$ millions)
A$:US$ contracts (A$ millions)
ARS:US$ contracts (ARS millions)

Commodity contracts
WTI contracts (thousands of barrels)
MOPS contracts (thousands of barrels)
Propane contracts (millions of gallons)

$ 975
125

$ 425
–

$ 850

$ 425

C$ 297
A$ 537
36

C$ 491
A$ 1,676
–

C$ 788
A$ 2,213
36

C$ 788
A$ 2,212
36

476
121
17

1,417
–
–

1,893
121
17

1,502
121
17

$ 500
–

$ 500

C$ –
A$ –
–

–
–
–

$ 50
125

$ (75)

C$ –2
A$ 1
–

391
–
–

$ (21)
(13)

$ (34)

$ 68
61
(1)

$ 40
(1)
4

1. Excludes gold sales contracts (see note 5), gold lease rate swaps (see note 5) and Celtic Resources share purchase warrants (see note 11).
2. $62 million of non-hedge currency contracts were economically closed out by entering into offsetting positions, albeit with differing counterparties.

US Dollar Interest Rate Contracts
Cash Flow Hedges – Cash Balances
Receive-ﬁxed swaps have been designated against the
ﬁrst $425 million of our cash balances as a hedge of the
variability of forecasted interest receipts on the balances
caused by changes in Libor.

Each period the effective portion of changes in the

fair value of the swaps, which relates to future interest
receipts, is recorded in OCI. Also, as interest is received
and recorded in earnings, an amount equal to the differ-
ence between the ﬁxed-rate interest earned on the swaps
and the variable-rate interest earned on cash is recorded
in earnings as a component of interest income.

Fair Value Hedges
Receive-ﬁxed swaps totaling $500 million have been
designated against the 7 1/2% debentures as a hedge of
the variability in the fair value of the debentures caused
by changes in Libor. We have concluded that the hedges
are 100% effective under FAS 133, because the critical
terms (including: notional amount, maturity date, inter-
est payment and underlying interest rate – i.e. Libor)
of the swaps and the debentures are the same. Changes
in fair value of the swaps, together with an equal corre-
sponding change in fair value of the debentures, caused
by changes in Libor, are recorded in earnings each
period. Also, as interest payments on the debentures are
recorded in earnings, an amount equal to the difference
between the ﬁxed-rate interest received under the swap
less the variable-rate interest paid under the swap is
recorded in earnings as a component of interest costs.

Barrick Annual Report 2005

Notes to Consolidated Financial Statements (cid:1) 109

Non-hedge Contracts
We use gold lease rate swaps as described in note 5. The
valuation of gold lease rate swaps is impacted by market
US dollar interest rates. Our non-hedge pay-ﬁxed swap
position mitigates the impact of changes in US dollar
interest rates on the valuation of gold lease rate swaps.

Currency Contracts
Cash Flow Hedges
Currency contracts totaling C$788 million, A$2,213 mil-
lion, and ARS$36 million have been designated against
forecasted local currency denominated expenditures as a
hedge of the variability of the US dollar amount of those
expenditures caused by changes in currency exchange
rates. Hedged items are identiﬁed as the ﬁrst stated
quantity of dollars of forecasted expenditures in a future
month. For a C$547 million and A$2,065 million portion
of the contracts, we have concluded that the hedges are
100% effective under FAS 133 because the critical terms
(including notional amount and maturity date) of the
hedged items and currency contracts are the same. For
the remaining C$241 million and A$147 million portions,
prospective and retrospective hedge effectiveness is
assessed using the hypothetical derivative method under
FAS 133. The prospective test involves comparing the
effect of a theoretical shift in forward exchange rates on
the fair value of both the actual and hypothetical deriva-
tive. The retrospective test involves comparing the effect
of historic changes in exchange rates each period on the
fair value of both the actual and hypothetical derivative
using a dollar offset approach. The effective portion of
changes in fair value of the currency contracts is recorded
in OCI until the forecasted expenditure impacts earnings.
For expenditures capitalized to the cost of inventory, this
is upon sale of inventory, and for capital expenditures,
this is when amortization of the capital assets is recorded
in earnings.

If it is probable that a hedged item will no longer

occur in the originally speciﬁed time frame or within a
further two-month period, the accumulated gains or
losses in OCI for the associated currency contract are
reclassiﬁed to earnings immediately. The identiﬁcation
of which currency contracts are associated with these
hedged items uses a last-in, ﬁrst-out (“LIFO”) approach,
based on the order in which currency contracts were
originally designated in a hedging relationship.

Commodity Contracts
Cash Flow Hedges
Commodity contracts totaling 2,014 thousand barrels
of diesel fuel and 17 million gallons of propane have
been designated against forecasted purchases of the
commodities for expected consumption at our mining
operations. The contracts act as a hedge of the impact
of variability in market prices on the cost of future
commodity purchases. Hedged items are identiﬁed as
the ﬁrst stated quantity in millions of barrels/gallons
of forecasted purchases in a future month. Prospective
and retrospective hedge effectiveness is assessed using
the hypothetical derivative method under FAS 133.
The prospective test is based on regression analysis of
the month-on-month change in fair value of both the
actual derivative and a hypothetical derivative caused by
actual historic changes in commodity prices over the
last three years. The retrospective test involves comparing
the effect of historic changes in commodity prices each
period on the fair value of both the actual and hypothetical
derivative using a dollar offset approach. The effective
portion of changes in fair value of the commodity con-
tracts is recorded in OCI until the forecasted transaction
impacts earnings. The cost of commodity consumption
is capitalized to the cost of inventory, and therefore
this is upon the sale of inventory.

