Abacus Global Management, Inc. Annual Report 2006

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FY2006 Annual Report · Abacus Global Management, Inc.

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Barrick
Now

Annual Review 2006

Reserves and Resources as of December 31, 2006 1, 2

Gold (mm ozs)
North America
South America
Australia-Pacific
Africa

Total

Other Metals
Copper (bn lbs)
Nickel (mm lbs)
Platinum (000s ozs)
Palladium (000s ozs)

Other Metals Contained In:

Silver (mm ozs)
Copper (bn lbs)
Zinc (mm lbs)

Proven and
Probable Reserves

Measured and
Indicated Resources

46
38
22
17

123

6.0
–
–
–

15
6
12
2

6.6
254
262
1,073

Proven and Probable
Gold Reserves

Measured and
Indicated
Gold Resources

964
1.2
1,555

48
–
48

The company expects 2007 gold production of 8.1 to 8.4 million ounces and copper production of approximately
400 million pounds. Total cash costs are expected to be in the range of $335 to $350 per ounce for gold and about
$0.90 per pound for copper. Gold production is expected to be slightly weighted to the second half of 2007.

1. Mineral reserves (“reserves”) and mineral resources (“resources”) have been calculated as at December 31, 2006 in accordance with National Instrument 43-101 as required by Canadian securities regulatory authorities. For United States report-
ing 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 U.S. reporting purposes, 1.88 million
ounces of the Cortez reserve, Buzwagi and Pueblo Viejo are classified as mineralized material. In addition, while the terms “measured”, “indicated” and “inferred” mineral resources are required pursuant to National Instrument 43-101, the U.S.
Securities and Exchange Commission does not recognize such terms. Canadian standards differ significantly from the requirements of the U.S. Securities and Exchange Commission, and mineral resource information contained herein is not com-
parable to similar information regarding mineral reserves disclosed in accordance with the requirements of the U.S. Securities and Exchange Commission. U.S. investors should understand that “inferred” mineral resources have a great amount of
uncertainty as to their existence and great uncertainty as to their economic and legal feasibility. In addition, U.S. investors are cautioned not to assume that any part or all of Barrick’s mineral resources constitute or will be converted into reserves.
Calculations have been prepared by employees of Barrick, its joint venture partners or its joint venture operating companies, as applicable, under the supervision of Jacques McMullen, Vice President, Metallurgy and Process Development of
Barrick, Rick Allan, Director – Engineering and Mining Support of Barrick, and Rick Sims, Manager Corporate Reserves of Barrick. Reserves have been calculated using an assumed long-term average gold price of $US 475 ($Aus. 640) per ounce,
a silver price of $US 8.50 per ounce, a copper price of $US 1.50 per pound and exchange rates of $1.21 $Can/$US and $0.74 $US/$Aus. Reserves at the Kalgoorlie property assumed a gold price of $US 500 ($Aus. 675). Copper reserves at the
Osborne property assumed a copper price of $US 1.75 per pound. Reserve calculations incorporate current and/or expected mine plans and cost levels at each property. Varying cut-off grades have been used depending on the mine and type of
ore contained in the reserves. Barrick’s normal data verification procedures have been employed in connection with the calculations. Resources as at December 31, 2006 have been estimated using varying cut-off grades, depending on both the
type of mine or project, its maturity and ore types at each property. For a breakdown of reserves and resources by category and for a more detailed description of the key assumptions, parameters and methods used in calculating Barrick’s
reserves and resources, see Barrick’s most recent Annual Information Form/Form 40-F on file with Canadian provincial securities regulatory authorities and the U.S. Securities and Exchange Commission.

2. Gold and copper resource estimates for Reko Diq have been prepared by employees and consultants of Tethyan Copper Company Limited (“Tethyan”) in accordance with the JORC Code. For additional information related to Reko Diq resources
reported by Tethyan, including related assumptions, see Tethyan’s press release dated January 11, 2006 and its 2005 Fourth Quarter Report. Such resource estimates have been reviewed by Jacques McMullen, Vice President, Metallurgy and
Process Development of Barrick, Rick Allan, Director – Engineering and Mining Support of Barrick, and Rick Sims, Manager Corporate Reserves of Barrick. The inferred and indicated mineral resource amounts reported under the JORC Code are
substantially similar to the inferred and indicated mineral resource amounts that would be reported in accordance with National Instrument 43-101.

Fax:416-861-2492
Tel:416-861-9911

Toronto, Canada M5J 2S1
P.O.Box 212
161 Bay Street,Suite 3700
TD Canada Trust Tower
BCE Place
Corporate Office

www.barrick.com

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

The Company’s quality assets and its
unrivalled project pipeline, combined with
the strength of its balance sheet and the
talents of its people, position Barrick to
deliver significant value to its shareholders.

TABLE OF CONTENTS

1
2
6

Financial Highlights
Letter to Shareholders
Barrick Now

Barrick Today
Barrick in 2006
Barrick in 2007

10 Barrick Projects
12 Responsible Mining
14 Financial Strategy

16 Regional Business Units
North America
South America
Australia-Pacific
Africa

24 Corporate Directory

The 2006 Annual Report consists of the 2006 Annual Review and the 2006 Financial Report.

Cautionary Statement on Forward-Looking Information

Certain information contained or incorporated by reference in this Annual Report 2006, including any information as
to our future financial or operating performance, constitutes “forward-looking statements”. All statements, other than
statements of historical fact, are forward-looking statements. The words “believe”, “expect”, “anticipate”,
“contemplate”, “target”, “plan”, “intends“, “continue”, “budget”, “estimate“, “may”, “will”, “schedule” and sim-
ilar 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 competitive 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 Canadian and Australian dollars, South African rand, Chilean Peso and
Papua New Guinean kina versus US dollar); fluctuations in the spot and forward price of gold and copper or certain
other commodities (such as silver, diesel fuel and electricity); changes in US dollar interest rates or gold lease rates that
could impact the mark-to-market value of outstanding derivative instruments and ongoing payments/receipts under
interest rate swaps and variable rate debt obligations; risks arising from holding derivative instruments (such as credit
risk, market liquidity risk and mark-to-market risk); changes in national and local government legislation, taxation, con-
trols, regulations and political or economic developments in Canada, the United States, Dominican Republic, Australia,
Papua New Guinea, Chile, Peru, Argentina, South Africa, Tanzania, Russia, Pakistan 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 successfully integrate acquisitions; operating or technical difficulties in connection with mining
or development activities; employee relations; litigation; the speculative nature of exploration and development,
including the risks of obtaining necessary licenses and permits; diminishing quantities or grades of reserves; adverse
changes in our credit rating; and contests over title to properties, particularly title to undeveloped properties. In addi-
tion, there are risks and hazards associated with the business of exploration, development and mining, including
environmental hazards, industrial accidents, unusual or unexpected formations, pressures, cave-ins, flooding and gold
bullion or copper cathode losses (and the risk of inadequate insurance, or inability to obtain insurance, to cover these
risks). Many of these uncertainties and contingencies can affect our actual results and could cause actual results to
differ materially from those expressed or implied in any forward-looking statements made by, or on behalf of, us.
Readers are cautioned that forward-looking statements are not guarantees of future performance. All of the forward-
looking statements made in this Annual Report 2006 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.

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Financial
Highlights

(in millions of US dollars, except per share data)
(US GAAP basis)

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

Copper production (millions of pounds)
Average realized copper price per pound
Total cash costs per pound 1
Total production costs per pound

2006

5,636
1,506
2,122
3,043
14,199
1.77
2.48
0.22

8,643
541
282
359

367
3.06
0.79
1.22

$
$
$

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

–
–
–
–

$
$
$

Reserves: proven and probable (thousands of ounces)2

123,066

88,591

89,056

1. See page 34 of Barrick’s 2006 Financial Report for a discussion of our total cash cost performance measures.

2. 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 U.S. reporting purposes, 1.88 million ounces of the Cortez reserve, Buzwagi and Pueblo Viejo are classified as mineralized material. For a breakdown of reserves and
resources by category and additional information relating to reserves and resources, see pages 128–136 of Barrick’s 2006 Financial Report.

Higher Prices… Expanded Margins

541

439

Up 23%

600

450

300

150

3.00

2.25

1.50

0.75

2.48

1.35

Up 84%

1.77

Up 136%

0.75

2005

2006

REALIZED PRICE
US$ per ounce

2005

2006

2005

2006

CASH FLOW
US$ per share

EARNINGS
US$ per share

Barrick Annual Review 2006

Financial Highlights (cid:1) 1

Letter to
Shareholders

gold projects around the world are unlikely to
replace production declines across the industry.
This growing discrepancy between gold supply and
demand should have a profound impact on our
industry and we believe Barrick is strategically posi-
tioned to leverage the opportunities that lie ahead.
For the industry as a whole, new projects are
characterized by higher capital and operating costs,
signiﬁcantly longer timelines for development,
more rigorous regulatory and public scrutiny, and
in most cases, by lower grades.

We have worked steadily to prepare Barrick
for this new environment. We have the strength,
breadth and scale, coupled with the ﬁnancial
resources, to maintain a comprehensive exploration
program, optimize our portfolio of operating mines
and advance our pipeline of quality projects. It is
this project pipeline, unrivalled in the gold mining
industry, which also sets Barrick apart from its
competitors.

In 2006 we laid much of the ground work for
our future. The acquisition of Placer Dome and a
strong performance from Barrick’s four newest gold
mines led to record levels of gold production, which
combined with strong gold and copper prices
to produce the best ﬁnancial results in Barrick’s
history. The Company also effectively completed
the integration of Placer Dome to establish itself as
the pre-eminent gold producer.

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

Dear Shareholders,
2006 was a dynamic year for the gold mining indus-
try, and a banner year for Barrick. We saw a wave of
industry consolidation and historically high gold
prices, coupled with robust demand and ﬂat supply.
This comes at a time when global interest in gold as
an alternate investment is on the rise.

The yellow metal has been trading higher in
United States dollar terms, but also against other
major global currencies, an encouraging indicator
for gold. However, while higher gold prices have
attracted capital to the sector, few new discoveries
have been found. Over the next three years, new

2 (cid:1) Letter to Shareholders

Barrick Annual Review 2006

Record results for Barrick in 2006:

(cid:1) Gold production for the year was
8.6 million ounces, at total cash

costs per ounce of $282, meeting

our original guidance;

(cid:1) Copper production was 367 million
pounds, exceeding our original

production guidance, at total cash

costs of $0.79 per pound;

(cid:1) Earnings per share increased
136 per cent to $1.77; and

(cid:1) Cash ﬂow per share from operations

rose 84 per cent to $2.48.

The average spot gold price in 2006 increased
36 per cent, but Barrick earnings and operating
cash ﬂow per share increased by multiples of that
percentage. This demonstrates the excellent lever-
age our earnings and cash ﬂow have to movements
in gold price. Our results also beneﬁted from newly
acquired copper production, and higher copper
prices, which rose 83 per cent over 2005.

These strong ﬁnancial results were achieved
in spite of the fact that we incurred signiﬁcant costs
in voluntarily reducing our forward sales contracts.
During the year the legacy Placer Dome hedge
book was eliminated, and by February 2007, we had
also completely eliminated Barrick’s ﬁxed price
corporate gold sales contracts. As a result of these
deliveries, the Company expects to incur an after-
tax cost of $564 million in the ﬁrst quarter of 2007,
and $65 million in the second quarter. From second
quarter 2007 onwards, all gold production from our
operating mines will be sold into the spot market.
The remaining project gold sales contracts serve as
price support to optimize ﬁnancing for our major
projects, including Pascua-Lama and Pueblo Viejo.
We repositioned our portfolio of operating
mines by selling certain Placer Dome assets for
$3.1 billion. We were able to obtain signiﬁcant value
for the assets by selling them to companies better
positioned to maximize synergies with their own
operations. The capital will be redeployed into build-
ing our new projects, which offer greater upside
potential and lower cash costs for our shareholders.
2006 was the ﬁrst full year of operations for
three of the Company’s newest mines: Lagunas
Norte, Veladero, and Tulawaka. All three turned in
solid performances, meeting their targets for the
year. The Cowal mine, the fourth in this suite of
new mines, was commissioned in April 2006.

Barrick Annual Review 2006

Letter to Shareholders (cid:1) 3

“The challenges are complex, but the

opportunities are very great. We have the
people, assets and discipline to achieve our
targets and generate strong financial results.”

We advanced e ach of the Company’s four
signiﬁcant projects: Cortez Hills in Nevada, Pascua-
Lama on the border of Chile and Argentina, Pueblo
Viejo in the Dominican Republic, and Donlin Creek
in Alaska. At Cortez Hills, our most advanced
project, we are currently working to secure permits
for the development of the proposed mine. Pascua-
Lama received the necessary approvals of the
Environmental Impact Assessment from both the
Chilean and Argentinean governments. The Pueblo
Viejo project beneﬁted from exploration drilling
that increased reserves by 35 per cent to 18.1 million
ounces of gold (100 per cent basis). At Donlin
Creek, we are on track to complete a feasibility
study and satisfy the terms of the joint-venture
agreement to increase our interest to 70 per cent.
Barrick acquired a 37.5 per cent interest in the
Reko Diq property in Pakistan, through the joint
acquisition of Tethyan Copper Company in part-
nership with Antofagasta plc. This provides the
Company with an interest in a very large copper-
gold district which has the potential to become a
major source of production in the future.

During the year we took advantage of favorable
ﬁnancing conditions in the debt market to issue
innovative copper-linked notes. These notes raised
$1 billion while locking in an attractive average
price (over $3 per pound) for roughly one-third of

our copper production for the next three years.
Proceeds from the notes will be used to build our
pipeline of gold projects – Barrick’s core business.
There are also a number of intangibles that
contributed to our successes in 2006. We know suc-
cessful companies thrive over time largely because
they have attracted, retained and motivated the
best talent in their industry. We believe that Barrick
has a management team and a workforce second to
none in the industry. Our employees are motivated
and dedicated to making our strategic vision a
reality. It is their drive and perseverance that have
made the Company what it is today.

We also recognize that good corporate citizen-
ship is also good business. In fact, it is essential to
achieve long-term business sustainability. Barrick
has always been a pioneer and a leader in corporate
social responsibility. The Company’s philosophy of
responsible mining represents a commitment to
share the beneﬁts of mining with the communities
where we live and work.

Barrick in 2007:
Strength now, and into the future
In 2007 we anticipate gold production will be slightly
lower and operating costs higher than last year.
Production is expected to be 8.1 to 8.4 million
ounces at total cash costs of $335 to $350 per ounce.

4 (cid:1) Letter to Shareholders

Barrick Annual Review 2006

A substantial portion of the cash cost increase is
attributable to mining at below reserve grade in
2007 as planned.

Inﬂationary pressures felt across the mining
industry have also had an impact on industry-wide
cash costs; however, the Company’s cost containment
programs have helped to mitigate the impact on
Barrick. As cost pressures begin to stabilize in 2007,
we do not expect to see similar increases in 2008.

The Company has already poured gold at the
new Ruby Hill mine in Nevada and throughout
2007 we will continue advancing our projects, which
represent the strongest pipeline in the industry.
As envisioned, many of Barrick’s projects have the
potential to become large, long-life producers.
However, as we noted earlier, these projects entail
lengthy permitting timeframes, and as signiﬁcant
projects, take time to build to our standards.

The challenges going forward are many and
complex – but the opportunities are also very great.
The Company remains positive on the outlook for
gold price, and we have the people, the assets, and
the discipline to continue to achieve our targets,
replace our reserves, build new mines, and generate
strong ﬁnancial results.

Further, we recognize that our share price per-
formance needs to improve relative to the gold price
and we believe that the market will recognize the
latent value in our assets and the pipeline of
projects for the beneﬁt of our shareholders.

Lastly, before closing, we wish to pay tribute to
a Company director who has helped to shape and
guide Barrick’s success over the years. Joseph
Rotman, one of our founding shareholders and
directors, retires from our Board in 2007. He has
been a valued director, friend, and colleague since
1983. We will miss his wise counsel.

Peter Munk
Chairman

Gregory C. Wilkins
President and Chief
Executive Ofﬁcer

Barrick Annual Review 2006

Letter to Shareholders (cid:1) 5

Barrick
Now

Our reserves, mines, projects and balance
sheet are at record strength, our operating
mines are fully levered to the gold price
and our project pipeline is unequalled.

We achieved record results in 2006 of
$1.5 billion in earnings and $2.1 billion
in operating cash flow, positioning Barrick
for the opportunities that lie ahead.
We have the strength, breadth, scale
and financial resources to maintain
a comprehensive exploration program,
optimize our operating mines,
and advance our unrivalled pipeline
of quality projects.

6 (cid:1) Barrick Now

Barrick Annual Review 2006

Barrick
Today

Barrick is the industry’s pre-eminent gold producer, with
27 operating mines, an unrivalled pipeline of quality projects,
and the expertise and financial strength to unlock their value
for our investors.

As of February 2007 – more than two years ahead of schedule –
our operating mines have full leverage to a rising gold market.

Quality portfolio of
operating mines

Our quality portfolio of operating mines represents a large
production base – substantial reserves, long life and a stable
cost structure. Over 60% of production is anticipated to
come from OECD countries in 2007.

See pages 16–23

Industry’s largest reserves

With 123 million ounces in proven and probable reserves
and 35 million ounces in measured and indicated resources,
Barrick has the industry’s largest reserve base of gold plus
the proven ability to extract value from these ounces.

See page 11

Unrivalled pipeline of projects

Barrick has an unrivalled project pipeline, paired with a
highly skilled and experienced project development team
that has brought five new mines into production in the
last two years.

See pages 10–11

Extensive land positions on the
most prolific trends

Our focus on high discovery potential has positioned us on
some of the world’s most prolific trends. Our competitive
edge has already led us to nine super-giant deposits, each
with over 20 million ounces of gold endowment.

See pages 16–23

Financial strength

Barrick has the industry’s only ‘A’ rated balance sheet. This
gives us the flexibility and the financial capacity to manage
our operations and advance our project pipeline without
equity dilution.

See pages 14–15

Enhanced leverage to gold

Barrick is positive on the outlook for gold. As of February
2007, we have eliminated our fixed price Corporate Gold
Sales Contracts and the legacy Placer Dome hedge position,
two years ahead of schedule, giving our operating mines
full leverage to a rising gold market.

See page 15

Corporate Governance and
Social Responsibility

Barrick’s success is predicated on a commitment to
excellence. Our Code of Business Conduct and Ethics
provides the framework to conduct our business to the
highest standards, while our environmental, health, safety
and social programs are focused on responsible mining.

See pages 12–13

Barrick Annual Review 2006

Barrick Today (cid:1) 7

Barrick
in 2006

Quarterly Highlights

2006 was a banner year for Barrick, a year of
great opportunities and singular achievements.
Here are some of the highlights.

First Quarter

Second Quarter

(cid:1) Acquired Placer Dome Inc.

Focused our operating portfolio by divesting non-core assets
for US$1.6 billion in cash

Used favorable market conditions to eliminate the Placer
Dome hedge book and to increase our leverage to gold

(cid:1) Received approval of the Pascua-Lama Environmental

(cid:1) Eliminated legacy Placer Dome hedge position

Strengthened our operating portfolio with 12 new mines,
deepened our pipeline with 4 world-class projects, and added
large copper production and reserves

Peak gold margins above $300 per ounce and robust
copper revenues flowed to our bottom line, delivering
shareholder value

Impact Assessment from Chile
A milestone achievement, significantly advancing this key project
through the environmental permitting process

(cid:1) Acquired Tethyan Copper Company

Joint acquisition with Antofagasta plc brought us a 37.5%
interest in the large Reko Diq copper-gold project in Pakistan,
located on the prospective Tethyan belt

(cid:1) Reported record earnings and cash flow

(cid:1) Sold four Placer Dome mines to Goldcorp

1 2
3 4

(cid:1) Met our original full-year production and

(cid:1) Issued $1 billion of copper-linked notes

Fourth Quarter

Third Quarter

(cid:1) Sold South Deep for US$1.5 billion

Continued our rationalization of the Placer Dome portfolio by
selling this non-core South African asset

(cid:1) Realized synergies

Completed integration of Placer Dome mines, putting us on
track to capture the expected $200 million in annual synergies
beginning in 2007

(cid:1) Showcased our Nevada operations

Conducted mine tours to highlight the long life and excellent
exploration potential of our Nevada operations from our
flagship Goldstrike operation and the newly acquired Cortez
and Bald Mountain mines

(cid:1) Received approval of the Pascua-Lama Environmental

Impact Assessment from Argentina
Marked the receipt of both the Chilean and Argentinean
environmental approvals for this bi-national gold-silver
development project

total cash cost guidance
By meeting our original guidance for gold, and exceeding our
original guidance for copper, the Company posted record
financial results for the year

Innovative financing secured funding for our project pipeline,
simultaneously taking advantage of strong copper prices and
favorable debt markets

8 (cid:1) Barrick in 2006

Barrick Annual Review 2006

Barrick
in 2007

Outlook for the Year

We have positioned our Company to excel in a rising
gold market. In 2007 we expect to reap the benefits
of our quality portfolio of unhedged production,
advance our project pipeline and unlock the value of
our non-gold assets.

2007 Outlook
(cid:1) 8.1 – 8.4 million ounces of gold at total cash costs of $335–$350 per ounce
(cid:1) 400 million pounds of copper at total cash costs of about $0.90 per pound
(cid:1) Capture or exceed $200 million in annual synergies from Placer Dome integration

Hedge Book Reductions
(cid:1) All fixed price Corporate Gold Sales Contracts eliminated by February 2007
(cid:1) Operating mines unhedged and fully leveraged to gold prices
(cid:1) Project Gold Sales Contracts to support financing of development pipeline

Project Pipeline
(cid:1) $1.1 – $1.8 billion capital budget
(cid:1) Focused on preparing a final EIS at Cortez Hills, obtaining construction permits at Pascua-Lama, advancing detailed engineering on

Pueblo Viejo and completing the Donlin Creek feasibility study

(cid:1) $190 million on expensed project development
(cid:1) Obtain EIA approval and commence detailed engineering at Buzwagi; complete a scoping study and new resource estimate at Reko Diq

Unlocking Value in Other Metals
Our objective in 2007 is to surface value in our quality portfolio of non-gold projects by completing pre-feasibility studies at the large,
high grade Kabanga and Sedibelo projects and a feasibility study on the Fedorova project to increase our interest to 79%

Key Exploration Opportunities
The company plans to spend $170 million on exploration in 2007. Key areas of focus include:
(cid:1) North America – Nevada mine sites; Pueblo Viejo; Donlin Creek
(cid:1) South America – Frontera District

(cid:1) Australia-Pacific – Porgera, Reko Diq
(cid:1) Africa – North Mara, Lake Victoria greenstone belt

Summary
We expect 2007 to be a year of significant progress on many fronts. Our 27 operations are
poised to deliver full leverage to the strong gold price. A number of key milestones are
anticipated on our expanded project pipeline. Our exploration portfolio is focused on
high discovery potential on some of the world’s most prolific trends.

Barrick Annual Review 2006

Barrick in 2007 (cid:1) 9

Barrick
in 2007

Advancing Projects

During the year we will continue to advance our
projects through the pipeline, and bring them
steadily closer to long-life production.

Cortez Hills (60% basis)
LOCATION: ................................................................Nevada, USA
PROVEN AND PROBABLE GOLD RESERVES:..........................5.1 mm ozs
EXPECTED PRE-PRODUCTION CAPITAL:................$288 to $300 million
EXPECTED GOLD PRODUCTION* (FIRST 5 YRS):..........580 – 595 kozs/yr
EXPECTED TOTAL CASH COSTS* (FIRST 5 YRS):........$280 – $290 per oz
* includes production from pipeline

Pascua-Lama
LOCATION:......................................Chile and Argentina border
PROVEN AND PROBABLE GOLD RESERVES: ......................17.0 mm ozs
MEASURED AND INDICATED GOLD RESOURCES:..................3.1 mm ozs
EXPECTED PRE-PRODUCTION CAPITAL:..................$2.3 to $2.4 billion
EXPECTED GOLD PRODUCTION (FIRST 5 YRS): ..........750 – 775 kozs/yr
EXPECTED TOTAL CASH COSTS (FIRST 5 YRS): ............$40 – $50 per oz

KEY POINTS:

(cid:1) Highly prospective deposit, close to existing infrastructure
(cid:1) Construction period of approximately 15 months
(cid:1) In 2007: complete detailed engineering and planning; advance

KEY POINTS:

(cid:1) World-class gold-silver deposit, with exploration opportunities
(cid:1) Large annual production, long mine life, low cash cost
(cid:1) In 2007: secure remaining key agreements and permits;

exploration drilling

advance detailed engineering

Pueblo Viejo (60% basis)
LOCATION:....................................................Dominican Republic
PROVEN AND PROBABLE GOLD RESERVES:........................10.9 mm ozs
MEASURED AND INDICATED GOLD RESOURCES:....................1.3 mm ozs
EXPECTED PRE-PRODUCTION CAPITAL:..............$1.26 to $1.38 billion
EXPECTED GOLD PRODUCTION (FIRST 5 YRS): ............465 – 480 kozs/yr
EXPECTED TOTAL CASH COSTS (FIRST 5 YRS):..........$180 – $190 per oz

KEY POINTS:

(cid:1) Multi-metal revenue from world-class reserve
(cid:1) +20 year mine life; high exploration potential
(cid:1) In 2007: advance exploration and metallurgical analysis; begin

detailed engineering; optimize mine design

Donlin Creek (30%, with earn-in right to 70%)
LOCATION:..................................................................Alaska, USA
MEASURED AND INDICATED GOLD RESOURCES:....................5.9 mm ozs
STATUS: ..................Feasibility study to be completed in 2007

KEY POINTS:

(cid:1) Large gold deposit with good exploration potential
(cid:1) In 2007: conduct drilling program to increase measured and

indicated resource; complete feasibility study and meet back-in
requirements to increase our ownership to 70%

10 (cid:1) Barrick in 2007

Barrick Annual Review 2006

Barrick’s Project Pipeline

Barrick has the gold industry’s largest pipeline of projects, and the expertise and financial strength to unlock the value of
gold and other metals contained in these deposits. The projects are expected to come into operation over a number of years
– providing a continuing stream of new production for the Company, and long-term social and economic benefit for the
local communities.

EXPLORATION

FEASIBILITY

PERMITTING

CONSTRUCTION

OPERATIONS

Ruby Hill

Cortez Hills

Pascua-Lama

Buzwagi

Pueblo Viejo

Donlin Creek

Sedibelo

Kabanga

Reko Diq

Fedorova

PROVEN AND PROBABLE
RESERVES

MEASURED AND INDICATED
RESOURCES

Gold (mm ozs)

Copper (mm lbs)

Nickel (mm lbs)

Other metals contained within gold reserves and resources:

Silver (mm ozs)

Copper (mm lbs)

Zinc (mm lbs)

–

742

899

1,555

5,675

254

150

Replacing Production

Barrick has the industry’s largest base of gold reserves. We also have very significant resources, both measured, indicated and
inferred – and the exploration and financial strength to continue to find, acquire and develop new ounces, well into the future.

Resources
(millions of ounces at December 31, 2006)

Reserves
(millions of ounces at December 31, 2006)

Inferred

Measured &
Indicated

Proven & Probable

123

8.1–8.4

2007E Production

Barrick Annual Review 2006

Barrick in 2007 (cid:1) 11

Responsible
Mining

We are committed to making a
positive difference in the places
where we live and work. Each
year builds on the strengths and
experience of the previous year.

At Barrick, we are committed to making a positive
difference in the communities in which we live and
work. We recognize that responsible behavior is our call-
ing card, and that it creates opportunities to generate
greater value for our shareholders while also fostering
sustainable development in the communities and coun-
tries where we operate. We strive to earn the trust of
everyone involved – our employees, local community
members, governments, and any other stakeholders with
whom we interact.

Barrick’s Social Responsibility Charter provides a
policy framework for all our business activities world-
wide. This framework is deﬁned under four pillars:
Ethics; Employees; Community; and Environment,
Health and Safety.

Ethical Behavior
The Barrick Code of Business Conduct and Ethics
mandates that we conduct our business with the
highest ethical standards and in accordance with all
applicable laws, rules and regulations. Each year, our
employees are required to review and renew, on an
individual basis, their commitment to abide by the
Code. They are also given the means to report conduct
that violates the Code, in conﬁdence when necessary.
We strive to act as a responsible corporate citizen,
and we use our expertise to help facilitate constructive
public dialogue and informed debate on issues of
importance to Barrick, the mining industry, and the
communities in which we operate. We do so both as an
individual company, and through our afﬁliation with
a variety of industry associations and initiatives that
promote responsible mining practices, including the
UN Global Compact, Global Business Coalition on
HIV/AIDS and the Mining Association of Canada, to
name a few.

Our Employees
Barrick is committed to developing the full potential of
its employees. This process starts with respect for each
individual, and we act on that respect by observing
the fundamental tenets of human rights, safety, non-
discrimination and non-harassment in the workplace.
We compensate our employees fairly for their con-
tributions, provide them with meaningful performance
feedback, and offer them professional development and
training opportunities. We encourage accountability and
employee involvement in issues affecting the work-
place, an approach that helps us continue to improve
safety and work conditions, business efﬁciency, and the
Company as a whole.

Our Courageous Leadership program, which
involves all employees, goes far beyond merely ‘teach-
ing’ safety. It emphasizes individual responsibility and
leadership, so that everyone recognizes their personal
role in ensuring workplace safety. Because of this
emphasis on individual leadership, the program is
strengthening a culture of responsibility and empow-
erment in all areas of employees’ work lives, from
safety to environment to production. Our goal is to
have every employee go home in good health and unin-
jured, after every shift, each and every day. In 2006, our
efforts resulted in a 41% reduction in our total medical
injury rate. We are now instituting our new Powerful
Leadership program, which builds on the success of
Courageous Leadership and goes beyond empower-
ment to teach speciﬁc leadership skills.

We recognize that best practices continue to evolve
in this important area, and we too will continue to
evolve, learn, and apply what we learn.

12 (cid:1) Responsible Mining

Barrick Annual Review 2006

Community Development
Barrick fully considers social, cultural, environmental,
governmental and economic factors when evaluating
project development opportunities. In each community,
we interact with local residents, governments, non-
governmental organizations, international agencies
and other interested groups to facilitate long-term and
beneﬁcial resource development. In all our dealings,
we respect community interests and encourage open
two-way dialogue, providing accurate, timely informa-
tion and responding to the needs and concerns of the
local communities.

These principles establish our priorities for action.
We provide ﬁnancial support to a range of organiza-
tions through our community programs and charitable
donations. We build partnerships that help to develop
local infrastructure and entrepreneurial capacity. We also
develop local skills by providing employment for indige-
nous peoples and other members of the community. In
Donlin Creek, Alaska, for example, 92% of our explo-
ration camp employees and 90% of our crew supervisors
are from the local Alaskan Native population.

We are proud of the recognition we receive for our
careful attention to community interests and develop-
ment. For example, Barrick’s community engagement
efforts at our Cowal mine in Australia received the 2006
Environment and Community Excellence Award from
the New South Wales Minerals Council.

In Peru, our work in Cuncashca (associated with
our Pierina mine) was honore d with the Award
for Exce l le nce in Cor p orate S o c ial and Ethic al
Responsibility by the Canadian Manufacturers and
Exporters Association and the Canadian International
Development Agency (CIDA). The work is an ongoing
integrated agricultural and livestock project, developed
in consultation with the Andres Avelino Caceres com-
munity council. We have established a demonstration
far m and training fac ilit y in Cuncashca, where
improved agricultural techniques, sewing, food nutri-
tion and production, and business skills are being
taught. The facility is also a focal point for various
upgrades provided by Barrick to the community’s cattle
herd, irrigation system and local infrastructure.
Because of the success in Cuncashca (measured in
community impact and support), we have instituted a
parallel program at Lagunas Norte.

Barrick won the Award for Excellence in Corporate Social and
Ethical Responsibility in 2006 for its community based, integrated
agriculture/livestock project associated with the Pierina mine in
Cuncashca, Peru.

Environment, Health and Safety
Barrick has a responsibility to protect, reclaim and
enhance the environment on the sites where we oper-
ate. We constantly look for ways to improve our
performance, and in 2006 took another step forward
with our new Environmental Management System
Standard (EMSS) – a 15-principle standard, consistent
with ISO 14001, that will be required on all our sites.
The EMSS is being fully implemented on a three-year
schedule, with further tools and training each year. For
many of our sites, full compliance will require only
minor adjustment to their existing programs. In fact,
during 2006 our Lagunas Norte Mine in Peru obtained
ISO 14001 certiﬁcation of its environmental manage-
ment systems – the third Barrick operation to do so.

In 2005, Barrick became one of the ﬁrst signatories
to the voluntary International Cyanide Management
Code for the Gold Mining Industry, developed under
the auspices of the United Nations Environment
Program (UNEP). In 2006, our Cowal Project was the
ﬁrst facility of any kind to receive International
Cyanide Management Institute approval, when it
received pre-operation certiﬁcation.

Detailed information about our performance in
all these areas can be obtained online, and in print.
Visit www.bar r ick.com and click on Cor porate
Responsibility, or request a free copy of the print
version of our annual Responsibility Report.

Barrick Annual Review 2006

Responsible Mining (cid:1) 13

Financial
Strategy

In 2006, we successfully returned to the debt markets
with an innovatively structured ﬁnancing. We issued
a $1 billion copper-linked note to take advantage of
strong copper prices and attractive market conditions
for long-term debt. We issued $400 million in 10-year
notes and $6 00 million in 30-year notes to fund
development projects and to pre-ﬁnance upcoming
debt maturities.

The ﬁnancing was structured to accomplish two of
our goals: to raise $1 billion of long-term liquidity, and
to allow us to repay the notes by delivering the dollar
equivalent of 324 million pounds of copper over the
next three years, at attractive prices.

The market viewed this as one of the most inno-
vative ﬁnancing deals done to date in the mining
industry. As a result of our strong balance sheet, we
were able to maintain our credit ratings from Moody’s,
Dominion Bond Rating Service, and Standard & Poor’s
for the issuance.

With the Placer Dome acquisition, we decided to
increase our existing credit facility from $1 billion to
$1.5 billion and to cancel the legacy Placer Dome
facility of $750 million. This arrangement provides
us with access to short-term liquidity for bridge
ﬁnancing at better pricing than each company was
receiving individually.

Also, in 2006, we issued another tranche of $50 mil-
lion of bonds in the Peruvian capital markets, bringing
the total debt issued in this manner to $100 million. The
issue was done at very attractive rates and has allowed
Peruvian investors to become our partners in Lagunas
Norte, a project of great importance to their country.
In 2007, we expect to repay $600 million of debt
maturities, in keeping with the Company’s conserva-
tive ﬁnancial philosophy. Over the next seven years,

Barrick expects to spend $7 to $10 billion in further
developing its project pipeline, maintaining its strong
exploration program, and funding its sustaining capital
requirements.

Barrick has maintained, and is committed to
maintaining, a strong balance sheet. We forecast that,
at current commodity prices, the Company can
ﬁnance its project pipeline, without equity dilution,
while maintaining its investment grade credit rating.

Reducing the Forward Sales Program
Barrick is positive on the long-term outlook of the gold
price and has positioned itself for greater leverage to
higher prices.

In 2006, we successfully eliminated Placer Dome’s
7.7 million ounce gold hedge book. We completed this
action within six months of acquiring the company, to
give the newly acquired ounces full exposure to rising
gold prices.

We also reduced the Barrick ﬁxed price Corporate
Gold Sales Contracts by 1.7 million ounces in 2006, and
completely eliminated the ﬁxed price position by
February 21, 2007. This has occurred more than two
years earlier than our previously stated target, and is
consistent with our positive view for higher gold prices.
As of February 2007, Barrick has 9.5 million ounces
of Project Gold Sales Contracts, which have been
allocated to facilitate the ﬁnancing of our pipeline of
projects, including Pascua-Lama, Pueblo Viejo, Donlin
Creek, and Reko Diq. These contracts will provide price
support for these future ﬁnancings, and represent
about 26% of Barrick’s 36 million ounces of undevel-
oped gold reserves.

14 (cid:1) Financial Strategy

Barrick Annual Review 2006

Currency and Commodity Risk Management
Barrick has always placed a high priority on cost con-
trol and reduction. As our global footprint has grown
over the years, our foreign currency exposure now
makes up approximately 30% of our total cash costs.
Our mine sites are also large consumers of energy such
as diesel, gas, oil and propane for equipment and
general power use.

As such, we have developed and maintain an active
risk management program where we monitor long-
term exposures and use appropriate ﬁnancial instru-
ments to mitigate our currency and commodity risks.
This program has generated over $360 million to oper-
ating cash ﬂow over the last three years and is expected
to continue to contribute as we remain disciplined in
controlling costs.

Total Fixed Price Forward Sales as a % of Company Reserves

2001

2002

2003

2004

2005

2006

2007–Feb 21

■ Corporate Gold Sales
■ Project Gold Sales

Internal Controls and Compliance
Management has a framework for the evaluation of
internal controls throughout the business supported by
a Compliance function as well as an Internal Audit
process. The framework includes the review and assess-
ment of controls as envisaged by the Sarbanes-Oxley
requirements. The results of our assessment made
through the application of this framework enabled us
to conclude that the system of internal controls over
ﬁnancial reporting, including disclosure controls and
procedures, is effective. The assessment of the legacy
Placer Dome sites was not required to be performed as
part of the 2006 Sarbanes-Oxley driven process per the

Securities and Exchange Commission; however, we
did complete substantial preliminary reviews of these
operations in 2006, in discharging our commitment to
maintain the integrity and reliability of our consoli-
dated ﬁnancial statements and in preparation for their
full inclusion in our 2007 assessment.

We are leveraging the internal controls framework
in our business improvement initiative to standardize
processes, including ﬁnancial management procedures,
to further improve reporting performance, information
quality and capacity utilization in support of our over-
riding objective of increased shareholder value.

Barrick Annual Review 2006

Financial Strategy (cid:1) 15

North
America

Regional Business Unit

▲ Donlin Creek

• Eskay Creek

2006 Production
(million ounces)

2006 Total
Cash Costs
(dollars per ounce)

3.4

314

(cid:1) Goldstrike celebrated 10 years of underground

mining, 20 years of open pit mining, and 30 million
ounces of gold production

(cid:1) Exploration at Pueblo Viejo increased reserves on
a 100% basis from 13 million ounces to 18 million

ounces, and R&D shows potential to significantly

increase recoveries of copper, silver and zinc

(cid:1) Ruby Hill mine in Nevada poured first gold in

February, 2007

(cid:1) Exploration drilling at Cortez Hills underground
expanded proven and probable reserves to

5.1 million ounces

46million ounces of proven and probable reserves

CANADA

Golden Sunlight

• Hemlo

•
•
•●▲
••
•

•

Turquoise Ridge
Goldstrike
Marigold
Cortez/Cortez Hills
Bald Mountain
Ruby Hill
Round Mountain

UNITED STATES

Pueblo Viejo

▲

● Mine ▲ Project

Regional Overview
With the acquisition of Placer Dome, our North
America region now consists of 10 operating mines and
three large projects. It is our largest region by produc-
tion and reserve measures, with 46 million ounces of
proven and probable reserves and 15 million ounces of
measured and indicated resources. The region is
expected to produce about 3.15 to 3.25 million ounces
of gold in 2007, at total cash costs of about $370 to $385
per ounce.

In Nevada, the region’s largest cluster of operations,
we moved quickly to integrate the acquired assets and
began realizing the ﬁnancial and operational beneﬁts of
our larger, stronger portfolio.

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

Barrick Annual Review 2006

2006 marked a major anniversary for Goldstrike:
10 years of underground mining, 20 years of open pit
mining, and cumulative production of 30 million ounces
of gold. It is our ﬂagship operation, and our single largest
mine. In 2007, Goldstrike will produce about 20% of our
total gold production, and it hosts 16 million ounces of
proven and probable reserves.

This property, with its world-class mining and pro-
cessing facilities, is the Company’s center of operating
excellence. We often transfer experience and lessons
learned here to our other sites. For example, Cortez and
other mines are now beneﬁting from knowledge gained
in the Goldstrike tire management program, which has
had the dual result of saving money and improving
equipment availability. The Western 102 Power Plant at
Goldstrike met all expectations in 2006, its ﬁrst full
year of operation, and reduced total cash costs at the
property by $9 per ounce of gold produced.

Our most advanced project is Cortez Hills, located 60
miles from Goldstrike in Nevada and in which we have
60% ownership. This project is part of the Cortez prop-
erty, which covers 1,080 square miles on one of the
world’s most highly prospective mineral trends. Capital
costs on a 100% basis are estimated at about $480–$500
million, including the development of two open pits and
twin exploration declines to delineate the underground
potential. Ore from the two pits will be conveyed across
the valley to be processed at existing facilities.

We made signiﬁcant progress at our 60%-owned
Pueblo Viejo project in the Dominican Republic, which
has a large, world-class reserve of 18.1 million ounces on
a 100% basis. This project took a major step forward in
early 2007 when the Dominican Republic government
ofﬁc ially approve d its Env ironme ntal Impact
Assessment. We have used Barrick expertise to review
and update the 2005 Placer Dome feasibility study for
this project. While capital costs have risen to about
$2.1–$2.3 billion (100% basis) due to inﬂation and
changes in project scope, design changes are expected to
result in the recovery of signiﬁcant amounts of zinc,
silver and copper.

The Ruby Hill mine in Nevada poured gold in the
ﬁrst quarter of 2007. This is the ﬁfth mine Barrick has
commissioned in the last two years, and demonstrates the
Company’s ability to develop projects successfully.

Exploration
North America remains our key exploration focus, with
$69 million of the total 2007 exploration budget of
about $170 million to be spent in this region, most of it
in Nevada. The Placer Dome acquisition greatly
expanded our opportunities, by adding Cortez, Bald
Mountain and Turquoise Ridge/Getchell to the Barrick
portfolio. Our 2007 exploration programs will follow
up on the positive results returned this year.

In Nevada, the main focus for 2007 will be to
add resources around our existing operations, and to
prioritize and test new targets on our extensive land
holdings on the state’s three most prospective trends.
As an example, at the Cortez joint-venture prop-
erty, the exploration group is testing for extensions of
known mineralization along strike and at depth, and
also looking for new mineralization. At the Cortez Hills
Lower Zone, where known mineralization has been
expanded signiﬁcantly, in-ﬁll and extension drilling will
continue through 2007.

Successful drill programs were also completed at
Bald Mountain and at Dee-South Arturo, where miner-
alization was upgraded and expanded.

At Pueblo Viejo in the Dominican Republic, we will
conduct drilling to expand mineralization between the
Moore and Monte Negro pits, and follow up with inﬁll
and extension drilling to test regional targets.

2007 Opportunities
We anticipate steady operations at our existing sites,
where we focus on operational excellence and cost con-
tainment. We will continue to look for ways to optimize
use of our processing facilities at Goldstrike so that we
can expand their range of proﬁtable operations – with
toll milling of ore, for example – and leverage our
investment in that infrastructure.

At Cor te z Hi l l s , w e p l a n to c om p l e te t h e
Environmental Impact Study this year and expect to
receive a Record of Decision enabling the start of
pre-production waste stripping in 2008.

At Pueblo Viejo, our 2007 goals are to optimize the
mine plan, update the EIS, conduct detailed engineer-
ing to facilitate sectoral permits, and ﬁnalize govern-
ment negotiations in advance of providing a Notice to
Proceed by February 2008.

At Donlin Creek in Alaska, our focus is to deliver
a feasibility study to our joint-venture partner and fulﬁll
the back-in requirements to earn a 70% interest. We will
continue drilling to increase and upgrade the 20 million
ounces of measured and indicated resources.

Barrick Annual Review 2006

Regional Business Units – North America (cid:1) 17

South
America

Regional Business Unit

38million ounces of proven and probable reserves

(cid:1) Lagunas Norte (Peru) exceeded expectations,
producing 1.1 million ounces of gold at total

cash costs of $100 per ounce

(cid:1) Veladero (Argentina) produced 511,000 ounces
at total cash costs of $168 per ounce, achieving

the target for its first full year of operation

(cid:1) Zaldívar (Chile) produced 308 million pounds of
copper at total cash costs of $0.62 per pound

(cid:1) Pascua-Lama received environmental approvals

from Chile and Argentina

2006 Production
(million ounces)

2006 Total
Cash Costs
(dollars per ounce)

2.1

147

• Lagunas Norte
• Pierina

PERU

Zaldívar •

CHILE ARGENTINA

Pascua-Lama ▲

• Veladero

● Mine ▲ Project

Regional Overview
The start-up of our new generation of mines in 2005
paid off in 2006, with the region producing more
ounces, at ver y low total cash costs. We saw this
strength in all our mines – established, newly built, and
newly acquired. The region is expected to produce
approximately 1.85 to 1.93 million ounces of gold in
2007, at total cash costs of about $230 to $245 per
ounce and approximately 315 million pounds of copper
at total cash costs of about $0.80 per pound.

Lagunas Norte and Veladero both had excellent per-
formances in their ﬁrst full year of operation. Zaldívar,
our newly acquired copper mine from Placer Dome,
proved a powerful addition to our portfolio, allowing
the Company to take advantage of robust copper prices
throughout the year to generate signiﬁcant cash ﬂow
and earnings. Pierina (Peru) continues to be a success,
producing more than one-half million ounces of gold at
lower total cash costs per ounce than anticipated.

In December, our Pascua-Lama project received
environmental approval from the Argentinean govern-
ment, after a thorough, intensive two-year review that
included detailed examination by a commission of
independent scientiﬁc professionals. With environmen-
tal approvals from both Chile and Argentina now in
place, we are developing detailed engineering plans and

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

Barrick Annual Review 2006

Pascua-Lama: Its development will benefit from our decade of experience in South America, strong local and regional community
support, and existing infrastructure (including roads, water, camps, and power supply) at Veladero, just 6 kilometers away. The Veladero
pit is visible, center-right above.

have begun submission of documentation to obtain the
sectoral approvals and permits that are required prior to
initiating construction in either country. The Pascua-
Lama project has strong support from local citizens and
regional stakeholders in both countries. Pascua-Lama’s
approval in Chile, for example, has some 400 conditions
that will ensure it is an environmentally responsible
project. One of our objectives is to help the people in
the region ﬁnd ways to grow their economy, skills and
infrastructure for long-term beneﬁt. As a result, this
large, long-life mine will not only contribute low cost
ounces to Company production, it will also offer jobs
and community development in the region for many
years to come. We believe Pascua-Lama will be a model
for sustainable, meaningful development.

Exploration
With the environmental permitting of Pascua-Lama
completed, the Company intends to resume explo-
ration in the Frontera district in 2007 with a budget of
about $30 million. New gold and copper-gold targets
which were outlined by early stage exploration in 2006
will be drill-tested in 2007.

2007 Opportunities
Over the years, we have done extensive engineering and
permitting for one of the most signiﬁcant development

projects in our history: Pascua-Lama. Now, in 2007,
we expect to make further progress toward construc-
tion permits.

The timing is excellent. We now have 10 years of
experience in South America; we operate four mines in
the region, three of which we built ourselves; and we
have an excellent track record in responsible mining.
We will use the power of all these resources to unlock
the value of this world-class gold-silver deposit, which
already has 17 million ounces of proven and probable
gold reserves, and a further 689 million ounces of
silver contained within those reserves.

