A New Era in GoldGold Barrick Gold Corporation Annual Report 2009 Gold surged to new highs in 2009 supported by strong investment demand and a shift by Central Banks to become net purchasers as gold re-emerges as an important asset class. 4 Message from the Chairman 7 Message from the President and CEO 10 Exceptional Gold Leverage 12 Operations 15 Projects in Construction 20 Reserve and Resource Development 22 Responsible Mining 28 Management’s Discussion and Analysis 96 Financial Statements 100 Notes to Consolidated Financial Statements 155 Mineral Reserves and Resources 163 Corporate Governance and Committees of the Board 164 Shareholder Information 166 Board of Directors and Senior Officers Barrick Gold Exceptional leverage to higher gold prices with the industry’s largest fully unhedged production and reserves and with new low cost production from its next generation of world-class mines. FINANCIAL HIGHLIGHTS REALIZED GOLD PRICES1 CASH MARGINS1 (US dollars per ounce) (US dollars per ounce) ADJUSTED OPERATING CASH FLOW1 (US dollars millions) ADJUSTED NET INCOME1 (US dollars millions) 985 872 621 519 429 2,899 2,254 1,810 1,661 276 1,768 1,036 2007 2008 2009 2007 2008 2009 2007 2008 2009 2007 2008 2009 Record realized price in 2009 Record cash margins in 2009 Record adjusted operating cash flow in 2009 Record adjusted net income in 2009 Barrick reported a record realized gold price, cash margins, adjusted operating cash flow and adjusted net income in 2009. (in millions of US dollars, except per share data) (US GAAP basis) Sales Net income (loss) per share Adjusted net income1 per share Operating cash flow Adjusted operating cash flow1 Cash and equivalents Dividends per share Operating Highlights Gold production (000s oz) Average realized gold price per ounce1 Total cash costs per ounce1 Net cash costs per ounce1 Copper production (M lbs) Average realized copper price per pound1 Total cash costs per pound1 1 Non-GAAP measure – see pages 85–90 of the 2009 Financial Report. 2 2009 8,136 (4,274) (4.73) 1,810 2.00 (2,322) 2,899 2,564 0.40 7,423 985 466 363 393 3.16 1.17 $ $ $ $ $ $ 2008 7,613 785 0.90 1,661 1.90 2,254 2,254 1,437 0.40 7,657 872 443 337 370 3.39 1.19 $ $ $ $ $ $ 2007 6,014 1,119 1.29 1,036 1.19 1,768 1,768 2,207 0.30 8,060 621 345 228 402 3.22 0.82 $ $ $ $ $ $ Exceptional Leverage to Gold Price On Gold Industry’s Largest Fully Unhedged Production and Reserves New Low Cost Production From World-class Projects in Construction Project Development Excellence Built 7 Mines in 5 Years on Schedule Consistent Track Record of Achieving Operating Targets From a Diversified and Balanced Geopolitical Portfolio of Operations History of Reserve Replacement From Consistent Funding in Exploration and Disciplined Acquisitions Unwavering Commitment To Responsible Mining Maintained Listings on Dow Jones Sustainability Indexes Achieved 25% Improvement in Lost-time Injury Rate Financial Strength With Gold Industry’s Only ‘A’ Credit Rating Barrick Annual Report 2009 3 Peter Munk, Founder and Chairman (right) Aaron Regent, President and Chief Executive Officer Message from the Chairman Fellow shareholders, If we look back over the past decade, gold’s performance has been quite exceptional. Virtually no other asset class can claim such a remarkable record and, as such, we have seen gold reassert itself as an increasingly important asset for global investors. In all but one of the past 10 years, gold closed higher than it did the previous year. Over the same period, gold has significantly outpaced the S&P 500. Buyers of all stripes, be they institutional funds, retail investors or even coin collectors poured new money into gold. They were joined by a smattering of central banks, and above all, an international group of professional wealth managers, seeking to protect the value of their assets, thus pushing investment demand for gold to ever-higher levels. After last year’s business failures, which were followed by even more dramatic government bailouts for global banks and insurance companies, we now see sovereign states exposed to the dangers of financial implosion, further undermining confidence in the world’s leading currencies. Governments could only counter the unprecedented economic upheaval of recent years by pumping enormous sums of “rescue” money into their systems – leaving the critical question of repayments to an even more uncertain future. These debt levels, arguably unsustainable, further explain why many informed 44 Message from the Chairman people are questioning the wisdom of holding their assets in currencies exposed to a risk of significant devaluation. Their uncertainty has led to an ever- growing bias towards asset diversification, with a clear preference for gold. The enormous growth in exchange traded funds that hold pure, physical gold is a clear manifestation of this trend. When we consider the nearly universal and continuing concern about the global economy and its prospects, it is difficult not to be optimistic about gold. Whereas some investors, particularly the perennial gold bugs, predict a doubling, or even a tripling, of the current gold price, we at Barrick are expecting more realistic increases, similar to those we experienced over the past decade. While daily trading activities and unforeseen political and economic factors will undoubtedly cause short- term swings in the gold market, the fundamental trend is relatively predictable. This is because, in both of the two most likely economic scenarios – a steady, universal recovery, or a sluggish and deteriorating global economy – the fundamental reasons to buy gold remain valid. In the first case, concerns about inflation will likely emerge, spurring gold buying to higher levels; in the second, concerns about currencies will increasingly encourage more purchasing of gold. In both scenarios, the memory of recent events (talk of major economic upheaval and informed comments referring to the near collapse of the financial system), will remain longer with those whose occupation is to conserve wealth (whether their own or as managers) than in any of the previous post-war recessions. Likewise, the fact that gold performed so strongly in all major currencies during an entire decade, and outperformed virtually all other asset classes, will not be forgotten quickly. Of course gold, like any other commodity, depends on supply as well as demand. And the supply side of the equation also encourages an optimistic outlook. In contrast to growing investment demand, gold supply from mines peaked in 2001, and has since experienced a declining trend. This reflects the increasing difficulty of finding, permitting and building mines. Moreover, the same financial market upheaval that is driving gold prices higher is also making it more difficult to finance new mine developments, especially considering the substantially higher costs of new projects today. While, on balance, I remain somewhat pessimistic about the short-term health of the global economy, I am optimistic about Barrick’s prospects. In the midst of a new era for gold, we are the gold industry leader. In 2009, we translated our bullish outlook into action, by eliminating all of our remaining Gold Hedges. As a result, Barrick offers shareholders unique leverage to gold with both the largest production and largest reserves in the industry. We continue to believe that our shares offer investors an exceptional opportunity to participate in the gold market relative to our peers or to the gold exchange traded funds. Over the long term, Barrick management – with an excellent track record of acquisition-led growth and major new mine development – has proven its ability to ensure Barrick shares outperform spot gold. Despite the multi-billion dollar cost of fully eliminating our Gold Hedges during 2009, we have maintained our ‘A’ rated balance sheet, the only one in our industry. Conservative fiscal management has always contributed to our financial strength and has defined Barrick since its inception. Our financial capacity is that much more Message from the Chairman | Barrick Annual Report 2009 5 Message from the Chairman 3,800 3,000 2,200 1,400 600 important, considering we have a large pipeline of economically viable projects to provide us with organic growth – projects that will continue to lower our cash cost profile. Two of these projects, Buzwagi in Tanzania and Cortez Hills in Nevada, are now in production. Equally, both the Pueblo Viejo project in the Dominican Republic, and the Pascua-Lama project in Chile and Argentina, are in construction and remain on track and on budget. When complete, these world-class, long-life mines will add low cost production to our portfolio. On a personal and sombre level, our optimism for the future, evolving during 2009, was cruelly tempered late last year by a personal tragedy for all of us at Barrick. In December 2009, Greg Wilkins, my dear friend and colleague of over 25 years, passed away following a courageous battle with cancer. As our President and CEO, Greg, with his bold leadership, strategic vision and an unyielding passion for success, helped to cement Barrick’s position as the global leader in our industry. Since the day we started Barrick, Greg remained focused on our primary commitment: to deliver strong performance and returns for our shareholders. As Barrick’s Founder and Chairman, I can assure you that we shall carry on this tradition. I would also like to extend my gratitude and appreciation to Peter Godsoe, who retires from our Board of Directors this year. Peter has been a member of the Board since 2004 and his wise and level-headed counsel will be greatly missed. Equally, I wish to thank Barrick’s talented and dedicated team of more than 20,000 employees on virtually every continent of the globe, who every day contribute to the success of this great Company in so many ways. Your passion for Barrick and your 66 Message from the Chairman GOLD VS THE S&P 500 1,200 900 600 300 0 00 01 02 03 04 05 06 07 08 09 Gold US$/oz S&P 500 Index commitment to the Company are fully recognized by us and greatly appreciated. In conclusion, I must acknowledge and congratulate Aaron Regent on his first year as our new President and Chief Executive Officer. Over the past year, he has consistently demonstrated the creativity and keen strategic insight we were looking for in a chief executive. As Barrick’s first CEO appointed from outside the Company, Aaron continues to introduce ideas that are creative, innovative and invigorating. He also adds a new and dynamic dimension to our strategic decision- making process. I am absolutely confident that, matched with Barrick’s track record of excellence and our tradition of integrity, Aaron will build exceptional value for shareholders, now and well into the future. Peter Munk Founder and Chairman Message from the President and CEO 2009 was a year of significant change for both the gold industry and for Barrick. After decades of selling gold, central banks became net purchasers, which has helped to reinforce gold’s role as a diversifying asset within investment portfolios. This was further supported by increased investment demand and the accumulation of gold in global exchange traded funds. These factors drove gold prices through the $1,000 per ounce level, setting a new record just above $1,225 per ounce. Many of the conditions that have supported rising gold prices remain. Continued concern about the status of the world’s economies, global currency imbalances and the growth of US dollar reserves, as well as government monetary and fiscal policies, have increased gold’s attractiveness as an investment. In addition, the gold mining industry has struggled to replace and grow production levels. The trend of falling mine supply over the