If it is probable that a hedged item will no longer

occur in the originally speciﬁed time frame, or within a
further two-month period, the accumulated gains or
losses in OCI for the associated commodity contract are
reclassiﬁed to earnings immediately. The identiﬁcation of
which commodity contracts are associated with these
hedged items uses a LIFO approach, based on the order
in which commodity contracts were originally designated
in a hedging relationship.

Non-hedge Contracts
Non-hedge fuel contracts are used to mitigate the risk
of oil price changes on consumption at the Pierina,
Eskay Creek and Lagunas Norte mines. On completion
of regression analysis, we concluded that the contracts
do not meet the “highly effective” criterion in FAS 133
due to currency and basis differences between contract
prices and the prices charged to the mines by oil suppli-
ers. Despite not qualifying as an accounting hedge, the
contracts protect the Company to a signiﬁcant extent
from the effects of oil price changes.

110 (cid:1) Notes to Consolidated Financial Statements

Barrick Annual Report 2005

Derivative Assets and Liabilities

Non-hedge Derivative Gains (Losses)1

2005

2004

For the years ended December 31

2005

2004

2003

At January 1
Derivatives settled
Change in fair value of:

Non-hedge derivatives
Cash ﬂow hedges
Effective portion
Ineffective portion
Share purchase warrants
Fair value hedges

$ 359
(183)

$ 337
(120)

23
1
5
(5)

147
–
–
(8)

Non-hedge derivatives
Commodity contracts
Currency contracts
Interest rate contracts
Share purchase warrants

Hedge ineffectiveness

Ongoing hedge inefﬁciency
Due to changes in timing

At December 31

$ 2041

$ 3591

of hedged items

$ 4
3
2
(5)

$ (9)
(4)
16
–

–

$ 3
17
32
–

$ 6

$ 5

$ 71

1. Non-hedge derivative gains (losses) are classiﬁed as a component of other

(income) expense.

Classiﬁcation:
Other current assets
Other assets
Other current liabilities
Other long-term obligations

$ 128
177
(42)
(59)

$ 165
257
(11)
(52)

$ 204

$ 359

1. Derivative assets and liabilities are presented net by offsetting related
amounts due to/from counterparties if the conditions of FIN No. 39,
Offsetting of Amounts Related to Certain Contracts, are met. Amounts
receivable from counterparties netted against derivative liabilities
totaled $9 million at December 31, 2005.

Cash Flow Hedge Gains (Losses) in OCI

Commodity
price hedges

At December 31, 2002
Effective portion of change in

fair value of hedging instruments

Transfers to earnings:

On recording hedged items in earnings
Hedge ineffectiveness due to changes

in timing of hedged items

At December 31, 2003
Effective portion of change in fair value

of hedging instruments

Transfers to earnings:

On recording hedged items in earnings
Hedge ineffectiveness due to

changes in timing of hedged items

At December 31, 2004
Effective portion of change in fair value

of hedging instruments

Transfers to earnings:

On recording hedged items in earnings
Hedge ineffectiveness due to changes

in timing of hedged items

Gold/
silver

$ 9

(13)

–

Fuel

$ –

(1)

–

(1)

(4)

–

(10)

–

251

(58)

–

219

117

(96)

–

240

(38)

(100)

–

Currency hedges

Interest rate hedges

Operating Administration
costs

costs

Capital
expenditures

Cash Long-term
debt

balances

Total

$ 26

$ –

$ 26

$ (12)

$ 49

(7)

–

(11)

–

(16)

–

$ 30

–

(18)1

(5)

(2)1

(4)

(1)1

(18)

–

(19)

–

(6)

–

(1)

–

(8)

348

(91)

(18)

288

(20)

147

–

(25)

–

(132)

(2)

3012

(134)

(1)

$ 39

$ (2)

$ (18)

$ 1892

At December 31, 2005

$ –

$ 38

$ 102

Hedge gains/losses classiﬁed within

Portion of hedge gain (loss) expected

Gold Cost of
sales
sales

Cost of

sales Administration Amortization

Interest
expense

Interest
cost

to affect 2006 earnings2

$ –

$ 11

$ 64

$ 11

$ 2

$ (3)

$ (1)

$ 84

1. On determining that certain forecasted capital expenditures were no longer likely to occur within two months of the originally speciﬁed time frame.
2. Based on the fair value of hedge contracts at December 31, 2005.

Barrick Annual Report 2005

Notes to Consolidated Financial Statements (cid:1) 111

d) Fair Value of Financial Instruments
Fair value is the value at which a ﬁnancial instrument
could be closed out or sold in a transaction with a willing
and knowledgeable counterparty over a period of time
consistent with our risk management or investment
strategy. Fair value is based on quoted market prices,

where available. If market quotes are not available, fair
value is based on internally developed models that use
market-based or independent information as inputs.
These models could produce a fair value that may not be
reﬂective of future fair value.