The pre-production capital cost estimate at Pascua-
Lama has been updated from $1.4–$1.5 billion to about
$2.3–$2.4 billion, reﬂecting inﬂationary pressures
af fe cting the mining industr y as we l l as de sig n
improvements and scope changes. Once in operation,
Pascua-Lama is expected to produce an average of
about 750,000–775,000 ounces of gold and about
35 million ounces of silver a year in the ﬁrst ﬁve years
of an estimated 23-year mine life at total cash costs of
about $40–$50 per ounce of gold (including silver
credits). These cash costs are expected to be near the
bottom of the operating cost curve for the industry.
Pascua-Lama will beneﬁt from existing infrastructure,
processing, stafﬁng and experience from the Veladero
mine, located less than 10 kilometers away.

Barrick Annual Review 2006

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

Australia-
Pacific

Regional Business Unit

22million ounces of proven and probable reserves

(cid:1) Cowal mine started operations in April 2006

(cid:1) Porgera expected to be a solid producer for

years to come

(cid:1) Osborne copper production expected to
increase by over 40% in 2007 to about

85 million pounds

2006 Production
(million ounces)

2006 Total
Cash Costs
(dollars per ounce)

2.2

353

WESTERN
AUSTRALIA

• Plutonic

Lawlers • • Darlot

• Granny Smith
• Kalgoorlie

Kanowna •

• Porgera

PAPUA
NEW GUINEA

• Osborne

QUEENSLAND

NEW SOUTH
WALES
Cowal •

• Henty

TASMANIA

● Mine

Regional Overview
The Australia-Paciﬁc region grew in size and strength
in 2006. We now have 10 operating mines, which are
expected to produce 2.2 to 2.3 million ounces of gold
in 2007, at total cash costs of $385 to $400 per ounce.

The Cowal mine entered production in late April,
and is expected to produce approximately 240,000
ounces of gold in 2007, at total cash costs of about $315
per ounce.

In Papua New Guinea, remediation work is being
completed on the West Wall at Porgera. Production
levels were affected by this work in 2006, and are expected
now to rise again. Barrick owns a 75% interest in this
joint venture and operates the mine. We expect Porgera
to be a solid producer for many years to come. Our
share of reserves and resources stands at seven million
ounces of proven and probable reserves, and two mil-
lion ounces of measured and indicated resources.

Our Osborne mine, beneﬁting from higher copper
prices, commissioned its ﬁrst satellite project in
October. This project will supplement ore from the
mine’s underground operations. Osborne is expected to
produce about 85 million pounds of copper in 2007, at
total cash costs of approximately $1.35 per pound.

20 (cid:1) Regional Business Units – Australia-Pacific

Barrick Annual Review 2006

Cowal: Entered production in April 2006, the fourth in Barrick’s new generation of mines announced for development in 2004, and the
ninth we have built in the last 10 years.

In 2006, our Australian business unit, in conjunction
with our Corporate ofﬁce, identiﬁed an opportunity that
led us to partner with Antofagasta plc to purchase
Tethyan Copper Company. We acquired a 37.5% interest
in the Reko Diq copper-gold project on the highly
prospective – and largely unexplored – Tethyan gold belt
in Pakistan. The project as a whole has an indicated
resource of 15 billion pounds of copper and 10 million
ounces of gold plus an inferred resource of 12 billion
pounds of copper and 12 million ounces of gold. We are
currently working with Antofagasta to advance the inﬁll
drilling program and complete a scoping study for the
project in 2007.

Exploration
Exploration in this region is focused primarily around
our mine sites, where we can add value at existing
operations. We have also begun initial exploration for
iron-oxide copper-gold targets in South Australia.

Drilling at Porgera shows excellent potential for
reserve additions at depth, and further laybacks to the
existing pit are also being contemplated. This potential,
and the existing strong production, make Porgera a
valuable part of our portfolio.

At Reko Diq in Pakistan, a 95,000 meter drill pro-
gram, which commenced in the second half of 2006,
will continue through 2007. The focus of this program
is to conﬁrm and upgrade resources previously deﬁned
at the Western Porphyries and Tanjeel areas, with the
objective of preparing a new resource statement.

2007 Opportunities
Overall, the Australia-Paciﬁc region provides Barrick
with strong, steady production from a group of stable
mines. We expect production to rise in 2007, mainly
because of higher contributions from both Cowal and
Porgera. In total, this region represents over 25% of our
2007 production base.

We are starting to see some stabilization of cash
costs in Australia, which have been subject to upward
pressure over the last few years because of the country’s
base metals mining boom and resulting competition
for labor. This pressure has begun to abate, and in addi-
tion we are starting to feel the beneﬁts of the employee
retention programs that we put in place to help address
the issue.

Our continued exploration programs and higher
gold prices are helping to extend the life of a number of
our mines in the region.

Barrick Annual Review 2006

Regional Business Units – Australia-Pacific (cid:1) 21

Africa

Regional Business Unit

17million ounces of proven and probable reserves

(cid:1) Portfolio rationalized with sale of South Deep

for $1.5 billion

(cid:1) Feasibility study completed at 2.6 million-ounce

Buzwagi project

(cid:1) Drilling at Kabanga indicates it is one of world’s

largest nickel-sulphide deposits

(cid:1) Pre-feasibility began at Sedibelo platinum project,

for completion in 2007

2006 Production
(thousand ounces)

2006 Total
Cash Costs
(dollars per ounce)

914

315

• North Mara

▲ Kabanga

Tulawaka •

• Bulyanhulu
▲ Buzwagi

TANZANIA

▲ Sedibelo

● Mine ▲ Project

Regional Overview
Barrick’s Africa region, formerly part of the Australia
region, became an autonomous business unit during the
2006 integration of Placer Dome assets, strengthening
the Company’s decade-old presence on this continent.
The region is highly prospective, and we are excited
about the gold, nickel and platinum group metals
opportunities within this portfolio.

Our African business unit contains three operating
mines and three projects, with all but the Sedibelo
platinum project located in Tanzania. This region is
expected to produce about 825,000 to 875,000 ounces
of gold in 2007, at total cash costs of about $310 to $325
per ounce.

In December, Barrick sold the South Deep mine to
Gold Fields for a full and fair price of $1.5 billion. Its
sale provides value to our shareholders, and allows
management to focus on key operations and projects.
Tulawaka completed its ﬁrst full year of operations,
producing 98,000 equity ounces of gold at total cash
costs of $280 per ounce. It is an excellent example of
the value that small projects can add to the bottom line,
when they are quickly developed and well-managed.

Our other two operating mines, Bulyanhulu and
North Mara, both exceeded their 2006 targets. They are
long-life, stable producers, and create value by anchoring

22 (cid:1) Regional Business Units – Africa

Barrick Annual Review 2006

Tulawaka: A small but high-return open pit mine that strengthens our presence on Tanzania’s highly prospective Lake Victoria green-
stone belt. Buzwagi, our new project on the belt, will benefit from experience gained building Tulawaka, plus shared infrastructure and
training and manpower opportunities.

our presence in Africa. From this solid base, we have
already brought one new mine into production, and are
now steadily advancing our other projects.

Exploration
In 2006, Barrick spent $22 million in this region and
focused its efforts in Tanzania with a balanced strategy
between minesite activities and grassroots exploration
on the Lake Victoria greenstone belt. We advanced our
understanding of the underground potential at North
Mara and airborne geophysical surveys identiﬁed new
regional targets that will be tested in 2007.

2007 Opportunities
We are encouraged by the potential we see at our three
projects in this region.

At Kabanga, our 50% joint-venture partner, Xstrata
PLC, will complete the drilling program and pre-feasi-
bility study begun in 2006, as part of an agreement with
Barrick. As the operator, Xstrata has already spent
$50 million, and is committed to spend an additional
$95 million in order to complete a full feasibility study,
expected in the latter part of 2008. Results to date indi-
cate that Kabanga is one of the largest and highest
grade nickel-sulphide deposits in the world.

This is an excellent example of one of the methods
that Barrick uses to realize the value of assets within the
portfolio. Initial work by our exploration teams at

Kabanga, which was part of the Sutton Resources trans-
action, demonstrated a signiﬁcant resource. We then
partnered with a leading nickel company, whose
expertise will allow us to maximize the opportunity it
represents for our investors.

In 2006, we completed a feasibility study and an
Environmental Impact Assessment (EIA) at Buzwagi.
This gold project, close to the Bulyanhulu mine, has 2.6
million ounces of proven and probable reserves, and an
additional 0.4 million ounces of measured and indi-
cated resources. A major milestone was reached in
February 2007 when we signed a Mineral Development
Agreement (MDA) with the Tanzanian government. In
2007, we expect to complete a detailed construction
design and receive EIA approval.

We expect to complete the Sedibelo pre-feasibility
study during 2007. Barrick has the right to earn into
a 50% interest in this platinum-palladium project
in South Africa. The deposit contains measured and
indicated resources of 3.8 million ounces of platinum
and 1.7 million ounces of palladium. Sedibelo is
located in the Bushveld Complex, one of the world’s
most proliﬁc platinum districts, and has excellent
economic potential. Drilling will continue for most of
2007 to conﬁrm additional targets in the lease area. Our
partner on this project is a local South African tribe,
whose 50% ownership signiﬁcantly exceeds local
requirements for Black Economic Empowerment.

Barrick Annual Review 2006

Regional Business Units – Africa (cid:1) 23

Board of Directors and
Senior Officers

Board of Directors

Howard L. Beck, Q.C.
Toronto, Ontario
Corporate Director

C. William D. Birchall
Toronto, Ontario
Vice Chairman,
Barrick Gold Corporation

Donald J. Carty, O.C.
Dallas, Texas
Vice Chairman and
Chief Financial Officer,
Dell, Inc.

Gustavo Cisneros
Caracas, Venezuela
Chairman and
Chief Executive Officer,
Cisneros Group of Companies

Senior Officers

Peter Munk
Founder and Chairman

C. William D. Birchall
Vice Chairman

Gregory C. Wilkins
President and
Chief Executive Ofﬁcer

Marshall A. Cohen, O.C.
Toronto, Ontario
Counsel,
Cassels Brock & Blackwell LLP

Peter A. Crossgrove, O.C.
Toronto, Ontario
Corporate Director

John W. Crow
Toronto, Ontario
President, J&R Crow Inc.

Robert M. Franklin
Toronto, Ontario
President, Signalta Capital
Corporation

Peter C. Godsoe, O.C.
Toronto, Ontario
Corporate Director

Alexander J. Davidson
Executive Vice President,
Exploration and
Corporate Development

Gordon F. Fife
Executive Vice President,
Organizational Effectiveness

J. Brett Harvey
Venetia, Pennsylvania
President, Chief Executive
Officer and Director,
CONSOL Energy Inc.

The Right Honourable
Brian Mulroney, P.C.,
C.C., LL.D.
Montreal, Quebec
Senior Partner, Ogilvy Renault

Anthony Munk
New York, New York
Managing Director,
Onex Investment Corp.

Peter Munk, O.C.
Toronto, Ontario
Founder and Chairman,
Barrick Gold Corporation

Patrick J. Garver
Executive Vice President
and General Counsel

Peter J. Kinver
Executive Vice President
and Chief Operating Ofﬁcer

Jamie C. Sokalsky
Executive Vice President
and Chief Financial Ofﬁcer

Joseph L. Rotman, O.C.
Toronto, Ontario
Chairman,
Roy-L Capital Corporation

Steven J. Shapiro
Houston, Texas
Corporate Director

Gregory C. Wilkins
Toronto, Ontario
President and
Chief Executive Officer,
Barrick Gold Corporation

Vincent Borg
Senior Vice President,
Corporate Communications

Kelvin Dushnisky
Senior Vice President,
Corporate Affairs

International Advisory Board

The International Advisory Board was established to provide advice to Barrick’s Board of Directors and management as the Company
expands internationally.

Chairman

The Right Honourable
Brian Mulroney
Former Prime Minister
of Canada

Members

Gustavo Cisneros
Venezuela

Secretary William S. Cohen
United States

The Honourable
Paul G. Desmarais, Sr.
Canada

Vernon E. Jordan, Jr.
United States

Andrónico Luksic
Chile

Angus A. MacNaughton
United States

Peter Munk
Canada

Karl Otto Pöhl
Germany

Lord Charles Powell of
Bayswater KCMG
United Kingdom

The Honourable
Nathaniel Rothschild
United Kingdom

The Honorable
Andrew Young
United States

24 (cid:1) Board of Directors and Senior Officers

Barrick Annual Review 2006

Barrick
Now

Annual Review 2006

Reserves and Resources as of December 31, 2006 1, 2

Gold (mm ozs)
North America
South America
Australia-Pacific
Africa

Total

Other Metals
Copper (bn lbs)
Nickel (mm lbs)
Platinum (000s ozs)
Palladium (000s ozs)

Other Metals Contained In:

Silver (mm ozs)
Copper (bn lbs)
Zinc (mm lbs)

Proven and
Probable Reserves

Measured and
Indicated Resources

46
38
22
17

123

6.0
–
–
–

15
6
12
2

6.6
254
262
1,073

Proven and Probable
Gold Reserves

Measured and
Indicated
Gold Resources

964
1.2
1,555

48
–
48

Fax:416-861-2492
Tel:416-861-9911

Toronto, Canada M5J 2S1
P.O.Box 212
161 Bay Street,Suite 3700
TD Canada Trust Tower
BCE Place
Corporate Office

www.barrick.com

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

TABLE OF CONTENTS

1
2
6

Financial Highlights
Letter to Shareholders
Barrick Now

Barrick Today
Barrick in 2006
Barrick in 2007

10 Barrick Projects
12 Responsible Mining
14 Financial Strategy

16 Regional Business Units
North America
South America
Australia-Pacific
Africa

24 Corporate Directory

The 2006 Annual Report consists of the 2006 Annual Review and the 2006 Financial Report.

Cautionary Statement on Forward-Looking Information

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Barrick
Now

Annual Review 2006

Reserves and Resources as of December 31, 2006 1, 2

Gold (mm ozs)
North America
South America
Australia-Pacific
Africa

Total

Other Metals
Copper (bn lbs)
Nickel (mm lbs)
Platinum (000s ozs)
Palladium (000s ozs)

Other Metals Contained In:

Silver (mm ozs)
Copper (bn lbs)
Zinc (mm lbs)

Proven and
Probable Reserves

Measured and
Indicated Resources

46
38
22
17

123

6.0
–
–
–

15
6
12
2

6.6
254
262
1,073

Proven and Probable
Gold Reserves

Measured and
Indicated
Gold Resources

964
1.2
1,555

48
–
48

Fax:416-861-2492
Tel:416-861-9911

Toronto, Canada M5J 2S1
P.O.Box 212
161 Bay Street,Suite 3700
TD Canada Trust Tower
BCE Place
Corporate Office

www.barrick.com

Barrick
Now

Financial Report 2006

TABLE OF CONTENTS

1 Management’s Discussion

and Analysis

77 Notes to Consolidated

Financial Statements

137 Corporate Governance and

Committees of the Board

73 Financial Statements

128 Mineral Reserves and Resources

138 Shareholder Information

140 Board of Directors and

Senior Ofﬁcers

The 2006 Annual Report consists of the Annual Review 2006 and this Financial Report 2006

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

Contents

2 Our Business
2 Core Business
2 Vision and Strategy
4 Capability to Execute our Strategy
7 Key Economic Trends

14 Operations Review
15 Executive Overview and 2007 Outlook
17 Acquisitions and Divestitures
20 Consolidated Gold and Copper Production,

Sales and Costs

21 Results of Operating Segments
34 Total Cash Costs Performance Measures
37 Other Costs and Expenses

43 Quarterly Information
44 Fourth Quarter Results
45 Liquidity, Capital Resources and Financial Position
45 Cash Flow
47 Liquidity
48 Financial Position
49 Contractual Obligations and Commitments
51 Financial Instruments
52 Off-Balance Sheet Arrangements
55 Critical Accounting Policies and Estimates
65 Cautionary Statement on Forward-Looking Information
66 Glossary of Technical Terms

This MD&A is intended to help the reader understand
Barrick Gold Corporation (“Barrick”, “we”, “our” or
the “Company”), our operations, ﬁnancial perfor-
mance and present and future business environment.
It includes the following sections:
(cid:1) Our Business – a general description of our core

business; our vision and strategy; our capability to
execute our strategy; 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 2007.

(cid:1) Liquidity, Capital Resources and Financial Position –
an analysis of cash ﬂows; sources and uses of cash;
contractual obligations and commitments; our
ﬁnancial position; ﬁnancial instruments; and
off-balance sheet arrangements.

(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 21,
2007, is intended to supplement and complement our
audited consolidated ﬁnancial statements and notes

thereto for the year ended December 31, 2006 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 relating
to our Company, including our most recent Annual
Infor mation For m, is avail able on SE DAR 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 66. 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 important
in making an investment decision; or (iii) if it would
signiﬁcantly alter the total mix of information avail-
able to investors. We evaluate materiality with refer-
ence to all relevant circumstances, including potential
market sensitivity.

Barrick Financial Report 2006

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

Vision and Strategy
Our vision is to be the world’s best gold mining com-
pany by ﬁnding, acquiring, developing and producing
quality reserves in a safe, proﬁtable and socially respon-
sible manner.

Our goal is to create value for our shareholders.
We reinvest cash ﬂow from our mines in exploration,
development projects and other investments to work
towards the long-term sustainability of our business,
to generate cash ﬂow, and to provide leverage to gold
prices through gold production and replacement
of our reserve/resource base. 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 by
ensuring that we have a strong project pipeline, while
effectively managing current operations.

In 2005, we set our 2006 strategy, which focused
on growth in reserves and production, operational
excellence, strengthening the organization and
responsible mining. Our successes in each of these
areas, including the successful integration of Placer
Dome into Barrick, have laid the foundation for our
2007 key areas of focus: share price performance,
responsible mining and building and maintaining
a high performance organization.

Our Business

Core Business
We are the world’s preeminent gold mining company
in terms of market capitalization, annual gold produc-
tion and gold reserves. In early 2006, we completed
the acquisition of Placer Dome Inc. (“Placer Dome”),
which resulted in a signiﬁcant increase in the scale of
our mining operations. The acquisition of Placer
Dome also added signiﬁcant copper reserves at two
mines, Zaldívar in Chile and Osborne in Australia.
Further details of the Placer Dome acquisition can be
found on page 17.

Gold Produced by Region in 2006

North America 39%

Africa 11%

Australia Pacific 26%

South America 24%

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

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

Barrick Financial Report 2006

2006 Strategic Objectives

2006 Results

2007 Strategic Objectives

Growth in reserves and production
(cid:1) Growth at existing mine sites by ﬁnding
new reserves and converting mineralized
material to reserves

(cid:1) Growth through successful exploration
focusing principally in key exploration
districts

(cid:1) Growth through targeted acquisitions
(cid:1) Advance the development of Cowal,
Pascua-Lama, Ruby Hill and Buzwagi
as well as newly acquired Placer Dome
projects, including Pueblo Viejo,
Cortez Hills, Donlin Creek and Sedibelo

Operational excellence
(cid:1) Control costs

(cid:1) Global supply chain management
(such as extending tire life and
evaluating alternatives for supply)
(cid:1) Continuous improvement initiatives
(cid:1) Currency, interest rate and commodity

hedge programs

(cid:1) Effective assessment and management

of risk

(cid:1) Effective capital allocation
(cid:1) Secure efﬁcient sources of funding

for capital

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 control over ﬁnancial reporting

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) Met market guidance for production
(cid:1) Beneﬁted from an excellent ﬁrst full year

of production at 3 new mines and brought
the Cowal mine into production
(cid:1) Advanced all of our major projects
(cid:1) Achieved reserve growth through

exploration discoveries

(cid:1) Completed Placer Dome acquisition, sale
of assets to Goldcorp Inc. (“Goldcorp”),
South Deep sale, and Reko Diq acquisition
(cid:1) Research and development successes that

are expected to enhance project economics

Share price performance
(cid:1) Grow the business through a combination
of opportunistic acquisitions, new deposit
discoveries and replacement of reserves
and resources

(cid:1) Advance project pipeline through

achievement of milestones, prioritization
and effective sequencing

(cid:1) Strong ﬁnancial management, including
hedge book management, balance sheet
optimization and realizing additional
Placer Dome acquisition synergies

(cid:1) Realigned Russian business strategy

(cid:1) Operational excellence focused on meeting

production and cost targets, realizing savings
from ongoing continuous improvement
initiatives, and increased focus on R&D

(cid:1) Advance opportunities for vertical

integration and effective consumables
management

(cid:1) Met market guidance for total cash costs
(cid:1) Effective program of hedging and managing

production cost risks, such as currency
exchange rates, fuel and power

(cid:1) Successfully reduced ﬁxed-price Corporate

Gold Sales Contracts and eliminated
acquired Placer Dome hedge position

(cid:1) Continuous improvement initiatives ongoing

to mitigate cost pressures, increase
throughput and quality improvements

(cid:1) Launched capital allocation process

improvements including new approvals
process and tracking system

(cid:1) Issued $1 billion of copper-linked notes
and increased credit facility from $1.0 to
$1.5 billion

(cid:1) Successful integration of Placer Dome

across all regions and functions, including
cultural integration

(cid:1) Leadership development and succession

plans completed for key leaders

High performance organization
(cid:1) Leadership development
(cid:1) Optimization of business processes such
as planning project management and
risk management

(cid:1) Achieved targets in developing compliance

(cid:1) Technology improvements to increase

and governance capabilities

automation and control costs

(cid:1) Effective capital management through
prioritization, capital allocation and
value measurement

(cid:1) Compliance with business code of
conduct and applicable corporate
governance legislation

(cid:1) Courageous Safety Leadership program

rolled out across Barrick

Responsible mining
(cid:1) Achieve safety and health performance

(cid:1) Focus on contractor safety resulted in 40%

targets

(cid:1) Effective government relations and

community engagement

(cid:1) Environmental leadership through energy

and conservation strategy

reduction of incidents over 2005

(cid:1) Developed and adopted Corporate Social
Responsibility (“CSR”) guidelines across
Barrick

(cid:1) Expanded Non-Governmental

Organizations (“NGO”) partnerships

(cid:1) Improved ratings on Dow Jones

Sustainability Index

(cid:1) Recipient of 2006 CME/CIDA Award for

Excellence in CSR

Barrick Financial Report 2006

Management’s Discussion and Analysis (cid:1) 3

Capability to Execute our Strategy
Our capability to execute our strategy comes from
the strength of our regional business unit structure,
our experienced management team and a strong proj-
ect pipeline that ensures long-term sustainability of
the business.

Regional Business Unit Structure
We manage our business using a regional business
unit (“RBU”) structure. We have four RBUs: North
America, South America, Australia Paciﬁc, and Africa.
Each region receives direction from the Corporate
Ofﬁce, but has responsibility for all aspects of its
business such as strategy and sustainability of mining
operations, including exploration, development, con-
struction, production and closure. Each team is led
by its own Regional President, with oversight by the
Corporate Ofﬁce. Each region has two overriding
responsibilities: to optimize current assets and to grow
its business.

Each RBU essentially operates as a business unit
and contains the following functional groups:
Technical Services; Legal; Organizational Effective-
ness, including Human Resources and Continuous
Improvement; Finance; Operations Support; Commu-
nications; Exploration; Business Development; and
Governmental Relations. Since their inception, the
RBUs have added signiﬁcant value to our business by
realizing operational efﬁciencies in the region, allocat-
ing resources more effectively and understanding and
better managing the local business environment,
including labor, consumable costs and supply, and
government and community relations. In a period
of inﬂationary cost pressures experienced by the min-
ing industry, we believe that our RBU structure has
allowed us to better deal with the challenges and
issues impacting our industry. Furthermore, this
structure served us well for the integration of Placer
Dome, which was successful and substantially com-
plete by the end of second quarter 2006.

In fourth quarter 2006, on closing of a transaction
to vend-in our Russian gold assets to Highland Gold
Mining Ltd. (“Highland”), we concluded that we no
longer had a Russia/Central Asia operating segment
and our segment disclosure in our Financial Statements
has been revised to exclude Russia/Central Asia.

Experienced Management Team
and Skilled Workforce
We have an experienced management team with a
proven track record in the mining industry. Strong
leadership and governance are critical to the success-
ful implementation of our core strategies. We continue
to focus on leadership development for key members
of our executive, senior mine management and front-
line management. A skilled workforce has a signiﬁcant
impact on the efﬁciency and effectiveness of our oper-
ations. The remote nature of many of our mine sites,
as well as strong competition for human resources,
presents challenges in maintaining a well-trained and
skilled workforce. We continue to focus our efforts on
employee retention, recruiting skilled employees and
positive labor relations, including training programs,
leadership development and succession planning. In
2006, we completed the implementation of a Human
Resource information system to help us effectively
manage the impact our workforce has on our mining
operations.

Advanced Exploration and Project Pipeline
Our pipeline of advanced exploration and develop-
ment projects represents a critical component to our
long-term strategy of growing the business. We and
others in the mining industry face the challenges asso-
ciated with ﬁnding, acquiring and developing projects.
An economic discovery is no longer a guarantee of a
new mine, as considerable opposition to new mining
projects can develop from institutional NGOs or
unstable political climates. The development of a new
mine requires successful permitting and government
relations, community dialogue and engagement, and
signiﬁcant ﬁnancial and human capital. The size,
breadth and scale of a company such as ours, coupled
with our regional structure, enhances our prospects
for success; however, the timeline for developing proj-
ects has increased signiﬁcantly.

During 2004, we were focused on building our new
mines and laying the groundwork for growth in our
production. In 2005, we began to realize that growth, as
our new mines, Tulawaka, Lagunas Norte and Veladero
entered production. In 2006, our newest mine, Cowal,
began production and our Pascua-Lama project
received necessary environmental approvals in Chile

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

Barrick Financial Report 2006

and Argentina. We also completed a feasibility study for
Buzwagi in Tanzania and are awaiting approval of the
Environmental Impact Assessment (“EIA”).

In 2006, we acquired Placer Dome, and with that
acquisition, added four signiﬁcant exploration and
advanced stage projects to our project pipeline: Cortez
Hills, Donlin Creek in North America; Pueblo Viejo in
the Dominican Republic; and Sedibelo, a platinum
deposit in South Africa. With this signiﬁcant pipeline
of projects, we are expanding our staff capacity.
During the year, efforts were undertaken to quantify
the expected requirements. Initiatives to meet these
needs have now commenced through programs such
as our Engineers-in-Training Program.

In addition to the focus on personnel, enhance-
ments to systems and business processes are ongoing
and will help to improve operating and cost visibility.
We expect that these improvements will allow us to
more easily identify value-creating opportunities in
existing operating sites, development projects and
related merger and acquisition activity. The improve-
ments should allow better information sharing and
the ability to benchmark operating activities so that
best practices can be applied from our most efﬁcient
operations. For example, a detailed cost benchmark-
ing exercise was completed for open pit mining in
2006 that led to the identiﬁcation of improvement
opportunities at a number of our mine sites.

Technical innovation is also being pursued, utiliz-
ing our in-house research and development (“R&D”)
lab. Certain of our projects have realized beneﬁts as a
re sult of this R&D wor k, w hic h has pro duc e d
modiﬁed process ﬂow designs that yield enhanced
gold and metal by-product recoveries. An example of
this is the change in metallurgical process design at
Pueblo Viejo to improve recoveries of silver and zinc
that we expect will have a positive impact on project
economics. We increased our budget for R&D to
$20 million in 2007 from about $8 million spent in
2006 to support the various ongoing initiatives.

Cost Control and Supply Sourcing
In 2006, our supply chain focus was on implementing
long-term cost control and sourcing strategies for
major consumables and supplies used in our mining
activities through global commodity purchasing
teams. We also focused on mitigating the impact that
global shortages of commodities such as tires and
cyanide have on our operations through implementa-
tion of long-term supply arrangements for these
items. We have developed processes and systems to
monitor usage and supply of tires at our mine sites
that enable reallocation of tires between sites where
necessary. In 2007, we plan to continue to implement
cost control and sourcing strategies for consumables
and supplies.

Energy costs, which include costs for electrical
energy, diesel fuel, natural gas, propane, explosives
and some energy costs embedded into maintenance
and contractor services, account for approximately
30% of our total cash operating costs. In 2006, we
launched a strategic effort to design and implement a
company-wide, sustainable energy management pro-
gram that will pursue demand management, operat-
ing efﬁc ie nc ie s and inve st me nt in ge ne rating
capability. In 2007, our goal is to manage our demand
and seek to realize annual energy efﬁciency savings.
We plan to review new technologies and analyze cur-
rent practices to look for energy efﬁciency opportuni-
ties, as well as look to alternative, cleaner sources of
energy, possibly including solar or geothermal energy.
We also continue to review opportunities to increase
our generating capability, including renewable energy
projects such as the commissioning of our ﬁrst
2-megawatt wind turbine at Veladero later in 2007.

Many of our development projects reside in areas
where the energy infrastructure is either nonexistent
or severely stretched due to a lack of investment. The
implementation of energy solutions to support our
development activities is a signiﬁcant opportunity for
us to manage a large portion of future operating
expenses and provide long-lasting infrastructure for
our mining activities. For example, in 2005, we built a
gas-ﬁred power plant in Nevada, which provides
signiﬁcant cost beneﬁts to the Goldstrike property
(see page 12 under Electricity).

Barrick Financial Report 2006

Management’s Discussion and Analysis (cid:1) 5

Maintenance Program
Maintenance costs (including maintenance labor) rep-
resents about 30% of total cash operating costs at our
mines. The cost of maintenance is not only a function
of the price paid for parts and labor, but can also vary
considerably depending on whether the maintenance
is planned or unplanned, with unplanned mainte-
nance being the more costly. We are designing a global
maintenance program to support our operating mines
and projects in the adoption of best practices to achieve
optimal mine equipment performance and to enable
cost-effective on-site maintenance.

In 2006, our maintenance group supported vari-
ous programs, including: maintenance trades training
and certiﬁcation (e.g. mechanics, welders) for our
employees in Africa; implementation of a reporting
system for key maintenance performance indicators
for mines in Australia Paciﬁc; establishment of a
regional-based reliability engineering team and test
laboratory in North America to investigate the poten-
tial beneﬁts of establishing regional-based laborato-
ries and training facilities; and implementation of an
upgraded electronic asset management system in
South America.

In 2007, areas of focus for our maintenance group
include standardize d policie s, proce dure s and
processes for asset management; the introduction of
new technology and programs to improve mainte-
nance productivity; and setting standards for the
implementation of a global enterprise asset manage-
ment system.

Continuous Improvement
Our Continuous Improvement (“CI”) group’s vision is
to achieve operational excellence and a company cul-
ture that engages every employee in improvement
every day. We have a global network of Barrick employ-
ees across all sites that focus on CI in all key aspects of
our business. Structured problem-solving and planning
methodologies are used extensively to help identify
and execute improvement initiatives while fostering
company-wide learning through knowledge-sharing.
Implementation of CI initiatives has led to signiﬁcant
value creation to Barrick in terms of cost mitigation,
throughput increases and quality improvements.

Environmental, Health and Safety
Responsible mining is one of our key strategic objec-
tives. As part of our commitment to responsible min-
ing, we focus on continuously improving health and
safety programs, systems and resources to help control
workplace hazards. Continuous monitoring and inte-
gration of health and safety into decision-making
enables us to operate effectively, while also focusing on
health and safety. In 2006, we completed a review of
the Safety and Health System and Standards, with
implementation commencing in 2007; we completed
training of former Placer Dome supervisory and man-
agement-level employees in our “Courageous Leader-
ship for Safety and Health” program; we instituted risk
and change management processes including risk
assessments; and we established contractor safety
controls across all regions. Key areas of focus for 2007
will include: courageous safety leadership develop-
ment for the remainder of the hourly personnel;
implementation of the Gold Standards, which are
security standards by which we handle and protect the
gold from the point the gold is mined to the point
when it is processed and shipped; identiﬁcation of
signiﬁcant health issues; continued focus on risk and
change management; and continuing communication
of a safety culture as part of our core values.

We are subject to extensive laws and regulations
governing the protection of the environment, use of
water, endangered and protected species, waste dis-
posal, mine closure and reclamation and worker
health and safety. We seek to continuously implement
operational improvements to enhance environmental
performance. Our Environmental, Health, Safety and
Sustainability Executive Committee is responsible for
monitoring and reviewing environmental, safety and
health policies and programs, assessing performance
and monitoring current and future regulatory issues.
We are a charter signatory to the International Cyanide
Management Code. In March 2006, our Cowal mine
became the ﬁrst facility in the world to obtain the
International Cyanide Institute Certiﬁcation. We are a
signatory to the UN Global Compact, which encour-
ages businesses to support a precautionary approach to
environmental challenges, undertake initiatives to pro-
mote greater environmental responsibility and encour-
age the development and diffusion of environmentally

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

Barrick Financial Report 2006

friendly technologies. Following the acquisition of
Placer Dome, we began the implementation of our
Environmental Management System (“EMS”) Stan-
dard at all of the acquired operations. The EMS
Standard contains 15 elements of good environmen-
tal management and is consistent with ISO 14001.
Three of our mines, Lagunas Norte, Pierina and
Zaldívar, are ISO 14001 Certiﬁed and our goal is that
others will receive certiﬁcation in the future. Each
year, we issue a Responsibility Report that outlines our
environmental, health and safety and social responsi-
bility performance for the year.

Information Management and Technology
Our Information Management and Technology
(“IMT”) group provides focused and responsive sup-
port to enable us to meet our current business objec-
tives and long-term strategy goals. The IMT group
also 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 and cost by standardizing
system solutions, and ongoing analysis of business
needs and the potential beneﬁts that can be gained
from system enhancements.

Internal Control Over Financial Reporting
Management is responsible for establishing and main-
taining adequate internal control over ﬁnancial
reporting. Internal control over ﬁnancial reporting is
a process designed to provide reasonable assurance
regarding the reliability of ﬁnancial reporting and the
preparation of ﬁnancial statements for external pur-
poses in accordance with US GAAP.

The Company’s internal control over ﬁnancial
reporting includes those policies and procedures that
(i) pertain to the maintenance of records that, in rea-
sonable detail, accurately and fairly reﬂect the trans-
actions and dispositions of the assets of the Company;
(ii) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of ﬁnan-
cial statements in accordance with US GAAP, and that

receipts and expenditures of the Company are being
made only in accordance with authorizations of man-
agement and directors of the Company; and (iii) pro-
vide reasonable assurance regarding prevention or
timely detection of unauthorized acquisition, use or
disposition of the Company’s assets that could have a
material effect on the Company’s Financial State-
ments. Due to its inherent limitations, internal control
over ﬁnancial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk
that controls may become inadequate because of
changes in conditions, or that the degree of compli-
ance with the policies or procedures may deteriorate.
Barrick’s annual management report on internal
control over ﬁnancial reporting for the year ended
December 31, 2006 and the related attestation report
of Barrick’s auditors is included in Barrick’s 2006
Annual Report and its 2006 Form 40-F/Annual Infor-
mation Form on ﬁle with the SEC and Canadian
provincial securities regulatory authorities.

Key Economic Trends
In 2006, higher gold, copper and silver prices contin-
ued. While beneﬁting gold and copper revenues and
silver by-product credits, this also led to higher royalty
expenses. Although the trend of inﬂationary pressure
on other commodities and consumables, such as oil
and natural gas, eased late in 2006 and into 2007,
prices for many other commodities and consumables,
including electricity, tires and cyanide, remain at rel-
atively high levels and continue to cause upward pres-
sure on production costs. The gold mining industry
has also been facing upward pressure on labor costs.
We believe that other companies in the industry are
experiencing similar trends for labor, commodities
and consumables. Since the acquisition of Placer
Dome, the increase in scale of our business means that
these factors also impact the business on a larger scale.

Gold, Copper and Silver Prices
Market gold and copper prices have a signiﬁcant
impact on our revenue. Silver prices impact total
cash costs 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 macroeconomic
factors that are beyond our control.

Barrick Financial Report 2006

Management’s Discussion and Analysis (cid:1) 7

In 2006, gold prices ranged from $516 to $730 per
ounce with an average market price of $604 per ounce
and closed the year at $632 per ounce. The price
of gold followed an upward trend in 2006, reaching a
25-year high of $730 per ounce in May, primarily due
to strong physical and investment demand. Since May,
market gold prices retreated to trade generally in the
$600 to $650 per ounce range. Other economic inﬂu-
ences such as supply and demand, oil prices, trade
deﬁcits, the US dollar and US interest rates are factors
in explaining gold price movements, as well as Central
Bank activity. Demand for gold remains strong, both
for jewelry and as an investment in response to global
economic and political uncertainty. In the past few
years there has been a resurgence in gold as an invest-
ment vehicle, with more readily accessible gold invest-
ment opportunities (such as gold exchange traded
funds – “ETFs”). There has been speculation that cen-
tral banks in Asia and Russia have considered diversify-
ing their reserves away from the US dollar and into
other currencies and gold, which would provide further
fundamental strength to gold prices. We believe that
economic conditions for a higher gold price remain
favorable and we expect that gold mine supply will con-
tinue to fall short of jewelry and investment demand.

Average Monthly Spot Gold Prices (dollars per ounce)

750

700

650

600

550

500

450

400

350

300

2004

2005

2006

Over the last three years, our realized gold sales
prices have generally tracked the rising market gold
price. In certain periods our average realized price was
below market prices as we voluntarily chose to deliver
some of our production into gold sales contracts at
prices lower than prevailing market prices, consistent
with our goal to eliminate our ﬁxed-price Corporate
Gold Sales Contracts position (see page 54 for more
details). In 2006, our realized gold price was reduced
during the year by the opportunity cost of deliveries
into ﬁxed-price Corporate Gold Sales Contracts of
$367 million ($327 million in fourth quarter 2006)
combined with Placer Dome gold hedge accounting
adjustments of $165 million as we completely elimi-
nated the position in 2006. Had it not been for these
items, our realized price would have been approxi-
mately $63 per ounce higher in 2006 (and would have
largely tracked the spot gold price). In 2006, we
reduced our ﬁxed-price Corporate Gold Sales Con-
tracts through the delivery of 1.2 million ounces of
production into contracts and converting the pricing
of 0.5 million ounces into future spot pricing. We also
reallocated 3.0 million ounces of hedges to the Project
Gold Sales Contracts (see pages 52 to 55 for a descrip-
tion of our Gold Sales Contracts).

As of February 21, 2007, we fully eliminated the
remaining ﬁxed-price Corporate Gold Sales Con-
tracts. We expect to eliminate the entire Floating
Spot-Price Gold Sales Contracts position through
deliveries of gold production before the end of the
second quarter of 2007. This is expected to result in a
pre-tax reduction to our net income and cash ﬂow of
$572 million ($564 million post-tax) in ﬁrst quarter
2007 and $76 million ($65 million post-tax) in sec-
ond quarter 2007.

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

Barrick Financial Report 2006

The acquisition of Placer Dome has led to copper
prices having a signiﬁcant effect on our results due
to copper production from the Zaldívar copper mine
and the Osborne gold and copper mine. In 2006,
these mines produced 367 million pounds of copper
in the aggregate.

Average Monthly Spot Copper Prices (dollars per pound)

4.50

4.00

3.50

3.00

2.50

2.00

1.50

1.00

2004

2005

2006

Copper prices rose signiﬁcantly in the ﬁrst half of
2006, reaching a high of $3.99 per pound in May.
Realized copper prices tracked the rising spot market
prices. This rally was mainly due to strong physical and
investment demand, as well as relatively low global
copper inventory levels, exacerbated by labor strikes at
some of Chile’s large copper mines. We took advantage
of these high copper prices to issue $1 billion of cop-
per-linked notes that are repayable in the dollar equiv-
alent of 324 million pounds of copper (starting in
October 2006) over the following three years at $3.08
per pound (see page 47 for more details). In the latter
part of the year, copper prices trended lower from the
high in May 2006, closing at $2.85 per pound on
December 31, 2006. Copper prices have declined
further since December 31, 2006 on concerns of a
slowdown in global economic activity. In February
2007, we entered into a transaction where we can par-
ticipate in stronger copper prices up to $3.50 per
pound, while maintaining a ﬂoor price of $3.00 per
pound, on the remaining 274 million pounds of cop-
per in copper-linked notes.

Average Monthly Spot Silver Prices (dollars per ounce)

14.00

12.00

10.00

8.00

6.00

4.00

2004

2005

2006

Silver prices have risen more than 40% since the begin-
ning of the year, and reached a high of $15.17 per ounce
in May 2006, largely due to investment demand led by
the silver exchange-traded fund launched in second
quarter 2006. Silver rallied in the ﬁrst few months of
2006 along with gold, despite continued news that attri-
tion in the US photographic market would depress
demand. Silver prices have had support from industrial
consumers as technological advances continue to cre-
ate new uses for silver. Industrial demand now accounts
for approximately half of total demand. Over the last
three years we have produced between 10 to 18 million
ounces of silver by-products annually, mainly at our
Eskay Creek mine. For 2007, we expect to produce about
7 million ounces of silver, as Eskay Creek approaches
the end of its reserve life in early 2008. After Pascua-
Lama begins production, we expect that the quantities
of silver we produce annually will increase signiﬁcantly
due to the substantial amount of silver that is contained
in the gold mineral reserves.

Based on estimates of 2007 production and sales,
the approximate sensitivities of our income from con-
tinuing operations before income taxes and other items
to a 10% change in metal prices from 2006 average
spot rates are as follows: gold – $340 million; copper –
$75 million; and silver – $10 million.

Barrick Financial Report 2006

Management’s Discussion and Analysis (cid:1) 9

Average Monthly Chilean Peso Spot Rates
(US$:Chilean peso exchange rate)

650.00

625.00

600.00

575.00

550.00

525.00

500.00

2004

2005

2006

A weaker US dollar would cause our costs reported in
US dollars to increase. In 2006, the Canadian dollar
stabilized at the higher levels reached in 2005, mainly
due to sustained higher energy prices and global
investor interest in resource assets. The Australian dol-
lar has appreciated, mainly due to higher commodity
prices and a strong economic performance in Austra-
lia resulting in an interest rate environment that is
attractive to investors. The Chilean peso strengthened
in tandem with copper prices in 2006. It has since
weakened following copper.

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. About 70% of our consolidated pro-
duction costs are denominated in US dollars and are
not exposed to ﬂuctuations in US dollar exchange rates.
For the remaining portion, our currency hedge position
has mitigated to a signiﬁcant extent the effect of the
weakening of the US dollar over the last few years on
operating costs at our Australian and Canadian mines.
Over the last three years, our currency hedge position
has provided beneﬁts to us in the form of hedge gains

Currency Exchange Rates
Results of our mining operations in Australia, Canada
and Chile, reported in US dollars, are affected by
exchange rates between the Australian, Canadian and
Chilean currencies and the US dollar because a por-
tion of our annual expenditures are based in local
currencies. Following the Placer Dome acquisition,
our exposure to the Australian dollar and the Chilean
peso increased.

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

0.90

0.85

0.80

0.75

0.70

0.65

0.60

0.55

0.50

0.45

2004

2005

2006

Average Spot Rate

Average Hedge Rate

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

0.95

0.90

0.85

0.80

0.75

0.70

0.65

0.60

2004

2005

2006

Average Spot Rate

Average Hedge Rate

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

Barrick Financial Report 2006

when contract exchange rates are compared to prevail-
ing market exchange rates as follows: 2006 – $84 mil-
lion; 2005 – $100 million; and 2004 – $96 million.
These gains are reﬂected as an offset to our operating
costs. We have also recorded hedge gains which offset
administration expenses as follows: 2006 – $14 million;
2005 – $16 million; 2004 – $11 million.

Our currency hedge position at the end of 2006
provides protection for a signiﬁcant portion of our
Canadian and Australian dollar-based costs for the
next three years. The average hedge rates vary depend-
ing on when the contracts were put in place. For
hedges in place for future years, average hedge rates
are higher than 2006 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 approximately $0.72 for Australian dollar
contracts and approximately $0.81 for Canadian dol-
lar contracts. Beyond the next three years, our Cana-
dian dollar-based costs principally represent corporate
administration costs at our head ofﬁce. The portion
of the Australian dollar-based costs that remain
unhedged are subject to market currency exchange
rates, and consequently costs reported in US dollars
for our Australian mining operations could increase if
currency exchange rates against the US dollar remain
at present levels.

As of December 31, 2006, we had not hedged any
of the Chilean peso exposure at Zaldívar or the Pascua-
Lama project. In early 2007, we opportunistically
added 6.5 billion of Chilean peso hedges for exposures
in 2007.

For the unhedged portion of estimates of our
Australian, Canadian and Chilean currency-based
costs for 2007, a 10% change in market exchange rates
for these currencies would result in a change in
costs reported in US dollars for these currencies of
about $32 million. Further information on our cur-
rency hedge position is included in note 19 to the
Financial Statements.

Inﬂationary Cost Pressures
The mining industry continues to experience price
inﬂation for many commodities and consumables
used in the production of gold and copper, as well
as, in some cases, constraints on supply. These pres-
sures 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, we put in place hedge posi-
tions 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 improve-
ment initiatives to mitigate the impact on our business.

Fuel
We consume on average about 3.5 million barrels of
diesel fuel annually across all our mines.

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

2004

2005

2006

Diesel fuel is reﬁned from crude oil and is therefore
subject to the same price volatility affecting crude oil
prices. With global demand remaining high in 2006,
oil prices rose from $63 per barrel at the start of the
year to a record high $78 per barrel in July 2006, and
closed at $61 per barrel at the end of the year. Since the
end of 2006, the price of crude oil has continued to
decline due to warmer weather in the US northeast,
producer hedging and technical trading based on these

Barrick Financial Report 2006

Management’s Discussion and Analysis (cid:1) 11

lower levels. To help mitigate rising oil prices and con-
trol the cost of fuel consumption, at year end we had a
fuel hedge position totaling 4.2 million barrels, which
represents about 30% of our total estimated consump-
tion in 2007 and 15–20% of our total estimated con-
sumption in each of the following six years. The fuel
hedge contracts are primarily designated for our
Nevada-based mines and have an average price of
$59 per barrel. In 2006, we realized beneﬁts in the form
of fuel hedge gains totaling $16 million (2005: $10 mil-
lion; 2004: $4 million), when fuel hedge prices were
compared to market prices. These gains are reﬂected
in our operating costs. Based on estimates of our 2007
diesel fuel consumption, a $5 per barrel increase in the
price of oil would result in an increase in our annual
cost of fuel consumed of about $16 million for the
unhedged portion of our fuel consumption.

Electricity
We purchase about 3 billion kilowatt hours (“kwh”) of
electricity annually across all our mines. Electricity
costs represent approximately 12% of our operating
costs to produce gold and copper. We typically buy
electricity from regional power utilities, but at some
mines, we generate our own power. Fluctuations in
electricity prices are generally caused by local eco-
nomic factors. 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
electricity. Natural gas prices declined in North Amer-
ica in 2006, mainly due to mild winter weather, a rela-
tively calm hurricane season, and high natural gas
inventory levels.

In 2005, we comple te d construction of our
Western 102 power plant in Nevada for our Goldstrike
mine, designed to enable us to lower the cost of power
consumed at the mine. The plant has enabled us to
lower the cost per kwh from approximately 10 cents to
approximately 8 cents in 2006, with a corresponding
decrease of approximately $17 million in the total cash
costs of gold produced at Goldstrike or about $9 per
ounce in 2006.

Consumables
With increasing demand for tires and limitations in
supply from tire manufacturers, costs have been rising
and some companies have experienced difﬁculty
securing tires. We have been successful in mitigating
this cost pressure by ﬁnding ways to extend tire life
and looking at various alternatives for supply. In 2006,
we completed a tire tender process and concluded
long-term sourcing arrangements with preferred tire
suppliers to ensure that we continue to receive an ade-
quate supply of tires for our mines and development
projects. The limited availability of tires did not have
a signiﬁcant impact on productivity at our mines in
2006. In 2007, we will continue to monitor tire usage
and implement improved tire management processes
to further extend tire life.