last decade is likely to continue into the foreseeable future. Combined, all of these factors should help ensure a firmly supportive environment for gold prices. It was against this backdrop that Barrick took the dramatic step of eliminating its legacy Gold Hedges to gain full exposure to rising gold prices and minimize any further cost to the Company. At the time this decision was made, a $100 per ounce increase in the gold price would have increased the associated mark- to-market liability of the Gold Hedges by about $300 million. To eliminate the Gold Hedges, we made the difficult decision to issue $4 billion in new equity. This was done with great hesitation. We considered many different options but determined that it was important to eliminate the Gold Hedges in a definitive way, while protecting the balance sheet to preserve the Company’s ability to fund our large, low cost projects currently under construction. As a result of this step and previous initiatives over the last two years, Barrick has eliminated its legacy Gold Hedge position of 9.5 million ounces at a weighted average gold price of approximately $930 per ounce, which is meaningfully below today’s market prices of about $1,100 per ounce (as of March 9, 2010). In addition to eliminating the Gold Hedges, we also made progress on a number of other fronts. Operating results were in line with forecasts. Gold production was 7.4 million ounces at total cash costs of $466 per ounce, or $363 per ounce on a net cash cost basis. We also produced 393 million pounds of copper at total cash costs of $1.17 per pound. This reflects the strength of our diversified portfolio of 26 operating mines around the world. These production results were achieved while maintaining an unwavering commitment to responsible mining practices, which was once again recognized by our inclusion on the Dow Jones Sustainability Indexes. Also, Barrick’s safety performance significantly improved in 2009, with a 25% reduction in our lost- time injury frequency rate. Underpinning our production is the gold industry’s largest reserve base. Through a combination of acquisitions and exploration success, Barrick has consistently grown its reserves in each of the last four years and we achieved this once again in 2009. Today we have gold reserves of about 140 million ounces and just over 93 million ounces of resources. Our track record of converting reserves into producing assets continued in 2009, as we advanced our portfolio of new projects. The Buzwagi mine in Tanzania was completed on time and on budget. Construction of the Cortez Hills project is complete and the site is transitioning into the operating phase. The Cortez property is expected to contribute over one million ounces of gold at attractive total cash costs of between $295 – $315 per ounce in 2010. However, Cortez Hills is currently the subject of a legal action in the US courts which could impact 2010 operating targets. Opponents of the project have sought an injunction to stop operations. The Ninth Circuit Court of Appeals has denied the opponents’ claims in part, but ordered additional environmental analysis on two specific matters and mandated that the District Court decide the extent of appropriate injunctive relief in the interim. We have submitted a motion to the District Court for a limited injunction whereby Barrick would operate under a modified mine plan that would not impact on the matters raised by the Court of Appeals, while at the same time preventing significant economic Message from the President and CEO | Barrick Annual Report 2009 7 Message from the President and CEO hardship to the region. A hearing and a decision from the District Court on an injunction is expected in the second quarter of 2010. In addition, a supplemental Environmental Impact Statement (EIS) that addresses the two issues raised by the Court of Appeals is expected to be completed in the fourth quarter of 2010. Barrick’s 60%-owned Pueblo Viejo project, located in the Dominican Republic, is advancing according to schedule. On a 100% basis, Pueblo Viejo has gold reserves of over 23 million ounces, and in its first full five years of operation, Barrick’s share of annual gold production is expected to be 625,000 – 675,000 ounces at total cash costs of between $250 – $275 per ounce. Construction on the Pascua-Lama project also began in 2009. Pascua-Lama is a large, world-class project with gold reserves of about 18 million ounces and 671 million ounces of silver contained within gold reserves. Once operating, it is expected to produce between 750,000 – 800,000 ounces of gold annually at total cash costs of $20 – $50 per ounce, assuming a $12 per ounce silver price. This makes Pascua-Lama one of the lowest cost gold mines in the world. Altogether, these new mines will add over 2.4 million ounces of production at lower cash costs than our current profile. In addition to these advanced projects, we have a pipeline of next-generation projects which continue to progress well: Cerro Casale, Donlin Creek, Reko Diq and Kabanga. Collectively, our share of reserves and resources at these projects is over 52 million ounces of gold, 20 billion pounds of copper, and almost 1.6 billion pounds of nickel. They provide us with additional leverage to metal prices, the opportunity to deploy capital at attractive rates of return and the potential to further grow our production base. Our financial position at year-end was sound, with about $2.6 billion in cash on hand and a further $1.5 billion undrawn line of credit. Combined with strong operating cash flows, we are well positioned to support our operations, fund our projects and pursue disciplined acquisitions as well. The net results of our efforts were reflected in our 2009 financial results where underlying earnings and cash flows both increased. Adjusted net income was $1.8 billion, an increase of 9% from 2008. This resulted in an adjusted return on equity of 12%. Adjusted cash flow from operations was $2.9 billion, up 29% from 2008. Rising gold prices led to a significant increase in our cash cost margins, which rose to $519 per ounce, or $622 per ounce on a net cash cost basis after deducting copper credits. What We Did in 2009 What We Plan To Do in 2010 - Met production and cash cost targets - Advanced low cost projects on schedule and within budget - Deliver higher production at lower cash costs - Progress Pueblo Viejo, Pascua-Lama and complete Cortez Hills on schedule and on budget - Grew reserves through disciplined acquisitions - Grow the net asset value of the Company and and exploration success - Retained listings on the Dow Jones Sustainability Indexes - Achieved 25% improvement in lost-time injury rate to 0.15 increase metal exposure per share by: - maximizing free cash flow from existing operations - growing reserves and resources - advancing our pipeline of low cost, high-quality projects and - Completed organization review with expected annual - pursuing acquisitions which are accretive to savings of about $50 million - Eliminated all Gold Hedges - Maintained financial strength and the gold industry’s only ‘A’ credit rating shareholder value - Maintain license to operate - Preserve financial strength and the industry’s highest-rated balance sheet - Generated record adjusted net income and cash flow - Continue trend of strong earnings and cash flow generation 88 Message from the President and CEO The progress we made in 2009 has established a solid foundation from which to move the Company forward. With the completion of the Cortez Hills project, our production is anticipated to increase in 2010 at lower cash costs. Barrick’s production base and cash cost profile will be further improved with Pueblo Viejo, expected to begin production late in 2011, and Pascua- Lama, expected in early 2013. Many of our investors have told me they are disappointed with the performance of gold equities relative to the gold price and we share their frustration. Over the last two years, the gold price has risen by roughly 30%, while the benchmark Philadelphia Gold and Silver Index has remained flat. The challenge for Barrick and for our industry is to offer an investment case which is better than owning gold directly. In the case of Barrick I believe we can. We are focused, on a per share basis, on growing the net asset value of Barrick and increasing our leverage to the gold price. This means that even if the gold price doesn’t change, the value of the Company, and our share price, should increase as we continue to create new value. And by increasing our leverage, our shareholders will realize higher returns in a rising gold price environment than those who hold physical gold. While it is imperative that we pursue value creation initiatives, it is also essential that we do so while minimizing the risks inherent in our business to ensure that we are able to operate and build our projects without interruption. To achieve this, we are refining our life-of-mine plans and capital management processes to maximize the free cash flow that we are able to generate, but also to ensure that we are extracting the full economic potential of our mines and operating platforms. One such initiative is the creation of African Barrick Gold (ABG), a new public company that will be listed on the London Stock Exchange. ABG plans to offer around 25% of its equity for purchase by investors, while Barrick retains an ownership position of roughly 75%. ABG will hold Barrick’s four gold mines in Tanzania, as well as our exploration portfolio in that country. ABG will be better positioned to invest in and acquire smaller assets typical of Africa, which would have a negligible impact on Barrick, but could be quite meaningful to the growth profile of this smaller entity. The new company will be better positioned to pursue these opportunities, overseen by a strong Board of Directors with both mining and African experience, and where the value created can be better reflected as a separate public entity. At Barrick, we continue to grow our reserves and resources through a combination of acquisitions and exploration programs. Early in 2010, we agreed to acquire a further 25% interest in the Cerro Casale project. Cerro Casale is one of the world’s largest undeveloped gold and copper deposits, with over 23 million ounces of gold and about six billion pounds of copper. It is also located in Chile, a country with a very attractive mining environment and one familiar to Barrick. Following this acquisition, Barrick holds 75% of the project, and with this increased position, now has control over project parameters and timing. By maximizing the free cash flow and the economic potential of our existing mines, deploying capital at returns greater than our cost of capital, and given our track record of growing reserves and resources and turning those resources into producing mines, Barrick is well positioned to increase its net asset value and its leverage to the gold price for the benefit of our shareholders. In conclusion, I would like to thank all of the people at Barrick who are focused on delivering results in a safe and responsible manner every day. I would also like to thank our shareholders who supported us, particularly as we unwound our legacy Gold Hedges. Finally, I would like to thank the Board of Directors, led by our Founder and Chairman, Peter Munk, for the inspiration, guidance and support they have provided to me and the entire management team. Aaron Regent President and Chief Executive Officer Message from the President and CEO | Barrick Annual Report 2009 9 Exceptional Gold Leverage our advanced, high-quality projects start to contribute substantial new low cost production, beginning with Cortez Hills in Nevada, which is expected to help grow