Fair Value Information
At December 31

Financial assets
Cash and equivalents1
Accounts receivable1
Available-for-sale securities2
Equity-method investments
Derivative assets4

Financial liabilities

Accounts payable1
Long-term debt5
Derivative liabilities4
Restricted share units6
Deferred share units6

2005

2004

Carrying
amount

Estimated
fair value

Carrying
amount

Estimated
fair value

$ 1,037
54
62
138
305

$ 1,596

$ 386
1,801
101
17
1

$ 2,306

$ 1,037
54
62
140
305

$ 1,598

$ 386
1,827
101
17
1

$ 2,332

$ 1,398
58
61
86
422

$ 2,025

$ 335
1,686
63
6
1

$ 2,091

$ 1,398
58
61
75
422

$ 2,014

$ 335
1,731
63
6
1

$ 2,136

1. Recorded at cost. Fair value approximates the carrying amounts due to the short-term nature and generally negligible credit losses.
2. Recorded at fair value. Quoted market prices are used to determine fair value.
3. Recorded at cost, adjusted for our share of income/loss and dividends of equity investees.
4. Recorded at fair value based on internal valuation models that reﬂect forward market commodity prices, currency exchange rates and interest rates, and a
discount factor that is based on market US dollar interest rates. If a forward market does not exist, we obtain broker-dealer quotations. Valuations assume
all counterparties have an AA credit rating.

5. Long-term debt is generally recorded at cost except for obligations that are designated in a fair-value hedge relationship, which are recorded at fair value in
periods where a hedge relationship exists. The fair value of long-term debt is calculated by discounting the future cash ﬂows under a debt obligation by a
discount factor that is based on US dollar market interest rates adjusted for our credit quality.

6. Recorded at fair value based on our period end closing market stock price.

112 (cid:1) Notes to Consolidated Financial Statements

Barrick Annual Report 2005

e) Credit Risk
Credit risk is the risk that a third party might fail to
fulﬁll its performance obligations under the terms
of a ﬁnancial instrument. For cash and equivalents and
accounts receivable, credit risk represents the carrying
amount on the balance sheet.

For derivatives, when the fair value is positive, this

creates credit risk. When the fair value of a derivative
is negative, we assume no credit risk. In cases where
we have a legally enforceable master netting agreement
with a counterparty, credit risk exposure represents the

net amount of the positive and negative fair values for
similar types of derivatives. For a net negative amount,
we regard credit risk as being zero. A net positive amount
for a counterparty is a reasonable measure of credit risk
when there is a legally enforceable master netting
agreement. We mitigate credit risk by:
(cid:1) entering into derivatives with high credit-quality

counterparties;

(cid:1) limiting the amount of exposure to each counterparty;

and

(cid:1) monitoring the ﬁnancial condition of counterparties.

Credit Quality of Financial Assets
At December 31, 2005

Cash and equivalents
Derivatives1
Accounts receivable

Number of counterparties2

Largest counterparty (%)

Concentrations of Credit Risk
At December 31, 2005

Cash and equivalents
Derivatives1
Accounts receivable

AA–
or higher

$ 962
161
–

$ 1,123

47%

United
States

$ 879
140
6

$ 1,025

S&P Credit rating

A– or
higher

$ 54
82
–

$ 136

49%

Canada

$ 34
78
15

$ 127

B to BBB

$ 21
–
54

$ 75

–

Other
International

$ 124
25
33

$ 182

Total

$ 1,037
243
54

$ 1,334

Total

$ 1,037
243
54

$ 1,334

1. The amounts presented reﬂect the net credit exposure after considering the effect of master netting agreements.
2. For cash and equivalents and derivatives combined.

f) Risks Relating to the Use of Derivatives
By using derivatives, in addition to credit risk, we are
affected by market risk and market liquidity risk. Market
risk is the risk that the fair value of a derivative might
be adversely affected by a change in commodity prices,
interest rates, gold lease rates, or currency exchange rates,
and that this in turn affects our ﬁnancial condition.
We manage market risk by establishing and monitoring
parameters that limit the types and degree of market risk
that may be undertaken. We mitigate this risk by estab-
lishing trading agreements with counterparties under
which we are not required to post any collateral or make
any margin calls on our derivatives. Our counterparties
cannot require settlement solely because of an adverse
change in the fair value of a derivative.

Market liquidity risk is the risk that a derivative
cannot be eliminated quickly, by either liquidating it or
by establishing an offsetting position. Under the terms
of our trading agreements, counterparties cannot require
us to immediately settle outstanding derivatives, except
upon the occurrence of customary events of default
such as covenant breaches, including ﬁnancial covenants,
insolvency or bankruptcy. We generally mitigate market
liquidity risk by spreading out the maturity of our
derivatives over time.

Barrick Annual Report 2005

Notes to Consolidated Financial Statements (cid:1) 113

17 (cid:1) Asset Retirement Obligations

Asset Retirement Obligations (AROs)

At January 1
AROs incurred in the period
Impact of revisions to expected cash ﬂows

Adjustments to carrying amount of assets
Charged to earnings

Settlements

Cash payments
Settlement gains

Accretion

Operating mines
Closed mines

At December 31
Current part

2005

2004

$ 367
47

$ 318
14

29
15

(30)
(3)

11
10

446
(37)

32
22

(33)
(4)

11
7

367
(33)