Generally, prices for certain other consumables,
such as explosives, grinding media and cyanide, have
also been increasing. We experienced price increases
for explosives in 2006, by 25% in some cases, due to
increases in raw material prices (natural gas and
ammonia), but we were able to work with our suppli-
ers to mitigate the impact of price increases on these
raw material and explosives costs. Prices for grinding
media have also increased, by 15% in some cases.

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

Barrick Financial Report 2006

Labor Costs
Labor costs represent approximately 30% of our total
cash operating costs. With high demand for experi-
enced miners and relatively inﬂexible supply, the
industry has been facing upward pressure on labor
costs, as well as higher turnover rates in some cases. In
North America, the combination of a strong market
and low unemployment in certain areas in which we
operate has increased the recruiting cycle times for
experienced miners and operators and for technical
occupations. In South America, the region is experi-
encing pressure from organized labor groups to
increase wages due to the recent high metal prices. In
our Africa region, there is a shortage of qualiﬁed and
experienced Tanzanians for senior and technical roles.
This shortage has been addressed by contracting expa-
triates primarily from South Africa and Australia, but
at signiﬁcantly higher costs. In our Australia Paciﬁc
region, despite a trend of an increasingly mobile
workforce between Australia and Papua New Guinea,
there remain skill shortages in both countries, due in
part to increased competition for high-caliber gradu-
ates entering the mining sector and high demand for
and shortage of skilled trades (e.g. electrical and
mechanical). Labor cost pressures have been most
signiﬁcant in our Australia Paciﬁc region.

US Dollar Interest Rates

Interest Rates (%)

6.0

5.5

5.0

4.5

4.0

3.5

3.0

2.5

2.0

2004

2005

2006

5 Year Interest Rates

10 Year Interest Rates

30 Year Interest Rates

Short-term US dollar interest rates rose in the begin-
ning of 2006 as the US Federal Reserve continued its
tightening cycle. By mid-2006 the US Federal Reserve
put this tightening cycle on hold, and we expect the
yield curve to remain relatively ﬂat as the US Federal
Reserve sees inﬂation pressures moderating over time.
Volatility in interest rates mainly affects interest
receipts on our cash balances ($3.0 billion at the end
of 2006), and interest payments on variable-rate debt
(approximately $163 million at the end of 2006). The
relative amounts of variable-rate ﬁnancial assets and
liabilities may change in the future, depending upon
the amount of operating cash ﬂow we generate, as well
as amounts invested in capital expenditures.

Barrick Financial Report 2006

Management’s Discussion and Analysis (cid:1) 13

Operations Review

Selected Annual Information

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

Production (000s oz/millions lbs)2
Sales

000s oz/millions lbs3
$ millions3
Market price4
Realized price4,5
Total cash costs2,4,6
Amortization2,4,7
Total production costs2,4

Gold

Copper1

2006

2005

2004

2006

8,643

5,460

4,958

367

8,390
$ 4,485
604
541
282
77
$ 359

5,320
$ 2,350
444
439
227
76

4,936
$ 1,932
409
391
214
86
$ 303 $ 300

376
$ 1,151
3.05
3.06
0.79
0.43
$ 1.22

2006

2005

2004

Net income from continuing operations $ 1,209
Net income from continuing
operations – per share
Basic
Diluted
Net income
Net income per share

1.44
1.42
1,506

$ 395

$ 248

0.74
0.73
401

0.75
0.75

0.47
0.46
248

0.47
0.46

1.79
1.77

Basic
Diluted

Cash inﬂow (outﬂow) from
continuing operations
Operating activities
Investing activities
Financing activities
Cash inﬂow from discontinued

operations8

Cash position – end of year
Total assets9
Total long-term ﬁnancial liabilities10
Gold reserves (millions of contained ounces)
Copper reserves (billions of contained pounds)

2,122
(1,593)
(1,347)

726
(1,180)
93

509
(821)
740

2,828
3,043
21,373
$ 3,394
123.1A
6.0A

–

1,037
6,862
$ 1,780

88.6
–

–
1,398
6,287
$ 1,707
89.1
–

1. The 2005 and 2004 comparative periods for copper have been omitted as
we did not produce any significant amounts of copper prior to the produc-
tion from the copper mines acquired with Placer Dome.

2. Gold production and total cash cost per ounce/pound/ton statistics reflect
our equity share of production, including our equity share of production
from the South Deep mine through November 30, 2006.

3. Gold sales ($ millions) exclude the results of discontinued operations. Gold
sales (000s oz/millions lbs) exclude the results of discontinued operations
and reflect our equity share of sales.
4. Per ounce/pound weighted average.
5. The realized gold price in 2006 is inclusive of the opportunity cost of deliv-
eries into gold sales contracts of $367 million, combined with Placer Dome
gold hedge accounting adjustments of $165 million.

6. Total cash costs per ounce/pound/ton statistics exclude amortization and
inventory purchase accounting adjustments. Total cash costs per ounce/
pound/ton is a performance measure that is used throughout this MD&A.
For more information see pages 34 to 36.

7. Amortization includes inventory purchase accounting adjustments.
8.

In 2006, we received cash of approximately $1.6 billion from the sale of
operations to Goldcorp and approximately $1.2 billion from the sale of the
South Deep mine to Gold Fields Limited (“Gold Fields”).

9. Total assets increased in 2006 largely due to the acquisition of Placer Dome

that resulted in the recognition of assets totaling $15.3 billion.

10. Total long-term financial liabilities increased in 2006 largely due to liabilities
totaling $3.0 billion that were assumed in the acquisition of Placer Dome.

At the end of 2006, we had proven and probable gold
reserves of 123.1 million ounces.1 We also reported
gold mineral resources (measured and indicated)
of 35.0 million ounces and inferred resources of
24.9 million ounces.2 We have proven and probable
copper reserves of 6 billion pounds,2 with an addi-
tional 6.6 billion pounds of measured and indicated
resources. 2 Copper contained in Barrick’s gold
reserves at year end 2006 was 1.2 billion pounds.2
Silver contained in our gold reserves at year end is
963.9 million ounces and is primarily derived from
the Pascua-Lama deposit, one of the largest silver
deposits in the world, which contains 689.3 million
ounces of silver. 2 By replacing gold and copper
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 and
copper production levels. Reserves can be replaced by
expanding known ore bodies, acquiring mines or
properties or discovering new deposits. Once a site
with gold or copper 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
exploration is speculative in nature, exploration proj-
ects may prove unsuccessful.

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 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 U.S. reporting purposes,
1.88 million ounces of the Cortez reserve, Buzwagi and Pueblo Viejo are clas-
sified as mineralized material. For a breakdown of reserves and resources by
category and additional information relating to reserves and resources, see
pages 128–136 of this Financial Report 2006.

2. For a breakdown of reserves and resources by category and additional
information relating to reserves and resources, see pages 128–136 of this
Financial Report 2006.

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 U.S. reporting purposes,
1.88 million ounces of the Cortez reserve, Buzwagi and Pueblo Viejo are clas-
sified as mineralized material. For a breakdown of reserves and resources by
category and additional information relating to reserves and resources, see
pages 128–136 of this Financial Report 2006.

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

Barrick Financial Report 2006

Executive Overview and 2007 Outlook
Gold production in 2006 has increased substantially
over the prior year due to contributions from our new
mines, Tulawaka, Lagunas Norte, Veladero and Cowal,
as well as production from the Placer Dome mines
acquired in January 2006. Gold production in 2006
includes 2.56 million ounces from the acquired Placer
Dome mines. In 2006, we also produced 367 million
pounds of copper from two copper mines acquired
with Placer Dome. Earnings and operating cash ﬂow
have increased substantially due to the higher gold pro-
duction levels and higher realized gold prices, as well as
the contribution from copper production at recent high
copper prices. Earnings in 2006 also reﬂect a pre-tax
$367 million opportunity cost relating to the voluntary
delivery of 1.2 million ounces of gold production into
ﬁxed-price Corporate Gold Sales Contracts, and a pre-
tax gain of $288 million on the sale of South Deep.
Earnings on a per share basis reﬂect 322.8 million com-
mon shares issued in ﬁrst quarter 2006 to acquire
Placer Dome. In 2006, we completed the sale of certain
Placer Dome operations to Goldcorp, and the sale of
South Deep to Gold Fields. We also completed the
acquisition of a 37.5% indirect interest in the Reko Diq
copper project in Pakistan and acquired a 15% interest
in NovaGold Resources Inc. (“NovaGold”). For more
details please see pages 17 to 19.

Key Factors Affecting Earnings

For the years ended December 31
($ millions)

Refer
to page

Net income – 2005
Increase (decrease)

Higher market gold prices1
Less: impact of gold sales contracts1
Higher sales volumes gold2
Higher earnings from copper sales
Higher total cash costs
Higher interest expense
Higher exploration and project

development expense
Higher income tax expense3
Special items1,4
Other

Total increase

Net income – 2006

7
7
20
20
20

37
42
16

$ 1,342
(476)
429
767
(461)
(119)

(149)
(387)
265
(106)

$ 401

$ 1,105

$ 1,506

1. Our realized gold price was reduced during the year for the opportunity cost
of deliveries into fixed-price Corporate Gold Sales Contracts of $367 million,
combined with Placer Dome gold hedge accounting adjustments of $165 mil-
lion. Had it not been for these items, our realized price would have been
approximately $63 per ounce higher in 2006. The opportunity cost of deliver-
ies into ﬁxed-price Corporate Gold Sales Contracts and the Placer Dome gold
hedge accounting adjustments have been excluded from the special items
line on this table.

2. Impact of changing sales volumes on margin between selling prices, total
cash costs and amortization, but excluding inventory purchase accounting
adjustments.

3. Excluding the impact of the tax effects of special items.
4. Special items are presented on a post-tax basis. See page 16 for a description

of the special items.

Barrick Financial Report 2006

Management’s Discussion and Analysis (cid:1) 15

In 2006, we continued work on advancing our proj-
ect pipeline, including our new Ruby Hill mine in
Nevada, that began production in February 2007;
Cortez Hills and Donlin Creek in North America;
Pueblo Viejo in the Dominican Republic; Pascua-
Lama in Chile/Argentina; Sedibelo in South Africa;
Buzwagi and Kabanga in Tanzania; Fedorova in
Russia; and Reko Diq in Pakistan. We generated sub-
stantial amounts of operating cash ﬂow, over $2.1 bil-
lion. We generated $1.6 billion from the sale of
operations to Goldcorp; $1.2 billion from the sale of

South Deep; and $1 billion on issuance of copper-
linked notes. We used $1.1 billion to fund 2006 capital
expenditures and $1.8 billion to settle the acquired
Placer Dome hedge position. Our closing cash posi-
tion at the end of 2006 was $3.0 billion, which, when
combined with future operating cash ﬂow and other
sources of liquidity, is expected to provide the funding
for capital requirements associated with our project
pipeline in the short term. 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

Gain on sale of South Deep
Opportunity cost of deliveries into Corporate

Gold Sales Contracts

Hedge accounting adjustments related to the acquired

Placer Dome gold hedge position

Impairment charges on investments and other

long-lived assets

Inventory purchase accounting adjustments
Changes in asset retirement obligation cost estimates

at closed mines

Non-hedge derivative gains
Highland vend-in
Peruvian voluntary contribution
Deferred stripping accounting changes

Cumulative effect

Resolution of Peruvian tax assessment

Outcome of tax uncertainties
Reversal of other accrued costs

Refer to
page

41
41
19
27

Deferred tax credits due to change in tax status

2006

2005

2004

Pre-tax Post-tax

Pre-tax

Post-tax

Pre-tax

Post-tax

$ 288

$ –

(367)

(352)

(56)

(55)

(89)

(88)

(165)

(112)

–

(23)
(108)

(53)
–
51
(8)

–

–
–
–

(18)
(87)

(35)
29
51
(6)

–

–
–
31

(16)
–

(15)
6
–
–

–
–
–

(16)
–

(11)
4
–
–

–
–
5

(144)
–

(22)
5
–
–

–

–
21
–

(99)
–

(17)
9
–
–

–

141
15
81

Total

$ (385)

$ (211)

$ (75)

$ (67)

$ (229)

$ 42

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

Barrick Financial Report 2006

2007 Outlook

For the year ended December 31
($ millions except as otherwise indicated)

Gold

Production (millions of ounces)
Total cash costs1 ($ per ounce)
Amortization2 ($ per ounce)

Copper

Production (millions of pounds)
Total cash costs1 ($ per pound)
Amortization2 ($ per pound)

Corporate administration expense
Exploration expense
Project development expense3
Other operating expenses
Interest income4
Interest expense5
Capital expenditures6
Tax rate7

2007E

8.1–8.4
$335–$350
$95

400
$0.90
$0.30
$140
$170
$190
$115
$130
$95
$1,100–$1,800
30%

1. Guidance reflects our equity share of production. Gold production is expected
to be slightly lower in the first half of 2007 than in the second half of 2007.
Total cash costs per ounce/pound/ton exclude amortization expense and inven-
tory purchase accounting adjustments charged to cost of sales. Total cash costs
per ounce/pound/ton is a performance measure that is used throughout this
MD&A. For more information see pages 34 to 36.

2. Increase in rates per ounce in 2007 principally reﬂects the ﬁnal purchase price

allocation for Placer Dome mines.

3. Increase in 2007 mainly reﬂects higher development activity levels at projects.
4. Higher interest income in 2007 mainly reflects expected higher average cash

balances.

5. Net of amounts capitalized of $140 million. Interest costs incurred are
expected to increase in 2007 due to higher levels of debt outstanding after
debt issuances in 2006. Interest expense is expected to decrease in 2007 as
more interest is capitalized at acquired late-stage exploration and other proj-
ects including Cortez Hills, Donlin Creek, Pueblo Viejo, Buzwagi, Sedibelo,
and Reko Diq.

6. Higher capital expenditures in 2007 include construction costs expected at
Buzwagi, Pascua-Lama and Pueblo Viejo totaling $900 million. Range is sub-
ject to the Company receiving the timely receipt of permits and construction
approvals.

7. Represents the underlying effective tax rate excluding the impact of deliveries
into corporate gold sales contracts, as well as the impact of tax rate changes
and changes in deferred tax valuation allowances. The effective tax rate for
the full year is expected to be approximately 45% when the $629 million
opportunity cost of delivering into gold sales contracts in a low tax-rate juris-
diction is included. As a result of these deliveries the tax expense in first and
second quarters is expected to be based on the 30% underlying effective tax
rate on income excluding this opportunity cost.

Our ﬁnancial performance is affected by our ability to
achieve targets for production volumes and total cash
costs. We prepare estimates of future production 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 and copper 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; vary-
ing metallurgical and other ore characteristics; and
short-term mining conditions that require different
sequential development of ore bodies or mining in dif-
ferent 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/pound/ton are also affected by ore metal-
lurgy that impacts gold and copper 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 possible,
the effect they have on our operating results.

Acquisitions and Divestitures
Barrick has grown historically through a combination
of organic growth through new mineral reserve dis-
coveries and acquisitions. Most recently, the acquisi-
tion of Placer Dome has led Barrick to become the
world’s preeminent gold mining company.

Acquisition of Placer Dome
In ﬁrst quarter 2006, we acquired all the outstanding
common shares of Placer Dome at a total cost of
approximately $10.0 billion, including $1.3 billion in
cash and 322.8 million Barrick common shares. We
consolidated Placer Dome’s results of operations from
January 20, 2006 onwards.

Placer Dome was one of the world’s largest gold
mining companies. It had 12 producing mines based
in North America, South America, Africa and Austra-
lia/Papua New Guinea, and four signiﬁcant projects
that are in various stages of exploration/development.
Placer Dome’s most signiﬁcant mines were Cortez in
the United States, Zaldívar in Chile, Porgera in Papua
New Guinea, North Mara in Tanzania and South Deep
in South Africa. The most signiﬁcant projects were
Cortez Hills and Donlin Creek in the United States,
Pueblo Viejo in the Dominican Republic, and Sedi-
belo in South Africa. The acquisition of Placer Dome
was attractive principally due to proximity of both
companies’ mining operations and the attractive
pipeline of projects held by the combined company.

Barrick Financial Report 2006

Management’s Discussion and Analysis (cid:1) 17

We believe that the business combination between
Barrick and Placer Dome was an opportunity to create
a Canadian-based leader in the global gold mining
industry. This business combination further strength-
ened our position in the industry, with respect to our
reserves, development pipeline, production proﬁle,
and balance sheet. In the second quarter 2006, we
completed the majority of integration activities for the
Placer Dome mines and ofﬁces. The integration plan,
which we began immediately following the acquisition
of Placer Dome in ﬁrst quarter 2006, focused on inte-
grating people and mining operations of Placer Dome,
consolidation of certain business functions and explo-
ration ofﬁces, and elimination of redundancies
between the two organizations. We have identiﬁed over
$200 million in annual synergies from the combined
companies and we expect to reach the $200 million
annual synergies by the end of 2007. The synergies
identiﬁed are in the following areas:
(cid:1) Administration and ofﬁces globally – We expect
this area to contribute about 25% of the total
synergies. In 2006, we closed redundant ofﬁces
around the world, including Placer Dome’s
Brisbane ofﬁce in Australia; Santiago ofﬁce in
Chile; and Reno and Denver ofﬁces in the US. Most
head ofﬁce functions have been transferred from
Vancouver to Toronto. We have also begun
to realize synergies from other consolidating
activities around IT services, consolidated annual
reporting, and establishment of regional shared
service centers.

(cid:1) Exploration – This area contributes about 25% of
the total synergies. In 2006, synergies were realized
mainly from a reduced total exploration expendi-
ture on “new mine exploration” due to overlapping
budgets and reduced exploration on existing
Barrick and Placer projects as a result of more rig-
orous approval criteria for the combined company.

(cid:1) Operations and technical services – This area

comprises about 20% of the total synergies. Value
is being driven from sharing of operational and
maintenance best practices; project optimization;
continuous improvement; strategic sourcing and
supply chain management.

(cid:1) Finance and tax – We captured signiﬁcant value by
capitalizing on opportunities for debt consolida-
tion, reduced fees and costs, tax-related savings and
insurance savings, which comprise about 30% of
the total synergies.

We accounted for the acquisition of Placer Dome as a
purchase business combination, with Barrick as the
acquirer. The cost of acquisition has been allocated to
the assets and liabilities acquired. The excess of the
purchase cost over the net assets acquired represents
goodwill arising upon the acquisition. Goodwill prin-
cipally represents the advantage of sustaining and
growing a portfolio of mining operations and will be
enhanced in the combined business through ﬁnding
new mineral reserves and synergies that are realizable
from combining the operations of both companies.
We believe that goodwill arises due to the beneﬁts
that can be realized from managing a portfolio of
mines and mineral properties, rather than from indi-
vidual mines. In managing a group of mines, we have
the ﬂexibility, through our regional business units, to
allocate scarce resources such as capital and manpower
to the best opportunities. We seek to sustain and grow
the portfolio of mines in each region through locating
new investment opportunities over time, thereby sus-
taining the region as a going concern and, as a conse-
quence, goodwill value. The realization of synergies is
managed at a regional level. Each region has identiﬁed
potential synergies and is focused on the realization of
those synergies. We believe that, based on the way we
organize and manage our business, that goodwill is
most naturally associated with our regional business
units. Notwithstanding this belief, the allocation of
goodwill to reporting units is determined by speciﬁc
accounting rules that may preclude deﬁning reporting

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

Barrick Financial Report 2006

units to represent aggregations of mines. We are
presently completing a process to determine the appro-
priate deﬁnition of reporting units for the allocation of
goodwill, which could range from either individual
mines up to aggregation of all mines in each regional
business unit. On conclusion of this process the ﬁnal
allocation of goodwill to reporting units will be com-
pleted. For further information on goodwill allocation
and goodwill impairment testing see page 61.

Sale of Certain Placer Dome Operations
to Goldcorp
In second quarter 2006, we completed the sale of shares
of Placer Dome (CLA) Limited to Goldcorp Inc. under
a sale agreement that was entered into with Goldcorp
at the time of our original offer to acquire Placer
Dome. On completion of the transaction, Goldcorp
assumed interests and liabilities in all of Placer Dome’s
Canadian operations (other than its ofﬁce in Van-
couver), including all mining, reclamation and explo-
ration properties, Placer Dome’s interest in the La
Coipa mine in Chile, and a 40% interest in the Pueblo
Viejo project in the Dominican Republic, for cash con-
sideration of $1.6 billion. We recognized that we would
be able to create more value with the remaining Placer
Dome assets, after selling Placer Dome’s Canadian
operations to Goldcorp. The results of these operations
were consolidated until closing of the sale (May 12,
2006), and are presented under discontinued opera-
tions in the Financial Statements. No gain or loss arose
on closing of the transaction.

Acquisition of Interest in Reko Diq
In third quarter 2006, we completed the acquisition of a
50% interest in Atacama Copper Pty Ltd. (“Atacama”),
which has a 75% interest in the Reko Diq project in
Pakistan and associated mineral interests. The Reko
Diq project is located in a mining district which has
signiﬁcant gold and copper porphyry deposits as part
of an extended gold and copper belt. We paid cash con-
sideration of $123 million, including the cost of acquir-
ing a claw-back right held by BHP Billiton and we are
committed to fund our share of an exploration pro-
gram at Reko Diq.

Sale of South Deep Mine to Gold Fields Limited
In fourth quarter 2006, we sold our 50% interest in
the South Deep mine to Gold Fields for consideration
of $1.5 billion, of which approximately $1.2 billion was
paid in cash and the balance in Gold Fields shares
with a value of $308 million on closing. As with the
s ale of Pl acer Dome’s Canadian operations to
Goldcorp, the sale of South Deep to Gold Fields made
sense strategically as we optimize our portfolio of
operating mines by selling non-strategic assets. The
results of the South Deep mine for 2006 have been
presented under discontinued operations in the
Financial Statements. A gain on sale of $288 million
was recorded on closing within discontinued opera-
tions. Our consolidated gold production and total
cash costs per ounce statistics include South Deep up
until November 30, 2006.

Vend-in of assets to Highland
On November 17, 2006, we entered into an agreement
with Highland to transfer ownership of certain com-
panies holding Russian and Kyrgyz licenses in return
for 34.3 million Highland common shares, increasing
our ownership of Highland from 20% to 34%. In
effect, we have contributed our 50% interest in the
Taseevskoye deposit, as well as other exploration prop-
erties in Russia and Central Asia, to Highland, thereby
consolidating ownership of these properties under
one company. As part of the transaction, we have sec-
onded several of our employees to Highland, and
have received two additional Board seats. Completion
of the transaction occurred on December 15, 2006.
On closing, the fair value of Highland common shares
exceeded the carrying amount of assets exchanged
by $76 million. We recorded this difference as a gain
of $51 million in other income/expense to the extent
of the ownership in Highland held by independent
third parties, and the balance of $25 million as a
reduction in the carrying amount of our investment
in Highland. The Fedorova PGM deposit is not
included in this transaction.

Barrick Financial Report 2006

Management’s Discussion and Analysis (cid:1) 19

Consolidated Gold and Copper Production,
Sales and Costs
In 2006, gold production increased by about 3.2 mil-
lion ounces over the prior period, primarily due to the
acquired Placer Dome mines and also due to produc-
tion from our new mines, Tulawaka, Lagunas Norte,
Veladero and Cowal, partially offset by lower produc-
tion at Goldstrike and Kalgoorlie.

Realized gold prices of $541 per ounce in 2006
were $102 higher than in 2005, principally due to
higher market gold prices. Realized gold prices in 2006
reﬂect a reduction of $532 million or $63 per ounce
due to i) $165 million hedge accounting adjustments
relating to the acquired Placer Dome gold hedge posi-
tion, from the date of acquisition through the date the
position was eliminated, and ii) $367 million from the
voluntary delivery of 1.2 million ounces into our ﬁxed-
price Corporate Gold Sales Contracts at average prices
below the prevailing spot price. Cash margins on gold,
representing the difference between realized gold sell-
ing prices and total cash costs, increased by $47 per
ounce, or 22% in 2006 compared to 2005, as gold price
increases have more than offset increases in total cash
costs over the same period. Excluding the impact of
hedge accounting adjustments and deliveries into
ﬁxed-price Corporate Gold Sales Contracts, margins
would have increased by $110 per ounce or 52%. As of

Consolidated Cost of Sales/Total Cash Costs of Gold1,2

For the years ended December 31

Cost of goods sold1,2,3
Currency/commodity hedge gains
By-product credits
Royalties/production taxes
Accretion/other costs

Cost of sales/Total cash costs1

February 21, 2007, we fully eliminated the remaining
ﬁxed-price Corporate Gold Sales Contracts. We further
expect to eliminate the entire Floating Spot-Price Gold
Sales Contracts position through deliveries of gold
production before the end of the second quarter of
2007. This is expected to result in a reduction to our
pre-tax income and cash ﬂow of $572 million in ﬁrst
quarter 2007, and $76 million in second quarter 2007
(assuming an average prevailing spot gold price of
$650 per ounce).

Realized copper prices also increased signiﬁcantly
over the course of 2006, reﬂecting the trend of higher
market copper prices. The realized copper price for
2006 was reduced by $28 million or $0.07 per pound
for hedge accounting adjustments primarily relating
to premiums paid for copper put options purchased in
early 2006. Future realized copper prices will be
impacted by the copper-linked notes issued in 2006.
Under this issuance, we will receive $3.08 per pound
for a total of 285 million pounds of copper sales in
the period 2007 to 2009, including 129 million pounds
in 2007. In February 2007, we entered into a transac-
tion where we can participate in stronger copper
prices up to $3.50 per pound, while maintaining
a ﬂoor price of $3.00 per pound, on the remaining
274 million pounds of copper in copper-linked notes.

in millions

per ounce

2006

2005

2004

2006

2005

2004

$ 2,388 $ 1,357 $ 1,217
(100)
(146)
65
11

(100)
(123)
177
28

(110)
(132)
81
11

$ 285 $ 255
(21)
(25)
16
2

(12)
(15)
21
3

$ 248
(19)
(30)
13
2

$ 2,370 $ 1,207 $ 1,047

$ 282 $ 227

$ 214

1. Total cash costs and cost of sales both exclude amortization and inventory purchase accounting adjustments – see page 36.
2. Excludes costs of sales related to discontinued operations and non-controlling interests.
3. At market currency exchange and commodity rates.

Cost of goods sold on a per ounce basis for 2006 was
higher than 2005 and 2004, primarily because, on
average, costs at the acquired Placer Dome mines are
higher than at our legacy mines. Costs also reﬂect the
effects of rising commodity and consumable prices

and processing of lower-grade ore at some mines,
partly offset by lower-cost production in 2006 from
Lagunas Norte that began operations in the second
half of 2005. Royalty expenses increased in 2006
largely due to the impact of higher market gold prices.

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

Barrick Financial Report 2006

Results of Operating Segments
In our Financial Statements, we present a measure of
historical segment income that reﬂects gold sales and
copper sales at average consolidated realized gold and
copper prices, respectively, less segment expenses and
amortization of segment property, plant and equip-
ment. Our segments mainly include producing mines
and development projects. We monitor segment
expenses using “total cash costs per ounce/pound/ton”
statistics that represent segment cost of sales divided
by ounces of gold, pounds of copper sold or tons
processed in each period. The discussion of results for
producing mines focuses on this statistic in explaining
changes in segment expenses.

Conducting mining activities in certain countries
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 for-
eign taxation legislation; and limitations on repatria-
tion of foreign earnings. We monitor these risks on an

ongoing basis and mitigate their effects where possi-
ble, but events or changes in circumstances could
materially impact our results and ﬁnancial condition.
For projects, we prepare estimates of capital expen-
ditures, reserves and costs to produce reserves. We also
assess the likelihood of obtaining key governmental
permits, land rights and other government approvals.
Estimates of capital expenditures are based on studies
completed for each project, which also include esti-
mates of annual production and production costs.
Adverse changes in any of the key assumptions in these
studies or other factors could affect estimated capital
expenditures, production levels and production costs,
and may affect 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
projects reﬂect expensed mine start-up costs. For a dis-
cussion of our signiﬁcant projects, see pages 24 to 34.
See also Note 4 to the Financial Statements for infor-
mation on our reportable segments.

Regional Production and Total Cash Costs

Production
(000s ozs/millions lbs)

Total cash costs
($ per oz/lb)

Year ended December 31

2006

2005

2004

2006

2005

2004

Gold

North America
South America
Australia Paciﬁc
Africa
Other

Total

Copper1

South America
Australia Paciﬁc

Total

3,372
2,104
2,220
914
33

2,863
1,234
934
398
31

2,963
646
999
350
–

$ 314
147
353
315
481

$ 244
126
257
336
303

$ 223
111
229
284
–

8,643

5,460

4,958

282

227

214

308
59

367

–
–

–

–
–

–

0.62
1.53

–
–

$ 0.79

$ –

1. The 2005 and 2004 comparative periods for copper have been omitted as we did not produce any significant amounts of copper prior to the production from the

copper mines acquired with Placer Dome.

Barrick Financial Report 2006

Management’s Discussion and Analysis (cid:1) 21

Consolidated Operational Trends – Gold
Over the past three years, we have seen an increasing
trend of ore tons mined along with a higher propor-
tion of waste tons, as a result of waste stripping at
some of our mines. The higher tons mined and
processed are due to a combination of opening new
mines, the acquired Placer Dome mines and produc-
tivity improvements at our existing mines. The
increase in tons processed has allowed us to increase
gold production over the three-year period. We have
been successful in containing mining costs per ton
over the last three years, but the mining of more waste
tons and higher processing costs per ton have been
signiﬁcant factors that have caused total cash costs per
ounce to increase over this period.

Tons Mined1

800,000

600,000

400,000

200,000

2004

2005

2006

Ore Tons

Waste Tons

1. All amounts presented are based on equity production.

Tons Processed1,2

200,000

150,000

100,000

50,000

2004

2005

2006

New Mines

Existing Mines

1. All amounts presented are based on equity production.
2. New mines include: Tulawaka, Lagunas Norte, Veladero and Cowal.

In 2006, total ore tons mined increased to a greater
degree than ore tons processed. This is as a result of
fewer tons placed on the leach pad at Round Mountain
in 2006, due to layback work done earlier in the year,
combined with reduced throughput at Kalgoorlie
caused by harder ore. In 2007, we expect waste tons
mined will increase due to higher waste stripping at
some of our mines, particularly Goldstrike. High gold
prices allow us to mine and process material in areas
that were previously uneconomic in a lower gold price
environment, which, while leading to higher average
total cash costs, enables us to generate an operating
contribution from low-grade material and extend
mine lives. Process-related improvements have also
resulted in improved throughput and expanded
capacity at some processing facilities. For example, ore
chemistry effects that had temporarily limited through-
put at the Goldstrike processing facilities during 2006
were partially mitigated by blending concentrate
material with long-term stockpile ore.

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

Barrick Financial Report 2006

Average Mill Head Grades1 (ounces/ton)

Total Cash Costs per Ton1 (dollars per ton)

0.080

0.070

0.060

0.050

0.040

0.030

0.020

0.010

2004

2005

2006

2004

2005

2006

Cost per Ton Mined

Cost per Ton Processed

1. Total cash costs per ounce/pound/ton statistics exclude amortization and
inventory purchase accounting adjustments. Total cash costs per ounce/
pound/ton is a performance measure that is used throughout this MD&A.
For more information see pages 34 to 36.

Industry wide cost pressures for consumables and
labor in particular have caused upward pressure on
processing total cash costs per ton. A continuation of
this trend, together with processing low-grade stock-
piles at Goldstrike and higher waste tons mined due to
waste stripping at some of our mines, are contributing
to expected higher total cash costs per ounce in 2007.

Existing Mines

New Mines

Reserve Grade

1. All amounts presented based on equity production. Average mill head grades
are expressed as the number of ounces of gold contained in a ton of ore
processed. Average mill head grades for new mines include those mines that
have commenced production beginning in 2005 and into 2006 (Tulawaka,
Lagunas Norte, Veladero and Cowal). Reserve grade represents expected
grade over the life of the mine and is calculated based on reserves reported
at the end of the immediately preceding year. 2004 and 2005 data exclude
reserve grades for former Placer Dome mines. 2006 data includes reserve
grade data for Placer Dome mines based on reserve data from Placer Dome’s
fourth quarter 2005 report.

Average mill head grades in 2006 decreased slightly
from 2005. This is primarily due to lower ore grades at
Goldstrike, as a result of processing from low-grade
long-term stockpiles in 2006, and at Kalgoorlie, due to
lower than expected ore grades, partly offset by higher
ore grades at our new Lagunas Norte mine. We have
been mining close to average reserve ore grade in the
past three years. In 2007, we expect average mill head
grades to decrease as a result of processing from
lower-grade stockpiles at Goldstrike for eight months
of the year due to waste stripping in the open pit, and
as a result of mining at or near reserve grade at
Veladero and Lagunas Norte. With the processing of
lower average ore grades and higher waste stripping,
production is expected to decrease slightly in 2007
and total cash costs are expected to increase.

Barrick Financial Report 2006

Management’s Discussion and Analysis (cid:1) 23

Operating Segments – Gold
North America

North America Operational Performance

Gold production
(000s ounces)

Gold total cash cost
(dollars per ounce)

4,000

3,000

2,000

1,000

400

300

200

100

2004

2005

2006

2007E

Placer Dome Sites

Barrick Sites

Cash Cost

Producing Mines
Through the Placer Dome acquisition (after taking into
account the sale of assets to Goldcorp) we acquired
four producing mines in North America. The mines
acquired from Placer Dome are Cortez (60% owned),
Turquoise Ridge (75% owned) and Bald Mountain in
Nevada, and Golden Sunlight in Montana. We also
acquired three signiﬁcant projects in North America:
Cortez Hills, within the Cortez Joint Venture area of
interest in Nevada (60% owned); Pueblo Viejo in the
Dominican Republic (60% owned); and Donlin Creek
in Alaska (30% owned with earn-in rights to 70%).

In 2006, the region produced 3.4 million ounces
of gold (2005: 2.9 million ounces) at total cash costs of
$314 per ounce (2005: $244 per ounce) in line with the
guidance for 2006. The 18% increase in gold produc-
tion over the prior year period was primarily due to
the acquired Placer Dome operations, partially offset
by lower production at Goldstrike, Eskay Creek and
Round Mountain. Although gold production at Cortez
lagged expectations earlier in 2006, due to layback
work resulting in lower processed ore grades, full-year
production was higher than expected due to better
than planned ore grades encountered in the second
half of 2006. At Golden Sunlight, production was
lower than expected due to high-wall instability issues
experienced during the ﬁrst half of the year, which
limited access to high-grade ore for the remainder of
the year. Excavation and development of the new
North Ramp pit access at the Golden Sunlight mine
was completed in August and ground monitoring
equipment was put in place to help mitigate the
impact of future slides, but the site is nonetheless vul-
nerable to continued high-wall instability challenges.
We are advancing feasibility studies that could result
in mine expansion and higher levels of production at
Bald Mountain beginning in 2009, subject to the tim-
ing of permitting. Lower production from Goldstrike
in 2006 was primarily attributed to lower-grade ore
processed from the open-pit stockpiles and ore chem-
istry effects that temporarily limited throughput at the
Goldstrike processing facilities. In fourth quarter
2006, we were able to partially mitigate the above ore
chemistry effects by blending concentrate material
with long-term stockpile ore. At Eskay Creek, fewer
tons at lower grades are being mined as the mine
reaches the end of its reserve life. At Round Mountain,
layback efforts during the year as part of the planned
pit expansion project, resulted in fewer ore tons mined
and more waste. This was partly mitigated by higher
than planned ore grades during the year.

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

Barrick Financial Report 2006

Total cash costs per ounce increased by 29% over
the prior year period. Higher costs resulted primarily
from higher prices paid for input commodities and
consumables used in the production process, and
higher royalties and production taxes due to higher
market gold prices. The region’s major consumables
such as tires, labor, cyanide, propane and diesel expe-
rienced an increase in price of 15% to 25%, which
accounts for the majority of the increase in total cash
costs per ounce. These cost increases were partially
mitigated by higher than expected silver by-product
credits at Eskay Creek due to high market silver prices
($4 per ounce) and better than expected silver grades,
and lower power costs at Goldstrike due to the com-
missioning of the Western 102 power plant. Year-to-
date power savings from the Western 102 power plant,
compared to local public utility rates, are estimated at
$9 per ounce for the Goldstrike property and $5 per
ounce for the region.

In 2007, we expect gold production of 3.150 to
3.250 million ounces at total cash costs of $370 to $385
per ounce from the North America region. Production
is expected to be lower than 2006 as increases in pro-
duction due to the start-up of the Ruby Hill and Storm
mines is expected to be more than offset by lower pro-
duction at Goldstrike and Round Mountain. Gold-
strike will be processing lower-grade ore stockpiles for
about eight months of the year due to waste stripping
in the open pit. Production is expected to be lower at
Bald Mountain due to lower ore grades, partly offset by
higher ore tons processed. Total cash costs per ounce
for the region is expected to be higher than 2006 due
to general inﬂationary cost pressures, the start up of
the Ruby Hill and Storm mines, and higher waste tons
mined at some of our mines.

Signiﬁcant Projects
Ruby Hill is an open pit mine with primarily oxide
material. Actual construction costs are expected to be
below the estimate of $75 million, including almost
$30 million in new mining equipment and processing
upgrades. Ore processing includes on-site gold recov-
ery by zero-discharge heap leach and carbon column
facilities. At the end of 2006, Ruby Hill had proven
and probable reserves of 1.1 million ounces of gold.1
First gold production occurred in February 2007 and
the mine is expected to produce about 120,000 ounces
at total cash costs of $240 to $250 per ounce for 2007.
Cortez Hills is our most advanced project and is
currently in the permitting stage. The project involves
the development of two adjacent deposits – Cortez
Hills and Pediment – within the Cortez Joint Venture
area of interest. The project will be developed as two
open pits with part of the deposit potentially to be
mined by underground mining methods. In 2006,
activities included the procurement of mining equip-
ment, the construction of the F-Canyon power line,
and underground exploration decline development.
Geological, geotechnical and hydrological site data
continues to be collected for use in the underground
pre-feasibility study. In 2007 we expect to advance
exploration drilling by approximately 200,000 feet,
and complete the detailed engineering and planning.
The project construction budget is $480 million to
$500 million2 (100% basis). Construction activities are
expected to last 15 months and will commence once
the Environmental Impact Study Record of Decision
is obtained, which is anticipated to be received in 2008.
Our share of production from Cortez is expected to
average 425–440 thousand ounces at total cash costs of
$290 to $300 per ounce in the ﬁrst 10 years after pro-
duction commences from Cortez Hills.

1. For a breakdown of reserves and resources by category and additional
information relating to reserves and resources, see pages 128–136 of this
Financial Report 2006.

2. Excluding capitalized interest.

Barrick Financial Report 2006

Management’s Discussion and Analysis (cid:1) 25

the $1.35 billion estimated in the feasibility analysis
prepared by Placer Dome in 2005. The increase is due
to the effect of design adjustments, capital required to
enable recovery of the by-product metals (copper, sil-
ver, and zinc) and signiﬁcant inﬂationary cost pressures
in the industry (reﬂecting the cost environment prevail-
ing in late 2006). Our 2007 objectives are to complete
engineering, conﬁrm zinc assumptions and test pro-
gram; complete negotiations with the government;
ﬁnalize a power sourcing strategy; continue to expand
the community development programs; and advance
exploration and metallurgical programs.

The Donlin Creek project is a large refractory gold
deposit in Southwestern Alaska, under lease from two
Alaska aboriginal corporations until 2015 and for so
long thereafter as mining operations are carried out on
the property. The Donlin Creek property is being
explored and developed under a Mining Venture
Agreement (“MVA”) between NovaGold and Barrick,
entered into in November 2002. Under the terms of
that agreement, we currently hold a 30% interest in the
project with the right to increase that interest to 70%
by satisfying the following conditions on or before
November 12, 2007: (1) funding of $32 million of
exploration and development expenditures on the
project; (2) delivering a feasibility study to NovaGold
meeting the requirements set out in the MVA; and
(3) obtaining the approval of Barrick’s Board of
Directors to construct a mine on the property. The
funding condition was satisﬁed in March 2006. Since
acquiring control of Placer Dome, we have moved deci-
sively to ensure that the appropriate ﬁnancial, technical
and human resources are being devoted to the timely
completion of the required feasibility study at Donlin
Creek and fulﬁll the back-in requirements to increase
our stake in Donlin Creek to 70%. In addition, we have
assigned technical personnel from both inside of

In May 2006, a joint venture agreement with
Goldcorp was ﬁnalized, which establishes Barrick as
the 60% owner and operator of the Pueblo Viejo proj-
ect. The Pueblo Viejo project is located in the Domini-
can Republic, 15 kilometers southwest of the provincial
capital of Cotui and approximately 100 kilometers
northwest of the national capital, Santo Domingo. The
access to the property is via paved national highways
which will require minor repairs to allow for trans-
portation of heavy equipment to the site. We initiated
a project review in March 2006 and must give notice
to the government by February 2008 whether we plan
to proceed with development. Since last March, we
have updated capital costs estimates, re-evaluated the
process ﬂowsheet, optimized the project and carried
out an exploration program. Our review has resulted
in a new silver process that is expected to increase sil-
ver recovery from 5% to 84%; inclusion of a copper
recovery circuit; and potential inclusion of a zinc
recovery process (currently being tested). The project
has high power requirements due to high levels of sul-
phur contained in the ore and we are investigating
options for the sourcing of power. At year end, our
share of proven and probable gold reserves at Pueblo
Viejo was 10.9 million ounces.1 We also reported
measured and indicated resources of 1.3 million
ounces and 2.7 million ounces in the inferred cate-
gory.2 Annual gold production in the ﬁrst full ﬁve years
of production is expected to be between 775 to 800
thousand ounces of gold at total cash costs of $180 to
$190 per ounce. Concurrent with the review and
update of the feasibility analysis, activities relating to
government and community relations and environ-
mental permitting for the mine are ongoing.

An updated capital cost estimate for the Pueblo
Viejo project was completed in 2006. The revised cost
estimate is $2.1 billion to $2.3 billion3, an increase from

1. Calculated in accordance with National Instrument 43-101 as required by
Canadian securities regulatory authorities. For United States reporting pur-
poses, 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 U.S. reporting purposes, Pueblo
Viejo is classified as mineralized material. For a breakdown of reserves and
resources by category and additional information relating to reserves and
resources, see pages 128–136 of this Financial Report 2006.

2. For a breakdown of reserves and resources by category and additional
information relating to reserves and resources, see pages 128–136 of this
Financial Report 2006.

3. Excluding capitalized interest.

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

Barrick Financial Report 2006

Producing Mines
In 2006, gold production in the region was 2.1 million
ounces (2005: 1.2 million ounces) at total cash costs of
$147 per ounce (2005: $126 per ounce). Gold produc-
tion increased by 71% over the prior year period
mainly due to the beneﬁt of a full year of production
from both Lagunas Norte and Veladero, both of which
commenced production in the second half of 2005.
Production was higher than the initial guidance,
mainly because of better than expected production
from Lagunas Norte, which produced 1.1 million
ounces as a result of increased capacity at the primary
crusher and higher gold recovery rates. Veladero and
Pierina both performed as planned, including strong
fourth quarter 2006 gold production at Veladero after
transitioning of mining from the Filo Mario pit to the
higher-grade Amable Pit.

Despite industry-wide inﬂationary cost pressures
during 2006, including rising commodity prices, the
South America region was able to limit the impact on
its mining operations with the increasing contribution
from low-cost mines such as Lagunas Norte, as well as
cost saving initiatives, with a particular emphasis on
tire maintenance and diesel consumption. In 2006,
total cash costs per ounce were lower than the initial
guidance due to lower waste tons mined, resulting in
lower mining costs combined with higher ore grades at
Lagunas Norte. In October 2006, industrial users of
diesel fuel renewed their price control subsidy con-
tracts with the Argentinean government. The contracts
were renewed at market rates with the effect that our
cost for diesel fuel has increased by about 30% from
previously contracted rates. The effect of the price
increase in 2006 was only about $1 per ounce, while in
2007, the estimated effect is an increase in total cash
costs for the region of $6 per ounce. In 2006, we also
incurred approximately $8 million relating to a volun-
tary contribution in Peru that will be paid to beneﬁt
Peruvian communities. This amount has been recorded
as part of other operating expense.

Barrick and externally to ensure that the challenges and
opportunities of the project are properly assessed and
exploited. In 2006, we spent approximately $55 million
to advance technical work relating to mine design,
geotechnical engineering, metallurgical process design
and environmental baseline studies. Approximately
92,800 meters of core drilling in 327 holes was com-
pleted by the end of 2006. Our share (at 30%) of
measured and indicated resources has increased to
5.9 million ounces1 from 4.4 million ounces noted at
the beginning of the year due in part to the conver-
sion of inferred resource ounces during the year. Our
share of the inferred resource, as previously estimated
by Placer Dome, has been reduced from 4.1 million
ounces to 0.5 million ounces1 due to the conversion
of 1.5 million ounces to indicated status and the
removal of 2.1 million ounces from the inferred cate-
gory. In 2007, our project budget is $87 million and
includes costs to complete the pre-feasibility and fea-
sibility studies. The 2007 drilling program includes
70,000 meters of inﬁll drilling and in-pit exploration
that is not required for the feasibility study. Gov-
ernment and local community relations will continue
to be a focal point as the project moves forward.

South America

South America Operational Performance

Gold production
(000s ounces)

Gold total cash cost
(dollars per ounce)

2,500

2,000

1,500

1,000

500

250

200

150

100

2004

2005

2006

2007E

Placer Dome Sites

Barrick Sites

Cash Cost

1. For a breakdown of reserves and resources by category and additional infor-
mation relating to reserves and resources, see pages 128–136 of this
Financial Report 2006.

Barrick Financial Report 2006

Management’s Discussion and Analysis (cid:1) 27

In 2007, we expect gold production of 1.850 to
1.925 million ounces at total cash costs of $230 to $245
per ounce. Production is expected to be lower than
2006 primarily due to lower ore grades at Lagunas
Norte. Total cash costs per ounce are expected to be
higher than 2006 due to the impact of lower produc-
tion at Lagunas Norte, higher waste stripping costs at
Veladero as mining transitions to the Filo Federico pit,
combined with inﬂationary cost pressures.