production to 7.6 – 8.0 million ounces of gold in 20101. Cortez Hills will be followed by the Pueblo Viejo project in the Dominican Republic in late 2011 and the Pascua-Lama project in Chile and Argentina in early 2013. Barrick has a proven history of successful mine development, delivering seven mines on schedule in the last five years. Beyond this, we see significant potential in three additional projects: Cerro Casale, Donlin Creek and Reko Diq. These continue to progress well and all have large gold inventories, which provide further development opportunities in what we believe is a supportive environment for gold prices. In 2009, we announced the elimination of our remaining Gold Hedges2 and remain committed to a “no gold hedge policy”. Barrick used the net proceeds from a The 15 kilometer ore conveyor transports crushed material from the Cortez Hills deposit across Crescent Valley to the processing facilities at the existing Cortez mine. Barrick offers investors exceptional leverage to gold prices on the largest unhedged reserves and production in the industry. In 2009, we produced about 40% more gold than our nearest competitor and the Company has the largest gold reserves by more than 48 million ounces. From this industry-leading production base, the Company reported record adjusted earnings of $1.8 billion ($2.00 per share), and record adjusted operating cash flow of $2.9 billion. And Barrick continued its trend of margin expansion, generating record cash margins of $519 per ounce or $622 per ounce on a net cash cost basis, in 2009. We offer leverage to strong gold prices today and we are positioned to enhance our leverage in the future as “Our positive view on the gold price led us to accelerate the elimination of the Gold Hedges ahead of the schedule we had established, further increasing our gold price leverage with the industry’s largest unhedged production and reserves.” Jamie Sokalsky, Executive Vice President and Chief Financial Officer 10 Exceptional Gold Leverage The Pueblo Viejo project remains on schedule to deliver first production in the fourth quarter of 2011. In its first full five years of operation, Barrick’s share of annual gold production is expected to be 625,000–675,000 ounces at total cash costs of $250–$275 per ounce. $4.0 billion equity issue and $1.25 billion debt issue to eliminate the Gold Hedges and the majority of the Floating Contracts. As a result, the Company recorded a $5.9 billion charge to earnings and a $5.2 billion cash outflow in 2009, primarily related to the settlement of the Gold Sales Contracts. Barrick made this strategic decision to gain full leverage to the gold price due to an increasingly positive outlook for gold. As well, the Company felt that the Hedges were adversely impacting Barrick’s appeal to the broader investment community and hence, its share price performance. Gold has surged to new, record- breaking levels. Following the financial crisis in late 2008 and subsequent deleveraging, the precious metal’s appeal has broadened as a store of value and a diversifying investment alternative. Ongoing global fiscal and monetary policies designed to stimulate an economic recovery increase the risk of higher inflation. As a result, there has been a structural shift by investors in favor of holding more gold. We saw central banks become net buyers – significantly reversing a 40-year trend – right down to individual investors buying gold coins. Constrained supply will provide further support for an increasing gold price as mine production remains challenged over the long term. New deposits are scarce and harder to find and development timelines have lengthened. Barrick is positioned to be a major beneficiary of a strong gold price environment. Investors cannot adequately evaluate their return on investment without considering risk. As the gold industry leader, we believe we offer investors a compelling risk-return proposition relative to our peers and the gold exchange traded funds. Barrick provides tremendous leverage to the gold price and a history of meeting operational targets and project development timelines and budgets. Our track record is one of long- established reliability, built on a foundation of a diversified and geopolitically balanced portfolio of operations, depth of expertise and experience, as well as our strong balance sheet. 1. This assumes that Barrick’s motion for a limited preliminary injunction at Cortez Hills is accepted. In December 2009, the appeal of the denial of a preliminary injunction sought by certain opponents of the Cortez Hills Project was denied in part and granted in part. As a result, the Company has sought a limited injunction that would restrict two discrete activities relating to the deficiencies while allowing the balance of the project to proceed. The plaintiffs have sought a broader injunction that would enjoin further construction and operation of the Project pending completion of the supplemental EIS. 2. The Gold Hedges are fixed price (non-participating) gold contracts and the Floating Contracts are floating spot-price (fully-participating) gold contracts. The Gold Hedges with the Floating Contracts comprise the Gold Sales Contracts. Exceptional Gold Leverage | Barrick Annual Report 2009 11 Operations The Goldstrike mine in Nevada continued to be a significant contributor in 2009 with gold production of 1.36 million ounces. In 2009, Barrick produced 7.4 million ounces of gold. This represents the industry’s highest production in a year of record highs for the gold price. Once again, the Company was within its production and cost targets. The strength of our 26-mine portfolio allows Barrick to absorb unplanned disruptions at certain sites, while continuing to meet expectations. Barrick’s operational structure is another key strength for the Company. Our operations are organized in regional business units (RBUs), allowing local management to customize corporate strategies to meet the unique conditions of each region. Each RBU draws on the strengths of other regions as well as the corporate head office. In February 2010, Barrick announced the creation of African Barrick Gold (ABG), a new company whose equity it will seek to list with the United Kingdom Listing Authority and to admit to trading on the London Stock Exchange, subject to market conditions. ABG also intends to seek a future listing on the Dar es Salaam Stock Exchange in Tanzania. African Barrick Gold will hold Barrick’s African gold mines and exploration properties. ABG will offer approximately 25% of its equity in an initial public offering (IPO) and Barrick will retain the remaining interest. This return of capital to Barrick is expected to provide increased financial capacity to fund the Company’s pipeline of development projects. 12 Operations African Barrick Gold is expected to produce approximately 800,000– 850,000 ounces of gold in 2010 and had total reserves of 16.8 million ounces (100% basis) as of December 31, 2009. As an Africa- focused public company, Barrick expects that ABG will be better positioned to generate shareholder value from its operating platform and that its range of growth options and ability to finance those options will be expanded and the intensity with which these options will be pursued will be improved. ABG will have an incentivized management team and an experienced Board of Directors. In addition, Barrick expects that listing on the Dar es Salaam Stock Exchange will enhance the profile of the new company in Tanzania and allow for local participation in this national champion. Barrick expects production to grow to 7.6–8.0 million ounces in 2010, net of the ABG IPO, at lower total cash costs of $425–$455 per ounce or net cash costs of $345–$375 per ounce. Higher production is driven by the start-up of Cortez Hills, a full year of operations at our new Buzwagi mine in Tanzania and higher production from the Veladero mine in Argentina as a result of access to higher grades and increased throughput from a crusher expansion completed in the latter half of 2009. The North America business unit continued to be our largest contributor, delivering 2.8 million ounces of gold in 2009. Nevada drives the region and is home to seven of its 10 mines including the flagship Goldstrike operation. Goldstrike produced about 1.4 million ounces of gold in 2009, while entering a high waste stripping phase in the latter half of the year; this is expected to be complete in mid-2010. The Veladero mine in Argentina is expected to increase production to 1.09–1.16 million ounces in 2010 as a result of increased throughput from a crusher expansion completed in 2009 and access to higher grades. The Cortez mine in Nevada produced about 518,000 ounces of gold in 2009. The Cortez property is expected to produce 1.08–1.12 million ounces at low total cash costs of $295–$315 per ounce in 2010. We have continued to add new reserves and resources since acquiring this highly prospective asset. South America remains our lowest cash cost region, producing 1.9 million ounces in 2009. Lagunas Norte in Peru produced just over 1.0 million ounces for the fourth year in a row at low cash costs below $140 per ounce. At the Pierina mine, also in Peru, successful in-fill drilling results have extended its expected life to mid-2013. Production from the Veladero mine in Argentina benefited from access to higher grades in the Amable and Federico pits, as well as from a crusher expansion completed in the latter half of 2009, which increased throughput from 50,000 to 85,000 tons per day. Veladero’s production “In 2009, our portfolio of operations continued its track record of achieving operating targets. These results demonstrate one of the key strengths of our diversified asset portfolio – dependability.” Peter Kinver, Executive Vice President and Chief Operating Officer Operations | Barrick Annual Report 2009 13 Operations Our copper business continued to generate significant cash flow for reinvestment in our core gold business. Production from our two copper mines, the Zaldívar operation in Chile and the Osborne mine in Australia, was 393 million pounds in 2009. Copper cash margins per ounce were robust at about 63% of the average realized price as the Company benefited from its copper hedge position. The average realized price of $3.16 was $0.82 per pound higher than the average spot price for the year. Utilizing option collar strategies, the Company has put in place floor protection on approximately 80% of expected copper production for 2010 at an average price of $2.19 per pound, but can fully participate in copper price upside on approximately 100% of 2010 production up to a maximum average price of $3.63 per pound. Barrick continues to look for opportunities to increase the value of its portfolio of operations. In 2009, we acquired the remaining 50% interest in the Hemlo operation in Ontario, and have subsequently increased the expected mine life of this operation. In our key region of Nevada, reserves grew at a number of operations including Cortez, South Arturo (located on the Goldstrike property) and Bald Mountain, where the Company plans to increase production capacity in the future. The Buzwagi mine in Tanzania was commissioned in May 2009 on time and on budget – another example of Barrick’s successful track record of mine development. is expected to grow significantly to 1.09–1.16 million ounces in 2010. The Australia Pacific business unit produced about 2.0 million ounces of gold in 2009. The Porgera mine in Papua New Guinea remains the largest contributor to the region with production of about 551,000 ounces. Our extensive land position in the highly prospective country of Papua New Guinea will be a key focus of our exploration programs in the Australia Pacific RBU, with about 15% of our total global exploration budget allocated to this country. We believe Papua New Guinea will provide opportunities for longer-term growth. The Africa business unit produced about 716,000 ounces and benefited from the start-up of our new Buzwagi mine in Tanzania in 14 Operations May 2009, on schedule and on budget. Buzwagi successfully ramped up by the end of 2009 and is expected to produce 240,000–260,000 ounces in 2010 at low total cash costs of $310–$350 per ounce to Barrick’s account. 