$ 409

$ 334

AROs arise from the acquisition, development, construc-
tion and normal operation of mining property, plant and
equipment, due to government controls and regulations
that protect the environment on the closure and reclama-
tion of mining properties. The major parts of the carrying
amount of AROs relate to tailings and heap leach pad
closure/rehabilitation; demolition of buildings/mine
facilities; ongoing water treatment; and ongoing care and
maintenance of closed mines. The fair values of AROs
are measured by discounting the expected cash ﬂows
using a discount factor that reﬂects the credit-adjusted
risk-free rate of interest. We prepare estimates of the
timing and amount of expected cash ﬂows when an ARO
is incurred. We update expected cash ﬂows to reﬂect
changes in facts and circumstances. The principal factors
that can cause expected cash ﬂows to change are: the
construction of new processing facilities; changes in the
quantities of material in reserves and a corresponding
change in the life of mine plan; changing ore character-
istics can impact required environmental protection

measures and related costs; changes in water quality
that impact the extent of water treatment required; and
changes in laws and regulations governing the protection
of the environment. When expected cash ﬂows increase,
the revised cash ﬂows are discounted using a current dis-
count factor whereas when expected cash ﬂows decrease
the additional cash ﬂows are discounted using a historic
discount factor, and then in both cases any change in
the fair value of the ARO is recorded. We record the fair
value of an ARO when it is incurred. At producing mines
AROs incurred and changes in the fair value of AROs
are recorded as an adjustment to the corresponding asset
carrying amounts. At closed mines, any adjustment to
the fair value of an ARO is charged directly to earnings.
AROs are adjusted to reﬂect the passage of time (accre-
tion) calculated by applying the discount factor implicit
in the initial fair-value measurement to the beginning-
of-period carrying amount of the AROs. For producing
mines accretion is recorded in the cost of goods sold
each period. For development projects and closed mines,
accretion is recorded as part of environmental remedia-
tion costs in other (income) expense. Upon settlement
of an ARO, we record a gain or loss if the actual cost
differs from the carrying amount of the ARO. Settlement
gains are classiﬁed as environmental remediation costs
in other (income) expense. Other environmental remedi-
ation costs that are not AROs as deﬁned by FAS 143 are
expensed as incurred (see note 7).

18 (cid:1) Other Long-Term Obligations

At December 31

Pension beneﬁts (note 23)
Other post-retirement beneﬁts (note 23)
Derivative liabilities (note 16c)
Restricted share units (note 22b)
Other

2005

2004

$ 54
28
59
16
51

$ 49
26
52
6
32

$ 208

$ 165

114 (cid:1) Notes to Consolidated Financial Statements

Barrick Annual Report 2005

19 (cid:1) Deferred Income Taxes

Expiry Dates of Tax Losses and AMT Credits

Recognition and Measurement
We record deferred income tax assets and liabilities
where temporary differences exist between the carrying
amounts of assets and liabilities in our balance sheet
and their tax bases. The measurement and recognition
of deferred income tax assets and liabilities takes into
account: enacted rates that will apply when temporary
differences reverse; interpretations of relevant tax legisla-
tion; tax planning strategies; estimates of the tax bases
of assets and liabilities; and the deductibility of expendi-
tures for income tax purposes. We recognize the effect of
changes in our assessment of these estimates and factors
when they occur. Changes in deferred income tax assets,
liabilities and valuation allowances are allocated between
net income and other comprehensive income based on
the source of the change.

Deferred income taxes have not been provided on
the undistributed earnings of foreign subsidiaries, which
are considered to be reinvested indeﬁnitely outside
Canada. The determination of the unrecorded deferred
income tax liability is not considered practicable.

Sources of Deferred Income Tax Assets
and Liabilities

At December 31

Deferred tax assets

Tax loss carry forwards
Capital tax loss carry forwards
Alternative minimum tax (“AMT”) credits
Asset retirement obligations
Property, plant and equipment
Inventory
Post-retirement beneﬁt obligations
Other

Gross deferred tax assets
Valuation allowances

Net deferred tax assets
Deferred tax liabilities

Property, plant and equipment
Derivatives

Classiﬁcation:

Non-current assets (note 14)
Non-current liabilities

$ 252
42
135
175
297
57
5
11

$ 290
48
121
106
206
14
18
6

974
(656)

809
(629)

318

180

(230)
(61)

(127)
(95)

$ 27

$ (42)

$ 141
(114)

$ 97
(139)

$ 27

$ (42)

1. 2004 deferred tax asset balances for tax loss carry forwards, for property,
plant and equipment and other have been restated with a corresponding
restatement of valuation allowances.

2006 2007 2008 2009 2010+

No
expiry
date

Total

Tax losses1
Chile
Tanzania
U.S.
Other

$ –
–
–
19

$ –
–
–
4

$ –
–
–
2

$ –
–
1
8

$ –
–
185
15

$ 700 $ 700
142
186
74

142
–
26

$ 19

$ 4

$ 2

$ 9

$ 200

$ 868 $ 1,102

AMT credits2

–

$ 135 $ 135

1. Represents the gross amount of tax loss carry forwards translated at

closing exchange rates at December 31, 2005.

2. Represents the amounts deductible against future taxes payable in years
when taxes payable exceed “minimum tax” as deﬁned by United States
tax legislation.

Valuation Allowances
We consider the need to record a valuation allowance
against deferred tax assets on a country-by-country basis,
taking into account the effects of local tax law. A valua-
tion allowance is not recorded when we conclude that
sufﬁcient positive evidence exists to demonstrate that it is
more likely than not that a deferred tax asset will be real-
ized. The main factors considered are:
(cid:1) historic and expected future levels of future taxable

(cid:1) opportunities to implement tax plans that affect

whether tax assets can be realized; and

(cid:1) the nature, amount and expected timing of reversal of

taxable temporary differences.

Levels of future taxable income are mainly affected
by: market gold and silver prices; forecasted future costs
and expenses to produce gold reserves; quantities of
proven and probable gold reserves; market interest rates
and foreign currency exchange rates. If these factors or
other circumstances change, we record an adjustment to
the valuation allowances to reﬂect our latest assessment
of the amount of deferred tax assets that will more likely
than not be realized.