Signiﬁcant Projects
In 2004, we made a decision to proceed with the
development of the Pascua-Lama project, contingent
on obtaining the necessary permits, approvals and
resolving certain ﬁscal matters. The Pascua-Lama
project is unique in that it is a bi-national project with
a mineral deposit that spans the border between
Argentina and Chile. It is located in the Frontera
District within approximately 10 kilometers of our
Veladero mine. The project is at an elevation of 3,800
to 5,200 meters. Pascua-Lama’s proximity to Veladero
is expected to provide beneﬁts during both the con-
struction phase and once operations have com-
menced, derived from shared infrastructure, local
supplier development, training and employee devel-
opment. As well, we expect that the construction of
Pascua-Lama will beneﬁt from our experience in con-
structing Veladero, a mine that was very similar in
terms of the challenges for construction. In February
2006, the Pascua-Lama project was granted approval
by the Chilean environmental regulatory authorities
in Resolution RCA 024. The Resolution imposes other
conditions on the development of the project, the
implic ations of which have re sulte d in the
reclassiﬁcation of about 1 million ounces of reserves
to mineralized material for reporting purposes. In
December 2006, the Province of San Juan, Argentina
issued its Declaration of Environmental Impact
Assessment which approves the environmental permit
submission in Argentina. We are developing detailed
engineering plans and have begun submission of doc-
umentation to obtain the administrative and sectoral

approvals and permits that are required prior to initi-
ating construction in either country. In addition, the
governments of Chile and Argentina must resolve cer-
tain remaining ﬁscal matters, including taxation, relat-
ing to the bi-national project. The timing of receipt of
approvals for permitting and licensing, cross-border
approvals and operating issues and ﬁscal tax and roy-
alty items are largely beyond the control of the
Company. The project team is using this period to
advance activities possible within the current permit-
ting outline, including site topography and control
surveys, as well as detailed geotechnical and geotec-
tonic information required for sectoral permitting.
At the end of 2006, Pascua-Lama had gold reserves
of 17.0 million ounces1, 1.4 million ounces less than
previously estimated due principally to the reclassiﬁ-
cation of approximately 1 million ounces of reserves
to mineralized material as a result of the conditions of
the Resolution. Pascua-Lama also has 689 million
ounces of silver and 565 million pounds of copper
contained in the gold reserves.1 In 2006, we updated
our feasibility study, including capital and operating
cost estimates for the Pascua-Lama project from those
estimates that were previously completed in June 2004.
The total estimated cost of construction is $2.3 billion
to $2.4 billion, an increase from the previous cost esti-
mate of $1.4 to $1.5 billion2 provided in July 2004. The
increase in capital cost is due primarily to inﬂationary
cost pressures (reﬂecting the cost environment prevail-
ing in late 2006). Although inﬂationary cost pressures
have increased the capital and operating cost estimates
at Pascua-Lama, we are currently evaluating possible
improvement opportunities that may enhance project
economics. Initial annual gold production in the ﬁrst
ﬁve years at Pascua-Lama is expected to be between
750 to 775 thousand ounces at total cash costs of $40
to $50 per ounce.

1. For a breakdown of reserves and resources by category and additional
information relating to reserves and resources, see pages 128–136 of this
Financial Report 2006.

2. Excluding capitalized interest.

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

Barrick Financial Report 2006

Australia Paciﬁc

Australia-Pacific Operational Performance

Gold production
(000s ounces)

Gold total cash cost
(dollars per ounce)

2,500

2,000

1,500

1,000

500

450

360

270

180

2004

2005

2006

2007E

Placer Dome Sites

Barrick Sites

Cash Cost

Producing Mines
Through the Placer Dome acquisition, we acquired four
producing gold mines and a copper-gold mine. The
acquired Placer Dome gold mines are Porgera (75%
owned) in Papua New Guinea, and Kanowna, Granny
Smith and Henty, in Australia. Gold production for the
region in 2006 was 2.2 million ounces (2005: 0.9 mil-
lion ounces), at total cash costs of $353 per ounce
(2005: $257 per ounce). The increase in gold produc-
tion in 2006 was mainly due to the contribution from
the acquired Placer Dome mines, combined with pro-
duction start-up at our newly constructed Cowal mine,
partially offset by lower production from Kalgoorlie.
Total gold production for 2006 was slightly below the
initial guidance, mainly due to lower production at
Kalgoorlie and a small delay in the start-up at Cowal.

Total cash costs per ounce were higher in 2006
compared to the prior year, and also higher than the
most recent guidance issued in second quarter 2006
of $330 to $345 per ounce, due to higher currency
exchange rates and higher costs for labor and input
commodities, including diesel fuel. Higher mainte-
nance costs, as equipment ﬂeets age, and the lower
production levels at some mines also contributed to
the higher total cash costs per ounce. To help mitigate
rising oil prices and control the cost of fuel consump-
tion, we put in place a fuel hedge position.

At Kalgoorlie, production in 2006 was lower than
the prior year due to reduced throughput caused by
harder ore, together with lower than expected ore
grades. Throughput improvements were expected
through the replacement of a damaged girth gear ear-
lier in the year, but these improvements were offset by
the effect of more abrasive, harder ore than originally
anticipated. A number of improvement programs have
been commenced, designed to address key issues such
as shovel and truck productivity and mill throughput.
At Porgera, remediation of the West Wall cutback
has precluded mining of Stage 5 of the pit, with con-
sequent lower production levels until mining of
higher grade ore recommences. Installation of a but-
tress was completed in December 2006, and the mine
is in the process of removing the buttress ramps,
which is the critical path to recommence mining on
Stage 5. We expect the ﬁrst blast to take place in
February 2007. Mill feed at Porgera in 2006 principally
came from low-grade long-term stockpiles. On
December 13, 2006, an explosion caused by a light-
ning strike resulted in substantial damage to the Hides
Power Station, Porgera’s main source of power. There
were no serious injuries, but extensive damage to the
power station resulted in a reduction of production
capacity to approximately half of normal levels. We
expect that production will return to normal levels
near the end of the ﬁrst quarter 2007, after repairs to
the power station are completed. A claim under our
business interruption insurance policy has been initi-
ated to compensate for the lost production.

Barrick Financial Report 2006

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

Our newly constructed Cowal mine went into pro-
duction in May of 2006. The total cost of construction
of the mine was $417 million. The projected cost of
construction exceeded the $335 million previously esti-
mated in 2005 due to construction delays that resulted
in an incre ase in the construction workforce as
attempts were made to meet the planned timing of the
project, and due to greater than expected input costs,
including labor, contractors, steel and fuel. Gold pro-
duction was below expectation during the start-up
phase as the grade of the soft oxide ore underper-
formed against plan, but has since improved with the
installation of the ball mill. Production during ﬁrst
quarter 2007 could be impacted by a shortage of
process water as a result of the drought affecting the
area. To mitigate the effects of the drought, we have
secured supplies of water from alternate sources and
are in the process of constructing additional water stor-
age facilities.

In November 2006, we signed a sale agreement for
disposition of our Paddington operations in Australia
for $39 million. The Paddington operations, which
form part of our Kanowna mine acquired in the
acquisition of Placer Dome, consist of the Paddington
mill and certain tenements in the region near the mill.
The transaction is expected to close in the ﬁrst quar-
ter of 2007.

In 2007, we expect gold production of 2.2 to
2.3 million ounces at total cash costs of approximately
$385 to $400 per ounce. Gold production is expected
to be similar to 2006, with higher production from
Porgera and Cowal offset by lower production at
Kanowna and Granny Smith. The expected increase in
production is primarily due to higher ore grades at
Porgera and the ﬁrst full year of production from
Cowal. The expected decrease at Kanowna is due to
lower production as a result of the sale of the Pad-
dington assets. At Granny Smith, lower ore grades are
expected due to the depletion of the Wallaby open pit
deposit and the processing of low-grade stockpiles.

Total cash costs per ounce are expected to be higher in
2007 due to a higher average currency hedge rate com-
bined with higher waste tons mined at some mines
and inﬂationary cost pressures relating to labor and
other consumables.

Africa

Africa Operational Performance

Gold production
(000s ounces)

1,000

750

500

250

Gold total cash cost
(dollars per ounce)

400

300

200

100

2004

2005

2006

2007E

Placer Dome Sites

Barrick Sites

Cash Cost

Producing Mines
Through the Placer Dome acquisition, we acquired
two producing gold mines in Africa, South Deep
(50%) in South Africa, and North Mara in Tanzania.
As described on page 19, we completed the sale of
South Deep to Gold Fields in 2006. Gold production
for 2006 was 0.9 million ounces (2005: 0.4 million
ounces), at total cash costs of $315 per ounce (2005:
$336 per ounce). Gold production and total cash costs
per ounce were both within the ranges of guidance
issued for 2006. Production for 2006 was higher than
the prior year due to the contribution from the
acquired Placer Dome mines, together with higher

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

Barrick Financial Report 2006

production at Bulyanhulu and Tulawaka. North Mara’s
production was positively impacted by the results of
mining the Gokona ore body rather than processing of
predominantly lower-grade stockpiles. At Tulawaka,
higher production in 2006 was a result of more hours
available to process material, as well as higher ore
grades and increased throughput due to the process-
ing of softer oxide ore. Production at Bulyanhulu
improved as a result of the completion of projects to
remove technical constraints to hoisting and plant
throughput rates.

Production at South Deep was lower than ex-
pected as a result of the skip accident that occurred in
second quarter 2006. A fully loaded skip fell down the
main shaft in May during routine maintenance, result-
ing in the restricted production for the remainder of
the year being hoisted from the lower capacity south
shaft. An underground ﬁre broke out in August 2006,
resulting in some of the higher grade mining areas
becoming inaccessible during the remainder of 2006,
which also impacted gold production levels.

During fourth quarter 2006, we reached an agree-
ment in principle with the Tanzanian government to
make additional annual payments under the Mining
and Development Agreements (“MDA”). Under the
agreement, Barrick will pay $7 million per year to the
Government, and has committed to make more use of
Tanzanian supplies and services. We expect the agree-
ment to be concluded early in 2007 and we have
accrued $7 million at December 31, 2006. This amount
has been recorded in other operating expense in
the Financial Statements. The payment of this amount
will be reviewed by both parties should economic
conditions deteriorate.

Higher production at North Mara, Bulyanhulu
and Tulawaka, partly offset by higher labor and con-
tractor costs, had a favorable impact on total cash
costs per ounce compared to the prior year. Increases
in labor cost for the region caused an increase in total
cash costs of approximately $6 per ounce. As with our
mines in other regions, higher input commodity
prices are leading to higher cash costs. In the Africa
region, input commodity prices are controlled by
means of using preferred suppliers. Freight and ship-
ping costs are signiﬁcant, but through proper planning
and logistics, freight and shipping costs on input com-
modities can be effectively controlled. The regional
supply chain team is in the process of implementing
forward purchase agreements on critical supply items.
At South Deep, business interruption insurance
has mitigated the impact on total cash costs of the skip
accident in the main shaft. In 2006, insurance pro-
ceeds related to the skip accident, included in total
cash costs, including the share attributed to Gold
Fields, totaled $22 million. Substantially all insurance
proceeds related to the underground ﬁre will be to the
account of Gold Fields.

In 2007, we expect gold production of 0.825 to
0.875 million ounces at total cash costs of $310 to $325
per ounce from the Africa region. We expect lower
production in 2007 as increases in production at
Bulyanhulu and Tulawaka are more than offset by the
impact of the sale of our 50% interest in South Deep
in late 2006, in which our share of production in 2006
was approximately 124,000 ounces. Total cash costs
per ounce for the region are expected to be slightly
lower than 2006 primarily as a result of the sale of the
higher cost South Deep mine and higher production
at Tulawaka, partially offset by higher labor and con-
sumables costs.

Barrick Financial Report 2006

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

Signiﬁcant Projects
The Buzwagi project is located within the highly
prospective Lake Victoria Greenstone Belt in Tanzania
on excellent terrain, which is relatively ﬂat, open land.
This is expected to simplify project execution. Buz-
wagi’s proximity to our other operations in the area
(Bulyanhulu and Tulawaka) is expected to beneﬁt its
operations due to shared infrastructure, training and
employee development. In addition, Buzwagi has the
best access to infrastructure of all our Tanzanian prop-
erties. A paved road connects the site to a rail line that
passes only 40 kilometers from the property. Buzwagi
has a proven and probable reserve of 2.6 million
ounces and measured and indicated resources of
0.4 million ounce s of gold 1. In 2006, activitie s
included exploration drilling and the completion of a
feasibility study. In early 2007, the MDA was approved
by the Tanzanian government. We are now awaiting
approval of the Environmental Impact Assessment,
which is expected to be received by the end of first
quarter 2007. Following approval, we intend to start
the two-year construction phase in late 2007, at an
estimated total cost of $400 million.2 The team that
is currently in place to build Buzwagi is virtually
unchanged from the team that built Tulawaka.

1. Calculated in accordance with National Instrument 43-101 as required by
Canadian securities regulatory authorities. For United States reporting pur-
poses, Industry Guide 7, (under the Securities and Exchange Act of 1934), as
interpreted by Staff of the SEC, applies different standards in order to clas-
sify mineralization as a reserve. Accordingly, for U.S. reporting purposes,
Buzwagi is classiﬁed as mineralized material. For a breakdown of reserves and
resources by category and additional information relating to reserves and
resources, see pages 128–136 of this Financial Report 2006.

2. Excluding capitalized interest.

Operating Segments – Copper

Copper Operational Performance

Copper production
(millions pounds)

Copper total cash cost
(dollars per pound)

500

400

300

200

100

0.92

0.88

0.84

0.80

0.76

0.72

2006

2007E

Production

Cash Cost

With the acquisition of Placer Dome, we acquired
Zaldívar, a copper mine in Chile, and Osborne, a cop-
per-gold mine in Australia. At Zaldívar, we produced
308 million pounds of copper in 2006 at total cash
costs of $0.62 per pound. Zaldívar exceeded targeted
production, despite damage to the stockpile building
and conveyor in June 2006. Temporary repairs were
made over a matter of weeks to mitigate the effects on
production schedules and the new building will be
erected as part of scheduled maintenance in early
2007. Total cash costs per pound were better than
expected due to the higher production levels achieved.
At Osborne, copper production in 2006 was
59 million pounds of copper at total cash costs of
$1.53 per pound. Production in 2006 was slightly
below guidance due to lower ore grades and through-
put as a result of delays in the construction of a paste
ﬁll plant. The delays restricted access to the higher-
grade ore areas of the underground mine. The total
cash costs per pound for the year were above guidance
mainly because of the lower production.

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

Barrick Financial Report 2006

In 2006, we met our guidance for consolidated
copper production and total cash costs per pound. In
2007, we expect to produce about 400 million pounds
of copper at total cash costs of about $0.90 per pound.
We expect higher copper production from Zaldívar in
2007, primarily because of the higher-grade ore mined
and placed on the leach pad in 2006 that will be pro-
duced in 2007. At Osborne, the paste ﬁll plant is
expected to be operational late in ﬁrst quarter 2007
and will provide access to higher-grade ore blocks.
The Trekelano open-pit project at Osborne com-
menced production during fourth quarter 2006 and is
now supplementing the ore supply from under-
ground. The ore grade from Trekelano is lower, but is
expected to complement the higher-grade under-
ground ore sources and allow higher throughput rates
to be achieved in 2007.

Total cash costs per pound at Zaldívar are expected
to be higher than 2006 due to higher prices for com-
modities and consumables as well as inﬂationary cost
pressures. Total cash costs per pound at Osborne are
expected to be lower in 2007 due to higher production.

Other Signiﬁcant Projects
In April 2005, we entered into a joint venture agree-
ment with Falconbridge Limited (“Falconbridge”) with
respect to the Kabanga nickel deposit and related con-
cession in Tanzania. In 2006, Xstrata Plc (“Xstrata”)
acquired Falconbridge. Xstrata is the operator of the
joint venture and the project is currently in the pre-
feasibility stage. Kabanga, which is one of the largest
undeveloped nickel sulphide deposits in the world,
is located in northwest Tanzania. The property is
approximately 385 kilometers from Bulyanhulu and
approximately 200 kilometers west of Tulawaka and is
accessible by paved/gravel road. In 2006, ongoing dia-
mond drilling, exploration and other project develop-
ment engineering activities being managed by Xstrata
have been performed as part of a work plan to prepare
an updated resource model and scoping study. Xstrata
has recently completed the $50 million work plan that
was contemplated in the joint venture agreement.
At December 31, 2006 our share of indicated nickel
resources at Kabanga was 254 million pounds of
nickel.1 We also had inferred resources of 1.1 billion

pounds of nickel.1 This is an increase from prior esti-
mates and is the result of the recently discovered
Tembo and Tusker zones. The new discoveries at Tembo
and Tusker are near surface and at good ore grade and
have the potential to signiﬁcantly enhance the econom-
ics of the Kabanga project. In 2007, Xstrata plans to pre-
pare a pre-feasibility study. In accordance with the joint
venture agreement, Xstrata has committed to spend
an additional $95 million, which will be used to fund
the pre-feasibility study with funds remaining for other
subsequent activities. After the $95 million spent
by Xstrata, funding will be shared equally by Barrick
and Xstrata.

Sedibelo is a large platinum deposit in South
Africa. The Sedibelo platinum project is located in
northern South Africa within the Western Limb of the
proliﬁc Bushveld Igneous Complex (“Bushveld”). The
Bushveld is the source of 80% of the world’s platinum
reserves and 70% of the world’s platinum production.
As operator of the project, we have a 50% earn-in
right to this project. We will earn a 10% interest on
completion of a feasibility study and an additional
40% interest once a decision to construct a mine has
been made. We will fund the exploration and feasibil-
ity study. Funding during the construction of the mine
will be shared 50% by each of the partners. In 2006,
we commenced work on a pre-feasibility study. At
December 31, 2006, the deposit had 3.8 million ounces
of measured and indicated platinum resources.2 The
project also had 5.3 million ounces of inferred plat-
inum resources.2 Mineralization is close to surface
which is expected to facilitate a possible open pit
mine. In 2007, we expect to spend about $26 million
to complete a pre-feasibility study as well as for other
drilling and planning activities.

Fedorova is a palladium and platinum develop-
ment project with nickel, copper and gold by-products
located in the Kola Peninsula of the Russian Feder-
ation. We own 50% (with an earn-in right to 79%) of
Fedorova. We are also the operator. Fedorova is a large
near surface PGM (platinum group metals) deposit.

1. For a breakdown of reserves and resources by category and additional
information relating to reserves and resources, see pages 128–136 of this
Financial Report 2006.

2. Calculated as at December 31, 2006 in accordance with National Instrument
43-101 as required by Canadian securities regulatory authorities.
Calculations have been prepared by or under the supervision of Hannes
Henckel, Manager Exploration and Geology of Barrick. Sedibelo measured
and indicated resources have been estimated using varying cut-off rates, as
applicable, depending on the ore type, and other relevant factors.

Barrick Financial Report 2006

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

Total Cash Costs Performance Measures
Total cash costs include all costs absorbed into inven-
tory, including royalties, by-product credits, production
taxes and accretion expense, and exclude inventory
purchase accounting adjustments and amortization.
The presentation of these statistics in this manner
allows us to monitor and manage those factors that
impact production costs on a monthly basis. We cal-
culate total cash costs based on our equity interest in
production from our mines. Total cash costs per
ounce/pound/ton are calculated by dividing the aggre-
gate of these costs by gold ounces, copper pounds sold
or ore tons processed. Total cash costs and total cash
costs per ounce/pound/ton are calculated on a consis-
tent basis for the periods presented. In 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 in the income statement. We have pro-
vided reconciliations below to illustrate the impact of
excluding amortization and inventor y purchase
accounting adjustments from total cash costs per
ounce/pound/ton statistics. Under purchase account-
ing rules, we recorded the fair value of acquired work
in progress and ﬁnished goods inventories as at the date
of the Placer Dome acquisition. As the acquired inven-
tory is sold, any purchase accounting adjustments
reﬂected in the carrying amount of inventory at acqui-
sition impact cost of sales. The method of valuing these
inventories is based on estimated selling prices less
costs to complete and a reasonable proﬁt margin. Con-
sequently, the fair values do not necessarily reﬂect costs
to produce consistent with ore mined and processed
into gold and copper after the acquisition.

At December 31, 2006 we had 1.1 million ounces of
palladium and 0.3 million ounce s of platinum
resources categorized to measured and indicated sta-
tus.1 We also had 1.3 million ounces of palladium and
0.3 million ounces of platinum resources categorized
to inferred resources.1 With regard to smelting, work
to date indicates recoveries are good. The 2006 drilling
program has allowed for the completion of a pre-feasi-
bility study and has provided the necessary support to
declare our equity portion of Fedorova as a resource.
In 2007, we expect to spend $30 million towards the
completion of a feasibility study, including approxi-
mately 60,000 meters of drilling.

Exploration Strategy
Our exploration strategy for 2007 will focus on the
replacement of mine production through a combina-
tion of exploration, corporate development and project
development. Our 2007 budget is $170 million and is
weighted towards near-term discovery around our
existing operations while still maintaining a balanced
portfolio in order to generate projects for the future.
A signiﬁcant portion of our budget will be spent in
Nevada, our key district. Exploration will also be
focused in the Frontera District around Pascua-Lama
and Veladero. Drill testing of targets in the vicinity of
the Veladero mine (Filo Sur) is underway, where the
goal is to deﬁne reserves and resources close to existing
mine infrastructure.

We indirectly own a 37.5% interest in Reko Diq
through our investment in Atacama. Reko Diq is a large
copper-gold porphyry mineral resource on the Tethyan
belt, located in southwest Pakistan in the province of
Baluchistan. The Tethyan belt is a prospective ground
for large copper-gold porphyries. At December 31,
2006, our share of measured and indicated copper
resources at Reko Diq was 5.7 billion pounds of cop-
per.1 We also had inferred copper resources of 4.3 bil-
lion pounds of copper.1 In 2006, 25,030 meters of
exploration drilling was completed. A $30 million
budget (100% basis) has been approved for 2007,
including a scoping study, exploration activities includ-
ing 69,000 meters of drilling, preparation of an updated
resource model and construction of an airstrip.

1. For a breakdown of reserves and resources by category and additional
information relating to reserves and resources, see pages 128–136 of this
Financial Report 2006.

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

Barrick Financial Report 2006

The principal limitation associated with total cash
costs per ounce/pound/ton statistics is that they do
not reﬂect the total costs to produce gold/copper,
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 and inventory purchase accounting
adjustments as well as providing details of the ﬁnan-
cial effect. We believe that the beneﬁts of providing
disaggregated information outweigh the limitation in
the method of presentation of total cash costs per
ounce/pound/ton statistics.

Total cash costs per ounce/pound/ton statistics
are intended to provide additional information, do
not have any standardized meaning prescribed by US
GAAP and should not be considered in isolation or as
a substitute for measures of performance prepared in
accordance with US GAAP. The measures are not nec-
essarily indicative of operating proﬁt or cash ﬂow from
operations as determined under US GAAP. Other com-
panies may calculate these measures differently.

We believe that using an equity interest presenta-
tion is a fairer, more accurate way to measure economic
performance than using a consolidated basis. For mines
where we hold less than a 100% share in the produc-
tion, we exclude the economic share of gold production
that ﬂows to our partners who hold a non-controlling
interest. Consequently, for the South Deep and Tula-
waka mines, although we fully consolidated these
mines in our Financial Statements, our production and
total cash cost statistics only reﬂect our equity share of
the production.

In managing our mining operations, we disaggre-
gate cost of sales between amortization and the other
components of cost of sales. We use total cash costs per
ounce/pound/ton statistics as a key performance mea-
sure internally to monitor the performance of our
regional business units. We use these statistics to assess
how well our regional business units are performing
against internal plans, and also to assess the overall
effectiveness and efﬁciency of our mining operations.
We also use amortization costs per ounce/pound/ton
statistics to monitor business performance. By disag-
gregating cost of sales into these two components and
separately monitoring them, we are able to better iden-
tify 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 these statistics, enhances the
ability of investors to assess our performance. These
statistics also enable investors to better understand
year-over-year changes in cash production costs, which
in turn affect our proﬁtability and ability to generate
cash ﬂow.

Barrick Financial Report 2006

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

Illustration of Impact of Excluding Certain Costs from Total Cash Costs per Ounce/Pound/Ton

($ millions, except per ounce/pound/ton

information in dollars)

Cost of sales2
Cost of sales at South Deep included in discontinued operations
Cost of sales attributable to non-controlling interests3
Inventory purchase accounting adjustments included in cost of sales4

Cost of sales as adjusted
Amortization at producing mines – consolidated
Amortization at South Deep included in discontinued operations
Amortization at producing mines attributable to

non-controlling interests3

Amortization at producing mines – equity basis
Inventory purchase accounting adjustments4

Cost of sales including amortization and inventory purchase

For the three months
ended December 31

For the years ended
December 31

Gold

Copper

Gold

Copper1

2006

2005

2006

2005

2004

2006

652
12
(11)
1

654
180
–

(2)

178
(1)

$ 367
–
(2)
–

$ 108
–
–
(26)

$ 2,343 $ 1,214 $ 1,047
–
–
–

101
(63)
(11)

–
(7)
–

365
124
–

(2)

122
–

82
31
–

–

31
26

2,370
627
18

1,207
409
–

1,047
425
–

(16)

629
11

(5)

404
–

–

425
–

$ 393
–
–
(97)

296
66
–

–

66
97

accounting adjustments – equity basis

831

$ 487

$ 139

$ 3,010 $ 1,611 $ 1,472

$ 459

Total cash costs per ounce/pound

For the three months
ended December 31

For the years ended
December 31

Gold

Copper

Gold

Copper1

(Per ounce/pound information in dollars)

2006

2005

2006

2005

2004

2006

Ounces/pounds sold – consolidated (thousands/millions)
Sales attributable to non-controlling interests3

Ounces/pounds sold – equity basis

Total cash costs per ounce/pound – equity basis
Amortization per ounce/pound – equity basis
Inventory purchase accounting adjustments per ounce/pound
Cost of sales and amortization per ounce/pound attributable

to non-controlling interests3

2,314
(31)

1,663
(13)

2,283

1,650

100
–

100

8,566
(176)

5,353
(33)

4,936
–

8,390

5,320

4,936

287
77
–

$ 221
74
–

$ 0.82
0.31
0.26

282 $ 227 $ 214
86
76
–
–

76
1

376
–

376

$ 0.79
0.17
0.26

–

Total costs per ounce/pound5 – consolidated basis

365

$ 295

$ 1.39

361 $ 303 $ 300

$ 1.22

Total cash costs per ton

(Per ton information in dollars)

Tons processed consolidated (millions of tons)
Tons attributed to non-controlling interests (millions of tons)3

Tons processed – equity (millions of tons)

Cost per ton – equity basis
Amortization per ton
Inventory purchase accounting adjustments
Cost of sales and amortization per ton attributable to non-controlling interests3

Cost per ton5 – consolidated basis

For the years ended
December 31

Gold

Copper1

2006

2005

2004

2006

158
(1)

157

98
–

15 $
4
–
1

12 $
4
–
–

20 $

16 $

84
–

12
5
–
–

28
–

$ 11
2
3
–

$ 16

1. The 2005 and 2004 comparative periods for copper have been omitted as we did not produce any significant amounts of copper prior to the production from the

copper mines acquired with Placer Dome.

2. The aggregate amount of cost of sales for gold and copper is as per Barrick’s income statement.
3. Relates to a 30% interest in Tulawaka and a 50% interest in South Deep.
4. Based on our equity interest.
5. Includes amortization, amounts attributable to non-controlling interests and inventory purchase accounting adjustments.

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

Barrick Financial Report 2006

Other Costs and Expenses

Exploration Expense

($ millions)

Exploration

2006

2005

2004

Comments on signiﬁcant variances

North America

$ 64 $ 34

$ 30

2006 vs. 2005 – Expenditures are higher in 2006 due to activities at Goldstrike, Cortez,
Bald Mountain, Round Mountain and Pueblo Viejo.

South America

2006 vs. 2005 – Expenditures are higher in 2006 due to activities at Lagunas Norte
and Veladero.

Australia Paciﬁc

2006 vs. 2005 – Expenditures are higher in 2006 due to activities at Porgera and other
Papua New Guinea exploration properties, Cowal, Plutonic and Kalgoorlie.

Africa

Other

Total

2006 vs. 2005 – Lower activity at Buzwagi, partly offset by higher expenditures at
Nyanzaga. 2005 vs. 2004 – Higher activity at Bulyanhulu.

2006 vs. 2005 – Higher activity in Indonesia and Eurasia.

$ 171 $ 109

$ 96

Project Development Expense
($ millions)

2006

2005

2004

Comments on signiﬁcant variances

Mine development

$ 78 $ 2

$ 15

Non-capitalizable project costs

2006 vs. 2005 – In 2006, expenditures were higher principally due to activities at acquired
Placer Dome projects including Donlin Creek, Pueblo Viejo and Sedibelo. 2005 vs. 2004 –
In 2004, Lagunas Norte development costs were expensed for part of the year.

Non-capitalizable costs mainly represent items incurred in the development/construction
phase that cannot be capitalized. 2006 vs. 2005 – Costs are higher in 2006 due to higher
start-up costs at Buzwagi, Taseevskoye and Pascua-Lama. 2005 vs. 2004 – Higher
amounts for Cowal, Pascua-Lama and Veladero.

Business development/other

In 2006, expenditures were higher due to increase in research and development activity.

Total

$ 119 $ 32

$ 45

Barrick Financial Report 2006

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

Amortization Expense
($ millions)

Increase (decrease)
due to

For the years ended
December 31

2006
Amount

Sales
volumes1

2005
Other2 Amount

Comments on other variances

Gold mines

North America

$ 242

$ 15

$ 14

$ 213

South America

127

(21)

101

Australia Paciﬁc

175

109

Africa

(1)

Copper mines

South America

Australia Paciﬁc

Sub total

693

$ 250

$ 34

Corporate assets

–

409

Total

$ 735

$ 427

Amortization Expense
($ millions)

Increase (decrease)
due to

Mainly due to amortization of purchase price adjustment related to property,
plant and equipment acquired with Placer Dome.

Higher amortization included in closing inventory at Pierina, combined with
an increase in reserves.

Mainly due to amortization of purchase price adjustment related to property,
plant and equipment acquired with Placer Dome.

Impact of capital additions in 2006, more than offset by increase in reserves
and amortization of purchase price adjustment related to property, plant and
equipment acquired with Placer Dome.

Due to amortization of purchase price adjustment related to property, plant
and equipment acquired with Placer Dome.

Due to amortization of purchase price adjustment related to supply con-
tract intangible assets and property, plant and equipment acquired with
Placer Dome.

For the years ended
December 31

2005
Amount

Sales
volumes1

2004
Other2 Amount

Comments on other variances

Gold mines

North America

$ 213

$ (27)

$ 1

$ 239

Impact of capital additions in 2005, partly offset by increase in reserves.

South America

Australia Paciﬁc

Africa

Copper mines

South America

Australia Paciﬁc

Sub total

Corporate assets

(2)

(4)

–

(20)

101

–

409

Total

$ 427

(4)

107

Mainly due to increase in reserves.

Impact of capital additions in 2005.

–

425

$ 452

1. For explanation of changes in sales volumes refer to page 20.
2. Other includes increases/decreases in amortization expense due to additions/dispositions of property, plant and equipment, purchase accounting adjustments and

the impact of historic changes in reserve estimates on amortization (refer to page 60).

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

Barrick Financial Report 2006

Amortization expense recorded in the ﬁrst nine months
of 2006 reﬂects preliminary purchase price allocations
for the acquired Placer Dome mines. In fourth quarter
2006, valuations for the acquired mines were ﬁnalized,
at which time amortization calculations were prospec-
tively recorded to reﬂect adjustments to the prelimi-
nary allocation. On ﬁnalization of the purchase price

allocation, we recorded amortization of purchase price
adjustments related to property plant and equipment
totaling $29 million in fourth quarter 2006. The
amount recorded for all of 2006 was $47 million.
We expect amortization expense to increase in 2007,
primarily due to the ﬁnal purchase price allocation for
Placer Dome mines.

Corporate Administration, Interest Income and Interest Expense

($ millions)
For the years ended December 31

Corporate

2006

2005

2004

Comments on signiﬁcant trends and variances

administration

$ 142

$ 71

2006 vs. 2005 – Increase in 2006 relates to the increase in scale of the Company after
the Placer Dome acquisition, and stock option expense in 2006 of $18 million.

Interest income

101

Interest costs

Total incurred

251

125

Capitalized

102

118

2006 vs. 2005 – Higher interest income in 2006 was mainly due to higher cash balances
in 2006. Also, in the ﬁrst ﬁve months of 2006, a $19 million ﬁnancing fee was paid by
Goldcorp representing, in part, compensation for interest costs incurred by us to carry
the cost of ﬁnancing related to certain operations sold to Goldcorp. 2005 vs. 2004 –
Increase in the average cash balance, combined with an increase in market interest rates.

2006 vs. 2005 – Higher interest costs in 2006 were mainly due to $1.3 billion of debt
assumed on the acquisition of Placer Dome, combined with interest relating to funds
drawn under a credit facility that were used for the cash component of the cost of
acquisition of Placer Dome and interest paid under our copper-linked notes issued in
October 2006. 2005 vs. 2004 – Increase mainly due to new ﬁnancing put in place in
2004 and 2005.

2006 vs. 2005 – In 2006, interest was capitalized at our development projects, Pascua-
Lama, Cowal and Ruby Hill. Also in 2006, we began to capitalize interest costs at
projects acquired from third parties including Cortez Hills, Donlin Creek, Pueblo Viejo,
Sedibelo, Reko Diq and Buzwagi. 2005 vs. 2004 – Increased amounts were capitalized
in 2005 at Pascua-Lama, Cowal, Veladero, and Lagunas Norte development projects as
construction costs were incurred and capitalized. Capitalization of interest at Lagunas
Norte ceased in third quarter 2005, while capitalization of interest at Veladero ceased
in fourth quarter 2005.

Interest expense allocated to
discontinued operations

–

Primarily relates to interest allocated to South Deep.

Expensed

$ 126

$ 7

$ 19

2006 vs. 2005 – Higher interest costs in 2006 were mainly due to higher levels of debt out-
standing after debt assumed with the acquisition of Placer Dome combined with lower
amounts of interest capitalized to development projects in 2006 compared to 2005.

Barrick Financial Report 2006

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

Other Operating Expenses

($ millions)
For the years ended December 31

2006

2005

2004

Comments on signiﬁcant trends and variances

Regional business unit overheads $ 88

$ 36

$ 24

Community development costs

–

2006 vs. 2005 – Higher overhead costs incurred in 2006 due to impact of the acquisi-
tion of Placer Dome, including: increase in headcount at regional head ofﬁces; IT costs
associated with coordinating and standardizing communications and network systems;
and recruitment and relocation costs.

Relates to amounts accrued for a voluntary contribution to be paid to beneﬁt Peruvian
communities and amounts to be paid under a Mining Development Agreement to the
Tanzanian Government.

Environmental remediation cost

World Gold Council fees

Higher production levels in 2005 and 2006

Total

$ 124

$ 59

$ 47

Impairment of Long-lived Assets

($ millions)
For the years ended December 31

2006

2005

2004

Comments on signiﬁcant trends and variances

Eskay Creek

$ –

$ – $ 58

Peruvian exploration properties

–

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.

In 2006, the carrying amount of Cuerpo Sur, an extension of Pierina, was tested for
impairment on completion of the annual life of mine planning process. An impairment
charge of $17 million was recorded to reduce the carrying amount to the estimated fair
value. In 2004, we completed an impairment test 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.

Other

Total

–

2004 includes write-down on various exploration-stage properties.

$ 17

$ – $ 139

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

Barrick Financial Report 2006

Other Income

($ millions)
For the years ended December 31

2006

2005

2004

Comments on signiﬁcant trends and variances

Non-hedge derivative gains

$ –

$ 6

$ 5

Gains on asset sales

Gains on investment sales

Gain on Kabanga transaction

Gain on vend-in of assets

to Highland Gold

Royalty income

Sale of water rights

Other

Total

Other Expense

($ millions)
For the years ended December 31

Impairment charges
on investments

–

In 2006, we sold various properties in Canada and Chile. 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.

$10 million of the gains recorded 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.

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

In 2006 we exchanged various interests in mineral properties for 34.3 million Highland
shares with a fair value that exceeded the carrying amount of assets exchanged by
$76 million, resulting in a gain of $51 million.

–

$ 89

$ 49

2006

2005

2004

Comments on signiﬁcant trends and variances

$ 6

$ 16

$ 5

2006 impairment charge relates to the write-down of two investments, both of which
were considered to be impaired. 2005 impairment charge relates to the write-down of
two investments which were determined to be impaired.

Changes in AROs at closed mines

In 2006, we recorded charges for changes in estimates of Asset Retirement Obligations
(“AROs”) at closed mines of $37 million for the Nickel Plate property in British Columbia,
Canada and $16 million for other properties.

Accretion expense at closed mines

Currency translation (gains) losses

Placer Dome integration costs

Corporate transaction costs

Other items

Total

(2)

(3)

–

2005 and 2004 include litigation costs for major litigations.

$ 96

$ 56

$ 47

Barrick Financial Report 2006

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

On September 7, 2006 a ﬁre occurred in the under-
ground part of the Central Shaft at Highland’s Darasun
mine. Highland’s management is currently uncertain
of the amount of damage and potential impairment,

if any, at Darasun as necessary valuations and engi-
neering studies have not been completed at the date of
this MD&A.

Income Taxes

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

Effective income tax rates
on elements of income

Income tax expense

2006

2005

2004

Pre-tax
income

Effective
tax rate

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

$ 1,560

27%

$ 420

$ 462

21%

$ 97

$ 43

56%

$ 24

Change in Australian tax status

Tax rate changes

Outcome of tax uncertainties

Release of deferred

tax valuation allowances
recorded in prior years

Total

(31)

–

(53)

$ 348

(5)

–

(32)

$ 60

(81)

–

(141)

(5)

$ (203)

Income tax expense increased in 2006 in comparison
to 2005 primarily due to the increase in pre-tax
income. Our underlying tax rate increased to 27% in
2006 primarily due to the impact of a higher amount
of deliveries into gold sales contracts in a low tax-rate
jurisdiction at prices below the prevailing spot market
gold price than in 2005.

The underlying tax rate is expected to be approxi-
mately 30% for 2007. This expected underlying rate
excludes the effect of gains and losses on non-hedge
derivatives, the effect of delivering into gold sales con-
tracts in a low tax-rate jurisdiction at prices below pre-
vailing market prices, any tax rate changes, and any
release of deferred tax valuation allowances. In ﬁrst
and second quarter 2006, the expected deliveries into
Floating Spot-Price Gold Sales Contracts are expected
to cause an increase in our reported effective tax rate
because most of the deliveries will occur in a low tax-
rate jurisdiction (see page 54).

We record deferred tax charges or credits if changes
in facts or circumstances affect the estimated 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 abil-
ity to realize deferred tax assets. In 2006, we released
$25 million of valuation allowances in the United States
due to the estimated effect of higher market gold prices

on the ability to utilize deferred tax assets. We released
$9 million of valuation allowances in a Chilean entity
due to the availability of income. We released valuation
allowances of $19 million in Canada reﬂecting utiliza-
tion of capital losses. 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 Vela-
dero, and also due to the impact of higher market gold
prices. In 2004, we recorded a tax credit of $141 million
on ﬁnal resolution of a Peruvian tax assessment in our
favor, as well as the reversal of other accrued costs total-
ing $21 million ($15 million post-tax). We also recorded
credits of $81 million due to a change in tax status in
Australia following an election that resulted in a revalu-
ation of assets for tax purposes; as well as an election to
ﬁle tax returns in US dollars, rather than Australian
dollars. In 2005, we revised our estimate of the revalua-
tion of assets for tax purposes due to the change
in status, and recorded a further deferred tax credit of
$5 million.

In 2006, an interpretative decision (“ID”) was
issued by the Australia Tax Ofﬁce that clariﬁed the tax
treatment of currency gains and losses on foreign cur-
rency denominated liabilities. Under certain condi-
tions, for taxpayers who have made the functional
currency election, and in respect of debt that existed

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

Barrick Financial Report 2006

at the time the election was made, the ID provided
clariﬁcation that unrealized foreign exchange gains
that currently exist on intercompany debt will not
crystallize upon repayment of the debt. The effect of
the ID was recorded as a $31 million increase to
deferred tax assets.

In second quarter 2006, a new federal rate change
was enacted in Canada that lowered the applicable tax
rate. The impact of this rate change was to reduce net
deferred tax assets in Canada by $34 million that was
recorded as a component of deferred income tax
expense. Also in second quarter 2006, on the change of
the tax status of a Canadian subsidiary, we recorded a

deferred income tax credit of $22 million, to reﬂect the
impact on the measurement of deferred income tax
assets and liabilities.

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 ability 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 64.

Quarterly Information
($ millions, except where indicated)

Sales
Net income from continuing operations
Net income from continuing operations per

share – basic (dollars)

Net income from continuing operations per

share – diluted (dollars)

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

2006

2005

$ 1,348 $ 1,573
393

132

$ 1,5111 $ 1,2041
226

458

$ 776
175

$ 627
113

$ 463
47

$ 484
60

0.15

0.46

0.53

0.29

0.33

0.21

0.09

0.11

0.15
418
0.48
0.48

0.45
405
0.47
0.46

0.52
459
0.53
0.53

0.29
224
0.29
0.29

0.32
175
0.33
0.32

0.21
113
0.21
0.21

0.09
47
0.09
0.09

0.11
66
0.12
0.12

1. Adjusted for the impact of reclassifying sales from our South Deep mine to discontinued operations.

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, rising gold production and sales volumes as our
new mines began production in 2005 and 2006 and, in
ﬁrst quarter 2006, our acquisition of Placer Dome.
Results in 2006 beneﬁted from the contribution of
gold and copper mines acquired in the Placer Dome
acquisition. Although these trends continued in the
second half of 2006, earnings in third quarter 2006
were reduced by post-tax adjustments of $25 million
related to revisions to the AROs at a closed mine and

$12 million for non-hedge derivative losses. In fourth
quarter 2006, sales and earnings were reduced as a
result of the delivery of gold ounces into gold sales
contracts at a post-tax opportunity cost of $312 mil-
lion. The effect on income of this charge was partially
mitigated by a post-tax gain of $288 million from the
sale of the South Deep mine. The 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 presented in the table on page 16.

Barrick Financial Report 2006

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

Effect on Earnings Increase (Decrease)

($ millions)

Three months ended December 31

2006

2005

Pre-tax

Post-tax

Pre-tax

Post-tax

Non-hedge derivative

gains (losses)

$ 11

$ (1)

Gain on sale of South Deep

288

–

Impairment charges on
long-lived assets
and investments

Inventory purchase

(23)

(18)

(13)

accounting adjustments

(25)

(21)

Change in asset retirement
obligation estimates

(15)

(10)

–

(2)

–

(3)

–

(8)

–

(6)

Deferred tax credits

Change in Australian

tax status

Highland vend-in

Peru voluntary contribution

Opportunity cost of deliveries
into ﬁxed-price Corporate
Gold Sales Contracts

Hedge accounting adjustments

related to the acquired
Placer Dome gold
hedge position

(327)

(312)

(33)

(18)

(11)

–

Total

$ (72)

$ (28)

$ (49)

$ (45)

In fourth quarter 2006, we generated operating cash
ﬂow of $337 million compared to operating cash ﬂow
of $269 million in the prior-year quarter. The positive
effects of higher gold sales volumes and higher real-
ized gold prices were offset by the $327 million oppor-
tunity cost of deliveries into ﬁxed-price Corporate
Gold Sales Contracts during fourth quarter 2006.

Fourth Quarter Results
In fourth quarter 2006, we produced 2.4 million
ounces of gold at total cash costs of $287 per ounce
compared to 1.6 million ounces at total cash costs of
$221 per ounce in the prior-year quarter. We also pro-
duced 100 million pounds of copper at total cash costs
per pound of $0.82 during the quarter from two cop-
per mines acquired with Placer Dome. Revenue for
fourth quarter 2006 was $1,348 million on gold sales
of 2.3 million ounces and copper sales of 100 million
pounds, compared to $776 million in revenue on just
gold sales of 1.7 million ounces for the prior-year
quarter. Sales volumes increased due to the contribu-
tion from new mines that began production in 2005
and 2006, combined with sales from mines acquired
with Placer Dome. During the quarter, spot gold
prices averaged $614 per ounce. We realized an aver-
age price of $461 per ounce during the quarter com-
pared to the average spot price of $486 per ounce and
an average realized price of $467 per ounce in the
prior-year quarter. The realized price of gold was sub-
stantially lower than the average spot-price due to
delivery of 1.0 million ounces into gold sales contracts
at an opportunity cost of approximately $143 per
ounce. We also recorded hedge accounting adjust-
ments of $8 per ounce associated with legacy Placer
Dome gold hedges. Earnings for fourth quarter 2006
were $418 million ($0.48 per share on a diluted basis),
$243 million ($0.16 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, combined
with earnings from copper sales, partly offset by the
impact of special items.

In fourth quarter 2006, we closed the sale of the
South Deep mine to Gold Fields. The consideration
was $1.5 billion, of which $1.2 billion was paid in cash
and $308 million in Gold Fields shares. On closing, we
recorded a gain of $288 million, representing the con-
sideration received less the carrying amount of net
assets of South Deep, including goodwill relating to
South Deep of $651 million. Also in the fourth quar-
ter, we recorded a $51 million gain on closing of the
vend-in to Highland.

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

Barrick Financial Report 2006

Liquidity, Capital Resources and Financial Position

Cash Flow

Operating Activities
Operating cash ﬂow increased by $1,396 million in 2006 to $2,122 million. The key factors that contributed to the
year over year increase are summarized in the table below.

Key Factors Affecting Operating Cash Flow

Impact on comparative
operating cash ﬂows

($ millions)
For the years ended
December 31

2006

2005

2004

2006 vs.
2005

2005 vs.
2004

Comments on signiﬁcant trends and variances

Gold sales volumes (000s oz)

8,390 5,320 4,936 $

666

$ 75

See page 20

Market gold prices ($/oz)

Impact of gold sales contracts

Higher copper earnings

(millions lbs)

Total cash costs gold ($/oz)

Sub-total

Other inﬂows (outﬂows)

604

532

376

282

444 409 1,342

186

See page 7

(476)

See page 7

–

833

–

See page 20

227

214

(461)

(69)

See page 20

1,904

225

Higher expenses1

556

271

259

(285)

Purchase of copper put options

Non-cash working capital

–

(26)

(66)

(86)

108

(12)

–

2006 vs. 2005 – Increase in taxes payable. 2005 vs. 2004 – Increase
in accounts payable in 2005 mainly due to timing of payments and
for mines that began production in 2005.

Interest expense

Income tax payments

126

280

(119)

(200)

See page 39

(35)

2006 vs. 2005 – Increased payments in 2006 related to acquisition
of Placer Dome. 2005 vs. 2004 – Increased payments in 2005 related
to higher gold prices and the start of Lagunas Norte production.

Effect of other factors

Total

$ 1,396

$ 217

1. Includes corporate administration, exploration, project development, and other operating expenses.

Barrick Financial Report 2006

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

Investing Activities
($ millions)
For the years ended
December 31

Project capital expenditures11

2006

2005

2004

Comments

Pascua-Lama

development costs

$ 113

$ 98 $ 35

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

Cowal construction

104

258

Production start-up in second quarter 2006 after a two-year construction phase,
which began in second quarter 2004.

Ruby Hill development costs

Cortez Hills

Tulawaka construction

Veladero construction

Lagunas Norte construction

Western 102 Power Plant

–

213

100

–

Construction activity started in ﬁrst quarter 2005.

Construction activity at mine acquired with Placer Dome.

Production start-up in ﬁrst quarter 2005.

284

Production start-up in fourth quarter 2005.

182

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

Construction activity started in ﬁrst quarter 2004. Production start-up in fourth quar-
ter 2005.

Other

–

Relates primarily to capitalized interest at Donlin Creek, Pueblo Viejo, Reko Diq,
Sedibelo and Buzwagi.

Sub total

285

789

640

Regional capital expenditures

North America

202

103

South America

248

114

Australia Paciﬁc

255

2006 vs. 2005 – Higher expenditures due to the impact of Bald Mountain, Turquoise
Ridge and Golden Sunlight, partly offset by lower expenditures at Marigold. 2005 vs.
2004 – Higher regional capital expenditures at Goldstrike in 2005, in particular, a 100-
ton shovel purchase and higher budgeted expenditures in general.

2006 vs. 2005 – Higher expenditures in 2006 due to expenditures at Veladero related
to capitalized pre-production stripping of the Filo Federico pit, combined with expen-
ditures at Lagunas Norte and Zaldívar. 2005 vs. 2004 – Purchases of equipment at
new mines.

2006 vs. 2005 – Higher expenditures due to the impact of Placer Dome mines, includ-
ing $79 million spent at Porgera primarily related to the remediation of the West
Wall cutback.