2009 PRODUCTION (thousands of ounces) North America 2,810 Australia Pacific 1,977 South America 1,889 Africa 716 Other 31 Projects in Construction Cortez Hills is expected to materially benefit Barrick’s overall production and cost profile. The existing process infrastructure blends ore from the Pipeline deposit with ore from Cortez Hills. Barrick has a history of project development excellence. We have built seven new mines in the last five years on time. The Cortez Hills project is just the A new fleet of heavy equipment has been commissioned for Cortez Hills. latest example of a mine developed on schedule and on budget. Experience is vital to this success. We have acquired a deep understanding of how to handle challenges related to designing, permitting, financing and building major projects. We also have a strong balance sheet with the industry’s only ‘A’ credit rating and are positioned to generate robust cash flow to support our project development activities. Cortez Hills in Nevada is a key project for us, and is expected to materially benefit our production and cash cost profile. With proven and probable reserves of over 14 million ounces at the end of 2009, the entire Cortez property is anticipated to contribute substantial production to the Barrick portfolio for many years to come. We will continue to focus exploration efforts here in 2010 where we see further upside potential at this underexplored property on the highly prospective Cortez Trend. In addition to Cortez Hills, Barrick has two other advanced projects, Pueblo Viejo in the Dominican Republic and Pascua- Lama straddling the border of Chile and Argentina. These world- class projects are also expected to deliver significant production and have a meaningful positive impact on our overall cash cost profile. Projects in Construction | Barrick Annual Report 2009 15 Projects in Construction Consistent with Barrick’s history of successful development, they remain on schedule and in line with their pre-production capital budgets. Our 60%-owned Pueblo Viejo project remains on track to deliver first production in the fourth quarter of 2011. As a result of a plan to accelerate the previously phased expansion of the processing plant from 18,000 to 24,000 tonnes per day, and other changes to the mine plan, Barrick’s share of gold production is now expected to be higher at 625,000–675,000 ounces, up from 600,000–650,000 ounces, at a lower cash cost of $250–$275 per ounce1, compared to total cash costs of $275–$300 per ounce. Since Barrick acquired the project with the Placer Dome acquisition, reserves have increased by approximately 77% or 10.3 million ounces to 23.7 million ounces (100% basis), resulting in a mine life of over 25 years. George Potter, Senior Vice President, Capital Projects Large scale autoclaving of gold, pioneered by Barrick at Goldstrike, is being constructed at the Pueblo Viejo project in the Dominican Republic. Significant progress has been made at Pueblo Viejo. As of February 2010, the majority of site preparation earthworks has been completed, with about 44,000 cubic meters of concrete poured and 1,500 tons of steel erected. Pre-production capital is expected to be $3.0 billion (100% basis) including the expansion capital of $0.3 billion for the increased processing capacity. “This is an exciting time for Barrick shareholders as we bring on substantial new low cost production. Buzwagi was completed on time and on budget in 2009 as was Cortez Hills in 2010. We look forward to continuing our trend of successful development with the delivery of Pueblo Viejo in Q4 2011 and Pascua-Lama in Q1 2013.” 1. Based on gold and oil price assumptions of $950 per ounce and $75 per barrel, respectively. 16 Projects in Construction In May 2009, we announced a construction decision on the Pascua-Lama project following the resolution of the cross-border tax agreement with Chile and Argentina and the receipt of remaining sectoral permits. This was a significant milestone for Barrick. Pascua-Lama is one of the largest undeveloped gold-silver deposits in the world with almost 18 million ounces in gold reserves and about 671 million ounces of silver contained within the gold reserves, for a mine life of over 25 years. Within 10 kilometers of our Veladero mine, the deposit sits in the Frontera district. Project development and subsequent mine operations are expected to benefit from our experience at Veladero and from the significant infrastructure in the area. The development of Pascua-Lama opens up the Frontera gold district where we see significant potential to surface further value through exploration on our extensive land position. In its first full five years of operation, average annual gold production at Pascua-Lama is expected to be 750,000–800,000 ounces at total cash costs of $20–$50 per ounce2 assuming a silver price of $12 per ounce. For every one dollar per ounce increase in the price of silver, total cash costs are expected to decrease by about $35 per ounce. Pascua-Lama remains on schedule A platform is already in place and the portal for the ore conveyor tunnel, shown in the foreground of this photo, has been completed. The tunnel will be used to transport the ore from Chile into Argentina where the process facilities will rest in the valley beyond. Close proximity to Veladero is shown with the Filo Federico pit in the upper right. to deliver first gold in the first quarter of 2013 and in line with its $2.8–$3.0 billion pre-production capital budget. Jobs and skills training for Dominicans at the Pueblo Viejo site. In 2009, Barrick entered into a transaction with Silver Wheaton Corp. to sell 25% of the life-of- mine silver production from the Pascua-Lama project and 100% of silver production from the Lagunas Norte, Pierina and Veladero mines until project completion at Pascua- Lama. Barrick receives a cash deposit of $625 million payable over three years as well as ongoing payments for each ounce of silver delivered under the agreement. This transaction is expected to enhance Pascua-Lama’s economics and introduces a partner to share the risks inherent in a project of this size. Further, the upfront cash consideration increases returns and 2. Total cash costs are calculated net of silver credits assuming silver, gold, and oil prices of $12 per ounce, $950 per ounce, $75 per barrel, respectively. Projects in Construction | Barrick Annual Report 2009 17 Projects in Construction represents an attractive source of financing for the project while maintaining Barrick’s upside on 100% of the gold and 75% of silver production at Pascua-Lama. By February 2010, detailed engineering at the project was about 90% complete. Major earthworks on the Chilean side are advancing, the portal for the ore conveyor tunnel between Chile and Argentina has been established, and the Barrealis camp has been progressing well with about 540 people currently on site. In Argentina, contractors for early earthworks preparation have mobilized to site. About 25% of the capital has been committed securing the mining fleet, processing mills, camp accommodation and earthworks contractors. Next Generation of Projects Beyond these advanced projects, we have four other late-stage projects, including Cerro Casale in Chile, Donlin Creek in Alaska, Reko Diq in Pakistan and Kabanga in Tanzania. This next generation of projects provides us with considerable development options for the future, representing significant latent value within our portfolio. The feasibility study optimization work at the Cerro Casale joint venture project in Chile has been completed. Cerro Casale is one of the world’s largest undeveloped gold-copper deposits, with gold reserves of about 23 million ounces 18 Projects in Construction The primary substation at Punta Colorada, Chile connecting to the main power grid from which Pascua-Lama will obtain its electrical energy. and just under 6 billion pounds of copper within gold reserves (100% basis) and an expected mine life of about 20 years. The project is located in the Maricunga district of Region III in Chile, 130 kilometers north of the Pascua-Lama project. Its proximity to Pascua-Lama is expected to provide opportunities for construction and operating synergies. Pre-production capital is expected to be about $4.2 billion (100% basis) with a construction period of about three years following the receipt of key permits. In February 2010, Barrick agreed to acquire an additional 25% interest in the Cerro Casale project from Kinross Gold Corporation for total consideration of $475 million, thereby increasing the Company’s interest in the project to 75%. Upon completion of the transaction with Kinross Gold, Barrick’s 75% share of average annual production is anticipated to be about 750,000–825,000 ounces of gold and 170–190 million pounds of copper in its first full five years of operation at total cash costs of about $240–$260 per ounce1 assuming a copper price of $2.50 per pound. A $0.25 per pound change in the copper price would result in an approximate $50 per ounce impact on the expected total cash cost per ounce over this period. On a life-of-mine basis, the Company’s share of average annual production is anticipated to be about 600,000–650,000 ounces of gold and about 170–190 million pounds of copper at total cash costs of about $140–$160 per ounce. Further optimization work on the Donlin Creek project in Alaska, with almost 37 million ounces in measured and indicated gold resources (100% basis) is underway, primarily focused on the potential to utilize natural gas to reduce operating costs. These studies are expected to be completed by mid-2010. Reko Diq is an immense copper- gold porphyry deposit on the Tethyan belt in the Balochistan province in southwest Pakistan with a total of about 25 million ounces of measured and indicated gold resources, 17 million ounces of inferred gold resources as well as 31 billion pounds of measured and indicated copper resources and 22 billion pounds of inferred copper resources, of which our share is 37.5%. Antofagasta plc and the Balochistan government hold interests in the project of 37.5% and 25%, respectively. The feasibility study is being finalized and is now under review, while progress continues with the expansion studies and the baseline environmental and social impact assessment, which is expected to be completed in the first half of 2010. Our Kabanga project in Tanzania, a 50-50 joint venture with Xstrata Plc, is a world-class-sized nickel sulfide deposit acquired as part of the portfolio of a gold company in the late 1990s. Kabanga has a compelling combination of high tonnage and high grade. The feasibility study is expected to be finalized early in the third quarter of 2010 at which point we will evaluate how best to maximize the value of this asset for the benefit of Barrick’s shareholders. Early in 2010, Barrick agreed to increase its ownership interest in Cerro Casale from 50% to 75%. Barrick’s 75% share of average annual production is expected to be about 750,000–825,000 ounces of gold and about 170–190 million pounds of copper at total cash costs of about $240–$260 per ounce in its first full five years of operation. 