A valuation allowance of $209 million has been

set up against certain deferred tax assets in the United
States. A majority of this valuation allowance relates
to AMT credits which have an unlimited carry forward
period. Increasing levels of future taxable income
due to higher gold selling prices and other factors and
circumstances may result in an adjustment to this
valuation allowance.

2005

20041

income;

Barrick Annual Report 2005

Notes to Consolidated Financial Statements (cid:1) 115

Source of Changes in Deferred Tax Balances

For the years ended December 31

2005

2004

2003

Temporary differences
Property, plant and equipment
Asset retirement obligations
Tax loss carry forwards
Derivatives
Other

Adjustment to deferred

tax balances due to change
in tax status1

Release of beginning-of-year

valuation allowances

Outcome of tax uncertainties

Intraperiod allocation to:

Income before income taxes
Cumulative accounting

changes

OCI

Balance sheet reclassiﬁcations

$ 30
(69)
38
(34)
8

(86)
(21)
93
(4)
(5)

$ 26
(2)
(10)
82
4

$ (27)

$ (23)

$ 100

(5)

(81)

–

(32)
–

(5)
(120)

(62)
–

$ (64)

$ (229)

$ 38

$ (30)

$ (225)

$ (49)

–
(34)
(5)

–
(4)
13

5
82
23

b) Exchangeable Shares
In connection with a 1998 acquisition, Barrick Gold Inc.
(“BGI”), issued 11.1 million BGI exchangeable shares,
which are each exchangeable for 0.53 of a Barrick com-
mon share at any time at the option of the holder, and
have essentially the same voting, dividend (payable in
Canadian dollars), and other rights as 0.53 of a Barrick
common share. BGI is a subsidiary that holds our inter-
est in the Hemlo and Eskay Creek Mines.

At December 31, 2005, 1.4 million (2004: 1.4 million)

BGI exchangeable shares were outstanding, which are
equivalent to 0.7 million Barrick common shares (2004:
0.7 million common shares), and are reﬂected in the
number of common shares outstanding. We have the
right to require the exchange of each outstanding BGI
exchangeable share for 0.53 of a Barrick common share.
While there are exchangeable shares outstanding, we are
required to present summary consolidated ﬁnancial
information relating to BGI.

Summarized Financial Information for BGI

$ (69)

$ (216)

$ 61

For the years ended December 31

2005

2004

2003

Total revenues and other income
Less: costs and expenses

$ 181
186

$ 216
287

$ 226
238

Income (loss) before taxes

$ (5)

$ (71)

$ (12)

Net income (loss)

$ 21

$ (41)

$ (31)

1. Relates to changes in tax status in Australia (note 8).

20 (cid:1) Capital Stock

a) Common Shares
Our authorized capital stock includes an unlimited
number of common shares (issued 538,081,875 common
shares); 9,764,929 First preferred shares Series A (issued
nil); 9,047,619 Series B (issued nil); 1 Series C special
voting share (issued 1); and 14,726,854 Second preferred
shares Series A (issued nil).

At December 31

Assets

Current assets
Non-current assets

We repurchased 4.47 million common shares in

Liabilities and shareholders’ equity

2004 (2003: 8.75 million common shares) for $95 mil-
lion, at an average cost of $21.20 per share (2003: $17.56
per share). This resulted in a reduction of common share
capital by $35 million (2003: $67 million) and a $60 mil-
lion (2003: $87 million) charge (being the difference
between the repurchase cost and the average historic
book value of shares repurchased) to retained earnings.

In 2005, we declared and paid dividends in US dollars

totaling $0.22 per share ($118 million) (2004: $0.22 per
share, $118 million; 2003: $0.22 per share, $118 million).

Current liabilities
Intercompany notes payable
Other long-term liabilities
Shareholders’ equity

2005

2004

$ 119
88

$ 67
119

$ 207

$ 186

$ 25
390
55
(263)

$ 24
395
56
(289)

$ 207

$ 186

116 (cid:1) Notes to Consolidated Financial Statements

Barrick Annual Report 2005

21 (cid:1) Other Comprehensive Income (Loss) (“OCI”)

Accumulated OCI at January 1

Cash ﬂow hedge gains, net of tax of $95, $99, $17
Investments, net of tax of $nil, $nil, $nil
Currency translation adjustments, net of tax of $nil, $nil, $nil
Additional minimum pension liability, net of tax of $nil, $nil, $nil

OCI for the year:

Changes in fair value of cash ﬂow hedges
Changes in fair value of investments
Currency translation adjustments
Adjustments to minimum pension liability

Less: reclassiﬁcation adjustments for gains/losses recorded in earnings:

Transfers of cash ﬂow hedge gains to earnings:

On recording hedged items in earnings
Hedge ineffectiveness due to changes in timing of hedged items

Investments:

(Gains) losses realized on sale
Other than temporary impairment charges

OCI, before tax
Income tax recovery (expense) related to OCI

OCI, net of tax

Accumulated OCI at December 31

Cash ﬂow hedge gains, net of tax of $61, $95, $99
Investments, net of tax of $nil, $nil, $nil
Currency translation adjustments, net of tax of $nil, $nil, $nil
Additional minimum pension liability, net of tax of $nil, $nil, nil

2005

2004

2003

$ 206
21
(146)
(12)

$ 69

23
(8)
3
(16)

(134)
(1)

16
(17)

(134)
34

$ 189
25
(147)
(7)