Africa

Other

Sub total

Total

2006 vs. 2005 – Higher expenditures in 2006 due to the impact of North Mara and
higher expenditures at Bulyanhulu to install a carbon-in-leach plant.

802

315

184

$ 1,087 $ 1,104

$ 824

1. Includes both construction costs and capitalized interest.

Investing activities in 2006 also included $1.3 billion
in ﬁrst quarter 2006 paid for the cash component of
the cost of the Placer Dome acquisition, which, net of
cash acquired of $1.1 billion, led to a net cash outﬂow
of $160 million. We recorded in cash ﬂows of discon-
tinued operations proceeds of $1.6 billion received on

closing of the sale of certain Placer Dome operations
and an inte re st in the Pue blo Vie jo proje c t to
Goldcorp in second quarter 2006 and $1.2 billion
received on closing of the sale of the South Deep mine
to Gold Fields in fourth quarter 2006.

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

Barrick Financial Report 2006

Financing Activities
The most signiﬁcant ﬁnancing cash ﬂows in 2006 were
$2.2 billion on issue of long-term debt obligations,
$1.8 billion to settle Placer Dome derivative positions
and cash receipts of $74 million received on the exer-
cise of employee stock options partly offset by divi-
dend payments made totaling $191 million. We also
made scheduled payments under our long-term debt
obligations totaling $1.6 billion in 2006.

Liquidity
Liquidity Management
Liquidity is managed dynamically, and factors that
could impact liquidity are regularly monitored. The
primary factors that affect liquidity include produc-
tion levels, realized 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 proj-
ects. We had three new mines start in 2005, with our
fourth and newest mine, Cowal, starting production in
second 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. Alternatives for sourcing our future
capital needs include our signiﬁcant cash position,
unutilized credit facilities, future operating cash ﬂow,
project ﬁnancings and public debt ﬁnancings. These
alternatives are evaluated to determine the optimal mix
of capital resources for our capital needs. We expect
that, absent a material adverse change in a combination
of our sources of liquidity and/or a signiﬁcant decline

in gold and copper prices, present levels of liquidity
will be adequate to meet our expected capital needs. If
we are unable to access project ﬁnancing due to unfore-
seen political or other problems, we expect that we will
be able to access public debt markets as an alternative
source of ﬁnancing. Any additional indebtedness would
increase our debt payment obligations, and may nega-
tively impact our results of operations.

Capital Resources
Adequate funding is in place or available for all our
signiﬁcant projects. We plan to put in place project
ﬁnancing for a portion of the expected construction
cost of a number of our projects; 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. For 2007,
we expect that any capital required will be funded from
a combination of our existing cash position and oper-
ating cash ﬂow.

In second quarter 2006, we received $1.6 billion
from the sale of operations to Goldcorp. In third quar-
ter 2006, we increased our $1 billion credit facility to
$1.5 billion. In early October 2006, we issued $1 billion
of copper-linked notes (the “Notes”) comprised of
$400 million of 5.75% notes due 2016 and $600 mil-
lion of 6.35% notes due 2036. During the ﬁrst three
years of these Notes, the original $1 billion of funding
is to be repaid in the dollar equivalent of approxi-
mately 324 million pounds of copper, and is to be
replaced over those three years by $1 billion of fund-
ing in the form of conventional interest-bearing notes
maturing in 2016 and 2036. The replacement of the
copper-linked portion of the notes with conventional
interest-bearing notes during this period occurs simul-
taneously such that the total amount outstanding at
any time from issue date to maturity is $1 billion. In
October 2006, we used a portion of the proceeds from
the Notes to repay debt, and plan to use the remaining
proceeds to repay other outstanding debt and to fund
our development projects.

Barrick Financial Report 2006

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

Capital Resources1

($ millions)
For the years ended December 31

2006

2005

2004

Opening capital resources

$ 2,084

$ 2,476

$ 1,970

New sources

Operating cash ﬂow
New and increases to ﬁnancing

facilities2

Proceeds from asset sales

Uses

Acquisition of Placer Dome
Other acquisitions3
Settlement of acquired Placer
Dome hedge position and
repayment of debt4

Project capital5
Regional capital5
Dividends
Share buyback
Other

2,122

726

509

1,550
2,850

134
–

1,056
–

8,606

3,336

3,535

(160)
(364)

–
–

(2,254)
(285)
(802)
(191)
–
48

–
(789)
(315)
(118)
–
(30)

–
(640)
(184)
(118)
(95)
(22)

Closing capital resources

$ 4,598

$ 2,084

$ 2,476

Components of closing

capital resources
Cash and equivalents
Unutilized credit facilities6

Total

$ 3,043 $ 1,037
1,047

1,555

$ 1,398
1,078

$ 4,598

$ 2,084

$ 2,476

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

been arranged but not utilized.

2. In 2006, includes a second $50 million Peruvian bond offering, $500 million
increase in our ﬁrst credit facility and the issuance of $1 billion of copper-linked
notes. In 2005, includes the first $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.

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, dependent upon maintain-
ing 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 ﬁnanc-
ing. The key factors that are important to our credit
rating include the following: our market capitaliza-
tion; 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
geopolitical risk proﬁle.

Financial Position

Key Balance Sheet Ratios

As at December 31

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

2006

2005

$ 764
$ 1,064
0.07:1
4.85:1

$ 231
$ 764
0.20:1
3.64:1

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

ities, excluding short-term debt obligations.

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

3. Includes acquisition of equity method investments, changes in available-for-

debt obligations.

sale securities and other acquisitions, net of cash acquired.

4. Represents $1,840 million paid to settle acquired Placer Dome hedge posi-
tions, $337 million repayment of acquired Placer Dome credit facility after
which it was terminated, and $77 million related to the redemption of Placer
Dome preferred shares.

5. Project capital represents capital invested in new projects to bring new mines
into production. Regional capital represents ongoing capital required at exist-
ing mining operations. Sum of project and regional capital equals capital
expenditures for the year.

6. Represents available amounts under our first credit facility of $1.5 billion and

$55 million available on Peruvian lease facilities.

Credit Rating

At February 21, 2007 from major rating agencies:

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

A–
Baa1
A

Non-cash working capital increased in 2006 mainly
due to increases in inventory levels as a result of the
acquisition of Placer Dome. Although operating cash
ﬂow exceeded capital expenditures in 2006, net debt
increased primarily as a result of settlement of acquired
Placer Dome hedge positions. Higher cash balances
partly offset by higher short-term debt, caused our cur-
rent ratio to increase at the end of 2006.

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

Barrick Financial Report 2006

Shareholders’ Equity

Outstanding Share Data

As at February 7, 2007

Common shares
Special voting shares
Exchangeable shares1
Stock options

Shares
outstanding

No. of shares

863,957,797
1
1,366,015
18,406,815

Conversion for
Barrick common
shares

723,989

1. Represents Barrick Gold Inc. (“BGI”) exchangeable shares. Each BGI share is

exchangeable for 0.53 Barrick common shares.

For further information regarding the outstanding
shares and stock options, please refer to the Financial
Statements and our 2006 Management Information
Circular and Proxy Statement.

Dividend Policy
In each of the last ﬁve years, we paid a total cash divi-
dend of $0.22 per common 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 divi-
dend policy semi-annually based on the cash require-
ments of our operating assets, exploration and
development activities, as well as potential acquisi-
tions, combined with our current and projected ﬁnan-
cial 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 comprehen-
sive income” or “OCI”, and excluded from the income
statement.

In 2006, other comprehensive income of $150 mil-
lion mainly included gains of $17 million on hedge
contracts designated for future periods, caused pri-
marily by changes in currency exchange rates, copper
prices, gold prices and fuel prices; reclassiﬁcation
adjustments totaling $77 million for losses on hedge
contracts designated for 2006 that were transferred to
earnings in 2006; and a $43 million unrealized
increase in the fair value of investments.

Included in other comprehensive income at
December 31, 2006 were unrealized pre-tax gains on
currency hedge contracts totaling $283 million, based
on December 31, 2006 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 earn-
ings at the same time as the corresponding hedged
operating costs and amortization of capital expendi-
tures are also recorded in earnings.

Contractual Obligations and Commitments

Payments due

($ millions)

At December 31, 2006

Long-term debt (1)

Repayment of principal
Interest

Asset retirement obligations (2)
Capital leases
Operating leases
Restricted share units
Other post-retirement obligations
Derivative liabilities (3)
Royalty arrangements (4)
Purchase obligations for supplies

and consumables (5)
Capital commitments (6)

2007

2008

2009

2010

2011

$ 737
225
42
20
6
6
11
82
167

261
116

$ 97
193
64
16
2
10
6
35
175

150
1

$ 101
185
114
16
1
27
3
2
171

33
–

$ 52
178
79
16
1
–
3
111
158

130
–

$ 25
175
58
16
–
–
3
2
137

7
–

2012 and
thereafter

$ 2,883
2,664
536
5
–
–
18
–
935

Total

$ 3,895
3,620
893
89
10
43
44
232
1,743

–
–

581
117

Total

$ 1,673

$ 749

$ 653

$ 728

$ 423

$ 7,041

$ 11,267

Barrick Financial Report 2006

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

(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 con-
ditions 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 security, we are
not required to post any collateral under any debt
obligations. The terms of our debt obligations would
not be affected by deterioration in our credit rating.
Projected interest payments on variable rate debt were
based on interest rates in effect at December 31, 2006.
Interest is calculated on our long-term debt obliga-
tions 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) Derivative Liabilities
Amounts presented in the table relate to hedge con-
tracts disclosed under notes 18 and 19 to the Financial
Statements. Payments related to derivative contracts
cannot be reasonably estimated given variable market
conditions.

(4) Royalties
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 spot gold price assumption of
$625 per ounce. The most signiﬁcant royalty agree-
ments are disclosed in note 6 to our Financial State-
ments. Based on 2006 production levels, an increase
in market gold prices by $50 per ounce would result
in an annual increase in royalty payments of approxi-
mately $18 million.

(5) Purchase Obligations for Supplies and

Consumables

Purchase obligations for supplies and consumables
primarily include commitments of approximately
$180 million related to community development costs
to be incurred at the Pascua-Lama project in Chile and
Argentina.

(6) Capital Commitments
Purchase obligations for capital expenditures include
only those items where binding commitments have
been entered into. Commitments at the end of 2006
mainly related to construction capital at our projects.

Capital Expenditures Not Yet Committed
We expect to incur capital expenditures during the next
ﬁve years for both projects and producing mines. The
projects are at various development stages, from pri-
marily exploration or scoping studies through to con-
struction execution. The ultimate decision to incur
capital at each potential site is subject to positive results
which allow the project to advance past decision hur-
dles. Primary and signiﬁcant projects in Barrick’s port-
folio at December 31, 2006 include Ruby Hill, Cortez
Hills, Buzwagi, Pascua-Lama, Pueblo Viejo, and Donlin
Creek (refer to pages 24 to 34 for further details).

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 or 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 sus-
pended, resulting in our rights to the property lapsing.
The validity of mining claims can be uncertain and
may be contested. Although we have attempted to
acquire satisfactory title to our properties, some risk
exists that some titles, particularly title to undevel-
oped properties, may be defective.

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

Barrick Financial Report 2006

Contingencies – Litigation
We are currently subject to various litigation as dis-
closed in note 27 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 main-
tain 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 47. We use interest rate contracts to
mitigate interest rate risk that is implicit in our cash

Summary of Financial Instruments1
As at and for the year ended December 31, 2006

Financial
Instrument

Principal/
Notional
Amount

Cash and equivalents

$3,043 million

Associated
Risks

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

Investments in available-
for-sale securities

$646 million

(cid:1) Market

Long-term debt

$3,244 million

(cid:1) Interest rate

Hedging instruments –
currency contracts

C$586 million
A$2,867 million
ZAR 46 million

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

Copper hedges

Acquired Placer Dome
gold hedges

Hedging instruments –
fuel and propane contracts

Debt hedging instruments –
interest rate contracts

300 million
pounds

Nil ounces

Fuel –
4 million barrels
Propane –
18 million gallons

$500 million

Cash hedging instruments –
interest rate contracts

$Nil

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

balances and outstanding long-term debt. In the nor-
mal 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 19 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 2
and 19 to our Financial Statements. For a discussion
of the methods used to value ﬁnancial instruments, as
well as any signiﬁcant assumptions, refer to note 19 to
our Financial Statements.

Amounts Recorded
in Earnings

Amounts Not
Recorded in
Earnings

Interest income less hedge gains on cash
hedging instruments – 2006 – $102 million;
2005 – $32 million; 2004 – $6 million

$Nil

Other income/expense – 2006 –
$2 million gain; 2005 – $1 million gain;
2004 – $1 million gain

$53 million gain
in OCI

Interest costs – 2006 – $126 million expensed
($102 million capitalized); 2005 – $7 million
expensed ($118 million capitalized); 2004 –
$19 million expensed ($41 million capitalized)

Carrying value
greater than
fair value by
$60 million

Hedge gains in cost of sales, corporate
administration and amortization –
2006 – $102 million; 2005 – $120 million;
2004 – $112 million

$208 million gain
in OCI

$28 loss in revenue

$165 loss in revenue

Hedge gains in cost of sales – 2006 –
$16 million; 2005 – $10 million;
2004 – $4 million

Change in fair value recorded in earnings –
2006 – $1 million loss; 2005 – $13 million
loss; 2004 – $2 million gain

Hedge gains/losses in interest income –
2006 – $1 million loss; 2005 – $6 million
gain; 2004 – $19 million gain

$57 million gain
in OCI

$17 million gain
in OCI

$21 million gain
in OCI

$17 million loss
in OCI

$3 million loss
in OCI

Non-hedge derivatives

Various

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

Gains in other income/expense – 2006 – $nil;
2005 – $6 million; 2004 – $5 million

$Nil

1. Refer to pages 52 to 55 for information on gold and silver sales contracts.

Barrick Financial Report 2006

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

Placer Dome Gold Hedge Position
At acquisition, Placer Dome had a net obligation to
deliver approximately 7.7 million ounces of gold as
well as various other derivative positions. The aggre-
gate fair value of these derivative positions was
recorded as a liability of $1,707 million on January 20,
2006. This Placer Dome gold hedge position has been
reduced to zero (on a net economic basis) at Decem-
ber 31, 2006. The elimination of these hedges was done
via a combination of ﬁnancial closeouts and offsetting
positions with 4.7 million ounces eliminated in ﬁrst
quarter 2006 and 3 million ounces eliminated in sec-
ond quarter 2006. The total cash required to settle
these Placer Dome gold hedge positions was approxi-
mately $1.8 billion, with approximately $160 million to
be incurred in future periods for positions which have
been economically offset but not yet settled.

The acquired Placer Dome positions received
hedge accounting treatment from the date of the
acquisition until they were eliminated and, therefore,
had a designated date and price against speciﬁc future
gold sales. Due to the impact of hedge accounting for
these contracts, revenue recorded in 2006 was based on
selling prices that approximated spot gold prices less a
ﬁxed reduction of $165 million. At December 31, 2006,
Barrick’s remaining ﬁxed-price gold sales contracts
stood at 1.3 million ounces of Corporate Gold Sales
Contracts, and a further 9.5 million ounces of Project
Gold Sales Contracts. Subsequent to December 31,
2006, we reduced the ﬁxed-price Corporate Gold Sales
Contract book to zero (see pages 52 to 55).

Off Balance Sheet Arrangements
We have historically used gold and silver sales contracts
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.

On acquisition of Placer Dome, we acquired its
pre-existing gold hedge position totaling 7.7 million
ounces of committed gold obligations, which was
recorded on our balance sheet at an estimated fair
value based on a market gold price of $567 per ounce
on the date of acquisition. Acquired gold forward sales
contracts were designated as cash ﬂow hedges of future
gold production. Changes in the fair value of these
cash ﬂow hedges were recorded each period on the
balance sheet and in OCI to the extent they met ongo-
ing accounting hedge effectiveness assessments until
the hedges were economically closed out. In future
periods, the hedge gain or loss that occurs between the
date of acquisition and the hedge designation date will
be recorded as a component of revenue on the hedge
designation date. Revenue reported in each period will
represent the cash proceeds for either spot sales or
under pre-existing Barrick normal sales contracts plus
or minus a hedge gain or loss resulting from the
cash ﬂow hedges. The other acquired Placer Dome
derivative instruments were all classiﬁed as non-hedge
derivatives from the date of acquisition. The cash settle-
ments of liabilities under the acquired Placer Dome
derivatives positions are classiﬁed as ﬁnancing activities
in the cash ﬂow statement in the Financial Statements.

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

Barrick Financial Report 2006

Project Gold Sales Contracts
In anticipation of building our projects, and in sup-
port of any related ﬁnancing, we have 9.5 million
ounces of existing ﬁxed-price gold sales contracts
speciﬁcally allocated to these projects. The allocation
of these contracts will help reduce gold price risk at
the projects, and are expected to help secure ﬁnancing
for construction. We expect that the allocation of
these contracts will eliminate any requirement by
lenders to add any incremental gold sales contracts
in the future to support any ﬁnancing requirements.
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 par t of our Master Trading Ag re e me nts
(“MTAs”), Project Gold Sales Contracts are not sub-
ject to any provisions regarding any ﬁnancial go-ahead
decisions with construction, or any possible delay or
change in the project.

Key Aspects of Project Gold Sales Contracts

As of December 31, 2006

Expected delivery dates1

Future estimated average
realizable selling price
Mark-to-market value at
December 31, 2006

2010–2019, the approximate
terms of the expected ﬁnancing

$391/oz2

($3,187) million3

1. The contract termination dates are in 2016 in most cases, but we currently
expect to deliver production against these contracts starting in 2010, subject
to the timing of receipt of approvals of the environmental impact assess-
ments, as well as the resolution of other external issues, both of which are
largely beyond our control.

2. Upon delivery of production from 2010–2019, the term of expected financ-
ing. Approximate estimated value based on current market US dollar inter-
est rates and on an average lease rate assumption of 0.75%.
3. At a spot gold price of $632 per ounce and market interest rates.

The allocation of gold sales contracts to projects
involves: i) the identiﬁcation of contracts in quantities
and for terms that mitigate gold price risk for the proj-
ect during the term of the expected ﬁnancing (con-
tracts were chosen where the existing termination dates
are spread between the targeted ﬁrst year of production
and the expected retirement of ﬁnancing for the proj-
ect); and ii) the eventual settlement of proceeds from
these contracts for the beneﬁt of production.

Through allocation of these gold sales contracts to
these projects, we 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.

Under the Project Gold Sales Contracts, we have
an obligation to deliver gold by the termination date
(currently 2016 in most cases). However, because we
typically ﬁx the price of gold under our gold sales con-
tracts to a date that is earlier than the termination date
of the contract (referred to as the “interim price-set-
ting date”), the actual realized price on the contract
termination date depends upon the actual gold mar-
ket forward premium (“contango”) between the
interim price-setting date and the termination date.
Therefore, the $391/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
Project Gold Sales Contract position, is not necessarily
representative of the prices that may be realized for
actual deliveries into gold sales contracts, in particu-
lar, 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 acceler-
ate gold deliveries, this would likely lead to reduced
contango that would otherwise have built up over
time (and therefore a lower realized price).

Barrick Financial Report 2006

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

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. “back-
wardation”). 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.

Corporate Gold Sales Contracts and Floating
Spot-Price Gold Sales Contracts
In 2006, we reduced our ﬁxed-price Corporate Gold
Sales Contracts through the delivery of 1.2 million
ounces of production into contracts and converting
the pricing of 0.5 million ounces into future spot pric-
ing. We also reallocated 3.0 million ounces of hedges
to the Project Gold Sales Contracts.

As of February 21, 2007, we fully eliminated the
remaining ﬁxed-price Corporate Gold Sales Contracts.
We expect to eliminate the entire Floating Spot-Price
Gold Sales Contracts position through deliveries of
gold production before the end of the second quarter
of 2007. This is expected to result in a reduction to our
pre-tax income and cash ﬂow of $572 million in ﬁrst
quarter 2007, and a reduction of $76 million in second
quarter 2007.

Fixed-Price Silver Sales Contracts

As of December 31, 2006

Millions of silver ounces
Current termination date of

silver sales contracts

Average estimated realizable

selling price at 2016
termination date

Mark-to-market value at
December 31, 2006

2016 in most cases

$8.42/oz1

($82) million2

1. Approximate estimated value based on current market contango of 2.50%.
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 contractual
termination date.

2. At a spot silver price of $12.90 per ounce.

We also have ﬂoating spot-price silver sales contracts
under which we are committed to deliver 7 million
ounces of silver over the next ten years at spot prices,
less an average ﬁxed-price adjustment of $2.53 per
ounce. These ﬂoating spot-price contracts were previ-
ously 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 18 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 during 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 2016 in most cases).

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

Barrick Financial Report 2006

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 obligations under the
MTAs 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 $8.3 billion at
year end. The MTAs exclude unrealized mark-to-
market valuations in the calculation of consoli-
dated 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
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 represent an immediate economic obligation
for payment by us. Our obligations under the gold for-
ward sales contracts are to deliver an agreed upon
quantity of gold at a contracted price by the termina-
tion date of the contracts (currently 2016 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 delivery of
gold and silver under the contracts.

Fair Value of Derivative Positions

As at December 31, 2006
($ millions)

Corporate Gold Sales Contracts
Project Gold Sales Contracts
Floating Spot-Price Gold Sales Contracts
Silver Sales Contracts
Floating Spot-Price Silver Sales Contracts
Foreign currency contracts
Interest rate and gold lease contracts
Fuel contracts
Gold positions offset but not ﬁnancially settled1
Copper contracts

Total

Unrealized
Gain/(Loss)

(387)
(3,187)
(260)
(82)
(18)
176
49
29
(160)
81

$ (3,759)

1. These are acquired Placer Dome contracts which have been economically off-
set, but not yet settled. Upon settlement, there will be a cash impact of
approximately negative $160 million, but no material impact on earnings as
the contract values were captured as part of the fair value of assets and liabil-
ities recorded upon acquisition of Placer Dome.

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 uti-
lize determine how we report our ﬁnancial condition
and results of operations, and they may require man-
agement to make estimates or rely on assumptions
about matters that are inherently uncertain.

Our ﬁnancial condition and results of operations
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 dif-
ferent 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 appropriate manner in which to
record and report our ﬁnancial condition and results
of operations.

Barrick Financial Report 2006

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

Accounting Policy Changes in 2006
This section includes a discussion of accounting
changes that were adopted in our 2006 Financial
Statements. On January 1, 2006, we adopted FASB
Interpretation No. 47, Accounting for Conditional
Asset Retirement Obligations (“FIN 47”). The adop-
tion of FIN 47 did not have a material effect on our
Financial Statements, and therefore a detailed discus-
sion of this accounting change has not been included.

FAS 123R, Share-Based Payment (“FAS 123R”)
On January 1, 2006, we adopted FAS 123R, which
includes in its scope our stock options, Restricted
Share Units (“RSUs”) and Deferred Share Units
(“DSUs”). Prior to January 1, 2006, 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 over
the exercise price. Historically, the exercise price for
stock options equaled the market price of stock at
the grant date, resulting in no compensation cost.
FAS 123R requires us to expense the fair value of
share-based payment awards over the vesting term.
We adopted FAS 123R using the modiﬁed prospective
method and our Financial Statements for periods
prior to adoption, including the 2005 comparative
Financial Statements, have not been restated. Total
stock option expense recorded in 2006 was $27 mil-
lion. Historically, we have recorded compensation
expense for RSUs and DSUs based on their fair values,
and the adoption of FAS 123R had no signiﬁcant
impact on accounting for RSUs and DSUs.

In September 2006, the SEC released a letter on
accounting for stock options. The letter addresses the
determination of the grant date and measurement date
for stock option awards. For Barrick, the stock option
grant date is the date when the details of the award,
including the number of options granted by individual
and the exercise price, are approved. The application of
the principles in the letter issued by the SEC did not
change the date that has been historically determined
as the measurement date for stock option grants.

For stock option grants issued after September 30,
2005 we used the Lattice valuation model to deter-
mine fair value. The most signiﬁcant assumptions
involving judgment that affect a stock option’s value
under the Lattice model include, but are not limited
to: expected volatility, expected term and expected
exercise behavior of option holders.

In ﬁrst quarter 2006, we assumed the outstanding
fully-vested Placer Dome stock options. These stock
options are exercisable into an equivalent number of
Barrick shares based on the exchange ratio under the
acquisition of Placer Dome. The estimated fair value
of these stock options of $22 million was recorded as
part of the cost of acquisition.

FAS 151, Inventory Costs (“FAS 151”)
On January 1, 2006, we adopted FAS 151. Under FAS 151,
abnormal amounts of idle facility expense, freight, han-
dling costs and wasted materials are recognized as cur-
rent period charges rather than capitalized to inventory.
FAS 151 also requires that the allocation of ﬁxed pro-
duction overhead to the cost of inventory be based on
the normal capacity of production facilities. FAS 151 is
applicable prospectively from January 1, 2006 and we
have modiﬁed our inventory accounting policy consis-
tent with its requirements. Under our modiﬁed
accounting policy for inventory, production-type costs
that are abnormal are excluded from inventory and
charged directly to cost of sales. Interruptions to nor-
mal activity levels at a mine could occur for a variety of
reasons, including equipment failures and major main-
tenance activities, strikes, power supply interruptions
and adverse weather conditions. When such interrup-
tions occur we evaluate the impact on the cost of inven-
tory produced in the period and, to the extent the
actual cost exceeds the cost based on normal capacity,
we expense any excess directly to cost of sales. The
adoption of FAS 151 did not have a signiﬁcant impact
on our Financial Statements in 2006.

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

Barrick Financial Report 2006

FAS 158, Employers’ Accounting for Deﬁned
Beneﬁt Pension and Other Post-retirement Plans
(“FAS 158”)
In September 2006, the FASB issued FAS 158 that will
require employers to fully recognize the obligations
associated with single-employer deﬁned beneﬁt pen-
sion, retiree healthcare and other post-retirement plans
in their ﬁnancial statements.

FAS 158 requires an employer to:
a) Recognize in its balance sheet an asset for a plan’s
overfunded status or a liability for the plan’s under-
funded status.

b) Recognize as a component of other compre-
hensive income, the existing unrecognized net
gains or losses, unrecognized prior service costs or
credits and unrecognized net transition assets or
obligations.

c) Measure deﬁned beneﬁt plan assets and obligations
as of the date of the employer’s ﬁscal year-end
balance sheet (with limited exceptions).

The requirement to recognize the funded status of a
beneﬁt plan and the related disclosure requirements
noted in a) and b) above are effective as of the end of
the ﬁscal year ending after December 15, 2006. We have
adopted these provisions effective December 31, 2006.
The requirement to measure the plan assets and beneﬁt
obligations as of the date of the employer’s ﬁscal year-
end mentioned in c) above is effective for ﬁscal years
ending after December 15, 2008. The incremental effect
of adopting FAS 158 is disclosed in note 26 to the
Financial Statements.

Staff Accounting Bulletin No. 108 – Considering
the effects of Prior Year Misstatements when
Quantifying Misstatements in Current Year
Financial Statements (“SAB 108”)
In September 2006, the SEC issued SAB 108. SAB 108
addresses the multiple methods used to quantify ﬁnan-
cial statement misstatements and evaluate the accumu-
lation of misstatements. SAB 108 requires registrants
to evaluate prior period misstatements using both a
balance sheet approach (“iron curtain method”) and
an income statement approach (“rollover method”).
SAB 108 is effective for interim and annual periods

ending after November 15, 2006. SAB 108 allows a
one-time transitional cumulative effect adjustment to
retained earnings as of January 1, 2006 for errors that
were previously deemed not material, but would be
material under the requirements of SAB 108. We have
historically used the rollover method in quantifying
potential ﬁnancial statement misstatements. As
required by SAB 108, we re-evaluated prior period
immaterial misstatements using the iron curtain
method. Based upon the result of our evaluation, we
did not identify any material errors or misstatements
that were previously deemed not material under the
rollover approach. Going forward, we will apply both
methods in quantifying potential ﬁnancial statement
errors and misstatements, as required by SAB 108.

Future Accounting Policy Changes
This section includes a discussion of future account-
ing changes that may have a signiﬁcant impact on our
Financial Statements.

FASB Interpretation No. 48, Accounting for
Uncertainty in Income Taxes – an interpretation
of FASB Statement No. 109 (“FIN 48”)
In June 2006, the FASB issued FIN 48. The interpre-
tation 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 contingency accounting
or a probability threshold.

Under the interpretation, an entity should presume
that a taxing authority will examine all tax positions
with full knowledge of all relevant information. There-
fore, when evaluating a tax position for recognition and
measurement, consideration of the risk of examination
is not appropriate. In applying the provisions of the
interpretation, there will be distinct recognition and
measurement evaluations. The ﬁrst step is to evaluate
the tax position for recognition by determining if the
weight of available evidence indicates it is more likely
than not, based solely on the technical merits, that the
position will be sustained on audit, including resolu-
tion of related appeals or litigation processes, if any.
The second step is to measure the appropriate amount
of the beneﬁt to recognize. The amount of beneﬁt to

Barrick Financial Report 2006

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

recognize will be measured as the maximum amount
which is more likely than not to be realized. The tax
position should be de-recognized in the ﬁrst period
when it is no longer more likely than not of being sus-
tained. On subsequent recognition and measurement,
the maximum amount which is more likely than not to
be recognized at each reporting date will represent
management’s best estimate given the information
available at the reporting date, even though the out-
come of the tax position is not absolute or ﬁnal. Sub-
sequent recognition, de-recognition, and measurement
should be based on new information. A liability for
interest or penalties or both will be recognized as
deemed to be incurred based on the provisions of the
tax law, that is, the period for which the taxing author-
ity will begin assessing the interest or penalties or both.
The amount of interest expense recognized will be
based on the difference between the amount recog-
nized in accordance with this interpretation and
the beneﬁt recognized in the tax return. Under this
interpretation, an entity will disclose its policy on
the classiﬁcation of interest and penalties and also
disclose the reconciliation of the total amounts of
unrecognized tax beneﬁts at the beginning to the
end of each period. On transition, the change in net
assets due to applying the provisions of the ﬁnal inter-
pretation will be considered a change in accounting
principle with the cumulative effect of the change
treated as an offsetting adjustment to the opening
balance of retained earnings in the period of transition.
The interpretation is effective by the beginning of the
ﬁrst annual period beginning after December 15,
2006. We are presently evaluating the impact of this
interpretation on our Financial Statements.

FAS 157 Fair Value Measurements (“FAS 157”)
In September 2006, the FASB issued FAS 157 which
provides enhanced guidance for using fair value to
measure assets and liabilities. FAS 157 is meant to
remedy the diversity and inconsistency within gener-
ally accepted accounting principles in measuring fair
value. FAS 157 applies whenever other standards
require (or permit) assets or liabilities to be measured
at fair value. FAS 157 does not expand the use of fair
value in any new circumstances.

FAS 157 expands disclosure about the use of fair
value to measure assets and liabilities in interim
and annual periods subsequent to initial recognition.
The disclosures focus on the inputs used to measure
fair value and for recurring fair value measurements
using signiﬁcant unobservable inputs, the effect
of measurement on earnings (or changes in net assets)
for the period must be disclosed. FAS 157 is effective
for ﬁnancial statements issued for ﬁscal years begin-
ning after November 15, 2007, and interim periods
within those ﬁscal years. Early adoption is permitted.
We are currently assessing the impact on our Financial
Statements.

FSP No. AUG AIR-1 – Accounting for Planned
Major Maintenance Activities (“FSP AIR-1”)
In September 2006, the FASB issued FSP AIR-1 which
amends guidance from the AICPA Industry Audit
Guide, Audits of Airlines with respect to planned
major maintenance activities and makes this guidance
applicable to entities in all industries. Of the three
methods of accounting for planned major mainte-
nance allowed by FSP AIR-1, we have chosen the built-
in overhaul method. The built-in overhaul method is
based on segregation of plant and equipment costs
into those that should be depreciated over the useful
life of the asset and those that require overhaul at peri-
odic intervals. Thus, the estimated cost of the overhaul
component included in the purchase price is set up
separately from the cost of the asset and is amortized
to the date of the initial overhaul. The cost of the ini-
tial overhaul is then capitalized and amortized to the
next overhaul, at which time the process is repeated.

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

Barrick Financial Report 2006

FSP AIR-1 is effective for the ﬁrst ﬁscal year begin-
ning after December 15, 2006. The provisions shall
also be applied retrospectively for all ﬁnancial state-
ments presented unless it is impractical to do so. The
provisions of FSP AIR-1 will be applied beginning
January 1, 2007. We are in the process of determining
the effect, if any, that adoption of this FSP will have on
prior periods.

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; or
there is a reasonable likelihood that materially differ-
ent amounts could be reported under different condi-
tions 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 measurement of amorti-
zation is quantities of proven and probable gold and
copper reserves, because we amortize a large portion
of property, plant and equipment using the units-of-
production method. The estimation of quantities of
gold and copper reserves, in accordance with the prin-
ciples in Industry Guide No. 7, issued by the US
Securities and Exchange Commission (“SEC”) is com-
plex, requiring signiﬁcant subjective assumptions 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 numer-
ous factors, including new information 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 and copper pro duction could dif fer from
expected gold and copper production based on
reserves, and an adverse change in gold or copper
prices could make a reserve uneconomic to mine.
Variations could also occur in actual ore grades and
gold, silver and copper recovery rates from estimates.
A key trend that could reasonably impact reserve
estimates is rising market mineral prices, because the
mineral price assumption is closely related to the trail-
ing three-year average market price. As this assump-
tion 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 mineral price assumption used
to measure reserves has also been rising. The gold
price assumption was $475 per ounce in 2006 (2005:
$400 per ounce; 2004: $375 per ounce). The copper
price assumption was $1.50 ($1.75 at Osborne) per
pound in 2006.

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 amortiza-
tion is spread over a shorter time period. Also, amorti-
zation expense is more signiﬁcantly impacted by
changes in reserve estimates at underground 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 mineral price assumptions and changes
in production costs. Production costs at under-
ground mines are impacted by factors such as dilu-
tion, which can signiﬁcantly impact mining and
processing costs per ounce.

Barrick Financial Report 2006

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

Impact of Historic Changes in Reserve Estimates on Amortization

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

North America
South America
Australia Paciﬁc
Africa

Total

2006

2005

Reserves
increase
(decrease)1

Amortization
increase
(decrease)

Reserves
increase
(decrease)1

Amortization
increase
(decrease)

1.7
0.1
0.6
3.0

5.4

$ (6)
(35)
(16)
(18)

$ (75)

2.4
0.3
0.2
0.1

3.0

$ (3)
(22)
(3)
–

$ (28)

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 con-
dition and near term prospects of the investee, includ-
ing 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 earn-
ings. In 2006, we reviewed two investments that were
impaired, and after concluding that the impairments
were other-than-temporary, we recorded a pre-tax
impairment charge of $6 million (2005: $16 million;
2004: $5 million).

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 devel-
opment project for recoverability 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 impair-
ment 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 or pounds of
copper 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 or
copper 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 undiscounted expected
future cash ﬂows are less than the carrying amount.
We generally 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 consis-
tent with the period of expected cash ﬂows.

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

Barrick Financial Report 2006

Expected future cash ﬂows are inherently uncer-
tain and could materially change over time. They are
signiﬁcantly affected by reserve estimates, together
with economic factors such as gold, copper and silver
prices, other commodity and consumable costs and
currency exchange rates, estimates of costs to produce
reserves and future regional capital. If a signiﬁcant
adverse change in the market gold price, or the mar-
ket copper price, occurred that caused us to revise the
price assumptions downwards, the conclusions on the
impairment tests could change, subject to the effect of
changes in other factors and assumptions. The assess-
ment and measurement of impairment excludes the
impact of derivatives designated in a cash ﬂow hedge
relationship for future cash ﬂows arising from operat-
ing 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 discounted net cash ﬂows and fair value can
be substantial. Therefore, although the value of a mine
may decline gradually over multiple reporting peri-
ods, 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 determina-
tion of when to record an impairment charge can be
very subjective. We make this determination using
available evidence taking into account current expec-
tations for each mining property.

For acquired exploration-stage properties, the pur-
chase price is capitalized, but post-acquisition explo-
ration 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 complete for large
properties. We monitor the results of exploration activ-
ity 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 mar-
ket for exploration properties, and because it is not
possible to use discounted cash ﬂow techniques due to
the very limited information that is available to accu-
rately model future cash ﬂows. In general, if an impair-
ment occurs at an exploration-stage property, it would

probably have minimal value and most of the acquisi-
tion cost may have to be written down. Impairment
charges are recorded in other income/expense and
impact earnings in the year they are recorded. Prospec-
tively, 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, we con-
cluded that the project was not impaired. On comple-
tion of the impairment test for Eskay Creek, we
conclude d that the mine was impaire d, and we
recorded a pre-tax impairment charge of $58 million.
On completion of the exploration program for 2005
and updating assessments of future plans, we con-
cluded that a group of Peruvian exploration-stage
properties were impaired at the end of 2004 and we
recorded a pre-tax impairment charge of $67 million.
Throughout 2006, we updated our impairment assess-
ments for the Eskay Creek mine and Cowal project
and we concluded that they were not impaired at
the end of 2006. In 2006, the carrying amount of
Cuerpo Sur, an extension of Pierina, was tested for
impairment on completion of the annual life of mine
planning process. An impairment charge of $17 mil-
lion was recorded.

Impairment Assessments of Goodwill
Goodwill represents the excess of the purchase price of
an acquire d busine s s over the fair value of the
identiﬁable assets acquired and liabilities assumed. We
test for impairment of goodwill on an annual basis and
at any other time if events occur or circumstances
change that would indicate that it is more likely than
not that the fair value of the reporting unit has been
reduced below its carrying amount. Circumstances that
could trigger an impairment test include: a signiﬁcant
adverse change in the business climate or legal factors;
an adverse action or assessment by a regulator; unan-
ticipated competition; the loss of key personnel; change
in reportable segments; the likelihood that a reporting

Barrick Financial Report 2006

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

unit or signiﬁcant portion of a reporting unit will be
sold or otherwise disposed of; adverse results of test-
ing for recoverability of a signiﬁcant asset group within
a reporting unit; and the recognition of a goodwill
impairment loss in the ﬁnancial statements of a sub-
sidiary that is a component of a reporting unit. The
impairment test for goodwill is a two-step process.
Step one consists of a comparison of the fair value of a
reporting unit with its carrying amount, including the
goodwill allocated to the reporting unit. Measurement
of the fair value of a reporting unit is based on one or
more fair value measures including present value tech-
niques of estimated future cash ﬂows and estimated
amounts at which the unit as a whole could be bought
or sold in a current transaction between willing par-
ties. We also consider comparable market capitaliza-
tion rates for each reporting unit as of the date of the
impairment test. If the carrying amount of the report-
ing unit exceeds the fair value, step two requires the
fair value of the reporting unit to be allocated to the
underlying assets and liabilities of that reporting
unit, resulting in an implied fair value of goodwill.
If the carrying amount of the reporting unit goodwill
exceeds the implied fair value of that goodwill, an
impairment loss equal to the excess is recorded in net
earnings (loss).

At December 31, 2006, the carrying value of good-
will was approximately $5.9 billion. Goodwill arose in
connection with our January 2006 acquisition of Placer
Dome. The determination of reporting units and allo-
cation of goodwill to those reporting units is not yet
complete. For the initial impairment test in fourth
quarter 2006, we considered the impact of allocating
goodwill to individual mines and to aggregations of
mines within regional business units. On completion of
this goodwill impairment test, we concluded that there
was no impairment of goodwill in 2006.

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 construction
project, such as the complexity of a plant or its loca-
tion. We consider various relevant criteria to assess
when the mine is substantially complete and ready for
its intended use and moved into production 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 minerals in saleable form

(within speciﬁcations)

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

In 2005, we determined the start date for three new
mines: Tulawaka, Lagunas Norte and Veladero. In
2006, we determined the start date for Cowal. When a
mine construction project moves into the production
stage, the capitalization of certain mine construction
costs ceases and costs are either capitalized to inven-
tory or expensed, except for capitalizable costs related
to proper ty, plant and equipment additions or
improvements, underground 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 mining prop-
erties. 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 correspon-
ding 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.

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

Barrick Financial Report 2006

The fair values of AROs are measured by discount-
ing 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 circum-
stances, 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 operations; and any instances of
non-compliance with laws or regulations that result in
ﬁnes or injunctions or delays in projects, or any unfore-
seen environmental contamination at, or related to, our
mining properties could result in us suffering signiﬁ-
cant costs. We mitigate these risks through environ-
mental and health and safety programs under which we
monitor compliance with laws and regulations and take
steps to reduce the risk of environmental contamina-
tion occurring. We maintain insurance for some envi-
ronmental 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 corresponding change in the life of mine
plan; changing ore characteristics that ultimately
impact the environment; changes in water quality that
impact the extent of water treatment required; and
changes in laws and regulations governing the protec-
tion of the environment. In general, as the end of the
mine life nears, the reliability of expected cash ﬂows
increases, but earlier in the mine life, the estimation of
an ARO is inherently more subjective. Signiﬁcant judg-
ments 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 assess-
ment 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 exte nt of wate r tre at me nt, c an 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 assump-
tions and the lower end of the range can be signiﬁcant,
and consequently 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 concluded 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 2006, we recorded increases in ARO estimates of
$73 million (2005 $91 million: 2004: $68 million) of
which $27 million of this increase (2005: $47 million;
2004: $14 million) related to new AROs at development
projects and mines that commenced production dur-
ing 2006. A $7 million reduction (2005: $29 million
increase; 2004: $32 million increase) relates to updates
of the assessment of the extent of water treatment and
other assumptions at our operating mines. We recorded
increases in AROs of $53 million at our closed mines,
which were charged to earnings (2005: $15 million;
2004: $22 million).

AROs at December 31, 2006

($ millions)

Operating mines
Closed mines
Development projects

Total

$ 683
200
10

$ 893

Barrick Financial Report 2006

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

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 reg-
ulations are either unclear or subject to varying inter-
pretations, 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 liabilities, 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 and copper 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 valu-
ation allowances has been rising gold and copper
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 2006, we released $25 million of valuation
allowances in the United States due to the estimated
effect of higher market gold prices on the ability
to utilize deferred tax assets. We released $9 million
of valuation allowances in a Chilean entity due to
the availability of income. We released valuation
allowances of $19 million in Canada reﬂecting utiliza-
tion of capital losses.

In 2005, we released valuation allowances totaling
$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 pro-
duction at Veladero in 2005. We released valuation
allowances totaling $5 million in 2004 as a conse-
quence of an election to consolidate our Australian
operations into one tax group.

Valuation allowances at December 31

($ millions)

United States
Chile
Argentina
Canada
Tanzania
Australia
Other

Total

2006

2005

$ 211
110
46
59
217
2
13

$ 209
124
46
63
204
2
8

$ 658

$ 656

United States: most of the valuation allowances relate
to 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 production 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.

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

Barrick Financial Report 2006

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.

Cautionary Statement on
Forward-Looking Information

Certain information contained or incorporated by
reference in this 2006 MD&A, including any informa-
tion as to our future ﬁnancial or operating perfor-
mance, constitutes “forward-looking statements”. All
statements, other than statements of historical fact, are
forward-looking statements. The words “believe”,
“expect”, “anticipate”, “contemplate”, “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 competitive uncertainties and contingencies.
Known and unknown factors could cause actual results
to differ materially from those projected in the for-
ward-looking statements. Such factors include, but are
not limited to: ﬂuctuations in the currency markets
(such as Canadian and Australian dollars, South
African rand, Chilean peso and Papua New Guinean
kina versus US dollar); ﬂuctuations in the spot and for-
ward price of gold and copper or certain other com-
modities (such as silver, diesel fuel and electricity);
changes in US dollar interest rates or gold lease rates
that could impact the mark-to-market value of out-
standing derivative instruments and ongoing pay-
ments/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, regula-
tions and political or economic developments in
Canada, the United States, Dominican Republic,
Australia, Papua New Guinea, Chile, Peru, Argentina,
South Africa, Tanzania, Russia, Pakistan or Barbados or
other countries in which we do or may carry on busi-
ness in the future; business opportunities that may be
presented to, or pursued by, us; our ability to success-
fully integrate acquisitions; operating or technical
difﬁculties in connection with mining or development
activities; employee relations; litigation; the speculative
nature of exploration and development, including
the risks of obtaining necessary licenses and permits;
diminishing quantities or grades of reserves; adverse
changes in our credit rating; and contests over title to
properties, particularly title to undeveloped properties.
In addition, there are risks and hazards associated with
the business of exploration, development and mining,
including environmental hazards, industrial accidents,
unusual or unexpected formations, pressures, cave-ins,
ﬂooding and gold bullion or copper cathode losses
(and the risk of inadequate insurance, or inability to
obtain insurance, to cover these risks). Many of these
uncertainties and contingencies can affect our actual
results and could cause actual results to differ materi-
ally 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 2006
MD&A 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 Financial Report 2006

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

GLOSSARY OF TECHNICAL TERMS

DRILLING:

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

Core: drilling with a hollow bit with a diamond cutting
rim to produce a cylindrical core that is used for geo-
logical study and assays. Used in mineral exploration.

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 con-
taining the valuable ore mineral from which most of
the waste mineral has been eliminated.

In-fill: any method of drilling intervals between exist-
ing holes, used to provide greater geological detail and
to help establish reserve estimates.

EXPLORATION: Prospecting, sampling, mapping, dia-
mond-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.

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

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

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 ref-
erence 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, drifting
and raising. In an open pit mine, development
includes the removal of overburden.

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

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

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

Recovered grade: actual metal content of ore deter-
mined 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.

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

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

Barrick Financial Report 2006

MINERAL RESERVE: See page 128 – “Gold Mineral
Reserves and Mineral Resources.”

MINERAL RESOURCE: See page 128 – “Gold Mineral
Reserves and Mineral Resources.”

MINING CLAIM: That portion of applicable mineral
lands that a party has staked or marked out in accor-
dance 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.

RECLAMATION: The process by which lands disturbed
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 physically
recovered in the processing of ore. It is generally stated
as a percentage of the material recovered compared to
the total material originally present.

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

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

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.

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 econom-
ically and technically recoverable precious metals have
been removed from the ore.

Barrick Financial Report 2006

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

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, 2007

68 (cid:1) Management’s Responsibility

Barrick Financial Report 2006

Management’s Report on Internal
Control Over Financial Reporting

Barrick’s management is responsible for establishing and maintaining adequate internal control over ﬁnancial reporting.

Barrick’s management assessed the effectiveness of the Company’s internal control over ﬁnancial reporting as of December 31,
2006. Barrick’s management used the Committee of Sponsoring Organizations of the Treadway Commission (COSO) frame-
work to evaluate the effectiveness of Barrick’s internal control over ﬁnancial reporting. Based on that evaluation, Barrick’s
management concluded that the Company’s internal control over ﬁnancial reporting was effective as of December 31, 2006.

Based on Barrick management’s assessment, there were no material weaknesses in Barrick’s internal control over ﬁnancial

reporting as of December 31, 2006.

Barrick acquired control of Placer Dome Inc. (“Placer Dome”) in January 2006. Barrick’s management excluded the mines
sites and the development projects of the former Placer Dome (the “Placer Dome Operations”) from its assessment of the effec-
tiveness of Barrick’s internal control over ﬁnancial reporting. The Placer Dome Operations represent approximately
$6.2 billion of the total assets and approximately $2.4 billion of the total revenue of Barrick’s consolidated ﬁnancial statement
amounts as at December 31, 2006.