1. Based on gold price, copper price, and oil price assumptions of $950 per ounce, $2.50 per pound and $75 per barrel, respectively, and assuming a Chilean peso foreign exchange rate of 525:1. Projects in Construction | Barrick Annual Report 2009 19 Reserve and Resource Development Reserves are the lifeblood of any mining company. In 2009, Barrick grew the world’s largest gold reserve base for the fourth consecutive year to 139.8 million ounces. Our reserve base is well situated in geopolitically secure countries. Just over 60% of our reserves are located in investment grade countries1, including the United States, Canada, Chile, Australia and Peru. One of Barrick’s key priorities is to increase reserves and resources per share. Our exploration2 growth strategy is a three-fold balanced approach that focuses on: finding new discoveries; adding reserves and resources at our existing mines; and identifying and delivering exploration upside following acquisitions. Since 1990, we have mined 100 million ounces; acquired 103 million ounces and found 135 million ounces. Over this period, we spent about $2.1 billion to discover approximately 135 million ounces for a discovery cost of about $16 per ounce. Our success can largely be attributed to the fact that we have maintained our commitment to exploration, sustaining substantial budgets through the years. We also have an integrated and aligned exploration and corporate development team to identify early stage opportunities, acquire them, and then find the ounces. The 2010 exploration budget is $170–$180 million. The budget supports a deep pipeline of projects and is weighted towards near-term resource additions and conversion at our existing mines while still providing support for earlier stage exploration in our operating districts. Nevada remains a key priority in 2010 with 38% of the total budget allocated to the region. The 2010 exploration budget is weighted towards resource additions and conversions around our mines. “Working in close collaboration with the Exploration team, we have an integrated approach to evaluating and pursuing accretive acquisition opportunities. Our collective knowledge and extensive expertise give Barrick a strong competitive advantage in this area.” Darren Blasutti, Senior Vice President, Corporate Development 1. BBB– or higher as rated by Standard & Poor’s. 2. Barrick’s exploration programs are designed and conducted under the supervision of Robert Krcmarov, Senior Vice President, Global Exploration of Barrick. For information on the geology, exploration activities generally, and drilling and analysis procedures on Barrick’s material properties, 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. 20 Reserve and Resource Development “We have extensive land positions on many of the world’s most prospective trends and, due in large part to our consistent funding and disciplined approach to exploration, we were successful at growing reserves again in 2009.” Rob Krcmarov, Senior Vice President, Global Exploration Reserves and Resources Summary 1,2,3 at December 31, 2009 (Barrick’s equity share) Proven and Probable Reserves Measured and Indicated Resources Inferred Resources Gold (000s oz) North America South America Australia Pacific Africa Other Other Metals Copper (M lbs) Nickel (M lbs) 139,751 55,219 49,581 18,048 16,763 140 6,063 – 61,788 32,510 7,856 16,228 5,170 24 12,899 1,066 31,594 12,110 4,396 11,368 3,546 174 9,355 525 Other Metals Contained in: Proven and Probable Gold Reserves Measured and Indicated Gold Resources Inferred Gold Resources Silver (000s oz) Copper (M lbs) 1,058,424 4,403.5 194,917 778.6 53,053 979.1 1. Mineral reserves (“reserves”) and mineral resources (“resources”) have been calculated as at December 31, 2009 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, Cerro Casale is 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 comparable 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 Ivan Mullany, Vice President, Operations Support of Barrick, Rick Allan, Senior Director, Mining of Barrick, and Rick Sims, Senior Director, Resources and Reserves of Barrick. Except as noted below, reserves have been calculated using an assumed long-term average gold price of $US 825 ($Aus. 1,030) per ounce, a silver price of $US 14.00 per ounce, a copper price of $US 2.00 per pound and exchange rates of $1.10 $Can/$US and $0.80 $US/$Aus. Reserves at Cerro Casale and Round Mountain have been calculated using an assumed long-term average gold price of $US 800. 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, 2009 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. In April 2009, Barrick acquired the remaining 50% interest in the Hemlo property. 2009 reserves and resources for Hemlo reflect Barrick’s 100% interest. 2008 reserves and resources reflect Barrick’s 50% interest. 3. 2009 reserves and resources for Cerro Casale reflect the change in Barrick’s interest to 50% of the Cerro Casale project but do not reflect the increase to 75% following the agreement to acquire an additional 25% entered into in February 2010. 2008 reserves and resources reflect Barrick’s then 51% interest. Reserve and Resource Development | Barrick Annual Report 2009 21 Responsible Mining At Barrick, we strive to be a global leader in responsible mining. Our priority is to safeguard the environment, to protect the safety of our employees, and to improve the quality of life in the communities and countries where we operate. In 2009, we continued to make substantial progress in these areas and were recognized for our leadership. For the second consecutive year, Barrick was named to the Dow Jones Sustainability World Index (DJSI), ranking the Company as a global leader in social and environmental responsibility. Barrick was also named one of the best 50 corporate citizens in Canada for 2009 by Corporate Knights, the Canadian Magazine for Responsible Business. Globally, Barrick’s strategy is to engage with communities, governments and other stakeholders to earn support for our operations and build effective community programs. In Tanzania, Papua New Guinea, Peru and other developing countries, where nine Barrick mines are located, the Company provides direct employment to nearly 10,000 people and generates important Working with the Dominican Republic’s Ministry of Education, Barrick is helping to raise academic standards at Primary and Secondary schools like Sabana Del Rey Public School. Programs at local schools are receiving strong support from teachers and principals. 22 Responsible Mining revenue to governments. In these countries, we invest in health care, nutrition, education and other necessities of life that are the building blocks of development. Our extensive training programs enable us to hire locally and assist area businesses to become suppliers to our operations. Education and Training At the Pascua-Lama project on the border of Chile and Argentina, nearly 10,000 people have taken part in wide-ranging training programs to build capacity and enhance the local skill base. Nearby, in Chile’s Atacama Region, Barrick and a growing alliance of non-governmental partners (NGOs) are moving forward with a series of targeted programs to alleviate poverty in the region. Through the Atacama Commitment, isolated communities have gained internet access for the first time and 400 school children are now using new wireless laptop computers in the classroom. In Tanzania, Barrick was instru - mental in opening three new schools in 2009 near our new Buzwagi operation, while at North Mara about 2,000 students were able to pursue their studies as a result of royalty payments to local villages in 2009. Barrick is also investing approximately $4.5 million to finance a new government-industry national training program to develop the technical skills of Tanzanians and reduce reliance on expatriate workers. Community Health In Papua New Guinea, where a severe shortage of health services exists, Barrick invests in health care infrastructure and supports a comprehensive HIV/AIDS program in partnership with the government and the Asian Development Bank. Community health programs to combat HIV/ AIDS, malaria and tuberculosis continue to make a positive difference in Tanzania, where Barrick has established the Lake Zone Health Initiative. This strategic public-private sector partnership involves the Tanzanian government, aid agencies, NGOs and others in a collaborative effort to improve the provision of health services to underserved populations in the country’s Lake Zone Region. Near the Company’s Lagunas Norte mine in Peru, our $1.3 million partnership with World Vision is Kelvin Dushnisky, Executive Vice President, Corporate Affairs The Lake Zone Health Initiative was established by Barrick to help combat HIV/AIDS, malaria and tuberculosis and improve access to health services for underserved populations. This collaborative effort involves the Tanzanian government, aid agencies, NGOs and other partners. enabling about 4,000 children and families in 30 communities to improve their health and nutrition and break the cycle of poverty. In Pakistan, at our Reko Diq project, we are training women health workers to address a serious gap in basic health care services to women and children. Indigenous Peoples Since 2006, Barrick has contributed nearly $1.6 million toward education, cultural “We believe our host communities have a legitimate stake in our operations and should benefit from them. We have built our reputation as a company committed to responsible business practices and to sharing the benefits of the projects we develop. The relationships we have established with communities and governments around the world reflect our values as a company.” Responsible Mining | Barrick Annual Report 2009 23 Responsible Mining preservation and community initiatives benefiting Western Shoshone tribes in Nevada. The establishment of an historic Collaborative Agreement in 2008 has led to increased training and employment for Western Shoshone and created 150 scholarships for Shoshone students. Barrick has recently committed to provide majority financing to build the new Ely Shoshone Elders’ Center, which will serve the growing seniors population in the Shoshone community of Ely. Strong partnerships also exist with the Wiradjuri people in Australia and the Diaguita community near our Pascua-Lama project. Environment Barrick has continued to meet high environmental standards, while pursuing new avenues for industry leadership. The Company’s climate change program is helping to set the standard within the gold mining industry. In 2009, we completed a risk assessment to identify and address the business risks associated with climate change, while continuing to improve overall energy efficiency. In 2010, Barrick will adopt a global climate change standard that will be applied at all operations. Building on our record of responsible mine closure, in 2009 Barrick adopted a Global Mine Closure Standard, which formalizes 24 Responsible Mining Community members take water samples and select an independent laboratory to test water quality near the Lagunas Norte mine in Peru. This activity provides transparency and builds trust within the community. our existing environmental and technical guidelines in this area. The Standard integrates a wide range of mine closure activities, including the practice of concurrent environmental reclamation. Under new Company guidelines, an assessment of the socio-economic aspects of mine closure will also be conducted, with the goal of mitigating potential negative outcomes and identifying post- closure opportunities in affected local communities. This innovative, multidisciplinary approach will take into account such issues as local employment, economic diversification and alternative uses for former mine property. In 2009, the Company adopted