$ 60

147
(3)
1
(5)

(132)
(2)

(6)
5

5
4

$ 32
(6)
(144)
(7)

$ (125)

348
24
(3)
–

(91)
(18)

11
(4)

267
(82)

$ (100)

$ 9

$ 185

128
12
(143)
(28)

206
21
(146)
(12)

189
25
(147)
(7)

$ (31)

$ 69

$ 60

Barrick Annual Report 2005

Notes to Consolidated Financial Statements (cid:1) 117

22 (cid:1) Stock-Based Compensation

In 2005, following a review of various types of stock-
based compensation arrangements, we introduced a new
stock-based compensation plan for employees. Under the
new plan, selected employees are granted restricted share
units (RSUs) each year that vest on the third anniversary

of the date of grant. Certain employees have the ability to
elect for 50% of each annual RSU grant to be exchanged
for stock options using a predetermined exchange ratio.
We expect that the volume of options granted each year
will decline compared to historical volumes, with a
greater number of RSUs issued instead.

a) Stock Options

Employee Stock Option Activity (Number of Shares in Millions)

C$ options
At January 1
Granted
Exercised1
Forfeited
Cancelled/expired

At December 31

US$ options
At January 1
Granted
Exercised1
Forfeited
Cancelled/expired

At December 31

2005

2004

2003

Average
price

19.4
–
(3.8)
(0.8)
(0.1)

14.7

5.9
2.1
(0.3)
(0.4)
(0.4)

6.9

$ 28
$ –
$ 25
$ 27
$ 40

$ 28

$ 22
$ 25
$ 15
$ 28
$ 26

$ 24

21.5
0.8
(1.7)
(0.7)
(0.5)

19.4

2.2
4.9
(1.0)
–
(0.2)

5.9

$ 27
$ 28
$ 25
$ 26
$ 31

$ 28

$ 19
$ 24
$ 15
$ –
$ 32

$ 22

18.9
4.8
(1.0)
(0.6)
(0.6)

21.5

3.0
–
(0.7)
–
(0.1)

2.2

$ 27
$ 29
$ 24
$ 24
$ 32

$ 27

$ 17
$ –
$ 13
$ –
$ 22

$ 19

1. The exercise price of the options is the closing share price on the day before the grant date. They vest evenly over four years, beginning in the year after

granting. Options granted in July 2004 and prior are exercisable over 10 years, whereas options granted since December 2004 are exercisable over 7 years.
At December 31, 2005, 12 million (2004: 13 million; 2003: 1 million) common shares, in addition to those currently outstanding, were available for
granting options.

Stock Options Outstanding (Number of Shares in Millions)

Range of exercise prices

C$ options
$ 22 – $ 27
$ 28 – $ 31
$ 32 – $ 43

US$ options
$ 9 – $ 18
$ 22 – $ 27
$ 28 – $ 37

Outstanding

Exercisable

Average
price

Average
life (years)

Average
price

6.2
6.5
2.0

14.7

0.2
6.5
0.2

6.9

$ 24
$ 29
$ 39

$ 28

$ 13
$ 24
$ 29

$ 24

6
6
1

4
6
5

4.9
4.2
2.0

11.1

0.2
1.1
0.1

1.4

$ 25
$ 29
$ 39

$ 29

$ 13
$ 24
$ 31

$ 23

We record compensation cost for stock options based
on the excess of the market price of the stock at the grant
date of an award over the exercise price. Historically, the

exercise price for stock options has equaled the market
price of the stock at the grant date, resulting in no
compensation cost.

118 (cid:1) Notes to Consolidated Financial Statements

Barrick Annual Report 2005

Option Information

For the years ended December 31
(per share and per option amounts in dollars)

Valuation assumptions
Expected term (years)
Expected volatility1, 2
Weighted average expected volatility2
Expected dividend yield1
Risk-free interest rate1, 2

2005

2004

2003

Black-Scholes
5
23%–30%
n/a
0.8%–1.0%
3.8%–4.0%

Lattice2
5
31%–38%
33.3%
0.9%
4.3%–4.5%

Black-Scholes
5
30%
30%
1.0%
3.8%

Black-Scholes
6
40%
40%
1.0%
4.5%

Options granted (in millions)
Weighted average fair value per option

1.1
$ 7.30

1.0
$ 8.13

5.7
$ 6.87

4.8
$ 8.50

Pro forma effects
Net income, as reported
Stock-option expense

Pro forma net income

Net income per share:
As reported – Basic
As reported – Diluted
Pro forma3

$ 401
(26)

$ 375

$ 0.75
$ 0.75
$ 0.70

$ 248
(29)

$ 219

$ 0.47
$ 0.46
$ 0.41

$ 200
(24)

$ 176

$ 0.37
$ 0.37
$ 0.33

1. Different assumptions were used for the multiple stock option grants valued under the Black-Scholes method.
2. Stock option grants issued after September 30, 2005 were valued using the Lattice valuation model. The volatility and risk-free interest rate assumption varied

over the expected term of that stock option grant.

3. Basic and diluted.

We changed the method used to value stock option
grants from the Black-Scholes method to the Lattice
valuation model for stock options granted after
September 30, 2005. We believe the Lattice valuation
model provides a more representative fair value because
it incorporates more attributes of stock options such as
employee turnover and voluntary exercise patterns of
option holders. For options granted before September 30,
2005, fair value was determined using the Black-Scholes
method. The expected volatility assumptions have been
developed taking into consideration both historical
and implied volatility of our US dollar share price. The
risk-free rate for periods within the contractual life of
the option is based on the US Treasury yield curve
in effect at the time of the grant.