PricewaterhouseCoopers LLP, independent auditors, who have audited and issued a report on the consolidated ﬁnancial
statements of Barrick for the year ended December 31, 2006, have also issued an attestation report on Barrick management’s
assessment of Barrick’s internal control over ﬁnancial reporting. This attestation report is located on pages 70–72 of Barrick’s
Financial Report 2006.

Barrick Financial Report 2006

Management’s Report on Internal Control Over Financial Reporting (cid:1) 69

Independent
Auditors’ Report

Independent Auditors’ Report

To the Shareholders of
Barrick Gold Corporation

We have completed an integrated audit of the consolidated ﬁnancial statements and internal control over ﬁnancial reporting
of Barrick Gold Corporation (the “Company”) as of December 31, 2006 and audits of its 2005 and 2004 consolidated ﬁnancial
statements. Our opinions, based on our audits, are presented below.

Consolidated ﬁnancial statements
We have audited the accompanying consolidated balance sheets of Barrick Gold Corporation as of December 31, 2006 and
2005, and the related consolidated statements of income, cash ﬂow, shareholders’ equity and comprehensive income for each
of the three years in the period ended December 31, 2006. 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 audit of the Company’s ﬁnancial statements as of December 31, 2006 and for the year then ended in
accordance with Canadian generally accepted auditing standards and the standards of the Public Company Accounting
Oversight Board (United States). We conducted our audits of the Company’s ﬁnancial statements as of December 31, 2005 and
December 31, 2004 and for each of the two years in the period ended 31 December, 2005 in accordance with Canadian gener-
ally accepted auditing standards. Those standards require that we plan and perform an audit to obtain reasonable assurance
about whether the ﬁnancial statements are free of material misstatement. An audit of ﬁnancial statements includes examining,
on a test basis, evidence supporting the amounts and disclosures in the ﬁnancial statements. A ﬁnancial statement audit also
includes assessing the accounting principles used and signiﬁcant estimates made by management, and evaluating the overall
ﬁnancial statement presentation.

In our opinion, the consolidated ﬁnancial statements referred to above present fairly, in all material respects, the ﬁnancial
position of the Company as of December 31, 2006 and 2005 and the results of its operations and its cash ﬂows for each of the
three years in the period ended December 31, 2006 in accordance with accounting principles generally accepted in the United
States of America.

70 (cid:1) Independent Auditors’ Report

Barrick Financial Report 2006

Internal control over ﬁnancial reporting
We have also audited management’s assessment, included in Management’s Report on Internal Control over Financial
Reporting appearing on page 69 of Barrick’s Financial Report 2006, that the Company maintained effective internal control
over ﬁnancial reporting as of December 31, 2006, based on criteria established in Internal Control – Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is
responsible for maintaining effective internal control over ﬁnancial reporting and for its assessment of the effectiveness of
internal control over ﬁnancial reporting. Our responsibility is to express opinions on management’s assessment and on the
effectiveness of the Company’s internal control over ﬁnancial reporting based on our audit.

We conducted our audit of internal control over ﬁnancial reporting in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control over ﬁnancial reporting was maintained in all material respects.
An audit of internal control over ﬁnancial reporting includes obtaining an understanding of internal control over ﬁnancial
reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal con-
trol, and performing such other procedures as we consider necessary in the circumstances. We believe that our audit provides
a reasonable basis for our opinions.

A company’s internal control over ﬁnancial reporting is a process designed to provide reasonable assurance regarding the
reliability of ﬁnancial reporting and the preparation of ﬁnancial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over ﬁnancial reporting includes those policies and procedures
that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reﬂect the transactions and dispo-
sitions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of ﬁnancial statements in accordance with generally accepted accounting principles, and that receipts and expen-
ditures of the company are being made only in accordance with authorizations of management and directors of the company;
and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition
of the company’s assets that could have a material effect on the ﬁnancial statements.

Because of its inherent limitations, internal control over ﬁnancial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inade-
quate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

As described in Management’s Report on Internal Control over Financial Reporting, management has excluded the mine
sites and development projects of the former Placer Dome Inc. (the “Placer Dome Operations”) from its assessment of inter-
nal control over ﬁnancial reporting as of December 31, 2006 because Placer Dome Inc. was acquired by the Company in a pur-
chase business combination during 2006. We have also excluded the Placer Dome Operations from our audit of internal
control over ﬁnancial reporting. These excluded Placer Dome Operations represent total assets and total revenues of $6.2 bil-
lion and $2.4 billion, respectively, of the related consolidated ﬁnancial statement amounts of Barrick Gold Corporation as of
and for the year ended December 31, 2006.

In our opinion, management’s assessment that the Company maintained effective internal control over ﬁnancial report-
ing as of December 31, 2006 is fairly stated, in all material respects, based on criteria established in Internal Control –
Integrated Framework issued by the COSO. Furthermore, in our opinion, the Company maintained, in all material respects,
effective internal control over ﬁnancial reporting as of December 31, 2006 based on criteria established in Internal Control –
Integrated Framework issued by the COSO.

Chartered Accountants
Toronto, Canada
February 21, 2007

Barrick Financial Report 2006

Independent Auditors’ Report (cid:1) 71

Comments by Auditors 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 2e to these consolidated ﬁnancial statements. Our report to the
shareholders dated February 21, 2007 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, 2007

72 (cid:1) Independent Auditors’ Report

Barrick Financial Report 2006

Consolidated
Statements of Income

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

Sales (notes 4 and 5)

Costs and expenses
Cost of sales1 (note 6)
Amortization (note 4)
Corporate administration
Exploration (note 4)
Project development expense
Other operating expenses (note 7a)
Impairment of long-lived assets (note 7b)

Interest income
Interest expense (note 19b)
Other income (note 7c)
Other expense (note 7d)

Income from continuing operations before income taxes and other items
Income tax (expense) recovery (note 8)
Non-controlling interests
Equity in investees (note 11)

Income from continuing operations
Discontinued operations (note 3b)

Income from discontinued operations
Income taxes

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

Net income for the year

Earnings per share data (note 9)
Income from continuing operations

Basic
Diluted
Net income
Basic
Diluted

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

2006

2005

2004

$ 5,636

$ 2,350

$ 1,932

2,736
735
142
171
119
124
17

4,044

101
(126)
89
(96)

(32)

1,560
(348)
1
(4)

1,209

297
–

1,506
–

$ 1,506

$
$

1.44
1.42

1.79
1.77

$
$

1,214
427
71
109
32
59
–

1,912

38
(7)
49
(56)

462
(60)
(1)
(6)

395

–
–

395
6

401

0.74
0.73

0.75
0.75

1,047
452
71
96
45
47
139

1,897

25
(19)
49
(47)

43
203
2
–

248

–
–

248
–

248

0.47
0.46

$
$

Barrick Financial Report 2006

Financial Statements (cid:1) 73

Consolidated
Statements of Cash Flow

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

2006

2005

2004

Operating Activities
Net income
Amortization (note 4)
Deferred income taxes (notes 8 and 22)
Hedge losses on acquired gold hedge position (note 19c)
Income from discontinued operations (note 3b)
Other items (note 10a)

Net cash provided by operating activities

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

Acquisition of Placer Dome, net of cash acquired of $1,102 (note 3a)
Other acquisitions, net of cash acquired of $8 million (note 3c)
Acquisition of equity method investments (note 11)
Available-for-sale securities (note 11)

Purchases
Sales

Other investing activities

$ 1,506
735
(109)
165
(297)
122

2,122

(1,087)
8
(160)
(47)
(125)

(245)
46
17

401
427
(30)
–
–
(72)

726

(1,104)
8
–
–
(58)

(31)
10
(5)

248
452
(225)
–
–
34

509

(824)
43
–
–
(40)

(7)
9
(2)

Net cash used in investing activities

(1,593)

(1,180)

(821)

Financing Activities
Capital stock

Proceeds on exercise of stock options
Dividends (note 23a)
Repurchased for cash (note 23a)

Long-term debt (note 19b)

Proceeds
Repayments

Settlement of acquired derivative instrument liabilities (note 19c)
Other ﬁnancing activities

Net cash (used in) provided by ﬁnancing activities

Cash Flows of Discontinued Operations (note 3b)

Operating activities
Investing activities – proceeds on sale
Other investing activities
Financing activities

Effect of exchange rate changes on cash and equivalents

Net increase (decrease) in cash and equivalents
Cash and equivalents at beginning of year (note 19a)

74
(191)
–

2,189
(1,581)
(1,840)
2

(1,347)

29
2,850
(62)
11

2,828

(4)

2,006
1,037

92
(118)
–

179
(59)
–
(1)

–
–
–
–

–

49
(118)
(95)

973
(41)
–
(28)

740

–
–
–
–

–

(361)
1,398

428
970

Cash and equivalents at end of year (note 19a)

$ 3,043

$ 1,037

$ 1,398

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

74 (cid:1) Financial Statements

Barrick Financial Report 2006

Consolidated
Balance Sheets

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

Assets
Current assets

Cash and equivalents (note 19a)
Accounts receivable (note 13)
Inventories (note 12)
Other current assets (note 13)

Non-current assets

Available-for-sale securities (note 11)
Equity method investments (note 11)
Property, plant and equipment (note 14)
Intangible assets (note 15)
Goodwill (note 16)
Other assets (note 17)

Total assets

Liabilities and Shareholders’ Equity
Current liabilities

Accounts payable
Short-term debt (note 19b)
Other current liabilities (note 18)

Non-current liabilities

Long-term debt (note 19b)
Asset retirement obligations (note 20)
Deferred income tax liabilities (note 22)
Other liabilities (note 21)

Total liabilities

Non-controlling interests

Shareholders’ equity
Capital stock (note 23)
Retained earnings (deﬁcit)
Accumulated other comprehensive income (loss) (note 24)

Total shareholders’ equity

Contingencies and commitments (notes 14 and 27)

Total liabilities and shareholders’ equity

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

Signed on behalf of the Board,

2006

2005

$ 3,043
234
931
588

$ 1,037
54
402
255

4,796

646
327
8,335
75
5,855
1,339

1,748

62
138
4,146
–
–
768

$ 21,373

$ 6,862

686
863
303

1,852

3,244
843
798
436

7,173

13,106
974
119

14,199

386
80
94

560

1,721
409
114
208

3,012

–

4,222
(341)
(31)

3,850

$ 21,373

$ 6,862

Gregory C. Wilkins, Director

Steven J. Shapiro, Director

Barrick Financial Report 2006

Financial Statements (cid:1) 75

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 25a)
Issued on acquisition of Placer Dome
Repurchased (note 23a)

At December 31

Common shares
At January 1

Issued on exercise of stock options (note 25a)
Issued on acquisition of Placer Dome (note 3a)
Repurchased (note 23a)
Options issued on acquisition of Placer Dome (note 3a)
Recognition of stock option expense (note 25a)

At December 31

Retained earnings (deﬁcit)
At January 1

Net income
Dividends (note 23a)
Adjustment on repurchase of common shares (note 23a)

At December 31

Accumulated other comprehensive income (loss) (note 24)

2006

2005

2004

538
3
323
–

864

534
4
–
–

538

535
3
–
(4)

534

$ 4,222
74
8,761
–
22
27

$ 4,129
93
–
–
–
–

$ 4,115
49
–
(35)
–
–

13,106

4,222

4,129

(341)
1,506
(191)
–

974

119

(624)
401
(118)
–

(341)

(31)

(694)
248
(118)
(60)

(624)

Total shareholders’ equity at December 31

$ 14,199

$ 3,850

$ 3,574

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 24)

Comprehensive income

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

2006

$ 1,506
150

$ 1,656

2005

401
(100)

301

2004

248
9

257

76 (cid:1) Financial Statements

Barrick Financial Report 2006

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
ZAR are to Canadian dollars, Australian dollars, and South African Rands respectively.

1 (cid:1) Nature of Operations

Barrick Gold Corporation (“Barrick” or the “Company”)
principally engages in the production and sale of gold,
as well as related activities such as exploration and mine
development. In 2006, we acquired Placer Dome Inc. (see
note 3a), which resulted in a substantial increase in the scale
of our mining operations. We also produce some copper
and hold interests in a platinum group metals development
project and a nickel development project, both located in
Africa and a platinum project located in Russia. Our min-
ing operations are concentrated in our four regional busi-
ness units: North America, South America, Africa and
Australia Paciﬁc. We sell our gold and copper production
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”). In 2006, we amended the classiﬁcation of certain
expense items on the face of our income statement to pro-
vide enhanced disclosure of signiﬁcant business activities
and reﬂect the increasing signiﬁcance of amounts spent on
those activities. Previously exploration expense and project
development expenses were grouped as a single line item.
In 2006, we began to present these items separately to enable
the amounts spent and trends in each type of expense to be
more easily identiﬁed. Also in 2006, we began to present
overheads incurred at our regional business units as a sepa-
rate line item under “other operating expenses” to provide
increased visibility of the amounts incurred. Previously these
expenses were included in “other expense” and not separa-
tely identiﬁed. To ensure comparability of ﬁnancial informa-
tion, prior-year amounts have been reclassified to conform
with the current year presentation.

b) Consolidation
These consolidated ﬁnancial statements include the accounts
of Barrick Gold Corporation and those entities we have the
ability to control either through voting rights or means
other than voting rights. For incorporated joint ventures
where we have the ability to control the joint venture,
subject in some cases to protective rights held by our joint
venture partners, we consolidate the joint venture and
record a non-controlling interest for the interest held by our
joint venture partner. In 2006 we ﬁnalized a joint venture
agreement for the Pueblo Viejo project, which is held
through an incorporated joint venture. Under the terms of
the joint venture agreement, we have the ability to control
the operating, investing and ﬁnancing decisions and there-
fore we consolidate this joint venture.

FIN 46R provides guidance on the identiﬁcation and
reporting of entities controlled through means other than
voting rights and deﬁnes such entities as variable interest
entities (“VIEs”). We apply this guidance to all entities,
including those in the development stage, except for unin-
corporated joint ventures, which are outside the scope of
FIN 46R. The principal entity that is a VIE is the entity that
owns the Reko Diq project. Neither ourselves nor the other
owners are the primary beneﬁciary for ﬁnancial reporting
purposes and we use the equity method of accounting for
our interest in this entity (note 11).

For unincorporated joint ventures under which we
hold an undivided interest in the assets and liabilities of the
joint venture, we include our interest in the assets and lia-
bilities in our ﬁnancial statements. Through the acquisition
of Placer Dome in 2006 we acquired interests in the Cortez,
Donlin Creek, Turquoise Ridge and Porgera mines which
are held through unincorporated joint ventures under
which we hold an undivided interest in the revenues,
expenses, assets and liabilities. For further information refer
to note 28.

Barrick Financial Report 2006

Notes to Consolidated Financial Statements (cid:1) 77

The Donlin Creek property is being explored and
developed under a Mining Venture Agreement that is
between NovaGold and Barrick entered into in November
2002. Under the terms of the agreement, we currently hold
a 30% interest in the project with the right to increase that
interest to 70% by satisfying the following conditions on or
before November 12, 2007: (1) funding of $32 million of
exploration and development expenditures on the project;
(2) delivering a feasibility study to NovaGold; and (3)
obtaining the approval of our Board of Directors to con-
struct a mine on the property. At the end of March 2006, we
had satisfied the funding condition. We are currently taking
the steps necessary to complete the feasibility study. We
record our 70% share of project expenditures each period,
together with an account receivable for Nova Gold’s share
of those of expenditures. Under a shareholders agreement,
Calista Corporation has the right to acquire a 5% to 15%
interest in the Donlin Creek project by paying a correspond-
ing percentage of capitalized costs within 90 days of receipt
of a completed feasibility study.

c) Foreign Currency Translation
The functional currency of all our operations is the US dol-
lar. 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, which are trans-
lated using the same historical rate as the associated
non-monetary assets and liabilities.

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 and copper
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; amounts of contingencies; and the
fair value of acquired assets and liabilities including pre-
acquisition contingencies. 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 measurement

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;
(cid:1) the amount of income tax expense;
(cid:1) allocations of the purchase price in business

combinations to assets and liabilities acquired; and

(cid:1) the valuation of reporting units used in the initial
allocation of goodwill and subsequent goodwill
impairment tests.

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

Signiﬁcant Changes in Estimates
Gold and Copper Mineral Reserves
At the end of each ﬁscal year, as part of our annual business
cycle, we prepare estimates of proven and probable gold and
copper mineral reserves for each mineral property. We pro-
spectively 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 on
amortization expense for 2006 was a decrease of $75 million
(2005: $28 million decrease; 2004: $15 million decrease).

Asset Retirement Obligations (AROs)
Each quarter we update cost estimates, and other assump-
tions used in the valuation of AROs, for AROs at each of
our mineral properties to reﬂect new events, changes in cir-
cumstances and any new information that is available.
Changes in these cost estimates and assumptions have a
corresponding impact on the fair value of the ARO. For
closed mines any change in the fair value of AROs results in
a corresponding charge or credit within other expense.
A charge of $53 million was recorded in 2006 for changes
in cost estimates for AROs at closed mines (2005: $15 mil-
lion expense; 2004: $22 million expense). For further details
see note 20.

78 (cid:1) Notes to Consolidated Financial Statements

Barrick Financial Report 2006

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

Placer Dome Purchase Price Allocation
In fourth quarter 2006, we ﬁnalized the valuations of assets
and liabilities acquired on the acquisition of Placer Dome.
In the ﬁnal purchase price allocation, the signiﬁcant
changes from the preliminary allocation were an increase in
the value of property, plant and equipment by $2,104 mil-
lion; recognition of intangible assets with a value of
$85 million; an increase in asset retirement obligations by
$215 million; and an increase in net deferred income tax
liabilities by $574 million. Goodwill arising in the ﬁnal
purchase price allocation amounted to $6,506 million. In
fourth quarter 2006, we prospectively revised the measure-
ment of amortization to reﬂect the ﬁnal values of property,
plant and equipment and intangible assets. We recorded an
increase in amortization expense in fourth quarter 2006 of
$30 million for property, plant and equipment and $10 mil-
lion for intangible assets. We also revised the measurement
of interest capitalized for fourth quarter 2006 to reﬂect ﬁnal
valuations of acquired qualifying assets that resulted in an
increase in interest capitalized by $14 million.

e) Accounting Changes
EITF 04-6 Accounting for Stripping Costs Incurred
During Production in the Mining Industry
In 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 amorti-
zation of the capitalized costs as a component of the cost of
inventory produced each period. Under EITF 04-6, strip-
ping 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 2005,
the effect of adopting EITF 04-6 compared to the prior pol-
icy was an increase in net income of $44 million ($0.08 per
share), excluding the cumulative effect on prior periods.

FAS 123R, Accounting for Stock-Based Compensation
On January 1, 2006, we adopted FAS 123R. Prior to this date
we applied FAS 123 and accounted for stock options under
the intrinsic value method, recording compensation cost for
stock options as the excess of the market price of the stock
at the grant date of an award over the exercise price. Histori-
cally, the exercise price of stock options equaled the market
price of the stock at the grant date resulting in no recorded
compensation cost. We provided pro forma disclosure of the
effect of expensing the fair value of stock options.

In September 2006, the SEC released a letter on
accounting for stock options. The letter addresses the deter-
mination of the grant date and measurement date for stock
option awards. For Barrick, the stock option grant date is
the date when the details of the award, including the num-
ber of options granted by individual and the exercise price,
are approved. The application of the principles in the letter
issued by the SEC did not change the date that has been his-
torically determined as the measurement date for stock
option grants.

We adopted FAS 123R using the modiﬁed prospective
method, which meant that ﬁnancial statements for periods
prior to adoption were not restated. From January 1, 2006
we record compensation expense for all new stock option
grants based on the grant date fair value, amortized on a
straight-line basis over the vesting period. We also record
compensation expense for the unvested portion of stock
option grants occurring prior to January 1, 2006, based on
the grant date fair value that was previously estimated and
used to provide for pro forma disclosures for ﬁnancial state-
ment periods prior to 2006, amortized on a straight-line
basis over the remaining vesting period for those unvested
stock options.

Compensation expense for stock options was $27 mil-
lion in 2006, and is presented as a component of cost of
sales, corporate administration and other expense, consis-
tent with the classiﬁcation of other elements of compensa-
tion expense for those employees who had stock options.
The recognition of compensation expense for stock options
reduced earnings per share for 2006 by $0.03 per share. The
application of FAS 123R to Restricted Share Units (RSUs)
and Deferred Share Units (DSUs) did not result in any
signiﬁcant change in the method of accounting for RSUs or
DSUs. See note 25 for further information on stock-based
compensation.

Barrick Financial Report 2006

Notes to Consolidated Financial Statements (cid:1) 79

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 exist-
ing 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 issu-
ing FAS 151. As historically 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 inventory. 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 was applicable prospectively from January 1,
2006 and we modiﬁed our inventory accounting policy con-
sistent with its requirements. Under our modiﬁed account-
ing policy for inventory, production-type costs that are
abnormal are excluded from inventory and charged directly
to the cost of sales. Interruptions to normal activity levels
at a mine could occur for a variety of reasons including
equipment failures and major maintenance activities,
strikes, power supply interruptions and adverse weather
conditions. When such interruptions occur we evaluate the
impact on the cost of inventory produced in the period, and
to the extent the actual cost exceeds the cost based on nor-
mal capacity we expense any excess directly to cost of sales.
The adoption of FAS 151 did not have any signiﬁcant effect
on our ﬁnancial statements.

FAS 158, Employers’ Accounting for Deﬁned Beneﬁt
Pension and Other Post-retirement Plans
In September 2006, the FASB issued FAS 158 that requires
employers to fully recognize the obligations associated with
single-employer deﬁned beneﬁt pension, retiree health care
and other post-retirement plans in their ﬁnancial state-
ments. FAS 158 was developed to respond to concerns that
past accounting standards needed to be revisited to improve
the transparency and usefulness of the information
reported about them. Under past accounting standards, the
funded status of an employer’s post-retirement beneﬁt plan
(i.e., the difference between the plan assets and obligations)
was not always completely reported in the balance sheet.
Employers reported an asset or liability that almost always
differed from the plan’s funded status because previous
accounting standards allowed employers to delay recogni-
tion of certain changes in plan assets and obligations that
affected the costs of providing such beneﬁts. Past standards
only required an employer to disclose the complete funded
status of its plans in the notes to the ﬁnancial statements.

FAS 158 requires recognition of the funded status of a
beneﬁt plan on the balance sheet – measured as the differ-
ence between plan assets at fair value (with limited excep-
tions) and the beneﬁt obligation, as at the ﬁscal year-end.
For a pension plan, the beneﬁt obligation is the projected
beneﬁt obligation; for any other post-retirement beneﬁt
plan, such as a retiree health care plan, the beneﬁt obliga-
tion is the accumulated post-retirement beneﬁt obligation.
FAS 158 also requires recognition, as a component of other
comprehensive income, net of tax, of the gains or losses and
prior service costs or credits that arise during the period
but are not recorded as components of net periodic beneﬁt
cost. Amounts recorded in accumulated other comprehen-
sive income are adjusted as they are subsequently recorded
as components of net periodic cost. FAS 158 requires dis-
closure of information about certain effects of net periodic
beneﬁt cost for the next ﬁscal year that arise from delayed
recognition of the gains or losses, prior service costs or
credits, and transition asset or obligation.

We adopted the provisions of FAS 158 in 2006, as
required, except for the requirement to measure the plan
assets and beneﬁt obligations at the ﬁscal year-end, which
is effective in ﬁscal years ending after December 15, 2008.
The adoption of FAS 158 did not signiﬁcantly impact our
ﬁnancial statements, and is disclosed in note 26.

80 (cid:1) Notes to Consolidated Financial Statements

Barrick Financial Report 2006

SEC Staff Accounting Bulletin No. 108 –
Considering the Effects of Prior Year Misstatements
when Quantifying Misstatements in Current Year
Financial Statements (SAB 108)
In September 2006, the SEC issued SAB 108. SAB 108
addresses the multiple methods used to quantify ﬁnancial
statement misstatements and evaluate the accumulation of
misstatements on the balance sheet. SAB 108 requires reg-
istrants to evaluate prior period misstatements using both
a balance sheet approach (“the iron curtain method”) and
an income statement approach (“the rollover method”).
SAB 108 is effective for interim and annual periods ending
after November 15, 2006. SAB 108 allows a one-time transi-
tional cumulative effect adjustment to retained earnings as
of January 1, 2006 for errors that were previously deemed
not material, but would be material under the requirements
of SAB 108. Barrick has historically used the rollover
method in quantifying potential ﬁnancial statement mis-
statements. As required by SAB 108, we re-evaluated prior
period immaterial errors using the iron curtain method.
Based upon the result of our evaluation, we did not identify
any material errors or misstatements that were previously
deemed not material under the rollover approach. Going
forward, we will be applying both methods in quantifying
potential ﬁnancial statement errors and misstatements, as
required by SAB 108.

f) Accounting Developments
FASB Interpretation No. 48 – Accounting for
Uncertainty in Tax Positions (FIN 48)
In June 2006, the FASB issued FIN 48 – Accounting for
Uncertainty in Income Taxes, 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 uncer-
tain tax positions as they are ﬁled on the income tax return,
while others use either gain contingency accounting or
a probability threshold.

Under FIN 48, an entity should presume that a taxing
authority will examine all tax positions with full knowledge
of all relevant information. Therefore, when evaluating a tax

position for recognition and measurement, consideration
of the risk of examination is not appropriate. In applying
the provisions of FIN 48, there are distinct recognition and
measurement evaluations. The ﬁrst step is to evaluate the
tax position for recognition by determining if the weight of
available evidence indicates it is more likely than not, based
solely on the technical merits, that the position will be sus-
tained on audit, including resolution of related appeals or
litigation processes, if any. The second step is to measure
the appropriate amount of the beneﬁt to recognize. The
amount of beneﬁt to recognize will be measured as the
maximum amount which is more likely than not to be real-
ized. The tax position should be de-recognized in the ﬁrst
period when it is no longer more likely than not of being
sustained. On subsequent recognition and measurement,
the maximum amount which is more likely than not to be
recognized at each reporting date will represent manage-
ment’s best estimate given the information available at the
reporting date, even though the outcome of the tax position
is not absolute or ﬁnal. Subsequent recognition, de-recog-
nition, and measurement should be based on new informa-
tion. A liability for interest or penalties or both will be
recognized as deemed to be incurred based on the provi-
sions of the tax law, that is, the period for which the taxing
authority will begin assessing the interest or penalties or
both. The amount of interest expense recognized will be
based on the difference between the amount recognized in
accordance with this interpretation and the beneﬁt recog-
nized in the tax return.

Under FIN 48, an entity must disclose its policy on the
classiﬁcation of interest and penalties and also disclose a
reconciliation of the total amounts of unrecognized tax
beneﬁts at the beginning and the end of each period. On
transition, the change in net assets due to applying the pro-
visions of the interpretation will be considered a change in
accounting principle with the cumulative effect of the
change treated as an offsetting adjustment to the opening
balance of retained earnings in the period of transition. The
interpretation is effective beginning January 1, 2007. We are
presently evaluating the impact of this interpretation on our
ﬁnancial statements.

Barrick Financial Report 2006

Notes to Consolidated Financial Statements (cid:1) 81

FAS 157, Fair Value Measurements
In September 2006, the FASB issued FAS 157 that provides
enhanced guidance for using fair value to measure assets
and liabilities. FAS 157 is meant to ensure that the measure-
ment of fair value is more comparable and consistent, and
improve disclosure about fair value measures. As a result of
FAS 157 there is now a common deﬁnition of fair value to
be used throughout US GAAP. FAS 157 applies whenever
US GAAP requires (or permits) measurement of assets or
liabilities at fair value. FAS 157 does not address when the
use of fair value measurements is required.

FAS 157 deﬁnes fair value as “the price that would be
received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the mea-
surement date.” This deﬁnition of fair value retains the
exchange-price notion contained (either explicitly or implic-
itly) in many earlier US GAAP deﬁnitions of fair value.
However, FAS 157 clariﬁes that the basis for a fair value
measure is the price at which a company would sell or other-
wise dispose of its assets or pay to settle a liability (i.e., an
exit price), not the market price at which a company acquires
its assets or assumes a liability (i.e., not an entry price). The
exit price concept is based on current expectations about the
future inﬂows associated with the asset and the future
outﬂows associated with the liability from the perspective of
market participants. Under FAS 157, a fair value measure
should reﬂect all of the assumptions that market participants
would use in pricing the asset or liability including, for
example, an adjustment for risk inherent in a particular val-
uation technique used to measure fair value.

In measuring fair value for a ﬁnancial statement item,
FAS 157 gives the highest priority to quoted prices in active
markets. However, FAS 157 also permits the use of unob-
servable inputs for situations in which there is little, if any,
market activity for the asset or liability being measured.
Whether there is signiﬁcant market activity or not, the
objective is a market-based measure, rather than an entity-
speciﬁc measure. FAS 157 also provides guidance on the
effect of changes in credit risk on a fair value measure;
investment blocks; and restricted securities.

FAS 157 expands disclosure about the use of fair value
to measure assets and liabilities. FAS 157 requires disclo-
sures intended to provide information about (1) the extent
to which companies measure assets and liabilities at fair
value, (2) the methods and assumptions used to measure
fair value, and (3) the effect of fair value measures on earn-
ings. FAS 157 is effective for ﬁnancial statements issued for
ﬁscal years beginning after November 15, 2007. Early adop-
tion is permitted. We are currently assessing the impact of
FAS 157 on our ﬁnancial statements.

FSP AUG AIR-1 – Accounting for Planned Major
Maintenance Activities (FSP Air-1)
In September 2006, the FASB issued FSP AIR-1 which
amends guidance from the AICPA Industry Audit Guide,
Audits of Airlines (“Airline Guide”) with respect to planned
major maintenance activities and makes this guidance
applicable to entities in all industries. Of the three methods
of accounting for planned major maintenance allowed by
FSP AIR-1, we plan to use the built-in overhaul method.
The built-in overhaul method is based on segregation of
plant and equipment costs into those that should be depre-
ciated over the useful life of the asset and those that require
overhaul at periodic intervals. Thus, the estimated cost of
the overhaul component included in the purchase price of
an asset is set up separately from the cost of the asset and is
amortized to the date of the initial overhaul. The cost of the
initial overhaul is then capitalized and amortized to the
next overhaul, at which time the process is repeated.

FSP AIR-1 is effective for the ﬁrst ﬁscal year beginning
after December 15, 2006. The provisions are applied retro-
spectively for all ﬁnancial statements presented unless it is
impractical to do so. We intend to apply the provisions of
FSP AIR-1 beginning January 1, 2007. We are in the process
of determining the effect that adoption of this FSP will have
on prior periods.

82 (cid:1) Notes to Consolidated Financial Statements

Barrick Financial Report 2006

g) Other Signiﬁcant Accounting Policies

Note

Page

Acquisitions and divestitures
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
Inventories
Accounts receivable, and other current assets
Property, plant and equipment
Intangible assets
Goodwill
Other assets
Other current liabilities
Financial instruments
Asset retirement obligations
Other non-current liabilities
Deferred income taxes
Capital stock
Other comprehensive income (loss)
Stock-based compensation
Post-retirement beneﬁts
Litigation and claims
Unincorporated joint ventures

3 (cid:1) Acquisitions and Divestitures

3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28

83
88
90
92
92
94
96
97
97
100
101
102
104
104
105
105
105
115
116
116
117
118
119
121
125
127

a) Acquisition of Placer Dome Inc. (“Placer Dome”)
Placer Dome Offer and Acceptance
In ﬁrst quarter 2006 we acquired 100% of the outstanding
common shares of Placer Dome. Placer Dome was one of
the world’s largest gold mining companies. It had 12 min-
ing operations based in North America, South America,
Africa and Australia/Papua New Guinea, as well as four
projects that are in various stages of exploration/develop-
ment. Its most signiﬁcant mines were Cortez in the United
States, Zaldívar in Chile, Porgera in Papua 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. The business combination between
ourselves and Placer Dome was an opportunity to create a
Canadian-based leader in the global gold mining industry,
which strengthens our competitive position, including in
respect of gold reserves, gold production, growth opportu-
nities, and balance sheet strength.

Accounting for the Placer Dome Acquisition
The Placer Dome acquisition has been accounted for
as a purchase business combination, with Barrick as the
accounting acquirer. We acquired Placer Dome on Janu-
ary 20, 2006, with the results of operations of Placer Dome
consolidated from January 20, 2006 onwards. The purchase
cost was $10 billion and was funded through a combination
of common shares issued, the drawdown of a $1 billion
credit facility, and cash resources.

Value of 322.8 million Barrick common shares

issued at $27.14 per share1

Value of 2.7 million fully vested stock options
Cash
Transaction costs

$ 8,761
22
1,239
32

$10,054

1. The measurement of the common share component of the purchase consid-
eration represents the average closing price on the New York Stock Exchange
for the two days prior to and two days after the public announcement on
December 22, 2005 of our final offer for Placer Dome.

In accordance with the purchase method of accounting, the
purchase cost was allocated to the underlying assets
acquired and liabilities assumed based primarily upon their
estimated fair values at the date of acquisition. The esti-
mated fair values were based on a combination of inde-
pendent appraisals and internal estimates. We concluded
that the excess of purchase cost over the net identiﬁable tan-
gible and intangible assets acquired represents goodwill.
Goodwill arising on the acquisition of Placer Dome princi-
pally represents the ability for the company to continue as
a going concern by ﬁnding new mineral reserves as well as
the value of synergies that we expect to realize as a direct
consequence of the acquisition of Placer Dome.

Barrick Financial Report 2006

Notes to Consolidated Financial Statements (cid:1) 83

The principal valuation methods for major classes of assets
and liabilities were:

Inventory

Building and
equipment

Proven and probable
reserves and value
beyond proven and
probable reserves at
producing mines

Development projects

Exploration properties

Intangible assets

Finished goods and work in process
valued at estimated selling prices less
disposal costs, costs to complete and a
reasonable proﬁt allowance for the
completing and selling effort.

Reproduction and/or replacement cost or
market value for current function and
service potential, adjusted for physical,
functional and economic obsolescence.

Multi-period excess earnings approach
considering the prospective level of cash
ﬂows and fair value of other assets at
each mine.

Discounted future cash ﬂows considering
the prospective level of cash ﬂows from
future operations and necessary capital
cost expenditures.

Appraised values considering costs incurred,
earn-in agreements and comparable
market transactions, where applicable.

Value based on potential cost savings,
price differential, discounted future cash
ﬂows, or comparable market transactions,
as applicable.

Long-term debt and
derivative instruments

Estimated fair values consistent with the
methods disclosed in note 19d.

Asset retirement
obligations

Estimated fair values consistent with the
methods disclosed in note 20.

Summary Purchase Price Allocation

Cash
Inventories
Other current assets
Property, plant and equipment

Buildings, plant and equipment
Proven and probable reserves
Value beyond proven and probable reserves

Intangible assets (note 15)
Assets of discontinued operations1
Other assets
Goodwill

Total assets

Current liabilities
Liabilities of discontinued operations1
Derivative instrument liabilities
Long-term debt
Asset retirement obligations
Deferred income tax liabilities

Total liabilities

Non-controlling interests

Net assets acquired

1. Includes operations that were sold to Goldcorp.

Severance Costs

Amounts recorded at acquisition
Settlements in 2006

Amounts outstanding at December 31, 2006

$ 1,102
428
198

2,946
1,571
419
85
1,744
347
6,506

15,346

669
107
1,729
1,252
387
686

4,830

462

$ 10,054

$ 48
45

$ 3

At acquisition we recorded liabilities totaling $48 million
that primarily relate to employee severance at Placer Dome
ofﬁces that were closed during the year. We expect to pay all
the outstanding amounts by second quarter 2007.

84 (cid:1) Notes to Consolidated Financial Statements

Barrick Financial Report 2006

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
Project development expense
Other operating expenses
Impairment of long-lived assets

Interest income
Interest expense
Other income
Other expense

Income from continuing operations

before income taxes and
other items

Income tax (expense) recovery
Non-controlling interests
Equity in investees

Income before cumulative
effect of changes in
accounting principles
Cumulative effect of changes
in accounting principles

As reported

Barrick

Placer Dome

$ 2,350

$ 1,978

Pro forma
purchase
adjustments1

1,214
427
71
109
32
59
–

1,912

38
(7)
49
(56)

462
(60)
(1)
(6)

395

1,271
264
68
91
81
6
–

1,781

39
(92)
44
(79)

(88)

109
(21)
2
4

(14)

131

(a)

131

5
1

(b)
(c)

(d)

(104)
(8)

(e)

(112)

Pro forma
consolidated
Barrick before
sale of certain
operations to
Goldcorp and
Gold Fields

$ 4,328

2,485
822
139
200
113
65
–

3,824

82
(98)
93
(114)

(37)

467
(89)
1
(2)

377

(8)

Pro forma
adjustments for
sale of certain
operations to
Goldcorp and
Gold Fields2

(f)

(f)
(f)

(f)

(352)

(265)
(50)

(28)

(343)

(2)

(f)

(2)

(11)
4

(4)

(11)

(g)

(f)

Pro forma
consolidated
Barrick

$ 3,976

2,220
772
139
172
113
65
–

3,481

82
(98)
91
(114)

(39)

456
(85)
1
(6)

366

(8)

Net income for the year

$ 401

$ 80

$ (112)

$ 369

$ (11)

$ 358

Earnings per share data:
Net income

Basic and diluted

$ 0.75

$ 0.18

$ 0.42

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 and Gold Fields.
3. Exclusive of amortization.

Barrick Financial Report 2006

Notes to Consolidated Financial Statements (cid:1) 85

Basis of Presentation
This unaudited pro forma consolidated ﬁnancial statement
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 consolidated statement
information assumes that Barrick acquired Placer Dome
effective January 1, 2005. In conjunction with the offer to
acquire Placer Dome, Barrick entered into an agreement
with Goldcorp Inc. (“Goldcorp”) for the sale of certain opera-
tions and projects of Placer Dome. This unaudited pro forma
consolidated ﬁnancial statement information assumes that
sale of these operations to Goldcorp occurred on January 1,
2005. Pro forma adjustments for the assumed effect of the
sale of these operations to Goldcorp on the results of opera-
tions of Barrick have been reﬂected in this unaudited pro
forma consolidated ﬁnancial statement information. Pro
forma adjustments also reﬂect the sale of the South Deep
mine in South Africa to Gold Fields Limited (“Gold Fields”),
had the sale occurred on January 1, 2005 (note 3b).

The unaudited pro forma consolidated ﬁnancial state-
ment 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. 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.

Pro Forma Assumptions and Adjustments
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. The
principal purchase accounting adjustments relate to amor-
tization, income taxes and interest expense, that have been
adjusted to the accounting base recognized for each in
the business combination.

Pro Forma Adjustments
The unaudited pro forma consolidated statement of
income reﬂects the following adjustments as if the acquisi-
tion of 100% of Placer Dome and subsequent sale of cer-
tain operations to Goldcorp and Gold Fields had occurred
on January 1, 2005:
(a) An increase in amortization expense by $131 million
to reﬂect the value assigned to property, plant and
equipment and intangible assets in the purchase price
allocation.

(b) An increase in interest income by $5 million for the
year ended December 31, 2005 to reﬂect interest
income earned on cash proceeds generated by the
assumed exercise of Placer Dome stock options.
(c) 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 was 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.

(d) A decrease in other expense by $21 million to de-rec-
ognize non-recurring transaction costs recorded by
Placer Dome relating to the Barrick offer.

(e) A debit to tax expense of $8 million for the year ended
December 31, 2005 to reﬂect the tax effect of the pro
forma purchase adjustments in (a) through (d).

(f) Adjustments to de-recognize the revenues and ex-
penses for the year ended December 31, 2005 relating
to the Placer Dome operations that were sold to
Goldcorp and Gold Fields.

(g) Adjustments to de-recognize income tax expense for
the operations that were sold to Goldcorp and Gold
Fields 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 and Gold Fields.

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

Pro forma earnings per share – diluted

536

323

859

$ 358

$ 0.42

859
2

861

$ 0.42

86 (cid:1) Notes to Consolidated Financial Statements

Barrick Financial Report 2006

b) Discontinued Operations

Results of Discontinued Operations

For the years ended December 31

2006

2005

Gold sales

South Deep operations
Operations sold to Goldcorp

Income (loss) before tax

South Deep1
Gain on sale of South Deep
Operations sold to Goldcorp

$ 158
83

$ 241

8
288
1

$ –
–

$ –

–

$ 297

$ –

1. Amounts are disclosed net of non-controlling interests of $24 million.

South Deep
On December 1, 2006, we sold our 50% interest in the
South Deep mine in South Africa to Gold Fields. Gold
Fields is responsible for all liabilities relating solely to the
assets of the mine, including employment commitments
and environmental, closure and reclamation liabilities. The
consideration on closing was $1,517 million, of which
$1,209 million was received in cash and $308 million
in Gold Fields shares. On closing we recorded a gain of
$288 million, representing the consideration received less
transaction costs and the carrying amount of net assets of
South Deep, including goodwill relating to South Deep of
$651 million.

The results of the operations of South Deep in 2006 are
presented under “discontinued operations” in the income
statement and cash ﬂow statement. As required by account-
ing rules applicable to discontinued operations, amortiza-
tion of property, plant and equipment at South Deep ceased
on September 1, 2006, the date when they were classiﬁed as
held for sale, and we allocated interest expense of $2 mil-
lion to these discontinued operations.

In second quarter 2006, a loaded skip and 6.7 kilome-
ters of rope fell 1.6 kilometers down the South Deep mine’s
Twin Shaft complex during routine maintenance, causing
extensive damage but no injuries. Repair costs for assets
that were damaged were expensed as incurred. We were
insured for property damage and a portion of business
interruption losses. Insurance recoveries of $12 million
(based on our 50% interest in South Deep) were recorded
within income from discontinued operations for the period
to December 1, 2006.

Operations Sold to Goldcorp
In second quarter 2006, we sold all of Placer Dome’s
Canadian properties and operations (other than Placer
Dome’s ofﬁce in Vancouver), 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, cer-
tain related assets and, our share in Agua de la Falda S.A.,
which included our interest in the Jeronimo project, to
Goldcorp Inc. (“Goldcorp”) (collectively, the ‘‘Operations
sold to Goldcorp’’). Goldcorp is responsible for all liabili-
ties relating solely to these properties and operations,
including employment commitments and environmental,
closure and reclamation liabilities.

The sales proceeds for the operations sold to Goldcorp
were $1,641 million. The aggregate net amount of assets and
liabilities of these operations were recorded in the purchase
price allocation at $1,641 million based on the terms of a
sale agreement with Goldcorp that was in place at the time
we acquired Placer Dome. The results of the operations sold
to Goldcorp were included under “discontinued opera-
tions” in the income statement and cash ﬂow statement
until closing. Interest expense of $21 million was allocated
to the results from the operations sold to Goldcorp. No gain
or loss arose on closing of the sale.

c) Acquisition of Pioneer Metals Inc. (“Pioneer”)
In 2006, we acquired control of Pioneer through the acqui-
sition of 59.2 million shares, representing approximately
91% of the outstanding shares of Pioneer. Total cash consid-
eration paid was $53 million. Pioneer has a portfolio of
exploration properties and interests, including the Grace
property which is adjacent to NovaGold Resources Inc.’s
Galore Creek project. This transaction represents a pur-
chase of assets, and we allocated the purchase price to the
assets acquired.

d) Sale of Paddington Operations
In November 2006, we signed a sale agreement for the
Paddington operations in Australia, under which we will
receive cash proceeds of $39 million. The Paddington oper-
ations, which form part of the Kanowna mine acquired in
the acquisition of Placer Dome, consist of the Paddington
mill and certain land tenements in the area near the mill.
We expect the transaction to close in ﬁrst quarter 2007.

Barrick Financial Report 2006

Notes to Consolidated Financial Statements (cid:1) 87

4 (cid:1) Segment Information

In 2004, we adopted a regional business unit approach to
the management of our mining operations. Our operations
were organized geographically in the following regions:
North America, South America, Australia/Africa, and
Russia/Central Asia. Notwithstanding this management
structure we reported information on a mine by mine basis
to the Chief Operating Decision Maker, and therefore con-
cluded that our operating segments represented individual
mines and development projects. In 2006, upon completion
of the Placer Dome acquisition and integration of the
acquired Placer Dome mining operations, we created a sep-
arate Africa business unit distinct from Australia and added
the Porgera mine in Papua New Guinea to the Australia
business unit, at the same time renaming it Australia

Paciﬁc. We revised the format of information provided to
the Chief Operating Decision Maker to be consistent with
our regional business unit structure, distinguishing between
gold and copper mining operations. In ﬁrst quarter 2006,
we revised our operating segment disclosure to be consis-
tent with the internal management structure and reporting
format changes, with restatement of comparative informa-
tion to conform to the current period presentation. In
fourth quarter 2006 on closing of a transaction to vend-in
our Russian gold assets to Highland Gold (see note 11), we
concluded that we no longer had a Russia/Central Asia
operating segment and segment disclosures have been
revised to exclude Russia/Central Asia.

Income Statement Information

Sales

Segment expenses

Segment income (loss)1

For the years ended December 31

2006

2005

2004

2006

2005

2004

2006

2005

2004

Gold

North America
South America
Australia Paciﬁc
Africa
Copper

South America
Australia Paciﬁc

$ 1,806
1,110
1,160
409

$ 1,249
521
401
179

$ 1,140
251
406
135

$ 1,051 $ 695 $ 651
58
238
100

147
264
108

307
757
228

$ 513
676
228
98

$ 341
273
126
(13)

$ 250
86
123
1

967
184

–
–

283
110

–
–

635
57

–
–

$ 5,636

$ 2,350

$ 1,932

$ 2,736

$ 1,214

$ 1,047

$ 2,207

$ 727

$ 460

1. Segment income (loss) represents segment sales, less segment expense and segment amortization.

For the years ended December 31

2006

2005

2004

2006

2005

2004

Exploration1

Regional business unit costs1

North America
South America
Australia Paciﬁc
Africa
Other expense outside reportable segments

$ 64
22
44
22
19

$ 34
19
13
34
9

$ 30
20
17
23
6

$ 171

$ 109

$ 96

$ 30
19
38
1
–

$ 88

$ 14
6
16
–
–

$ 36

$ 16
1
7
–
–

$ 24

1. Exploration and regional business unit costs are excluded from the measure of segment income but are reported separately by operating segment to the Chief

Operating Decision Maker.

88 (cid:1) Notes to Consolidated Financial Statements

Barrick Financial Report 2006

Geographic Information

Reconciliation of Segment Income

Long-lived assets2

Sales1

For the years ended December 31

2006

2005

2004

Segment income
Amortization of corporate assets
Exploration
Project development expense
Corporate administration
Other operating expenses
Impairment of long-lived assets
Other income (expense)

Income from continuing operations

before income taxes and
other items

$ 2,207
(42)
(171)
(119)
(142)
(124)
(17)
(32)

$ 727
(18)
(109)
(32)
(71)
(59)
–
24

$ 460
(27)
(96)
(45)
(71)
(47)
(139)
8

$ 1,560

$ 462

For the years ended
December 31

North America

United States
Canada
Dominican
Republic
South America

Peru
Chile
Argentina
Australia Paciﬁc
Australia
Papua

New Guinea

Africa

Tanzania

Other

2006

2005

2006

2005

2004

$ 2,518
921

$ 1,431
313

$ 1,638
168

$ 1,073
176

$ 934
206

492
1,599
1,014

–

540
269
843

–

852
967
258

–

521
–
–

251
–
–

2,142

815

1,147

401

406

438

993
452

–

669
234

197

409
–

–

179
–

135
–

$ 10,647

$ 5,114

$ 5,636

$ 2,350

$ 1,932

1. Presented based on the location in which the sale originated.
2. Long-lived assets include property, plant and equipment, and other tangible

non-current assets.