a new biodiversity standard to preserve biodiversity and protect habitats around our operations. The standard will apply from the exploration stage to post-mine closure with the goal of no net loss to biodiversity. Barrick will also expand its engagement with Conservation International, establishing a multi-year partnership in the Dominican Republic at our Pueblo Viejo project, where the Company has been engaged in a major clean-up of historic environmental impacts associated with a former mining operation at the site. Barrick will also continue to support Conservation International’s important biodiversity research in Papua New Guinea, near the Porgera Joint Venture. We have strengthened our company-wide focus on water conservation, setting our sights on industry leadership in this area following the adoption of a global water conservation standard in 2008. Barrick has also achieved certification of 19 operations under the International Cyanide Management Code – more than any other gold producer – with a further four mines on track for certification in the future. Safety and Health Barrick is focused on continually improving our safety approach with a goal of achieving zero incidents across the entire Company. Barrick has a comprehensive Safety and Health Management system that addresses such areas as leadership, training, risk management, operational controls, health and wellness, emergency preparedness and performance measurement. Over the past 10 years, the Company has dramatically improved its safety performance through a concerted program of training, awareness, and improved procedures. This improvement continued in 2009 as evidenced by a decline of 25% in the overall lost- time frequency rate, and a decline in the total recordable injury rate of 10%. Thirteen reporting locations, Don Ritz, Senior Vice President, Safety and Leadership At the Pueblo Viejo project in the Dominican Republic, Barrick has partnered with the Dominican Government to clean up historic environmental damage from a former mine. Pictured are nurseries used to grow plants for environmental remediation and reclamation at the site. including five operating mines and all of Barrick’s project sites, completed the year with no lost- time injuries. The Ruby Hill mine in Nevada completed the entire year with zero recordable injuries, a world-class performance. Barrick’s Pascua-Lama project has now achieved more than seven million hours (or five years) with no lost-time injuries. In addition, the Exploration group, which is active in many locations around the world, had no lost-time injuries in 2009. The South America regional business unit completed an entire quarter with no lost-time injuries – a new benchmark for the Company. Despite these positive achievements, there were four work-related “When we talk about creating a safety culture at Barrick, we mean that safety becomes such an engrained priority for everyone that it is an integral part of what we believe and the way we approach our work every day.” Responsible Mining | Barrick Annual Report 2009 25 Responsible Mining fatalities at Barrick sites during 2009. One employee died from a bee sting; the others fell from height. We were deeply saddened by these incidents. It is Company policy to conduct a full investigation and take corrective actions. Barrick developed new procedures for identifying bee hives on site and removing them safely, as well as recording known allergies and stocking EpiPens and special protective gear for such emergencies. Barrick reviewed its procedures related to working from height and issued new policies and guidelines. The Company also renewed efforts to increase employee awareness about how to work safely at height and around open holes. During 2009, Barrick introduced new policies and procedures for lightning protection and health screening for people working at high altitudes. Driving incidents account for about half of all high potential Patrick Garver, Executive Vice President and General Counsel 26 Responsible Mining Emergency preparedness is part of every site’s regular safety training. High altitude evacuations practiced here at Pascua-Lama are relevant in the challenging working conditions in the Andes mountains. safety incidents. In 2009, the Company banned the use of cell phones and electronic devices while operating vehicles. Barrick installed driver training simulators in each business region to help drivers improve their skills. The Company also introduced its Drive First program – a series of online training modules to help employees improve their driving behaviors. At Bald Mountain and Cortez, Barrick conducted a trial with in-vehicle monitoring devices that coach drivers on safe driving behaviors. Barrick will begin global implementation of these devices during the second quarter of 2010. Throughout 2010, the Safety and Health group will focus on risk management and health standard compliance, as well as safe driving initiatives. “It has to be the responsibility of each of us, no matter what our position is, no matter what part of the Company we work in, to consistently demonstrate the best of Barrick. And the best of Barrick is an unwavering commitment to responsible mining.” Financial Report 28 Management’s Discussion and Analysis 96 Financial Statements 100 Notes to Consolidated Financial Statements 155 Mineral Reserves and Resources 163 Corporate Governance and Committees of the Board 164 Shareholder Information 166 Board of Directors and Senior Officers Management’s Discussion and Analysis (“MD&A”) Management’s Discussion and Analysis (“MD&A”) is intended to help the reader understand Barrick Gold Corporation (“Barrick”, “we”, “our” or the “Company”), our operations, financial performance and present and future business environment. This MD&A, which has been prepared as of February 17, 2010, should be read in conjunction with our unaudited consolidated financial statements for the year ended December 31, 2009. Unless otherwise indicated, all amounts are presented in US dollars. 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 sig- nificant 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 sig- nificantly alter the total mix of information available to investors. We evaluate materiality with reference to all relevant circumstances, including potential market sensitivity. Continuous disclosure materials, including our most recent Form 40-F/Annual Information Form, annual MD&A, audited consolidated financial state- ments, and Notice of Annual Meeting of Shareholders and Proxy Circular will be available on our website at www.barrick.com, on SEDAR at www.sedar.com and on EDGAR at www.sec.gov. For an explanation of terminology unique to the mining industry, readers should refer to the glossary on page 91. Cautionary Statement on Forward-Looking Information and Changes in Definition of Non-GAAP Performance Measures Certain information contained or incorporated by reference in this MD&A, including any information as to our strategy, projects, plans or 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”, “intend”, “continue”, “budget”, “esti- mate”, “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 rea- sonable by us, are inherently subject to significant business, economic and competitive uncertainties and contingencies. Known and unknown factors could cause actual results, including costs, production and returns, to differ materially from those projected in the forward-looking statements. Such factors include, but are not limited to: the impact of global liquidity and credit availability on the timing of cash flows and the values of assets and liabilities based on projected future cash flows; fluctuations in the currency markets (such as Canadian and Australian dollars, South African rand, Chile an pe so, Argentine an pe so, Peruvian sol 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 obli- gations; risks arising from holding derivative instru- ments (such as credit risk, market liquidity risk and mark-to-market risk); changes in national and local government legislation, taxation, controls, regulations and political or economic developments in Canada, the United States, the Dominican Republic, Australia, Papua New Guinea, Chile, Peru, Argentina, South Africa, Tanzania, Russia, Pakistan or Barbados or 28 Management’s Discussion and Analysis 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; availability and increased costs associated with mining inputs and labor; litigation; the speculative nature of exploration and development, including the risks of obtaining necessary licenses and permits; diminishing quantities or grades of reserves; changes in costs and estimates associated with our projects; adverse changes in our credit rating; and contests over title to properties, par- ticularly title to undeveloped properties. In addition, there are risks and hazards associated with the busi- ness of exploration, development and mining, including environmental hazards, industrial accidents, unusual or unexpected formations, pressures, cave-ins, flood- ing 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 uncer- tainties 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 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 dis- cussion 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 law. Changes in Definitions of Non-GAAP Financial Performance Measures We use certain non-GAAP financial performance measures in our MD&A. For a detailed description of each of the non-GAAP measures used in this MD&A, please see the discussion under “Non-GAAP Financial Performance Measures” beginning on page 85 of our MD&A. Adjusted Operating Cash Flow Starting in this MD&A, we are introducing “Adjusted Operating Cash Flow” as a non-GAAP measure. We have adjusted our operating cash flow to remove the effect of “Elimination of gold sales contracts.” This settlement activity is not reflective of the underlying capacity of our operations to generate operating cash flow and therefore this adjustment will result in a more meaningful operating cash flow measure for investors and analysts to evaluate our performance in the period and assess our future operating cash flow generating capability. For a more fulsome description of this new measure, please refer to page 86 in the Non-GAAP Financial Performance Measures section of this MD&A. Adjusted EBITDA Starting in this MD&A, we are introducing “Adjusted EBITDA” as a non-GAAP measure. We have adjusted our EBITDA to remove the effect of “Elimination of gold sales contracts.” This settlement activity is not reflective of the underlying capacity of our operations to generate earnings and therefore this adjustment will result in a more meaningful earnings measure for investors and analysts to evaluate our performance in the period and assess our future earnings generating capability. For a more fulsome description of this new measure please refer to page 88 in the Non-GAAP Financial Performance Measures section of this MD&A. Adjusted Net Income In 2009, we updated the items included in our recon- ciliation of net income to adjusted net income for items that are not reflective of the ongoing operational results. These adjustments will result in a more mean- ingful adjusted net income for investors and analysts to assess our current operating performance and to predict future operating results: ß Added “Effect of tax rate changes” to exclude the effect of corporate income tax rate changes beyond the control of management. ß Added “Elimination of gold sales contracts” to exclude any gains/losses related to the elimination of the contracts. Included in this line is the loss incurred upon initial recognition of the liability and any gains/losses due to mark-to-market adjust- ments through the date contracts