We use the straight-line method for attributing
stock option expense over the vesting period. Stock
option expense incorporates an expected forfeiture rate.
The expected forfeiture rate is estimated based on histor-
ical forfeiture rates and expectations of future forfeitures
rates. We make adjustments if the actual forfeiture rate
differs from the expected rate.

Under the Black-Scholes model the expected term
assumption takes into consideration assumed rates of
employee turnover and represents the estimated average
length of time stock options remain outstanding before
they are either exercised or forfeited. Under the Lattice
valuation model, the expected term assumption is
derived from the option valuation model and is in part
based on historical data regarding the exercise behavior
of option holders based on multiple share-price paths.
The Lattice model also takes into consideration employee
turnover and voluntary exercise patterns of option holders.
As at December 31, 2005, there was $56 million of
total unrecognized compensation cost relating to unvested
stock options. We expect to recognize this cost over a
weighted-average period of 2 years.

Barrick Annual Report 2005

Notes to Consolidated Financial Statements (cid:1) 119

b) Restricted Share Units (RSUs) and Deferred

Share Units (DSUs)

Under our RSU Plan, selected employees are granted
RSUs, where each RSU has a value equal to one Barrick
common share. RSUs vest and will be settled in cash on
the third anniversary of the grant date. Additional RSUs
are credited to reﬂect dividends paid on Barrick com-
mon shares. RSUs are recorded at fair value on the grant
date, with a corresponding amount recorded as deferred
compensation that is amortized on a straight-line basis
over the vesting period. Changes in the fair value of the
RSUs are recorded, with a corresponding adjustment to
deferred compensation. Compensation expense for 2005
was $2 million (2004: $4 million; 2003: $4 million).
At December 31, 2005, the weighted-average remaining
contractual life of RSUs was 2.5 years.

Under our DSU plan, Directors receive 50% of
their basic annual retainer in the form of DSUs, with the
option to elect to receive 100% of such retainer in DSUs.
Each DSU has the same value as one Barrick common
share. DSUs must be retained until the Director leaves
the Board, at which time the cash value of the DSUs
will be paid out. Additional DSUs are credited to reﬂect
dividends paid on Barrick common shares. DSUs are
recorded at fair value on the grant date and are adjusted
for changes in fair value. The fair value of amounts
granted each period together with changes in fair value
are expensed.

DSU and RSU Activity

At December 31, 2002

Granted
Forfeited
Credits for dividends
Change in value

At December 31, 2003

Settled
Forfeited
Granted
Credits for dividends
Change in value

At December 31, 2004

Settled
Forfeited
Granted1
Converted to stock options
Credits for dividends
Change in value

At December 31, 2005

DSUs
(thousands)

Fair value
(millions)

RSUs
(thousands)

Fair value
(millions)

–
8
–
–

8
–
–
23
–

31
(3)
–
19
–
–

$ –
0.2
–
–
–

$ 0.2
–
–
0.5
–
–

$ 0.7
(0.1)
–
0.5
–
–
0.3

$ 1.4

489
130
(171)
4

452
(293)
(58)
131
3

235
–
(38)
415
(3)
2

611

$ 7.3
2.9
(2.9)
0.1
3.0

$ 10.4
(7.3)
(1.3)
3.1
0.1
0.6

$ 5.6
–
(0.9)
11.1
(0.1)
0.1
0.6

$ 16.4

1. In January 2006, under our RSU plan, 18,112 restricted share units were converted to 72,448 stock options, and 9,395 units were forfeited.

120 (cid:1) Notes to Consolidated Financial Statements

Barrick Annual Report 2005

23 (cid:1) Post-Retirement Beneﬁts

a) Deﬁned Contribution Pension Plans
Certain employees take part in deﬁned contribution
employee beneﬁt plans. We also have a retirement plan
for certain ofﬁcers of the Company, under which we con-
tribute 15% of the ofﬁcer’s annual salary and bonus. Our
share of contributions to these plans, which is expensed
in the year it is earned by the employee, was $20 million
in 2005, $19 million in 2004 and $16 million in 2003.

b) Deﬁned Beneﬁt Pension Plans
We have one qualiﬁed deﬁned beneﬁt pension plan
that covers certain of our United States employees and
provides beneﬁts based on employees’ years of service.
Our policy is to fund the amounts necessary on an
actuarial basis to provide enough assets to meet the
beneﬁts payable to plan members under the Employee
Retirement Income Security Act of 1974. Independent
trustees administer assets of the plans, which are
invested mainly in ﬁxed-income and equity securities.
On December 31, 2004, the qualiﬁed deﬁned beneﬁt plan
was amended to freeze beneﬁt accruals for all employees,
resulting in a curtailment gain of $2 million.