Asset Information

Segment
long-lived assets

Amortization

Segment
capital expenditures

For the years ended December 31

2006

2005

2006

2005

2004

2006

2005

2004

Gold

North America
South America
Australia Paciﬁc
Africa
Copper

South America
Australia Paciﬁc

Segment total
Cash and equivalents
Accounts receivable, inventories,

other current assets

Intangible assets
Goodwill

Other items not allocated to segments

$ 3,517
1,829
2,142
993

$ 1,744
1,652
815
669

$ 242
127
175
83

$ 213
101
46
49

$ 239
107
45
34

$ 260
343
340
93

1,276
438

10,195
3,043

1,753
75
5,855

452

–
–

4,880
1,037

711
–
–

234

49
17

693
–

–
–
–

–
–

409
–

–
–
–

–
–

425
–

–
–
–

218
525
308
45

–
–

18
21

1,075
–

1,096
–

–
–
–

$ 104
509
110
94

–
–

817
–

–
–
–

Enterprise total

$ 21,373

$ 6,862

$ 735

$ 427

$ 452

$ 1,087

$ 1,104

$ 824

Barrick Financial Report 2006

Notes to Consolidated Financial Statements (cid:1) 89

5 (cid:1) Revenue and Gold Sales Contracts

For the years ended December 31

2006

2005

2004

Gold bullion sales1
Spot market sales
Gold sales contracts

Concentrate sales

Copper sales1
Copper cathode sales
Concentrate sales

$ 3,949
369

$ 1,940
300

$ 1,111
709

4,318
167

2,240
110

1,820
112

$ 4,485

$ 2,350

$ 1,932

$ 951
200

$ 1,151

–
–

–

–
–

–

1. Revenues include amounts transferred from OCI to earnings for commodity

cash flow hedges (see note 19c and 24).

Products
All of our gold mining operations produce gold in doré form,
except Eskay Creek, which produces gold concentrate and
gold ore; Bulyanhulu which produces both gold doré and
gold concentrate; and Osborne which produces a concentrate
that contains both gold and copper. Gold doré is unreﬁned
gold bullion bars usually consisting of 90% gold that is
reﬁned to pure gold bullion prior to sale to our customers.
Gold concentrate is a processing product containing the
valuable ore mineral (gold) from which most of the waste
mineral has been eliminated, that undergoes a smelting
process to convert it into gold bullion. Gold bullion is sold
primarily in the London spot market or under gold sales
contracts. Gold concentrate is sold to third-party smelters.
At our Zaldívar mine we produce pure copper cathode,
which consists of 99.9% copper, a form that is deliverable
for sale in world metals exchanges.

Accounting Policy
We record revenue when the following conditions are met:
persuasive evidence of an arrangement exists; delivery and
transfer of title (gold revenue only) have occurred under the
terms of the arrangement; the price is ﬁxed or deter-
minable; and collectability is reasonably assured. Revenue
is presented net of direct sales taxes of $16 million (2005:
$nil; 2004: $nil).

Gold 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 deliv-
ery 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.

Gold Sales Contracts
At December 31, 2006, we had ﬁxed-price gold sales
contracts with various customers for a total of 10.8 million
ounces of future gold production and ﬂoating spot price
gold sales contracts for a total of 1.2 million ounces. We had
allocated 9.5 million ounces of the ﬁxed-price gold sales
contracts to our development projects (“Project Gold Sales
Contracts”). In addition to the gold sales contracts allocated
to the development projects, we had 1.3 million ounces of
Corporate gold sales contracts that we intend to settle
through delivery of future gold production from our oper-
ating mines.

In 2007, in the period through February 21, 2007, we
delivered a total of 0.9 million ounces of our 2007 gold
production into ﬁxed-price Corporate Gold Sales Contracts
at an average price of $340 per ounce. In 2007, we also
converted 0.4 million ounces of ﬁxed-price Corporate Gold
Sales Contracts into ﬂoating spot price contracts, for a total
of 1.6 million ounces of ﬂoating spot price contracts,
whereby the price realized will represent spot less an aver-
age ﬁxed reduction of about $240 per ounce.

The terms of gold sales contracts are governed by mas-
ter trading agreements (MTAs) that we have in place with
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 mecha-
nisms. The ﬁxed-price mechanism represents the market
price at the start date (or previous interim date) of the con-
tract 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

90 (cid:1) Notes to Consolidated Financial Statements

Barrick Financial Report 2006

gold adjusted based on the difference between the previ-
ously ﬁxed price and the market gold price at that interim
date. The ﬁnal realized selling price under a contract prima-
rily 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.

Mark-to-Market Value

$ millions

Project Gold Sales Contracts
Corporate Gold Sales Contracts
Floating Spot Price Gold Sales Contracts

1. At a spot gold price of $632 per ounce.

Total
ounces in
millions

At Dec. 31,
2006
value1

9.5
1.3
1.2

$(3,187)
(387)
(260)

12.0

$(3,834)

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 generally
been lower than longer-term rates. We use gold lease rate
swaps to achieve a more economically optimal term struc-
ture 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 0.5 million ounces of gold
spread from 2007 to 2013. The swaps are associated with
ﬁxed-price gold sales contracts with expected delivery dates
beyond 2007. Lease rate swaps are classiﬁed as non-hedge
derivatives (note 19c) and had a positive fair value of
$64 million at December 31, 2006 (2005: $66 million).

Floating spot price sales contracts were previously
ﬁxed-price forward sales contracts for which, in accordance
with the terms of our MTAs, we have elected to receive ﬂoat-
ing spot gold and silver prices, adjusted based on the differ-
ence 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 con-
tracts. Furthermore, ﬂoating price mechanisms were elected
for these contracts 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,
2006) was negative $260 million, which equates to an aver-
age reduction to the future spot sales price of approximately
$221 per ounce, when we deliver gold at spot prices against
these contracts.

At December 31, 2006, one counterparty made up 12%

of the total ounces committed under gold sales contracts.

Concentrate Sales
Under the terms of concentrate sales contracts with inde-
pendent smelting companies, gold and copper 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 and copper
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 con-
tracts are caused by changes in market gold and copper
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 in accounts receivable is
between ten and ﬁfteen thousand ounces of gold and 4 and
7 million pounds of copper.

Copper Cathode Sales
Under the terms of copper cathode sales contracts, copper
prices are set on a speciﬁed future date based upon market
commodity prices plus certain price adjustments. Revenue
is recognized at the time of shipment when risk of loss
passes to the customer, and collectability is reasonably
assured. Revenue is measured using forward market prices
on the expected date that ﬁnal selling prices will be ﬁxed.
Variations occur between the price recorded on the date of
revenue recognition and the actual ﬁnal price under the
terms of the contracts due to changes in market copper
prices, which result in the existence of an embedded deriv-
ative in the accounts receivable. This 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
in accounts receivable is between 20 and 30 million pounds
of copper.

Barrick Financial Report 2006

Notes to Consolidated Financial Statements (cid:1) 91

6 (cid:1) Cost of Sales

For the years ended December 31

2006

2005

2004

2006

2005

2004

Gold

Copper

Cost of goods sold1
By-product revenues2
Royalty expense
Mining production taxes

$ 2,289
(123)
150
27

$ 1,265
(132)
63
18

$ 1,128
(146)
53
12

$ 2,343

$ 1,214

$1,047

$ 390
(1)
4
–

$ 393

$ –
–
–
–

$ –

$ –
–
–
–

$ –

1. Cost of goods sold includes accretion expense at producing mines of $31 million (2005: $11 million; 2004: $11 million). Cost of goods sold includes charges to
reduce the cost of inventory to net realizable value as follows: $28 million in 2006; $12 million in 2005 and $9 million in 2004. 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 $693 million in 2006; $409 million in 2005 and $425 million in 2004. 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, 2006, we had fixed-price commitments to deliver 13.1 million ounces of silver at an average price of $6.45 per ounce and floating
spot price silver sales contracts for 7.0 million ounces over periods primarily of up to 10 years. The mark-to-market on silver sales contracts at December 31, 2006 was
negative $100 million (2005: negative $52 million).

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, Bulyanhulu
and Veladero mines and the Pascua-Lama project. The pri-
mary type of royalty is a net smelter return (NSR) royalty.
Under this type of royalty we pay the holder an amount cal-
culated as the royalty percentage multiplied by the value of
gold production at market gold prices less third-party
smelting, reﬁning and transportation 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 roy-
alty 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 9.8%, 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, sil-
ver and other minerals. Production at Veladero is subject to
a 3.75% NSR on extraction of all gold, silver and other min-
erals. Production at Lagunas Norte is subject to a 2.51%
NSR on extraction of all gold and other minerals. Through
the acquisition of Placer Dome we assumed various royalty
obligations at the Placer Dome mines. All production at
Cortez is subject to a 1.5% gross smelter return (“GSR”)
royalty, with a further GSR royalty over the Pipeline/South
Pipeline deposit (graduating from 0.4% to 5.0% based on
the price of gold) and a net value royalty of 5% over a por-
tion of the Pipeline/South Pipeline deposit. Production at
the Pueblo Viejo project is subject to a 3.2% NSR from the
sale of minerals less costs incurred on mining extraction or

removal of minerals from the leased properties. Production
at Donlin Creek project is subject to a 1.5% net smelter roy-
alty for the ﬁrst ﬁve years, and a 4.5% net smelter royalty
thereafter. Production at the North Mara mine is subject to
an NSR-type royalty of 3% on extraction of all minerals,
and an additional 1.1% land tenement royalty for produc-
tion out of the Gokona pit that is payable to the Tanzanian
Revenue Authority. Production at the Porgera mine is sub-
ject to a 2% net smelter royalty payable to the National
Government Department of Mining, which then distributes
it to the Enga Provincial government, the Porgera District
Authority, and local landowners. Production in Queensland
and Western Australia is subject to a royalty ranging from
2.5% to 2.7% of gold revenues.

Royalty expense is recorded at the time of sale of gold
production, measured using the applicable royalty percent-
age for NSR royalties or estimates of NPI amounts.

7 (cid:1) Other (Income) Expense

a) Other Operating Expenses

For the years ended December 31

2006

2005

2004

Regional business unit costs1
Community development costs2
Environmental remediation costs
World Gold Council fees

$ 88
15
8
13

$ 36
–
13
10

$ 24
–
14
9

$ 124

$ 59

$ 47

1. Relates to costs incurred at regional business unit offices.
2. In 2006, we paid amounts relating to new community programs in Peru

and Tanzania.

92 (cid:1) Notes to Consolidated Financial Statements

Barrick Financial Report 2006

Environmental Remediation Costs
During the production phases of a mine, we incur and
expense the cost of various activities connected with envi-
ronmental aspects of normal operations, including compli-
ance with and monitoring of environmental regulations;
disposal of hazardous waste produced from normal opera-
tions; and operation of equipment designed to reduce or
eliminate environmental effects. In limited circumstances,
costs to acquire and install plant and equipment are capital-
ized 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 informa-
tion develops or if circumstances change. Recoveries of
environmental remediation costs from other parties are
recorded as assets when receipt is deemed probable.

b) Impairment of Long-lived Assets

For the years ended December 31

2006

2005

2004

Eskay Creek1
Peruvian exploration properties2,3
Other

$ –
17
–

$ 17

$ –
–
–

$ –

$ 58
67
14

$ 139

1. The asset group that comprises the Eskay Creek mine was tested for impair-
ment 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 14c.

2. In 2006, the carrying amount of Cuerpo Sur, an extension of Pierina, was
tested for impairment on completion of the annual life of mine planning
process. An impairment charge of $17 million was recorded to reduce the
carrying amount to the estimated fair value.

3. 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 explo-
ration 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.

c) Other Income

For the years ended December 31

2006

2005

2004

Non-hedge derivative gains (note 19d)
Gains on sale of assets1
Gains on sale of investments (note 11)
Gain on Kabanga transaction
Gain on vend-in to Highland

Gold (note 11)
Royalty income
Sale of water rights
Other

$ –
9
6
–

51
10
5
8

$ 6
5
17
15

–
6
–
–

$ 5
36
6
–

–
2
–
–

$ 89

$ 49

1. In 2006, we sold certain properties in Canada and Chile. 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.

Kabanga Transaction
In April 2005, we entered into a joint venture agreement
with Falconbridge Limited (“Falconbridge”) with respect
to the Kabanga nickel deposit and related concession
in Tanzania. In 2006, Xstrata Plc (“Xstrata”) acquired
Falconbridge. Xstrata is the operator of the joint venture
and the project is currently in the pre-feasibility study stage.
Kabanga, which is one of the largest undeveloped nickel
sulphide deposits in the world, is located in northwest
Tanzania. The property is approximately 385 kilometers
from Bulyanhulu and approximately 200 kilometers west of
Tulawaka and is accessible by a paved/gravel road. In 2006,
ongoing diamond drilling, exploration and other project
development engineering activities being managed by
Xstrata have been performed as part of a work plan to pre-
pare an updated resource model and scoping study. Xstrata
has recently completed the $50 million work plan that
was contemplated in the joint venture agreement. In
2007, Xstrata plans to prepare a pre-feasibility study. In
accordance with the joint venture agreement, Xstrata has
committed to spend an additional $95 million, which will
be used to fund the pre-feasibility study with funds remain-
ing for other subsequent activities. After the $95 million
spent by Xstrata, funding will be shared equally by Barrick
and Xstrata.

Barrick Financial Report 2006

Notes to Consolidated Financial Statements (cid:1) 93

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 concession, which affects
its tax basis. Under the valuation proposed by the Peruvian
tax agency, SUNAT, the tax basis of the Pierina mining con-
cession 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 resolu-
tion 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 was classiﬁed in cost of sales and
$6 million of which was 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 believe that the audit reassessment has no
merit, that we will prevail, and accordingly no provision has
been booked for this reassessment.

d) Other Expense

For the years ended December 31

2006

2005

2004

Changes in AROs at closed mines
Accretion expense at closed

mines (note 20)

Impairment charges on
investments (note 11)

Legal costs for major litigation
Placer Dome integration costs
Corporate transaction costs
Currency translation (gains) losses
Pension and other post-retirement

beneﬁt expense (notes 26b and 26e)1

Other items

$ 53

$ 15

$ 22

6
–
12
7
(2)

3
9

16
8
–
–
(3)

8
2

5
5
–
–
1

2
5

$ 96

$ 56

$ 47

1. For the year ended December 31, 2006, $4 million of pension credit
that relates to active employees at producing mines is included in cost of
sales (2005: $nil), and $2 million is included in corporate administration
(2005: $nil).

8 (cid:1) Income Tax Expense (Recovery)

For the years ended December 31

2006

2005

2004

Current

Canada
International

Deferred

Canada
International

Income tax expense before

elements below1

Outcome of tax uncertainties
Change in tax status in Australia
Tax rate changes
Release of beginning of year

13
444

$ (3)
93

$ 19
24

$ 457

$ 90

$ 43

$ (117)
80

$ (15)
22

$ (26)
7

$ (37)

$ (19)

$ 420
–
(31)
12

$ 97
–
(5)
–

$ 24
(141)
(81)
–

valuation allowances

(53)

(32)

(5)

Total expense (recovery)

$ 348

$ 60

$(203)

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.

94 (cid:1) Notes to Consolidated Financial Statements

Barrick Financial Report 2006

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 consolidated
tax returns. This regime is elective and the election is irrev-
ocable. 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 mil-
lion adjustment to deferred taxes. In 2005, based on addi-
tional 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.

In ﬁrst quarter 2006, an interpretative decision (ID)
was issued by the Australia Tax Ofﬁce that clariﬁed the tax
treatment of currency gains and losses on foreign currency
denominated liabilities. Under certain conditions, for tax-
payers who have made the functional currency election, and
in respect of debt that existed at the time the election was
made, the ID provided clariﬁcation that unrealized foreign
exchange gains that currently exist on intercompany debt
will not crystallize upon repayment of the debt. The effect
of the ID was recorded as a $31 million increase to deferred
tax assets.

Tax Rate Changes
In second quarter 2006, a new federal rate change was
enacted in Canada that lowered the applicable tax rate. The
impact of this tax rate change was to reduce net deferred tax
assets in Canada by $34 million that was recorded as a com-
ponent of deferred income tax expense. Also in second
quarter 2006, on change of tax status of a Canadian
subsidiary, we recorded a deferred income tax credit of
$22 million, to reﬂect the impact on the measurement of
deferred income tax assets and liabilities.

Release of Beginning of Year Valuation Allowances
In 2006, we released $25 million of valuation allowances
in the United States due to the estimated effect of higher
market gold prices on the ability to utilize deferred tax
assets. Also in 2006, we released $9 million of valuation
allowances in a Chilean entity due to the availability of
income, and we released valuation allowances of $19 mil-
lion in Canada, reﬂecting utilization of capital losses.

In 2005, we released valuation allowances totaling
$31 million in Argentina relating to the effect of the higher
gold price environment and the anticipated commence-
ment of sales in 2006. We released valuation allowances
of $2 million in Canada reﬂecting utilization of capital
losses. In 2004, we released valuation allowances totaling
$5 million relating to the consolidated tax return election
in Australia.

Reconciliation to Canadian Statutory Rate

For the years ended December 31

2006

2005

2004

At 36.12% (2005 and 2004: 38%)

statutory rate

Increase (decrease) due to:

Allowances and special tax

deductions1

Impact of foreign tax rates2
Expenses not tax-deductible
Release of beginning of year

valuation allowances

Impact of changes in tax status

in Australia
Tax rate changes
Valuation allowances set up

against current year tax losses

Outcome of tax uncertainties
Mining taxes
Other items

$ 563

$ 176

(55)
(131)
20

(53)

(31)
12

7
–
9
7

(92)
(54)
9

(32)

(5)
–

59
–
1
(2)

(70)
(4)
10

(5)

(81)
–

65
(141)
5
2

Income tax expense (recovery)

$ 348

$ 60

$ (203)

1. We are able to claim certain allowances and tax deductions unique to extrac-

tive 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 statutory rate. Additionally, we have reinvested earnings
and cash flow generated by the Zaldívar mine in Chile to fund a portion of
the construction cost of Pascua-Lama. The reinvestment of these earnings
and cash flow resulted in a lower tax rate applied for the period.

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 – 2002, Peru – 2003 and
Chile – 2003.

Barrick Financial Report 2006

Notes to Consolidated Financial Statements (cid:1) 95

9 (cid:1) Earnings per share

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

Income from continuing operations
Plus: interest on convertible debentures

Income available to common shareholders

and after assumed conversions
Income from discontinued operations

Income before cumulative effect of changes

in accounting principles

Cumulative effect of change in accounting principles

2006

2005

2004

Basic

Diluted

Basic

Diluted

Basic

Diluted

$ 1,209
–

$ 1,209
4

$ 395
–

$ 248
–

1,209
297

1,213
297

1,506
–

1,510
–

395
–

395
6

395
–

395
6

248
–

Net income

$ 1,506

$ 1,510

$ 401

$ 248

Weighted average shares outstanding
Effect of dilutive securities

Stock options
Convertible debentures

Earnings per share

842

536

533

–
–

4
9

–
–

2
–

–
–

1
–

842

855

536

538

533

534

Income from continuing operations
Income before cumulative effect of changes in accounting principles
Net income

$ 1.44
$ 1.79
$ 1.79

$ 1.42
$ 1.77
$ 1.77

$ 0.74
$ 0.74
$ 0.75

$ 0.73
$ 0.73
$ 0.75

$ 0.47
$ 0.47
$ 0.47

$ 0.46
$ 0.46
$ 0.46

Accounting Policy
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. For stock options, the
number of additional shares for inclusion in diluted earn-
ings per share calculations is determined using the treasury
stock method. Under this method, 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 num-
ber of common shares issued under stock options and
repurchased from proceeds is included in the calculation
of diluted earnings per share. For convertible debentures,
the number of additional shares for inclusion in diluted
earnings per share calculations is determined using the if
converted method. The incremental number of common
shares issued is included in the number of weighted aver-
age shares outstanding and interest on the convertible
debentures is excluded from the calculation of income.

96 (cid:1) Notes to Consolidated Financial Statements

Barrick Financial Report 2006

10 (cid:1) Operating Cash Flow – Other Items

a) Reconciliation of Net Income from

Continuing Operations to Cash Flow
from Operating Activities

For the years ended December 31

2006

2005

2004

b) Non-Cash Investing and Financing Activities
Placer Dome Acquisition
We purchased all of the common shares of Placer Dome in
2006 for $10,054 million (see note 3a). In conjunction with
the acquisition, liabilities were assumed as follows:

Adjustments for non-cash income

statement items:
Currency translation (gains)

losses (note 7d)

Accretion expense (note 20)
Cumulative accounting

changes (note 2e)

Amortization of discount/premium

on debt securities (note 19b)

Amortization of debt issue

costs (note 19b)

Stock option expense (note 25)
Non-hedge derivative copper options
Gains on sale of investments (note 7c)
Gain on Highland vend-in (note 7c)
Impairment charges on
investments (note 11)

Gain on Kabanga transaction (note 7c)
Gain on sale of long-lived assets (note 7c)
Impairment of long-lived assets (note 7b)
Revisions to AROs at closed

mines (note 7d)

Losses on write-down of inventory
Non-controlling interests

Cash ﬂow arising from changes in:

Accounts receivable
Goods and services taxes recoverable
Inventories
Accounts payable
Accrued interest (note 19b)
Income taxes payable
Derivative assets and liabilities
Other assets and liabilities
Settlement of AROs (note 20)

(2)
39

–

(12)

12
27
14
(6)
(51)

4
–
(9)
17

53
28
(1)

(78)
(20)
(193)
29
28
161
97
17
(32)

(3)
21

(6)

–

2
–
–
(17)
–

16
(15)
(5)
–

15
15
1

4
(16)
(151)
74
6
24
49
(56)
(30)

1
18

–

3
–
–
(6)
–

5
–
(36)
139

22
9
(2)

(2)
(68)
(51)
2
2
–
(12)
43
(33)

Other net operating activities

$ 122

$ (72)

$ 34

Operating cash ﬂow includes

payments for:
Income taxes
Pension plan contributions (note 26a)
Interest (net of amounts capitalized)

$ 280
$ 36
$ 211

$ 80
$ 20
$ 112

$ 45
$ 19
$ 57

Fair value of assets acquired1
Consideration paid

Liabilities assumed2

$ 15,346
10,054

$ 4,830

1. Includes cash of $1,102 million.
2. Includes debt obligations of $1,252 million (note 19b).

Vend-in of Assets to Highland Gold (“Highland”)
In 2006 we exchanged various interests in mineral properties
for 34.3 million Highland shares with a value of $95 million
at the time of closing of the transaction (see note 11).

Sale of South Deep
In 2006 we sold the South Deep mine to Gold Fields Limited
(“Gold Fields”) for $1,517 million. The proceeds included
18.7 million Gold Fields common shares with a value of
$308 million (see note 3b).

11 (cid:1) Investments

Available-for-Sale Securities

At December 31

Securities in an unrealized

gain position

Beneﬁt plans:1

Fixed-income securities
Equity securities
Other investments:

NovaGold
Gold Fields
Celtic
Other equity securities

Restricted cash

Securities in an unrealized

loss position

Other equity securities2

2006

Gains
(losses)
in OCI

Fair
value

2005

Fair
value

Gains in
OCI

5
16

$ –
2

$ 4
17

$ –
1

231
314
12
65
–

643

13
6
1
32
–

–
–
12
26
3

(1)

–

–
–
–
11
–

–

$ 646

$ 53

$ 62

$ 12

1. Under various benefit plans for certain former Homestake executives, a port-
folio of marketable ﬁxed-income and equity securities are held in a rabbi trust
that is used to fund obligations under the plans.

2. Other equity securities in a loss position consist of investments in various

junior mining companies.

Barrick Financial Report 2006

Notes to Consolidated Financial Statements (cid:1) 97

Purchases of Available-for-Sale Securities for Cash

For the years ended December 31

2006

2005

2004

NovaGold
Celtic
Other

$ 218
–
27

–
30
1

$ 245

$ 31

$ –
–
7

$ 7

Accounting Policy for Available-for-Sale Securities
Available-for-sale securities are recorded at fair value with
unrealized gains and losses recorded in other comprehen-
sive 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 and
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 evi-
dence that the carrying amount is recoverable within a rea-
sonable 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.

NovaGold Resources Inc. (“NovaGold”)
In fourth quarter 2006, we acquired a 14.8% interest in
NovaGold for cash consideration of $218 million as part of
a tender offer.

Gold Fields Limited (“Gold Fields”)
The investment in Gold Fields was acquired on December 1,
2006 as partial consideration for the sale of our interest in
South Deep (note 3b). At acquisition, we recorded a liquidity
discount of $48 million to reﬂect a restriction on our ability
to trade the shares for a period of 120 days from closing. As of
December 31, 2006, the discount is approximately $39 mil-
lion for the remaining 90 days of the restriction period.

Celtic Resources Holdings Inc. (“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 ordi-
nary share of Celtic and one-half of one share purchase
warrant. On June 1, 2005, the number of warrants 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, 2006, we held a 9% (2005: 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. 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, 2006
(2005: $0.5 million). 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 acquisi-
tion for an amount equal to 50% of the cost to Celtic of its
interest in the mineral property. No such rights have been
exercised since the initial subscription.

Gains (Losses) on Investments Recorded in Earnings

For the years ended December 31

2006

2005

2004

Gains realized on sales
Impairment charges

Cash proceeds from sales

$ 6
(4)

$ 2

$ 46

$ 17
(16)

$ 1

$ 10

$ 6
(5)

$ 1

$ 9

In the second half of 2005, the fair value of our investment
in Celtic declined below cost and at the end of 2005 we con-
cluded that the impairment was “other-than-temporary”
and recorded a $12 million impairment charge.

Equity Method Investments

At December 31

2006

2005

Highland
Diamondex
Atacama2

Fair Carrying
amount

value1

Fair
value1

Carrying
amount

$ 207
5
n/a

$ 199
5
123

$ 327

$ 134
6
–

$ 131
7
–

$ 138

1. Based on the closing market stock price.
2. As Atacama Copper Pty Limited is not a publicly traded company, there is no

readily determinable fair value.

98 (cid:1) Notes to Consolidated Financial Statements

Barrick Financial Report 2006

Purchases of Equity Method Investment for Cash

For the years ended December 31

2006

2005

2004

Highland
Diamondex
Atacama

–
2
123

$ 50
8
–

$ 40
–
–

$ 125

$ 58

$ 40

Accounting Policy for Equity Method Investments
Under the equity method, we record our equity share of the
income or loss of equity investees each period. On acquisi-
tion 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 man-
ner 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 evalu-
ated for impairment using the same method as an available-
for-sale security.

Highland Gold Mining Ltd. (“Highland”)
Our 34% interest in Highland was acquired in four tranches:
11.1 million common shares for cash of $46 million in 2003;
9.3 million common shares for cash of $40 million in 2004;
11 million common shares in 2005 for cash of $50 million;
and 34.3 million shares as part of a vend-in transaction
in 2006.

On November 17, 2006, we entered into an agreement
with Highland to transfer ownership of certain companies
holding Russian and Kyrgyz licenses in return for 34.3 mil-
lion Highland common shares increasing our ownership of
Highland from 20% to 34%. In effect, we are contributing
our 50% interest in the Taseevskoye deposit, as well as other
exploration properties in Russia and Central Asia, to
Highland, thereby consolidating ownership of these prop-
erties under one company. As part of the transaction, we
seconded several of our employees to Highland, and will
receive two additional Board seats. Completion of the trans-
action occurred on December 15, 2006. On closing, the fair
value of Highland common shares exceeded the carrying
amount of assets exchanged by $76 million. We recorded
this difference as a gain of $51 million in other income/
expense to the extent of the ownership in Highland held by
independent third parties, and the balance of $25 million as
a reduction in the carrying amount of our investment in
Highland. The Fedorova PGM deposit was not included in
this transaction.

The difference between the cost of our investment in
Highland and the underlying historic cost of net assets was
$111 million at June 30, 2006. The difference between the
cost of our investment and the underlying fair value of
assets and liabilities essentially represents an asset similar
to goodwill.

On September 7, 2006 a ﬁre occurred in the under-
ground part of the Central Shaft at Highland’s Darasun mine
(“Darasun”). Highland’s management is evaluating the
amount of damage and the possibility of asset impairment,
if any, at Darasun. Valuations and engineering studies are in
progress, but were not complete at the date of issuance of
these ﬁnancial statements. On ﬁnalization of these valuations
and studies, it is reasonably possible that an impairment
charge may be recorded by Highland which would impact
the equity investment in our ﬁnancial statements.

Diamondex Resources Limited (“Diamondex”)
We completed a subscription for 11,111,111 units of
Diamondex for cash of $8 million in 2005. Each unit con-
sists of one ordinary share of Diamondex and one share
purchase warrant. We allocated the cost as follows: $7 mil-
lion to the ordinary shares and $1 million to the share pur-
chase warrants.

We completed a subscription for a further 3,358,300
units of Diamondex for cash of $2 million in 2006. Each
unit consists of one ordinary share of Diamondex and one-
half share purchase warrant. As of December 31, 2006, we
have 14,469,411 common shares and 12,790,261 share pur-
chase warrants. We hold a 15% interest in the outstanding
common shares of Diamondex (28% assuming exercise of
the share purchase warrants). We record our equity share of
the income or loss of Diamondex each period based on our
total 15% interest in outstanding common shares. At
December 31, 2006, we determined that our investment
in Diamondex was “other than temporarily” impaired by
$2 million, due to a sustained decline in fair value of the
common shares relative to their carrying amount.

Atacama Copper Pty Limited (“Atacama”)
In September 2006, in connection with the previously
announced agreement with Antofagasta plc (“Antofagasta”)
to acquire 50% of Tethyan Copper Company’s (“Tethyan”)
Reko Diq project and associated mineral interests, we
acquired a 50% interest in Atacama Copper Pty Limited
(“Atacama”), a company incorporated under the laws of
Australia. We paid cash of $93 million for 50% of the issued
and outstanding share capital. The difference between
the amount paid and underlying equity in net assets was
$93 million. This difference represents the incremental fair

Barrick Financial Report 2006

Notes to Consolidated Financial Statements (cid:1) 99

value of the Reko Diq project and is not being amortized
while the project is in the development stage. In November
2006, we paid approximately $30 million for our 50% share
of the costs to terminate BHP Billiton’s interest in certain
Tethyan mineral interests. In return, we received additional
shares in proportion to our ownership interest, such that our
50% interest in Atacama is retained.

We determined that Atacama is a variable interest entity
and consequently we have used the principles of FIN 46R
to determine how to account for our ownership interest.
We concluded that neither ourselves nor Antofagasta are a
primary beneﬁciary and consequently we evaluated whether
either ourselves or Antofagasta have the right to control
Atacama under the joint venture agreement. We determined
that we share joint control with Antofagasta, so because
Atacama is a corporate joint venture we use the equity
method of accounting for our investment in Atacama. Our
maximum exposure to loss in this entity is limited to our
investment in Atacama, which totaled $123 million as of
December 31, 2006, and amounts we are committed to fund
Atacama’s interim exploration program. The cost of our
investment in Atacama at acquisition approximated the
underlying fair value of tangible net assets.

12 (cid:1) Inventories

At December 31

Raw materials

Ore in stockpiles
Ore on leach pads
Mine operating supplies
Work in process
Finished products

Gold doré/bullion
Copper cathode
Gold concentrate

Gold

Copper

2006

2005

2006

2005

$ 485
104
284
89

98
–
54

$ 360
34
133
47

32
–
47

$ 51
76
16
25

–
17
–

185
(70)

$ –
–
–
–

–
–
–

–
–

Non-current ore in stockpiles1

1,114
(298)

653
(251)

$ 816

$ 402

$ 115

$ –

1. Ore that we do not expect to process in the next 12 months.

Accounting Policy for Inventory
Material extracted from our mines is classiﬁed as either ore
or waste. Ore represents material that we expect can be
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 accumulated in
stockpiles that are subsequently processed into gold/copper
in a saleable form under a mine plan that takes into consid-
eration optimal scheduling of production of our reserves,
present plant capacity, and the market price of gold/copper.
Gold/copper in process represents gold/copper in the pro-
cessing circuit that has not completed the production
process, and is not yet in a saleable form.

Gold ore stockpiles are measured by estimating the
number of tons added and removed from the stockpile, the
number of contained ounces (based on assay data) and
the estimated metallurgical recovery rates (based on the
expected processing method). Copper ore stockpiles are
measured estimating the number of tons added and
removed from the stockpile. Stockpile ore tonnages are
veriﬁed by periodic surveys. Costs are allocated to a stock-
pile 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 min-
ing operations, and removed at each stockpile’s average cost
per recoverable unit.

We record gold in process, gold doré and gold in con-
centrate 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 beginning of a period,
plus the cost of inventory produced in a period. Costs capi-
talized to inventory include direct and indirect materials
and consumables; direct labor; repairs and maintenance;
utilities; amortization of property, plant and equipment;
waste stripping costs; and local mine administrative
expenses. Costs are removed from inventory and recorded
in cost of sales and amortization expense based on the aver-
age cost per ounce of gold in inventory. Mine operating sup-
plies are recorded at purchase cost.

We record provisions to reduce inventory to net realiz-
able value, to reﬂect changes in economic factors that impact
inventory value or to reﬂect present intentions for the use of
slow moving and obsolete supplies inventory.

For the years ended December 31

2006

2005

2004

Inventory impairment charges

$ 28

$ 15

$ 9

100 (cid:1) Notes to Consolidated Financial Statements

Barrick Financial Report 2006

Heap Leach Inventory
The recovery of gold and copper from certain oxide ores is
achieved through the heap leaching process. Our Pierina,
Lagunas Norte, Veladero, Cortez, Bald Mountain, Round
Mountain and Marigold mines all use a heap leaching
process for gold and our Zaldívar mine uses a heap leaching
process for copper. Under this method, ore is placed on leach
pads where it is treated with a chemical solution, which dis-
solves the gold or copper contained in the ore. The resulting
“pregnant” solution is further processed in a plant where the
gold or copper is recovered. For accounting purposes, costs
are added to ore on leach pads based on current mining and
leaching costs, including applicable depreciation, depletion
and amortization relating to mining operations. Costs are
removed from ore on leach pads as ounces or pounds are
recovered based on the average cost per recoverable ounce of
gold or pound of copper on the leach pad.

Estimates of recoverable gold or copper 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 35% and 95% of the ounces or
pounds placed on the pads.

Although the quantities of recoverable gold or copper
placed on the leach pads are reconciled by comparing the
grades of ore placed on pads to the quantities of gold or cop-
per actually recovered (metallurgical balancing), the nature
of the leaching process inherently limits the ability to pre-
cisely monitor inventory levels. As a result, the metallurgical
balancing process is constantly monitored and estimates are
reﬁned based on actual results over time. Historically, our
operating results have not been materially impacted by vari-
ations between the estimated and actual recoverable quanti-
ties of gold or copper on our leach pads. At December 31,
2006, the weighted average cost per recoverable ounce of
gold and recoverable pound of copper on leach pads was
$180 per ounce and $0.45 per pound, respectively (2005:
$134 per ounce of gold). Variations between actual and esti-
mated quantities resulting from changes in assumptions
and estimates that do not result in write-downs to net real-
izable value are accounted for on a prospective basis.

The ultimate recovery of gold or copper from a leach
pad will not be known until the leaching process is con-
cluded. Based on current mine plans, we expect to place the
last ton of ore on our current leach pads at dates for gold
ranging from 2009 to 2021 and for copper ranging from
2022 to 2027. Including the estimated time required for
residual leaching, rinsing and reclamation activities, we
expect that our leaching operations will terminate within a
period of up to six years 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 or
copper at each balance sheet date that we expect to recover
during the next 12 months.

Ore in Stockpiles

At December 31

Gold

Goldstrike

Ore that requires roasting
Ore that requires autoclaving

Kalgoorlie
Turquoise Ridge
Porgera
Other
Copper

Zaldívar

2006

2005

$ 239
84
58
14
17
73

$ 182
98
53
–
–
27

–

$ 536

$ 360

At Goldstrike, we expect to fully process the autoclave
stockpile by 2008 and the roaster stockpile by 2023. At
Kalgoorlie, we expect to fully process the stockpile by 2017.
At Zaldívar we expect to fully process the stockpile by 2027.

13 (cid:1) Accounts Receivable, and Other Current Assets

At December 31

Accounts receivable

Amounts due from concentrate sales
Amounts due from copper cathode sales
Other receivables

Other current assets

Derivative assets (note 19c)
Goods and services taxes recoverable
Restricted cash
Prepaid expenses
Other

2006

2005

$ 24
83
127

$ 18
–
36

$ 234

$ 54

$ 201
137
150
32
68

$ 128
101
–
23
3

$ 588

$ 255

Barrick Financial Report 2006

Notes to Consolidated Financial Statements (cid:1) 101

14 (cid:1) Property, Plant and Equipment

At December 31

2006

2005

Assets not subject to amortization

Acquired mineral properties and capitalized

mine development costs1

$ 1,621

$ 883

Amortized assets

Capitalized mineral property acquisition

and mine development costs
Buildings, plant and equipment2

Accumulated amortization3

6,616
7,017

3,976
4,057

15,254
(6,919)

8,916
(4,770)

$ 8,335

$ 4,146

1. Assets in the exploration or development stage that are not subject to

amortization.

2. Includes $131 million (2005: $122 million) of assets under capital leases.
3. Includes $41 million (2005: $18 million) of accumulated amortization for

assets under capital leases.

a) Unamortized Assets

Acquired Mineral Properties and Capitalized
Mine Development Costs

Exploration projects and other land positions
Value beyond proven and probable

reserves at producing mines

Development stage projects

Ruby Hill
Pascua-Lama
Cortez Hills
Pueblo Viejo
Donlin Creek
Buzwagi

Carrying amount
at December 31, 2006

$ 287

401

49
459
78
173
66
108

$ 1,621

Acquisitions
We capitalize the cost of acquisition of land and mineral
rights. On acquiring a mineral property, we estimate the fair
value of proven and probable reserves as well as the value
beyond proven and probable reserves and we record these
amounts as assets at the date of acquisition. At the time
mineralized material is converted into proven and probable
reserves, we classify the capitalized acquisition cost asso-
ciated with those reserves as a component of acquired
mineral properties, which are subject to amortization. When
production begins, capitalized acquisition costs that are
subject to amortization are amortized to operations using
the units-of-production method.

Development Stage Projects
We capitalize development costs incurred at development
projects that meet the deﬁnition of an asset after mineral-
ization is classiﬁed as proven and probable gold reserves (as
deﬁned by United States reporting standards). Before clas-
sifying mineralization as proven and probable reserves,
development costs incurred at development projects are
considered project development expenses that are expensed
as incurred. Development costs include: drilling, engineer-
ing studies, metallurgical test, permitting and sample min-
ing. At new mines, the cost of start-up activities such as
recruiting and training is expensed as incurred.

Interest Costs
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 also capitalize interest costs on the value
assigned to projects acquired from third parties if activities
that are necessary to get the asset ready for its intended use
are underway. This may be before the mineralization is
classiﬁed as proven and probable reserves (as deﬁned by
United States reporting standards).

In 2006, amortization of property plant and equipment
began at our Cowal mine after it moved from construction
into the production phase. In 2005, amortization of prop-
erty, plant and equipment at our Tulawaka, Lagunas Norte,
and Veladero mines began after the mines moved from
construction into the production phase. Amortization also
began in 2005 at the Western 102 power plant in Nevada
that was built to supply power for the Goldstrike mine as it
moved from construction into the production phase.

b) Amortized Assets
Capitalized Mineral Property Acquisition and Mine
Development Costs
We start amortizing capitalized mineral property acquisi-
tion and mine development costs when production begins.
Amortization is calculated using the “units-of-production”
method, where the numerator is the number of ounces pro-
duced and the denominator is the estimated recoverable
ounces of gold contained in proven and probable reserves.

102 (cid:1) Notes to Consolidated Financial Statements

Barrick Financial Report 2006

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 capi-
talized 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 esti-
mated recoverable ounces of gold contained in proven and
probable reserves within that ore block or area. If capitalized
underground development 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.

Buildings, Plant and Equipment
We record buildings, plant and equipment at cost. We capi-
talize 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 esti-
mated useful economic life for buildings and equipment at
ore processing facilities is 25 years and for mining equip-
ment is 15 years.

In the normal course of our business, we have entered
into certain leasing arrangements whose conditions 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 payments over the lease term.
In the case of our capital 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
Producing 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 indications that an
impairment may have occurred, we prepare estimates of
expected future cash ﬂows for each group of assets. Ex-
pected 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/copper 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 expenditures
to produce proven and probable gold/copper 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 undiscounted 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.

Barrick Financial Report 2006

Notes to Consolidated Financial Statements (cid:1) 103

e) Insurance
We purchase insurance coverage for certain insurable
losses, subject to varying deductibles, at our mineral prop-
erties including losses such as property damage and busi-
ness interruption. We record losses relating to insurable
events as they occur. Proceeds receivable from insurance
coverage are recorded at such time as receipt is probable
and the amount receivable is ﬁxed or determinable.
Proceeds from insurance claims totaled $12 million in 2006
(2005: $nil, 2004: $nil).

Exploration Projects
After acquisition, various factors can affect the recoverabil-
ity of the capitalized cost of land and mineral rights, partic-
ularly the results of exploration drilling. The length of time
between the acquisition of land and mineral rights and
when we undertake exploration work varies based on the
prioritization of our exploration projects 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.

d) Capital Commitments
In addition to entering into various operational commit-
ments in the normal course of business, we had commit-
ments of approximately $117 million at December 31, 2006
for construction activities at our development projects.

15 (cid:1) Intangible Assets

For the years ended December 31

Water rights
Technology3
Supply contracts1
Royalties2

Aggregate amortization expense

For the years ended December 31

Estimated aggregate amortization expense

2006

2005

Gross carrying
amount

Accumulated
amortization

Gross carrying
amount

Accumulated
amortization

$ 28
17
23
17

$ 85

–

2007

$ 7

$ –
–
9
1

$ 10

$ –
–
–
–

$ –

2008

$ 5

2009

$ 3

2010

$ 1

$ –
–
–
–

$ –

2011

$ 1

1. Supply contracts are being amortized over the weighted average contract lives of 4–8 years, with no assumed residual value.
2. Royalties are being amortized using the units of production method over the total ounces subject to royalty payments under the agreement.
3. The acquired technology will be used at the Pueblo Viejo project, which has been estimated to start up at a date later than 2010. The amount will be amortized

using the units-of-production method over the estimated proven and probable reserves of the mine, with no assumed residual value.

16 (cid:1) Goodwill

At January 1, 2006

Additions
Disposals

At December 31, 2006

–
6,506
651

$ 5,855

We allocate goodwill arising from business combinations
to reporting units acquired by preparing estimates of the
fair value of the entire reporting unit and comparing this
amount to the fair value of assets and liabilities (including
intangibles) in the reporting unit. The difference represents
the amount of goodwill allocated to each reporting unit.

104 (cid:1) Notes to Consolidated Financial Statements

Barrick Financial Report 2006

We test goodwill for impairment annually in the fourth
quarter of our ﬁscal year. This impairment assessment
involves estimating the fair value of each reporting unit that
includes goodwill. We compare this fair value to the total
carrying amount of each reporting unit (including good-
will). If the carrying amount exceeds this fair value, then we
estimate the fair values of all identiﬁable assets and liabili-
ties in the reporting unit, and compare this net fair value of
assets less liabilities to the estimated fair value of the entire
reporting unit. The difference represents the fair value of
goodwill, and if necessary, we reduce the carrying amount
of goodwill to this fair value.

Circumstances that could trigger an impairment of
goodwill include: a signiﬁcant adverse change in the busi-
ness climate or legal factors; an adverse action or assess-
ment by a regulator; unanticipated competition; the loss of
key personnel; change in reportable segments; the likeli-
hood that a reporting unit or signiﬁcant portion of a
reporting unit will be sold or otherwise disposed of; the
results of testing for recoverability of a signiﬁcant asset
group within a reporting unit; and the recognition of a
goodwill impairment loss in the ﬁnancial statements of a
subsidiar y that is a component of a repor ting unit.
Measurement of the fair value of a reporting unit is based
on one or more fair value measures including present value
techniques of estimated future cash ﬂows and estimated
amounts at which the unit as a whole could be bought or
sold in a current transaction between willing parties. We
also consider comparable market capitalization rates for
each reporting unit as of the date of the impairment test.

Goodwill arising on the acquisition of Placer Dome
was $6,506 million. In 2006 we determined that goodwill
should be allocated to reporting units that would either
represent individual mineral properties, or aggregations
of mineral properties, limited to aggregation at a regional
business unit level. Determination of appropriate reporting
units is ongoing and consequently the allocation of good-
will to reporting units was not completed at December 31,
2006. In fourth quarter 2006 we completed impairment
tests of goodwill assuming both no aggregation of mineral
properties into reporting units, and aggregation of mineral
properties up to the regional business unit level. On com-
pletion of these impairment tests we concluded that no
impairment of goodwill had occurred by December 31,
2006. On the disposal of the South Deep mine in December
2006, we concluded that goodwill totaling $651 million
should be attributed to the operation and reﬂected in the
calculation of the gain on sale.

17 (cid:1) Other Assets

At December 31

2006

2005

Non-current ore in stockpiles
Derivative assets (note 19d)
Goods and services taxes recoverable
Deferred income tax assets (note 22)
Debt issue costs
Deferred share-based compensation (note 25b)
Other

$ 368
209
48
528
36
36
114

$ 251
177
46
141
35
13
105

$ 1,339

$ 768

Debt Issue Costs
Additions to debt issue costs in 2006 of $11 million princi-
pally 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 (see note 19b).

18 (cid:1) Other Current Liabilities

At December 31

2006

2005

Asset retirement obligations (note 20)
Derivative liabilities (note 19d)
Post-retirement beneﬁts (note 26)
Deferred revenue
Income taxes payable
Other

$ 50
82
11
–
159
1

$ 303

$ 37
42
6
8
–
1

$ 94

19 (cid:1) Financial Instruments

Financial instruments include cash; evidence of ownership
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 13;
investments – note 11; restricted share units – note 25b.

a) Cash and Equivalents
Cash and equivalents include cash, term deposits, commer-
cial paper and treasury bills with original maturities of less
than 90 days. Cash and equivalents include $605 million
held in Argentinean and Chilean subsidiaries that have
been designated for use in funding construction costs at our
Pascua-Lama development project.

Barrick Financial Report 2006

Notes to Consolidated Financial Statements (cid:1) 105

b) Long-Term Debt6

Dec. 31 Proceeds ments

7.50% debentures1 $ 498 $ – $ –
5.80%/4.875% notes 745
–
Veladero ﬁnancing
30
220
Bulyanhulu ﬁnancing
34
85
Other debt2
–
1,024
Copper-linked notes
87
908
US dollar notes
–
87
Senior convertible
debentures
Capital leases
Series B Preferred

–
13
–
50
995
87

296
94

–
16

–
7

Securities

First credit facility3

Less: current portion

–
–

3,957
(713)

–
1,000

2,152
–

77
1,000

1,244
–

2006

2005

2004

Repay- Amorti-

Assumed
on acqui-
sition of
zation55 Placer Dome

Dec. 31 Proceeds

Amorti-

zation5 Dec. 31 Proceeds

Repay-
ments

Amorti-
zation5

$ –
–
–
–
6
–
–

4
–

2
–

12
–

$ – $ 490
745
237
119
113
–
–

–
–
–
867
–
–

300
6

79
–

–
97

–
–

$ –
–
39
–
50
–
–

–
90

–
–

1,252
–

1,801
(80)

179
–

Repay-
ments

$ –
–
–
31
–
–
–

–
28

–
–

59
–

–
745
198
–
–
–
–

–
30

–
–

$ – $ 495
745
198
150
63
–
–

–
–
–
–
–
–

–
35

–
–

1,686
(31)

973
–

$ –
–
–
24
17
–
–

–
–

41
–

$ –
–
–
–
–
–
–

–
–

$ 3,244 $ 2,152 $ 1,244

$ 12

$ 1,252 $ 1,721

$ 179

$ 59

$ – $ 1,655

$ 973

$ 41

$ –

Short-term debt
Demand ﬁnancing

facility

Second credit facility4

150
–

–
37

–
337

–
–

150
300

–
–

$ 150 $ 37 $ 337

$ –

$ 450 $ –

$ –

$ – $

–
–

–

–
–

$ –

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 represents the estimated fair value.