were settled. Management’s Discussion and Analysis | Barrick Financial Report 2009 29 Index 31 Business Overview 31 Our Business 32 Our Strategy 32 36 Capability to Execute our Strategy 2009 Results at a Glance 2009 Business Developments 38 40 Outlook for 2010 44 Market Review 50 Financial and Operating Results 50 52 55 55 59 62 64 Review of Financial Results Review of Operating Results Reserves Review of Operating Segment Performance Review of Capital Projects Review of Significant Income and Expenses Income Tax 65 Financial Condition Review 66 67 70 71 Balance Sheet Review Liquidity and Cash Flow Financial Instruments Commitments and Contingencies 73 Review of Quarterly Results 74 US GAAP Critical Accounting Policies and Estimates 82 International Financial Reporting Standards (IFRS) 85 Non-GAAP Financial Performance Measures 91 Glossary of Technical Terms ß Added “Non-recurring restructuring costs” to exclude the non-recurring charges related to our Organization Review. Restructuring costs related to our mine closures are not included in this adjustment. ß Adjusted “Gains/losses on the disposition of long-lived assets” to “Gains/losses on acquisitions/ dispositions” to include bargain purchase gains and gains on step acquisitions. We believe that each of these changes is consistent with our definition of adjusted net income, as described in the Non-GAAP Financial Performance Measures on page 85. Realized Price per Ounce/Pound In 2009, we updated the items in our Reconciliation of Sales to Realized Price per ounce/pound to include export duties that are paid upon sale and currently netted against revenues. We believe this provides investors and analysts with a more accurate measure with which to compare to market gold prices and to assess our gold sales performance and is consistent with our definition as described in the Non-GAAP Financial Performance Measures on page 89. Net Cash Costs/Net Cash Margin In 2009, we changed the non-GAAP measure “total gold cash costs per ounce – full credit basis for non- gold sales” to “net cash costs per ounce” in name only. Starting in 2009, we have placed greater emphasis on our net cash costs per ounce measure because we believe that it illustrates the performance of our busi- ness on a consolidated basis and enables investors to better understand our performance in comparison to other gold producers who present results on a similar basis. As part of this emphasis, we also introduced the measure “net cash margin”, which is calculated as the difference between realized price and net cash costs per ounce, as opposed to the measure “cash margin” which was previously disclosed by us and was calcu- lated using total cash costs per ounce. 30 Management’s Discussion and Analysis Business Overview Our Business Barrick’s vision is to be the world’s best gold mining company by finding, acquiring, developing and pro- ducing quality reserves in a safe, profitable and socially responsible manner. Guided by our five core values, behave like an owner, act with a sense of urgency, be a team player, continually improve, and deliver results, we have become the world’s preeminent gold mining company. We have the largest market capitalization and our annual gold production and gold reserves are the largest in the industry. We also produce significant amounts of copper at some of our operating mines. We sell our production in the world market through three primary distribution channels: gold bullion is sold in the gold spot market; gold and copper con- centrate is sold to independent smelting companies; and copper cathode is sold to various manufacturers and traders. MARKET CAPITALIZATION as at December 31, 2009 ($USD billions) 50 40 30 20 10 0 Barrick Goldcorp Newmont AngloGold Ashanti Kinross Gold Fields PROVEN AND PROBABLE GOLD RESERVES1 (millions of ounces) 150 120 90 60 30 0 Barrick Dec. 31, 2009 Newmont Dec. 31, 2008 Gold Fields June 30, 2009 AngloGold Ashanti Dec. 31, 2009 Kinross Dec. 31, 2009 Goldcorp Dec. 31, 2009 1. Based on most recent public information as at date noted. Our large mineral inventory is well situated in geopo- litically secure countries. Approximately 61% of our reserves are located in investment grade1 countries, including the United States, Chile, Australia, Peru and Canada, which minimizes our concentration risk to any one country and provides a lower overall risk profile. 1. Defined as being rated BBB- or higher by S&P. 2009 GOLD PRODUCTION1 (millions of ounces) 8 6 4 2 0 Barrick Newmont AngloGold Ashanti Gold Fields (F2009) Goldcorp Kinross 1. Based on 2009 actual results, where available. Newmont is based on the most recent public guidance issued. Management’s Discussion and Analysis | Barrick Financial Report 2009 31 2009 TOTAL CASH COSTS1 ($USD per ounce) 600 480 360 240 120 0 Our Strategy Our core objective is to maximize long-term value for our shareholders by following a strategy that emphasizes return on capital, as well as earnings and cash flow growth, while providing full leverage of pro- duction and reserves/resources to market gold prices. To deliver on this objective, we focus on the following strategic priorities: Financial Strength ß Optimize realized gold price ß Contain production costs ß Optimize return on capital expenditures ß Maintain a strong financial position and Goldcorp Newmont Kinross Barrick AngloGold Ashanti Gold Fields good liquidity 1. Based on 2009 actual results for Barrick, AngloGold Ashanti and Gold Fields. All others are based on the most recent public guidance issued. We have operating mines or projects in Canada, the United States, the Dominican Republic, Australia, Papua New Guinea, Peru, Chile, Argentina, Pakistan and Tanzania. We manage our business using a regional business unit (“RBU”) structure. We have four RBUs, each of which is led by its own Regional President: North America, South America, Australia Pacific, and Africa. In addition, we have a Capital Projects group, distinct from our RBUs, to focus on managing our project pipeline. The geographic split of gold production for the year ended December 31, 2009 was as follows: GOLD PRODUCTION BY REGION IN 2009 North America 38% Africa 10% South America 25% Australia Pacific 27% 32 Management’s Discussion and Analysis Gold Leverage ß Meet annual production targets ß Grow reserve/resource base ß Unhedged on all future gold production Growth ß Develop advanced projects on time and on budget ß Acquire future growth opportunities Responsible Mining ß Improve safety and environmental performance, and ß Maintain our social license to operate. Capability to Execute our Strategy Our capability to execute our strategy comes from the strength of our experienced management team, skilled workforce and organizational structure, a strong pipeline of projects that facilitates the long-term sustainability of our business, our strong financial position, and our commitment to corporate social responsibility. Experienced Management Team, Skilled Workforce and Organizational Structure In 2009 we experienced a number of changes in our senior management team. The Company appointed Aaron Regent, an experienced executive with com- bined expertise in the mining and finance sectors, as the President and Chief Executive Officer of the Company. Mr. Regent’s new leadership is comple- mented by an experienced senior management team with a proven track record at Barrick and within the mining industry. Strong leadership and governance are critical to the successful implementation of our core business strategies. Acquisitions have always been an integral part of our growth strategy. Our corporate development team has demonstrated their ability to identify and acquire targets that have been successfully integrated into our operations. In 2006, we acquired Placer Dome Inc., one of the world’s largest gold mining companies, strengthening our position as the industry leader. Since then we have made a number of all cash acquisi- tions designed to expand our project pipeline, or increase our current production profile. These acquisi- tions include: a 75% interest in Cerro Casale in Chile; a 100% interest in the Kainantu exploration property in Papua New Guinea; the remaining 40% interest in our Cortez mine in the United States; the remaining 50% interests in our Storm (United States) and Hemlo (Canada) mines; and an additional 20% interest in our Porgera mine in Papua New Guinea. We have also made a number of recent divestitures that have allowed us to realize value in non-core assets that can then be redeployed into our gold portfolio. These all cash acquisitions and non-core divestitures are impor- tant to our growth strategy as they meet our goal of growing our production/reserves and resources without diluting current shareholders, thus increasing shareholder leverage to gold prices. A skilled workforce has a significant impact on the efficiency and effectiveness of our operations, particu- larly our ability to meet our annual production targets and contain costs. The remote nature of many of our mine sites presents some challenges in maintaining a well-trained and skilled workforce. We continue to focus on training and development for key members of our senior mine management, technical profession- als and frontline workers through our talent manage- ment processes, enhanced distance learning programs and e-learning technologies in order to meet this chal- lenge. We have also expanded our technical training and development programs beyond our technical mining disciplines (mining, metallurgy, maintenance and geology) to include our critical support functions. This program is now improving the technical and lead- ership skills of over 1,000 professionals. Leadership development for key leadership positions and high potential employees will be an area of focus in the coming year in order to support our continued growth plans by maintaining a robust leadership pipeline. We manage our business using an RBU structure to ensure that each region is able to customize corpo- rate strategies to meet the unique conditions in which they operate. Each of our RBUs is led by its own Regional President: North America, South America, Australia Pacific, and Africa, operating as a standalone business unit with a range of functional groups. Since their inception, the RBUs have added value to our business by realizing operational efficiencies in the region, allocating resources more effectively and understanding and better managing the local business environment, including labor, consumable costs and supply and government and community relations. In the second half of 2009 we completed an inter- nal organization review with the objective of improving organizational efficiency and strengthening our RBU structure. This review was focused on ensuring clear alignment within the Company on key priorities, that appropriate resources were in place to support these priorities and that there was clarity around roles and responsibilities. An additional goal was to identify ways to simplify work practices and reduce our over- all general and administrative cost structure. Key results of the review included: ß Elimination of identified areas of overlap; ß More responsibility and accountability at the RBU level; and ß A net reduction of about 80 positions, primarily at our corporate office in Toronto. Exploration and Development of New Mines Our inventory of exploration and development projects represents an important component of our long-term strategy of growing our reserves and resources. We have an Exploration Group that is focused on finding new discoveries, adding reserves and resources at our existing mines and identifying and delivering explo- ration upside following acquisitions. We have been successful in adding reserves as a