As well as the qualiﬁed plan, we have non-qualiﬁed

deﬁned beneﬁt pension plans covering certain employees
and former directors of the Company. An irrevocable
trust (“rabbi trust”) was set up to fund these plans. The
fair value of assets held in this trust was $22 million in
2005 (2004: $31 million), and is recorded in our consoli-
dated balance sheet under available-for-sale securities.
Actuarial gains and losses arise when the actual
return on plan assets differs from the expected return
on plan assets for a period, or when the expected and
actuarial accrued beneﬁt obligations differ at the end of
the year. We amortize actuarial gains and losses over the
average remaining life expectancy of plan participants,
in excess of a 10% corridor.

c) Pension Plan Information

Fair Value of Plan Assets

For the years ended December 31

2005

2004

2003

Balance at January 1
Actual return on plan assets
Company contributions
Beneﬁts paid

$ 170
10
10
(24)

$ 166
14
6
(16)

$ 170
19
8
(31)

Balance at December 31

$ 166

$ 170

$ 166

At December 31

2005

2004

Target

Actual

Composition of plan assets:

Equity securities
Debt securities

50%
50%

49% $ 81
85
51%

$ 78
92

100% 100% $ 166

$ 170

Projected Beneﬁt Obligation (PBO)

For the years ended December 31

Balance at January 1

Interest cost
Actuarial losses
Beneﬁts paid
Curtailments/settlements

Balance at December 31

Funded status1
Unrecognized actuarial losses

Net beneﬁt liability recorded

ABO2, 3

2005

2004

$ 218
13
17
(24)
–

$ 221
12
3
(16)
(2)

$ 224

$ 218

$ (58)
29

$ (48)
11

$ (29)

$ (37)

$ 222

$ 217

1. Represents the fair value of plan assets less projected beneﬁt obligations.
Plan assets exclude investments held in a rabbi trust that are recorded
separately on our balance sheet under Investments (fair value $22 million
at December 31, 2005). In the year ending December 31, 2006, we do
not expect to make any further contributions.

2. For 2005 we used a measurement date of December 31, 2005 to calculate

accumulated beneﬁt obligations.

3. Represents the ABO for all plans. The ABO for plans where the PBO

exceeds the fair value of plan assets was $222 million (2004: $49 million).

Pension Expense

For the years ended December 31

2005

2004

2003

Expected Future Beneﬁt Payments

For the years ending December 31

Return on plan assets
Interest cost
Actuarial gains
Loss on curtailment
Gain on settlement

$ (11)
12
–
–
–

$ (11)
12
1
(2)
–

$ (11)
14
–
–
1

$ 1

$ –

$ 4

2006
2007
2008
2009
2010
2011–2015

$ 16
$ 16
$ 16
$ 16
$ 17
$ 90

Barrick Annual Report 2005

Notes to Consolidated Financial Statements (cid:1) 121

Total Recorded Beneﬁt Liability

At December 31

Current
Non-current

Beneﬁt plan liability
Additional minimum liability1 (note 20)

2005

2004

$ 3
26

$ 29
28

$ 57

$ –
37

$ 37
12

$ 49

1. A minimum pension liability is recognized if the Accumulated Beneﬁt
Obligation (ABO), exceeds the fair value of the pension plan assets.
The liability that is recorded is calculated by subtracting the fair value
of plan assets from the ABO, adjusting this amount by the accrued/prepaid
pension cost that has already been recorded on the balance sheet.

d) Actuarial Assumptions

For the years ended December 31

2005

2004

2003

Discount rate1

Beneﬁt obligation
Pension cost

Return on plan assets1
Wage increases

5.50% 5.50% 6.25%
5.50% 6.25% 6.50%
7.00% 7.00% 7.00%
5.00% 5.00% 5.00%

1. Effect of a one-percent change: Discount rate: $26 million change in ABO
and $1 million change in pension cost; Return on plan assets: $2 million
change in pension cost.

Pension plan assets, which consist primarily of ﬁxed-
income and equity securities, are valued using current
market quotations. Plan obligations and the annual pen-
sion expense are determined on an actuarial basis and
are affected by numerous assumptions and estimates
including the market value of plan assets, estimates of
the expected return on plan assets, discount rates, future
wage increases and other assumptions. The discount rate,
assumed rate of return on plan assets and wage increases
are the assumptions that generally have the most
signiﬁcant impact on our pension cost and obligation.

The discount rate for beneﬁt obligation and pension
cost purposes is the rate at which the pension obligation
could be effectively settled. This rate was developed by
matching the cash ﬂows underlying the pension obligation
with a spot rate curve based on the actual returns avail-
able on high-grade (Moody’s Aa) US corporate bonds.
Bonds included in this analysis were restricted to those
with a minimum outstanding balance of $50 million.
Only non-callable bonds, or bonds with a make-whole
provision, were included. Finally, outlying bonds (highest

and lowest 10%) were discarded as being non-represen-
tative and likely to be subject to a change in investment
grade. The resulting discount rate from this analysis was
rounded to the nearest 25 basis points. The procedure
was applied separately for pension and post-retirement
welfare plan purposes, and produced the same rate in
each case.

The assumed rate of return on assets for pension

cost purposes is the weighted average of expected
long-term asset return assumptions. In estimating the
long-term rate of return for plan assets, historical markets
are studied and long-term historical returns on equities
and ﬁxed-income investments reﬂect the widely accepted
capital market principle that assets with higher volatility
generate a greater return over the long run. Current
market factors such as inﬂation and the interest rates are
evaluated before long-term capital market assumptions
are ﬁnalized.

Wage increases reﬂect the best estimate of merit

increases to be provided, consistent with assumed
inﬂation rates.

e) Other Post-retirement Beneﬁts
We provide post-retirement medical, dental, and life
insurance beneﬁts to certain employees. We use the
corridor approach in the accounting for post-retirement
beneﬁts. Actuarial gains and losses resulting from vari-
ances between actual results and economic estimates or
actuarial assumptions are deferred and amortized over
the average remaining life expectancy of participants
when the net gains or losses exceed 10% of the accumu-
lated post-retirement beneﬁt obligation.