2. The debt has an aggregate principal amount of $1,024 million, of which $163 million is subject to floating interest rates and $861 million is subject to fixed interest

rates ranging from 6.37% to 8.05%. The notes mature at various times between 2007 and 2035.

3. 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
$1.5 billion or the equivalent amount in Canadian currency. The credit facility, which is unsecured, has an interest rate of Libor plus 0.25% to 0.35% on drawn down
amounts, and a commitment rate of 0.07% to 0.08% on undrawn amounts. We increased the limit of this facility from $1 billion in August 2006. The facility currently
matures in 2011.

4. During third quarter 2006, we terminated a second credit facility which consisted of unused bank lines of credit of $850 million with an international consortium

of banks.

5. Amortization of debt discount/premium.
6. The agreements which govern our long-term debt each contain various provisions which are not summarized herein. In certain cases, these provisions allow Barrick
to, at its option, redeem indebtedness prior to maturity at specified prices and also may permit redemption of debt by Barrick upon the occurrence of certain speci-
fied changes in tax legislation.

Series B Preferred Securities
On December 18, 2006, we redeemed all of the outstanding
8.5% Series B Preferred Securities due December 31, 2045
for cash at a redemption price of $1,039.43 per $1,000 aggre-
gate principal amount, for total cash of $80 million. The
redemption price was comprised of the outstanding princi-
pal amount of $77 million plus accrued and unpaid inter-
est to December 17, 2006 of $3 million.

Senior Convertible Debentures
The convertible senior debentures (the “Securities”) mature
in 2023 and had an aggregate principal amount of $230 mil-
lion outstanding as at the end of 2006. Holders of the
Securities may, upon the occurrence of certain circum-
stances and within speciﬁed time periods, convert their
Securities into common shares of Barrick. These circum-
stances are: if the closing price of our common shares
exceeds 120% of the conversion price for at least 20 trading
days in the 30 consecutive trading days ending on the last
trading day of the immediately preceding ﬁscal quarter;

106 (cid:1) Notes to Consolidated Financial Statements

Barrick Financial Report 2006

if certain credit ratings assigned to the Securities fall below
speciﬁed levels or if the Securities cease to be rated by
speciﬁed rating agencies or such ratings are suspended or
withdrawn; if for each of ﬁve consecutive trading days, the
trading price per $1,000 principal amount of the Securities
was less than 98% of the product of the closing price of our
common shares and the then current conversion rate; if
the Securities have been called for redemption provided
that only such Securities called for redemption may be con-
verted and upon the occurrence of speciﬁed corporate
transactions. On December 31, 2006 the conversion rate
per each $1,000 principal amount of Securities was 39.75
common shares and the effective conversion price was
$25.16 per common share. The conversion rate is subject to
adjustment in certain circumstances. As such, the effective
conversion price may also change.

No circumstance permitting conversion was in exis-
tence on December 31, 2006. However, if such a circum-
stance had existed and all the Securities were converted, and
settlement occurred on December 31, 2006, we would have
issued 9.14 million common shares with an aggregate fair
value of $281 million based on our closing share price on
December 31, 2006.

We may redeem the Securities at any time on or after
October 20, 2010 and prior to maturity, in whole or in part,
at a prescribed redemption price that varies depending
upon the date of redemption from 100.825% to 100% of the
principal amount, plus accrued and unpaid interest. The
maximum amount we could be required to pay to redeem
the securities is $232 million plus accrued interest. Holders
of the Securities can require the repurchase of the Securities
for 100% of their principal amount, plus accrued and
unpaid interest, on October 15, 2013 and October 15, 2018.
In addition, if speciﬁed designated events occur prior to
maturity of the Securities, we will be required to offer to
purchase all outstanding Securities at a repurchase price
equal to 100% of the principal amount, plus accrued and
unpaid interest. For accounting purposes the Securities
are classiﬁed as a “conventional convertible debenture” and
the conversion feature has not been bifurcated from the
host instrument.

Demand Financing Facility
We have a demand ﬁnancing facility that permits borrow-
ings of up to $150 million. The terms of the facility require
us to maintain cash on deposit with the lender as a com-
pensating balance equal to the amount outstanding under
the facility, which is restricted as to use. The net effective
interest rate is 0.4% per annum. At December 31, 2006,
$150 million had been drawn on the facility and an equal
amount had been placed on deposit that is included in
restricted cash (see note 13).

Copper-Linked Notes/US Dollar Notes
In October 2006, we issued $1,000 million of Copper-Linked
Notes. During the ﬁrst three years, the full $1,000 million
obligation of these notes is to be repaid through the delivery
of (the US dollar equivalent of) 324 million pounds of cop-
per. At December 31, 2006, 285 million pounds of copper
remained (2007 – 129 million pounds, 2008 – 103 million
pounds, 2009 – 53 million pounds). Coincident with the
repayment of (the US dollar equivalent of ) 324 million
pounds of copper, we will reborrow $1,000 million. Over the
next three years, the total amount outstanding under these
notes will be $1,000 million, with a portion repayable in a
copper-linked equivalent and a portion repayable in a ﬁxed
amount of US dollars at the maturity of the notes (2016 and
2036). As the copper-linked equivalent is repaid, the ﬁxed
US dollar obligation will increase. After 2009, only the ﬁxed
US dollar obligation will remain. The accounting principles
applicable to these Copper-Linked Notes require separate
accounting for the future delivery of copper (a ﬁxed-price
forward sales contract that meets the deﬁnition of a deriva-
tive that must be separately accounted for) and for the
underlying bond (see note 19d).

5.80%/4.875% Notes
On November 12, 2004, we issued $400 million of deben-
tures at a $3 million discount that mature on November 15,
2034 and $350 million of debentures at a $2 million dis-
count that mature on November 15, 2014.

Veladero Financing
One of our wholly owned subsidiaries, Minera Argentina
Gold S.A. in Argentina has a limited recourse amortizing
loan facility for $250 million, the majority of which has a
variable interest rate. We have guaranteed the loan until
completion occurs, after which it will become non-recourse
to the parent company. As at December 31, 2006, comple-
tion as deﬁned in the loan agreement has not occurred. The
loan is insured for political risks by branches of the
Canadian and German governments.

Barrick Financial Report 2006

Notes to Consolidated Financial Statements (cid:1) 107

Interest

7.50% debentures
5.80%/4.875% notes
Veladero ﬁnancing
Bulyanhulu ﬁnancing
Other debt
Copper-linked notes/US dollar notes
Senior convertible debentures
Capital leases
Series B Preferred Securities
Demand ﬁnancing facility
First credit facility
Second credit facility
Other interest

Less: interest allocated to discontinued operations
Less: interest capitalized

Cash interest paid
Amortization of debt issue costs
Amortization of discount/premium
Losses (gains) on interest rate hedges
Increase in interest accruals

Interest cost

For the years ended December 31

2006

2005

2004

Interest Effective
rate1

cost

Interest Effective
rate1

cost

Interest Effective
rate1

cost

9.8%
5.5%
10.2%
5.5%
5.4%
5.8%
2.0%
6.7%
4.4%
8.8%
7.4%
5.0%

$ 49
41
25
6
53
13
6
6
3
12
29
6
2

251

(23)
(102)

$ 126

$ 211
12
(12)
12
28

$ 251

8.2%
5.6%
8.6%
7.5%
4.1%
–
–
6.2%
–
–
–
–

$ 41
42
20
10
3
–
–
6
–
–
–
–
3

125

–
(118)

$ 112
2
–
5
6

$ 125

6.1%
5.4%
7.5%
8.0%
1.2%
–
–
–
–
–
–
–

$ 31
5
4
14
1
–
–
–
–
–
–
–
5

–
(41)

$ 19

$ 57
3
–
(2)
2

$ 60

1. The effective rate includes the stated interest rate under the debt agreement, amortization of debt issue costs and debt discount/premium and the impact of interest

rate contracts designated in a hedging relationship with long-term debt.

Scheduled Debt Repayments

7.50% debentures
5.80%/4.875% notes
Veladero ﬁnancing
Bulyanhulu ﬁnancing
Copper-linked notes/US dollar notes
Other debt
Senior convertible debentures
Demand ﬁnancing facility

Minimum annual payments under capital leases

2007

$ 500
–
58
34
–
100
–
45

$ 737

$ 20

2008

2009

2010

$ –
–
48
34
–
–
–
15

$ 97

$ 16

–
–
53
17
–
16
–
15

$ 101

$ 16

$ –
–
30
–
–
7
–
15

$ 52

$ 16

2011 and
thereafter

–
750
32
–
1,000
836
230
60

$ 2,908

108 (cid:1) Notes to Consolidated Financial Statements

Barrick Financial Report 2006

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

■ Sales

■ Cost of sales

Impacted by

■ Prices of gold and copper

■ Consumption of diesel fuel

■ Prices of diesel fuel, propane

and propane

and natural gas

■ Local currency denominated

expenditures

■ Currency exchange rates –
US dollar versus A$ and C$

■ Administration, exploration
and business development
costs in local currencies

■ Currency exchange rates –
US dollar versus A$, C$,
and ZAR

■ Capital expenditures in local

currencies

■ Currency exchange rates –
US dollar versus A$ and C$

■ Interest earned on cash

■ US dollar interest rates

■ Fair value of ﬁxed-rate debt

■ US dollar interest rates

Under our risk management policy, we seek to mitigate the
impact of these market risks to provide certainty for a por-
tion of our revenues and to control costs and enable us to
plan our business with greater certainty. The timeframe and
manner in which we manage these risks varies for each item
based upon our assessment of the risk and available alterna-
tives for mitigating risk. For these particular 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 effective-
ness criteria and are designated in a hedge accounting rela-
tionship. 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 compli-
ance 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 obligations
will be met by physical delivery of our gold and silver pro-
duction and they meet the other requirements set out in
paragraph 10(b) of FAS 133. In addition, our past sales prac-
tices, productive capacity and delivery intentions are con-
sistent with the deﬁnition of a normal sales contract.
Accordingly, we have elected to designate our gold and
silver sales contracts as “normal sales contracts” with the
result that the principles of FAS 133 are not applied to
them. Instead we apply revenue recognition 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 instru-
ment 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 rela-
tionships between hedging instruments and hedged items,
including the related risk-management strategy. This docu-
mentation includes linking all hedging instruments 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 analy-
sis to assess prospective effectiveness, we consider regres-
sion outputs for the coefﬁc ie nt of de te r mination
(R-squared), the slope coefﬁcient and the t-statistic to assess
whether a hedge is expected to be highly effective. Each

Barrick Financial Report 2006

Notes to Consolidated Financial Statements (cid:1) 109

period, using a dollar offset approach, we retrospectively
assess whether hedging instruments have been highly effec-
tive 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 hedg-
ing instrument is not expected to be highly effective, we
stop hedge accounting prospectively. In this case accumu-
lated gains or losses remain in OCI until the hedged item
affects earnings. We also stop hedge accounting prospec-
tively if:
(cid:1) a derivative is settled;
(cid:1) it is no longer highly probable that a forecasted transac-

tion will occur; or

(cid:1) we de-designate a hedging relationship.

If we conclude that it is probable that a forecasted transac-
tion will not occur in the originally speciﬁed time frame, or
within a further two-month period, gains and losses accu-
mulated 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 derivatives accounted for in designated hedging
relationships are classiﬁed in the same category as the cash
ﬂows from the item being hedged. Cash ﬂows resulting
from derivatives not designated in hedging relationships are
recorded as operating cash ﬂows. If a derivative has a nega-
tive fair value at inception, the resulting cash ﬂows are
recorded as ﬁnancing activities.

Changes in the fair value of derivatives each period 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 ineffec-
tiveness which is recorded in earnings immediately.

(cid:1) Non-hedge derivatives: recorded in earnings.

d) Derivative Instruments (“Derivatives”)
Placer Dome Acquisition
Through the acquisition of Placer Dome in ﬁrst quarter
2006 we assumed the following derivative positions:

Gold sold forward contracts

(millions of ounces)

Gold bought forward contracts

(millions of ounces)

Gold options (millions of ounces)
Silver contracts (millions of ounces)
A$ currency contracts (A$ millions)

Notional
amount

Fair value at
January 20, 2006

7.0

0.3
1.0
6.5
133

$ (1,544)

14
(188)
(11)
22

$ (1,707)

Gold sold forward contracts were designated as cash ﬂow
hedges at the date of acquisition. The acquired Placer gold
cash ﬂow hedge position was eliminated in 2006. Approx-
imately 6.2 million ounces of the acquired Placer Dome
positions received hedge accounting treatment for the
period from the date of acquisition to the date they were
eliminated, and under which they had a designated date
and price against speciﬁc future gold sales.

Gold sold forward contracts acquired through the
Placer Dome acquisition were designated in ﬁrst quarter
2006 against forecasted gold sales as a hedge of the variabil-
ity in market prices on future sales. Hedged items are
identiﬁed as the ﬁrst stated quantity of ounces of forecasted
sales in a future month. Prospective and retrospective hedge
effectiveness is assessed with a dollar offset method using
intrinsic values. The effective portion of changes in fair
value of the gold contracts is recorded in OCI until the fore-
casted gold sale impacts earnings. Upon settlement of the
contracts during 2006, hedge accounting was terminated
and the accumulated gain/loss will remain in OCI until
the forecasted transactions to which these contracts were
designated occurs and impacts earnings.

110 (cid:1) Notes to Consolidated Financial Statements

Barrick Financial Report 2006

Summary of Derivatives at December 31, 20061

Notional amount by term to maturity

Accounting
classiﬁcation by
notional amount

Fair value

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)
ZAR:US$ contracts (ZAR millions)

Commodity contracts
Gold sold forward contracts (thousands of ounces)
Gold bought forward contracts

(thousands of ounces)

Copper purchased put option contracts

(millions of pounds)

Copper sold forward contracts (millions of pounds)
WTI forward and option contracts

(thousands of barrels)

Propane bought forward contracts

(millions of gallons)

Natural gas bought forward contracts

(millions of Btu)

Within
1 year

2 to 5
years

Over 5
years

Cash ﬂow
hedge

Fair value
hedge

Total

$ 500
–

50
125

$ 500

$ (75)

$ –
–

$ –

$ 550
125

$ 425

–
–

–

$ 500
–

$ 500

Non-
hedge

$ 50
125

$ (5)
(10)

$ (75)

$ (15)

C$ 310
A$1,100

C$ 276
A$1,767
–

C$ 586
A$2,867

C$ 586
A$2,863
46

ZAR

46 ZAR

ZAR

46 ZAR

C$ –
A$ –
ZAR –

–

–
–

178

542

32
129

364

–

–
156

542

32
285

–

15
285

991

2,281

920

4,192

3,754

–

C$
A$
ZAR

–
–
–

–

–
–

–

C$
A$
ZAR

–2
4
–

542

17
–

438

–

$ 34
142
–

$ (184)

–
81

(1)

–

1. Excludes gold sales contracts (see note 5), gold lease rate swaps (see note 5), Celtic Resources & Midway Gold share purchase warrants (see note 11).
2. C$23 million of non-hedge currency contracts were economically closed out by entering into offsetting positions, albeit with differing counterparties.

US Dollar Interest Rate Contracts
Fair Value Hedges
Receive-ﬁxed swaps totaling $500 million have been desig-
nated against the 71/2% debentures as a hedge of the vari-
ability in the fair value of the debentures caused by changes
in Libor. We have concluded that the hedges are 100% effec-
tive under FAS 133, because the critical terms (including:
notional amount, maturity date, interest 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 corresponding 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.

Non-hedge Contracts
We use gold lease rate swaps as described in note 5. The val-
uation of gold lease rate swaps is impacted by market US
dollar interest rates. Our non-hedge pay-ﬁxed swap posi-
tion 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$586 million, A$2,863 million,
and ZAR46 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 over the next
four years. Hedged items are identiﬁed as the ﬁrst stated
quantity of dollars of forecasted expenditures in a future
month. For a C$533 million and A$2,776 and ZAR46 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$53 million and A$87 million portions, prospec-
tive and retrospective hedge effectiveness is assessed using
the hypothetical derivative method under FAS 133. The
prospective test involves comparing the effect of a theoreti-
cal shift in forward exchange rates on the fair value of both
the actual and hypothetical derivative. 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

Barrick Financial Report 2006

Notes to Consolidated Financial Statements (cid:1) 111

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 3,754 thousand barrels of
diesel fuel and 18 million gallons of propane have been des-
ignated against forecasted purchases of the commodities for
expected consumption at our mining operations. The con-
tracts act as a hedge of the impact of variability in market
prices on the cost of future commodity purchases over the
next seven years. 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 deriva-
tive 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 deriva-
tive caused by actual historic changes in commodity prices
over the last three years. The retrospective test involves com-
paring the effect of historic changes in commodity prices
each period on the fair value of both the actual and hypo-
thetical derivative using a dollar offset approach. The effec-
tive portion of changes in fair value of the commodity
contracts 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.

The terms of a series of copper-linked notes result in an
embedded ﬁxed-price forward copper sales contract that
meets the deﬁnition of a derivative and must be separately
accounted for. The resulting copper derivative has been des-
ignated against future copper sales as a cash ﬂow hedge of
the variability in market prices on those future sales.
Hedged items are identiﬁed as the ﬁrst stated quantity of
pounds of forecasted sales in a future month. Prospective
hedge effectiveness is assessed using a dollar offset method.
The prospective assessment involves comparing the effect of
theoretical shifts in forward copper prices on the fair value
of both the actual hedging derivative and a hypothetical
derivative. The retrospective assessment involves comparing

the effect of historic changes in copper prices each period
on the fair value of both the actual and hypothetical deriva-
tive. The effective portion of changes in fair value of the cop-
per contracts is recorded in OCI until the forecasted copper
sale impacts 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 contract are reclassiﬁed to earnings immediately.
The identiﬁcation of which commodity contracts are asso-
ciated 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 suppliers. Despite not qualifying
as an accounting hedge, the contracts protect the Company
to a signiﬁcant extent from the effects of oil price changes.

Derivative Assets and Liabilities

At January 1
Acquired with Placer Dome
Derivatives settled (inﬂow) outﬂow

Operating activities
Financing activities
Change in fair value of:

Non-hedge derivatives
Cash ﬂow hedges
Effective portion
Ineffective portion
Share purchase warrants
Fair value hedges

2006

2005

$ 204
(1,707)

(184)
1,840

$ 359
–
–
(183)
–

(3)

17
3
–
8

23
1
5
(5)

At December 31

$ 178

$ 2041

Classiﬁcation:
Other current assets
Other assets
Other current liabilities
Other long-term obligations

$ 201
209
(82)
(150)

$ 128
177
(42)
(59)

$ 178

$ 204

Derivative liabilities assumed in Placer acquisition
Other derivative assets and liabilities

(160)
338

–
204

$ 178

$ 204

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 $5 million at
December 31, 2006.

112 (cid:1) Notes to Consolidated Financial Statements

Barrick Financial Report 2006

Non-hedge Derivative Gains (Losses)1

For the years ended December 31

2006

2005

2004

Non-hedge derivatives
Commodity contracts
Currency contracts
Interest rate contracts
Share purchase warrants

Hedge ineffectiveness

Ongoing hedge inefﬁciency
Due to changes in timing

of hedged items

$ (11)
–
8
–

(3)

–

$ 4
3
2
(5)

$ (9)
(4)
16
–

–

$ 6

$ 5

1. Non-hedge derivative gains (losses) are classified as a component of other

(income) expense.

Cash Flow Hedge Gains (Losses) in OCI

Commodity
price hedges

Currency hedges

Interest rate hedges

Gold/
silver

Copper

Fuel

Operating
costs

Administration
costs

Capital
expenditures

Cash
balances

Long-term
debt

Total

$ –

$ (1)

$ 219

$ 25

$ 36

$17

$ (8)

$ 288

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

At December 31, 2005
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

–

(148)

165

–

(4)

–

117

(96)

–

240

(38)

(10)

(100)

–

(1)

(16)

–

102

137

(84)

–

(11)

–

(16)

–

(2)

(14)

–

$ 14

(5)

(2)1

(4)

(1)1

(4)1

–

(20)

147

(19)

–

(6)

–

(2)

–

(132)

(2)

(25)

301

–

(134)

(1)

(18)

189

–

$ 39

$ (3)

$ (17)

$ 283

At December 31, 2006

$ 17

$ 57

$ 21

$ 155

Hedge gains/losses classiﬁed within

Portion of hedge gain (loss) expected

to affect 2007 earnings2

Gold
sales

Copper
sales

Cost of
sales

Administration

Amortization

Interest
expense

Interest
cost

$ 2

$ 19

$ 12

$ 102

$ 10

$ 2

$ (3)

$ (1)

$ 143

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, 2006.

Barrick Financial Report 2006

Notes to Consolidated Financial Statements (cid:1) 113

e) 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 consis-
tent 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 inter-
nally developed models that use market-based or independ-
ent 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

2006

Carrying
amount

Estimated
fair
value

Carrying
amount

2005

Estimated
fair
value

Financial assets
Cash and equivalents1
Accounts receivable1
Available-for-sale securities2
Equity-method investments3
Derivative assets4

Financial liabilities

Accounts payable1
Long-term debt5
Derivative liabilities4
Restricted share units6
Deferred share units6

$ 3,043
234
646
204
410

$ 3,043
234
646
212
410

$ 1,037
54
62
138
305

$ 1,037
54
62
140
305

$ 4,537

$ 4,545

$ 1,596

$ 1,598

$ 686
3,957
232
42
2

$ 686
3,897
232
42
2

$ 386
1,801
101
17
1

$ 386
1,827
101
17
1

$ 4,919

$ 4,859

$ 2,306

$ 2,332

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. Excludes the investment in Atacama Pty for which there is
no readily determinable fair value.

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 share price.

f) 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 receiv-
able, credit risk represents the carrying amount on the bal-
ance sheet, net of any overdraft positions.

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 coun-
terparty, 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.

Location of credit risk is determined by physical location of
the bank branch, customer or counterparty.

Credit Quality of Financial Assets

At December 31, 2006

S&P Credit rating

AA – or
higher

A – or
higher

B to BBB

Total

Cash and equivalents
Derivatives1
Accounts receivable

$ 3,069
291
–

$ 21
88
–

4
–
234

$ 3,094
379
234

$ 3,360

$109

$ 238

$ 3,707

Number of counterparties2

Largest counterparty (%)

34%

65%

–

Concentrations of Credit Risk

At December 31, 2006

Cash and equivalents
Derivatives1
Accounts receivable

United
States

$ 2,479
159
23

Canada

$ 513
136
27

Other
Inter-
national

Total

$ 102
84
184

$ 3,094
379
234

$ 2,661

$ 676

$ 370

$ 3,707

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.

114 (cid:1) Notes to Consolidated Financial Statements

Barrick Financial Report 2006

g) 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 establishing 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 settle-
ment 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.

20 (cid:1) Asset Retirement Obligations

Asset Retirement Obligations (AROs)

At January 1
AROs acquired with Placer Dome
AROs arising in the period
Impact of revisions to expected cash ﬂows
Revisions to carrying amount of assets
Recorded in earnings1

Settlements

Cash payments
Settlement gains

AROs reclassiﬁed under “Liabilities of

discontinued operations”

Accretion

At December 31
Current portion

2006

2005

$ 446
387
27

$ 367
–
47

(7)
53

(32)
(4)

(16)
39

893
(50)

29
15

(30)
(3)

–
21

446
(37)

$ 843

$ 409

1. In 2006, we recognized an increase of $37 million for a change in estimate of
the ARO at the Nickel Plate property in British Columbia, Canada. The adjust-
ment was made on receipt of an environmental study that indicated a require-
ment to treat ground water for an extended period of time. The increase was
recorded as a component of other expense (note 7d).

AROs arise from the acquisition, development, construction
and normal operation of mining property, plant and equip-
ment, due to government controls and regulations that pro-
tect the environment on the closure and reclamation of
mining properties. The major parts of the carrying amount
of AROs relate to tailings and heap leach pad closure/reha-
bilitation; demolition of buildings/mine facilities; ongoing
water treatment; and ongoing care and maintenance of
closed mines. 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 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 cor-
responding change in the life of mine plan; changing ore
characteristics can impact required environmental protec-
tion 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 discount
factor whereas when expected cash ﬂows decrease the addi-
tional 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 adjust-
ment 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 (accretion) calculated by applying the dis-
count 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 reme-
diation 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 remediation costs
that are not AROs as deﬁned by FAS 143 are expensed as
incurred (see note 7).

Barrick Financial Report 2006

Notes to Consolidated Financial Statements (cid:1) 115

21 (cid:1) Other Non-current Liabilities

Sources of Deferred Income Tax Assets and Liabilities

At December 31

Pension beneﬁts (note 26)
Other post-retirement beneﬁts (note 26)
Derivative liabilities (note 19d)
Restricted share units (note 25b)
Other

2006

2005

85
33
150
42
126

54
28
59
16
51

$ 436

$ 208

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

22 (cid:1) Deferred Income Taxes

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; interpreta-
tions of relevant tax legislation; tax planning strategies;
estimates of the tax bases of assets and liabilities; and the
deductibility of expenditures 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.

2006

2005

$ 798
30
198
303
333
95
40
3

1,800
(658)

1,142

(1,377)
(9)
(26)

$ 252
42
135
175
297
57
5
11

974
(656)

318

(230)
(61)
–

$ (270)

$ 27

$ 528
(798)

$ 141
(114)

$ (270)

$ 27

No
expiry
date

Total

Valuation allowances

Net deferred tax assets
Deferred tax liabilities

Property, plant and equipment
Derivative instruments
Other

Classiﬁcation:

Non-current assets (note 17)
Non-current liabilities

Expiry Dates of Tax Losses and AMT Credits

2007

2008

2009

2010

2011+

Tax losses1
Canada
Australia
Barbados
Chile
Tanzania
U.S.
Other

$ 5
–
–
–
–
–
–

$ 3 $ 5
–
–
–
–
–
5

–
–
–
–
–
–

$ 1 $1,490 $

–
–
–
–
–
6

–
619
–
–
162
24

– $1,504
241
619
706
98
162
52

241
–
706
98
–
17

$ 5

$ 3 $ 10 $ 7 $2,295 $1,062 $3,382

AMT credits2

–

– $ 198 $ 198

1. Represents the gross amount of tax loss carry forwards translated at closing

exchange rates at December 31, 2006.

2. Represents the amounts deductible against future taxes payable in years
when taxes payable exceed “minimum tax” as defined by United States tax
legislation.

116 (cid:1) Notes to Consolidated Financial Statements

Barrick Financial Report 2006

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 valuation
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 realized. The main
factors considered are:
(cid:1) historic and expected future levels of future taxable income;
(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 circum-
stances 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 deferred income tax asset totaling $428 million has
been recorded in Canada. This deferred tax asset primarily
arose due to mark-to-market losses recorded for acquired
Placer Dome derivative instruments. Projections of various
sources of income indicate that the realizability of this
deferred tax asset is more likely than not, and consequently
no valuation allowance has been set up relating to this
deferred tax asset at December 31, 2006.

A valuation allowance of $211 million has been set up
against certain deferred tax assets in the United States at
December 31, 2006 (2005: $209 million). The majority of
this valuation allowance relates to AMT credits which have
an unlimited carry forward period. A valuation allowance
of $217 million has been set up against deferred tax assets
in Tanzania at December 31, 2006 (2005: $204 million).
A valuation allowance was historically recorded against
these deferred tax assets due to uncertainty as to the ability
to realize the assets. Increasing levels of future taxable
income due to higher gold selling prices and other factors
and circumstances may result in an adjustment to these val-
uation allowances in future periods. A valuation allowance
of $110 million has been set up at December 31, 2006 (2005:
$124 million) against tax loss carry forwards in Chile that
exist in entities that have no present sources of income.

Source of Changes in Deferred Tax Balances

For the years ended December 31

2006

2005

2004

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

Tax rate changes
Release of beginning-of-year

valuation allowances

Outcome of tax uncertainties

Intraperiod allocation to:

Income before income taxes
Acquisition of Placer Dome
OCI

Balance sheet reclassiﬁcations

$ (1,111)
128
546
52
(12)

$ 30
(69)
38
(34)
8

$ (86)
(21)
93
(4)
(5)

(397)

$ (27)

$ (23)

31
(12)

53
–

(5)
–

(32)
–

(81)
–

(5)
(120)

(325)

$ (64)

$ (229)

109
(432)
(2)
28

$ (30)
–
(34)
(5)

$ (225)
–
(4)
13

(297)

$ (69)

$ (216)

1. Relates to changes in tax status in Australia (note 8).

23 (cid:1) Capital Stock

a) Common Shares
Our authorized capital stock includes an unlimited number
of common shares (issued 864,194,770 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).

We repurchased 4.47 million common shares in 2004
for $95 million, at an average cost of $21.20 per share. This
resulted in a reduction of common share capital by $35 mil-
lion and a $60 million charge (being the difference between
the repurchase cost and the average historic book value of
shares repurchased) to retained earnings.

In 2006, we declared and paid dividends in US dollars
totaling $0.22 per share ($191 million) (2005: $0.22 per
share, $118 million; 2004: $0.22 per share, $118 million).

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 common 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 interest in the Hemlo and Eskay
Creek Mines.

Barrick Financial Report 2006

Notes to Consolidated Financial Statements (cid:1) 117

At December 31, 2006, 1.4 million (2005 – 1.4 million)
BGI exchangeable shares were outstanding, which are equiv-
alent to 0.7 million Barrick common shares (2005 – 0.7 mil-
lion 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 exchange-
able shares outstanding, we are required to present summary
consolidated ﬁnancial information relating to BGI.

Summarized Financial Information for BGI

For the years ended December 31

2006

2005

2004

At December 31

Assets

Current assets
Non-current assets

Liabilities and shareholders’ equity

Other current liabilities
Intercompany notes payable
Other long-term liabilities
Deferred income tax liabilities
Deﬁcit

2006

2005

$ 112
50

$ 119
88

$ 162

$ 207

25
387
80
(15)
(315)

25
390
55
–
(263)

$ 162

$ 207

Total revenues and other income
Less: costs and expenses1

$ 233
215

$ 181
186

$ 216
287

1. 2006 includes a $37 million increase in the ARO at the Nickel Plate property

(see note 20).

Income (loss) before taxes

$ 18

(5)

$ (71)

Net income (loss)

$ 33

$ 21

$ (41)

24 (cid:1) Other Comprehensive Income (Loss) (“OCI”)

Accumulated OCI at January 1

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 pension liability, net of tax of $nil, $nil, $nil

Other comprehensive income (loss) for the period:

Changes in fair value of cash ﬂow hedges
Changes in fair value of investments
Currency translation adjustments
Pension plans and other post-retirement beneﬁts:

Adjustments to minimum pension liability prior to adoption of FAS 158

FAS 158 adjustments (note 26):

Elimination of minimum pension liability
Net actuarial loss
Transition obligation

Less: reclassiﬁcation adjustments for gains/losses recorded in earnings:

Transfers of cash ﬂow hedge (gains) losses to earnings:

On recording hedged items in earnings
Hedge ineffectiveness due to changes in timing of hedged items

Investments:

Other than temporary impairment charges
Gains realized on sale

Other comprehensive income (loss), before tax
Income tax recovery (expense) related to OCI

Other comprehensive income (loss), net of tax

Accumulated OCI at December 31

Cash ﬂow hedge gains, net of tax of $60, $61, $95
Investments, net of tax of $7, $nil, $nil
Currency translation adjustments, net of tax of $nil, $nil, $nil
Pension plans and other post-retirement beneﬁts, net of tax of $4, $nil, $nil

2006

2005

2004

$ 128
12
(143)
(28)

$ 206
21
(146)
(12)

$ 189
25
(147)
(7)

$ (31)

$ 69

$ 60

17
43
–

13
(9)
(2)

77
–

4
(6)

152
(2)

23
(8)
3

147
(3)
1

(16)

(5)

–
–
–

(134)
(1)

16
(17)

(134)
34

–
–
–

(132)
(2)

5
(6)

5
4

$ 150

$ (100)

223
46
(143)
(7)

128
12
(143)
(28)

206
21
(146)
(12)

$ 119

$ (31)

$ 69

118 (cid:1) Notes to Consolidated Financial Statements

Barrick Financial Report 2006

25 (cid:1) Stock-based Compensation

a) Stock Options
Under Barrick’s stock option plan certain ofﬁcers and key
employees of the Corporation may purchase common
shares at an exercise price that is equal to the closing share
price on the day before the grant of the option. Stock
options 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

Employee Stock Option Activity (Number of Shares in Millions)

C$ options
At January 1
Granted
Issued on acquisition of Placer Dome
Exercised
Forfeited
Cancelled/expired

At December 31

US$ options
At January 1
Granted
Issued on acquisition of Placer Dome
Exercised
Forfeited
Cancelled/expired

At December 31

2006, 13 million (2005: 12 million; 2004: 13 million) com-
mon shares, in addition to those currently outstanding, were
available for granting options.

Total recorded compensation cost relating to stock
options was $27 million in 2006. Total intrinsic value relat-
ing to options exercised in 2006 was $27 million (2005:
$22 million; 2004: $12 million).

2006

2005

2004

Average
price

14.7
–
1.7
(2.4)
(0.2)
(1.9)

11.9

6.9
1.1
1.0
(0.9)
(0.4)
–

7.7

$ 28
$ –
$ 34
$ 26
$ 27
$ 40

$ 28

$ 24
$ 30
$ 19
$ 21
$ 24
$ 25

$ 25

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)

$ 27
$ 28
$
–
$ 25
$ 26
$ 31

19.4

$ 28

2.2
4.9
–
(1.0)
–
(0.2)

$ 19
$ 24
$
–
$ 15
–
$ 32

5.9

$ 22

Stock Options Outstanding (Number of Shares in Millions)

Range of exercise prices

Outstanding

Exercisable

Average
price

Average
life (years)

Intrinsic
value1
($ millions)

Average
price

Intrinsic
value1
($ millions)

C$ options
$ 22 – $ 27
$ 28 – $ 31
$ 32 – $ 43

US$ options
$ 9 – $ 19
$ 20 – $ 27
$ 28 – $ 37

4.9
5.6
1.4

11.9

0.3
6.2
1.2

7.7

$ 24
$ 29
$ 36

$ 28

$ 12
$ 24
$ 30

$ 25

6
6
1

6
6
10

$ 57
37
–

$ 94

$ 5
42
1

$ 48

4.8
4.5
1.3

10.6

0.2
2.7
0.1

3.0

24
29
36

12
23
28

$ 55
30
–

$ 85

$ 5
20
–

$ 25

1. Based on the closing market share price on December 31, 2006 of C$35.85 and US$30.70.

Barrick Financial Report 2006

Notes to Consolidated Financial Statements (cid:1) 119

Option Information

For the years ended December 31
(per share and per option amounts in dollars)

Valuation assumptions
Expected term (years)
Expected volatility2
Weighted average expected volatility2
Expected dividend yield
Risk-free interest rate2

2006

2005

Lattice1,2
4.5–5
30%–38%
31.6%
0.7%–0.9%
4.3%–5.1%

Black-Scholes1
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%

2004

Black-Scholes
5
30%
n/a
1.0%
3.8%

Options granted (in millions)3
Weighted average fair value per option

1.1
9.42

1.1
7.30

1.0
$ 8.13

5.7
$ 6.87

1. Different assumptions were used for the multiple stock option grants during the year.
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 these stock option grants.

3. Excludes 2.7 million fully vested options issued on the acquisition of Placer Dome.

We changed the model used to value stock option grants
from the Black-Scholes model to the Lattice valuation
model for stock options granted after September 30, 2005.
We believe the Lattice valuation model provides a more rep-
resentative fair value because it incorporates more attrib-
utes of stock options such as employee turnover and
voluntary exercise patterns of option holders. For options
granted before September 30, 2005, fair value was deter-
mined using the Black-Scholes method. The expected
volatility assumptions have been developed taking into con-
sideration 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 forfei-
ture rate is estimated based on historical 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 val-
uation 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, 2006, there was $39 million (2005:
$56 million; 2004: $69 million) of total unrecognized com-
pensation cost relating to unvested stock options. We expect
to recognize this cost over a weighted average period of
2 years (2005: 2 years; 2004: 2 years).

For years prior to 2006, we utilized the intrinsic value
method of accounting for stock options, which resulted in
no compensation expense. If compensation expense had
been determined in accordance with the fair value provisions
of SFAS No. 123 pro-forma net income and net income per
share would have been as follows:

Stock Option Expense

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

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 forma1

1. Basic and diluted.

2006

2005

401
(26)

375

248
(29)

219

$ 0.75
$ 0.75

$ 0.47
$ 0.46

$ 0.70

$ 0.41

120 (cid:1) Notes to Consolidated Financial Statements

Barrick Financial Report 2006

b) Restricted Share Units (RSUs) and

Deferred Share Units (DSUs)

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 RSU has a value equal to one Barrick com-
mon 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 common
shares. We expect that the volume of options granted each
year will decline compared to historical volumes, with a
greater number of RSUs issued instead.

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 compensa-
tion. Compensation expense for 2006 was $6 million (2005:
$2 million; 2004: $4 million). At December 31, 2006, the
weighted average remaining contractual life of RSUs was
2.5 years.

Under our DSU plan, Directors must receive a speci-
ﬁed portion 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

DSUs
(thousands)

Fair
value
(millions)

RSUs
(thousands)

Fair
value
(millions)

At December 31, 2003

Settled
Granted
Forfeited
Credits for dividends
Change in value

At December 31, 2004

Settled
Forfeited
Granted
Converted to stock options
Credits for dividends
Change in value

At December 31, 2005

Settled
Forfeited
Granted1
Converted to stock options
Credits for dividends
Change in value

At December 31, 2006

8
–
23
–
–
–

31
(3)
–
19
–
–
–

47
–
–
22
–
–
–

$ 0.2
–
0.5
–
–
–

$ 0.7
(0.1)
–
0.5
–
–
0.3

$ 1.4
–
–
0.7
–
–
–

452
(293)
131
(58)
3
–

235
–
(38)
415
(3)
2
–

611
(82)
(58)
893
(18)
8
–

$ 10.4
(7.3)
3.1
(1.3)
0.1
0.6

$ 5.6
–
(0.9)
11.1
(0.1)
0.1
0.6

$ 16.4
(2.5)
(1.6)
27
(0.5)
0.2
2.6

$ 2.1

1,354

$ 41.6

1. In January 2006, under our RSU plan, 18,112 restricted share units were con-

verted to 72,448 stock options, and 9,395 units were forfeited.

26 (cid:1) Post-retirement Beneﬁts

a) Deﬁned Contribution Pension Plans
Certain employees take part in deﬁned contribution em-
ployee beneﬁt plans. We also have a retirement plan for cer-
tain ofﬁcers of the Company, under which we contribute
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 $36 million in 2006,
$20 million in 2005 and $19 million in 2004.

b) Deﬁned Beneﬁt Pension Plans
We have qualiﬁed deﬁned beneﬁt pension plans that cover
certain of our United States, Canadian and Australian
employees and provide beneﬁts based on employees’ years
of service. Through the acquisition of Placer Dome, we
acquired pension plans in the United States, Canada and
Australia. Our policy is to fund the amounts necessary on an
actuarial basis to provide enough assets to meet the beneﬁts
payable to plan members. Independent trustees administer
assets of the plans, which are invested mainly in ﬁxed-
income and equity securities. On December 31, 2004, one of
our qualiﬁed deﬁned beneﬁt plans was amended to freeze
beneﬁt accruals for all employees, resulting in a curtailment
gain of $2 million. On January 31, 2006, actuarial assump-
tions were amended for one of our qualiﬁed deﬁned beneﬁt

Barrick Financial Report 2006

Notes to Consolidated Financial Statements (cid:1) 121

plans in Canada; no curtailment gain or loss resulted. On
June 30, 2006, one of our plans in Canada was partially
wound-up; no curtailment gain or loss resulted. On
December 31, 2006, one of our qualiﬁed deﬁned beneﬁt
plans was amended to freeze beneﬁts in the United States
accruals for all employees, resulting in a curtailment gain of
$8 million.

As well as the qualiﬁed plans, 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 $21 million in 2006 (2005:
$22 million), and is recorded in our consolidated 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.

Pension Expense (Credit)

For the years ended December 31

2006

2005

2004

Projected Beneﬁt Obligation (PBO)

For the years ended December 31

Balance at January 1

Increase for plans assumed on acquisition of

Placer Dome

Service cost
Interest cost
Actuarial (gains) losses
Beneﬁts paid
Curtailments

Balance at December 31

Funded status1
Actuarial losses

Net beneﬁt liability recorded

ABO 2,3

2006

2005

$ 224

$ 218

191
4
22
(7)
(37)
(8)

–
–
13
17
(24)
–

$ 389

$ 224

$ (88)
n/a

$ (58)
29

n/a

$ (29)

$ 386

$ 222

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 $21 million at December 31,
2006). In the year ending December 31, 2007, we do not expect to make any
further contributions.

2. For 2006, we used a measurement date of December 31, 2006 to calculate

accumulated benefit obligations.

3. Represents the accumulated benefit obligation (“ABO”) for all plans.
The ABO for plans where the PBO exceeds the fair value of plan assets was
$110 million (2005: $222 million).

Expected return on plan assets
Service cost
Interest cost
Actuarial losses
Curtailment gains

$ (20)
4
22
1
(8)

$ (11)
–
12
–
–

$ (11)
–
12
1
(2)

(1)

–

Pension Plan Assets/Liabilities

At December 31

Non-current assets
Current liabilities
Non-current liabilities
Other comprehensive income1

2006

5
(8)
(85)
6

$ (82)

c) Pension Plan Information

Fair Value of Plan Assets

1. Amounts represent actuarial losses.

For the years ended December 31

2006

2005

2004

Balance at January 1
Increase for plans assumed on
acquisition of Placer Dome

Actual return on plan assets
Company contributions
Beneﬁts paid

$ 166

$ 170

$ 166

127
35
10
(37)

–
10
10
(24)

–
14
6
(16)

Balance at December 31

$ 301

$ 166

$ 170

The projected beneﬁt obligation and fair value of plan assets
for pension plans with a projected beneﬁt obligation in
excess of plan assets at December 31, 2006 and 2005 were
as follows:

For the years ended December 31

Projected beneﬁt obligation, end of year
Fair value of plan assets, end of year

2006

2005

$ 111
$ 62

$ 224
$ 166

At December 31

2006

2005

Composition of plan assets:

Equity securities
Debt securities
Real estate
Other

Target

Actual

60% 59%–63% $ 180
106
40% 23%–41%
9
3%–9%
6
2%–9%

–
–

$ 81
85
–
–

100%

100% $ 301

$ 166

122 (cid:1) Notes to Consolidated Financial Statements

Barrick Financial Report 2006

The projected beneﬁt obligation and fair value of plan assets
for pension plans with an accumulated beneﬁt obligation
in excess of plan assets at December 31, 2006 and 2005 were
as follows:

For the years ended December 31

Projected beneﬁt obligation, end of year
Accumulated beneﬁt obligation, end of year
Fair value of plan assets, end of year

2006

2005

$ 111
$ 110
$ 62

$ 224
$ 222
$ 166

Effect of Adopting FAS 158
We adopted provisions of FAS 158 in 2006 (see note 2e).
FAS 158 requires employers to fully recognize the obliga-
tions for deﬁned beneﬁt pension and other post-retirement
plans in their ﬁnancial statements; past standards only
required note disclosure. FAS 158 requires recognition of
the funded status of a beneﬁt plan on the balance sheet,
which is measured as the difference between the fair value
of plan assets and the beneﬁt obligation, as at the ﬁscal year-
end. For pension plans, the beneﬁt obligation is the pro-
jected beneﬁt obligation; for other post-retirement beneﬁts,
the beneﬁt obligation is the accumulated post-retirement
beneﬁt obligation.

For the years ended December 31, 20061

Pre-
FAS 158

Adjust-
ments

Post-
FAS 158

Liability for plans
Pension plans
Other post-retirement beneﬁts
Additional minimum liability2

$ 82
31
13

$ 6
5
(13)

$ 88
36
–

Total recognized beneﬁt liability

$ 126

$ (2)

$ 124

Liability for plans

Net actuarial loss
Transition obligation

–
–

–

$ 9
2

9
2

$ 11

1. Includes incremental effect for other post-retirement benefits.
2. Elimination of historically recorded amounts in OCI.

Expected Future Beneﬁt Payments

For the years ending December 31

2007
2008
2009
2010
2011
2012 – 2016

$ 33
28
27
36
27
$ 134

d) Actuarial Assumptions

For the years ended December 31

2006

2005

2004

Discount rate1

Beneﬁt obligation
Pension cost

Return on plan assets1
Wage increases

4.40%–5.90% 5.50% 5.50%
4.40%-5.90% 5.50% 6.25%
7.00%–7.25% 7.00% 7.00%
3.5%–5.00% 5.00% 5.00%

1. Effect of a one-percent change: Discount rate: $33 million decrease in ABO
and $2 million increase in pension cost; Return on plan assets: $3 million
decrease in pension cost.

Pension plan assets, which consist primarily of ﬁxed-
income and equity securities, are valued using current mar-
ket quotations. Plan obligations and the annual pension
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 assump-
tions 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 available
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-representative 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 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

Barrick Financial Report 2006

Notes to Consolidated Financial Statements (cid:1) 123

Other Post-retirement Assets/Liabilities

For the year ended December 31

Current liability
Non-current liability
Accumulated other comprehensive income

2006

$ (3)
(33)
5

$ (31)

Amounts recognized in accumulated other comprehensive
income consist of:1

For the year ended December 31

Net actuarial loss (gain)
Transition obligation (asset)

2006

$ 3
2

$ 5

1. The estimated amounts that will be amortized into net periodic benefit cost

in 2007.

We have assumed a health care cost trend of 10% in 2007,
decreasing ratability to 5% in 2012 and thereafter. The
assumed health care cost trend had a minimal effect on the
amounts reported. A one percentage point change in the
assumed health care cost trend rate at December 31, 2006
would have increased the post-retirement obligation by
$4 million or decreased the post-retirement beneﬁt obliga-
tion by $3 million and would have had no signiﬁcant effect
on the beneﬁt expense for 2006.

Expected Future Beneﬁt Payments

For the years ending December 31

2007
2008
2009
2010
2012
2012 – 2016

$ 3
3
3
3
3
14

investments reﬂect the widely accepted capital market prin-
ciple that assets with higher volatility generate a greater
return over the long run. Current market factors such as
inﬂation and 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 inﬂa-
tion rates.

e) Other Post-retirement Beneﬁts
We provide post-retirement medical, dental, and life insur-
ance beneﬁts to certain employees. We use the corridor
approach in the accounting for post-retirement beneﬁts.
Actuarial gains and losses resulting from variances between
actual results and economic estimates or actuarial assump-
tions are deferred and amortized over the average remain-
ing life expectancy of participants when the net gains or
losses exceed 10% of the accumulated post-retirement
beneﬁt obligation.