company. Since 1990, we have spent approximately $2 billion on exploration, which has resulted in the discovery of approximately 135 million ounces of reserves, substantially more than the 99 million ounces that we have produced in the same time period. The per ounce cost of reserve addi- tions of approximately $16 has added substantial value to the Company. We prioritize exploration targets to optimize the investment in our exploration programs and are currently focused on Nevada, Chile and Papua New Guinea, where we believe there is excellent poten- tial to make new discoveries and to expand reserves and resources at our existing mines and projects. Management’s Discussion and Analysis | Barrick Financial Report 2009 33 RESERVES AND RESOURCES (millions of ounces) 31.9 50.6 24.9 35.0 123.1 124.6 34.8 65.0 31.6 61.8 138.5 139.8 12.4 17.6 88.6 2005 2006 2007 2008 2009 Inferred Resources M&I Resources P&P Reserves Building new mines is key to our long-term goal of increasing profitability and building long-term shareholder value. It can take a number of years for a project to move from the exploration stage through to mine construction and into production and this time frame has increased in recent years, 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. This significant increase in the timeline and cost of developing projects is reflected in our business strategy by ensuring that we have an inventory of projects combined with effective man- agement of current operating mines. The projects in our portfolio are at various stages of development, ranging from scoping to feasibility to construction. We have a dedicated Capital Projects group to focus on managing our large projects through this process, up to and including the building of new mines. This specialized group manages all project activities up to and including the commission- ing of new mines, at which point responsibility for mine operations is handed over to the RBUs. Over the past five years, we have built seven new projects on time and near budget, namely Tulawaka, Lagunas Norte, Veladero, Cowal, Ruby Hill, Buzwagi and Cortez Hills. We expect that this experience will allow us to de ve lop the two proje c ts c ur re ntly at an advanced stage (Pueblo Viejo and Pascua-Lama), which we expect to be commissioned over the next three years and which are expected to contribute significant low cost production. Financial Strength The recent global economic crisis has underlined the importance of maintaining adequate levels of liquid- ity and a strong balance sheet. We actively manage our liquidity by focusing on maintaining and growing operating cash flows; effective capital allocation, including prioritization of capital projects; and putting in place financing, when appropriate, for our capital needs. Of critical strategic importance is the ability to optimize capital employed through an effective and efficient capital allocation process. Ownership of Barrick’s capital allocation processes and standards is provided by a Business Strategy and Capital Allocation group. Through this group, the cap- ital allocation strategy for the Company is developed and regularly updated by compiling and analyzing information regarding spend alternatives and oppor- tunities. Capital is deployed in alignment with the strategic priorities of the Company, and appropriate performance management activities are in place to ensure that expected returns on capital are achieved. In 2009, we completed a $4.0 billion equity offer- ing and completed two debt issues, totaling $2.0 billion, while maintaining our S&P “A” credit rating. This cap- ital enabled us to eliminate all of our Gold Hedges2 and a significant portion of our Floating Contracts2, providing our investors with full leverage to gold prices. Our strong balance sheet and ability to gener- ate significant operating cash flows in a high gold price environment should enable us to maintain our strong financial position and good liquidity, and to fund our development projects and acquisitions. 2. The Gold Hedges are fixed price (non-participating) gold contracts and the Floating Contracts are floating spot-price (fully-participating) gold contracts. The Gold Hedges, together with the Floating Contracts, comprise the “Gold Sales Contracts”. 34 Management’s Discussion and Analysis Corporate Responsibility Operating in a socially responsible manner is critical in maintaining a license to operate in our industry. We are committed to making a positive difference in the communities in which we live and work. We rec- ognize that responsible behavior is our calling card, creating opportunities to generate greater value for our shareholders, while at the same time fostering sustainable development in the communities and countries where we operate. In 2009, we were named to the Dow Jones Sustainability World Index (DJSI), ranking the Company as a top performer in corporate social responsibility worldwide for the second consec- utive year. The renewed listing on the index reinforces Barrick’s position among the most sustainability- driven companies in the world. Responsible environmental management is cen- tral to our success as a leading gold mining company. In order to accomplish this goal across our 26 mines and four re g ions , we have an Env ironme ntal Management System which guides all of our sites. We have also developed and are continuing to develop specific performance standards. Our new Global Water Conservation Standard, completed in 2008, is now being implemented as a company-wide priority. In 2009, we drafted three additional Standards, including a Biodiversity Standard, a Mine Closure Standard and an Incident Reporting Standard, which are currently being implemented. In certain respects, these Standards exceed regulatory requirements and represent industry best practices. Barrick was a leading participant in the develop- ment of the International Cyanide Management Code and, by the end of 2009, we had achieved Cyanide Code certification at 19 of our 26 operations. Of the balance, four do not currently use cyanide and the remaining three are working towards certification, which we expect they will receive before the end of 2012. Barrick recognizes the risks that climate change represents to society and to our long-term success. We have adopted a Climate Change program with a focus on energy efficiency and the use of renewable energy to reduce the Company’s carbon footprint. The program builds on energy efficiency programs and renewable energy projects already underway at our operations and embeds climate change consid- erations into business management processes and investment decision-making. All 26 Barrick mines have conducted energy self-assessments and are work- ing toward greater energy efficiency and conservation. A small hydroelectric project in Chile’s Atacama Desert was brought on line in 2009. This end-of-pipe power generator produces power from water pumped 90 km to the minesite from the Negrillar aquifer at the base of the Andes. The underground mines in Nevada have successfully implemented bio-diesel use which has the combined benefit of reduced GHG emissions and lower particulate matter in engine exhaust. We believe that the health and safety of our work- ers is fundamental to our business. Our vision is: “Every person going home safe and healthy every day”. We are committed to the identification and elimina- tion or control of workplace hazards for the protection of ourselves and others. Our long-term goal is to be a zero incident company. For us to succeed in fulfilling this goal, we: ß Provide the expertise and resources needed to maintain safe and healthy working environments; ß Established clearly defined safety and occupational health programs and measure safety and health performance, making improvements as warranted; ß Operate in accordance with recognized industry standards, while complying with applicable regulations; ß Investigate the causes of accidents and incidents and develop effective preventative and remedial action; ß Train employees to carry out their jobs safely and productively; ß Maintain a high degree of emergency preparedness; and ß Require that vendors and contractors comply with our applicable safety and health standards. Management’s Discussion and Analysis | Barrick Financial Report 2009 35 2009 Results at a Glance Financial Highlights for the Years Ended December 311 (in millions, except where indicated) 2009 2008 $ Change % Change Sales Net income Per share Adjusted net income Per share EBITDA Adjusted EBITDA Operating cash flow Adjusted operating cash flow Cash and equivalents $ 8,404 (4,274) (4.73) 1,810 2.00 (2,514) 3,419 (2,322) 2,899 $ 2,564 $ 7,913 785 0.90 1,661 1.90 2,347 2,347 2,254 2,254 $ 1,437 $ 491 (5,059) (5.63) 149 0.10 (4,861) 1,072 (4,576) 645 $ 1,127 6% (644%) (626%) 9% 5% (207%) 46% (203%) 29% 78% 1. The amounts presented in this table include the results of discontinued operations. Financial Results ß Net loss of $4.3 billion, reflecting the decision to eliminate our Gold Hedges and Floating Contracts ß Adjusted net income of $1.8 billion, a 9% increase over the prior year largely due to higher cash margins with the rise in realized ß Adjusted EBITDA of $3.4 billion, a 46% increase over the prior year largely due to higher cash margins with the rise in realized gold prices and a new high for the Company ß Maintained the only “A” credit rating in the industry gold prices and continuing the five year trend of increasing (as established by S&P) after issuing $4 billion in equity and adjusted net income ß Net outflow of $2.3 billion of operating cash flow, reflecting the $5.2 billion spent on settlement of our Gold Hedges and a significant portion of our Floating Contracts ß Record $2.9 billion of adjusted operating cash flow, a 29% increase over the prior year largely reflecting growing cash $2 billion in debt during 2009 ß $2.6 billion in cash at year end and an undrawn credit facility of $1.5 billion ß Net debt increased to $4.4 billion, a 51% increase over the prior year largely due to the debt issued to settle the gold sales contracts and the remaining obligation to settle margins and the continuing trend of robust cash flows from the Floating Contracts. The increase in net debt over the operations ß EBITDA of $(2.5) billion reflecting the elimination of our Gold past five years has moved in line with our activities to invest in our business, through building new projects and making Hedges and Floating Contracts all cash acquisitions. ADJUSTED NET INCOME ($USD millions) ADJUSTED EBITDA ($USD millions) 1,600 1,200 800 400 0 3,200 2,400 1,600 800 0 2005 2006 2007 2008 2009 2005 2006 2007 2008 2009 ADJUSTED OPERATING CASH FLOWS ($USD millions) NET DEBT AND INVESTING ACTIVITIES ($USD millions) 3,000 2,000 1,000 0 6,000 4,000 2,000 0 2005 2006 2007 2008 2009 2005 2006 2007 2008 2009 Investing Activities and Payment on Gold Sales Contracts Net Debt 36 Management’s Discussion and Analysis Operational Highlights for the Years Ended December 311 Gold produced (000s ounces) Realized price ($ per ounce) Net cash costs ($ per ounce) Total cash costs ($ per ounce) Copper produced (millions of pounds) Total cash costs ($ per pound) 1. The amounts presented in this table include the results of discontinued operations. 2009 7,423 $ 985 $ 363 $ 466 393 $ 1.17 2008 $ Change % Change 7,657 $ 872 $ 337 $ 443 370 $ 1.19 (234) $ 113 26 $ 23 $ 23 $ ( 0.02) (3%) 13% 8% 5% 6% (2%) Gold Leverage ß 7.4 million ounces of production, once again the largest in the industry, within our original guidance range, 3% lower than the prior year ß Gold total cash costs of $466 per ounce were within our original guidance range, 5% higher than the prior year ß Realized gold prices increased 13% in 2009 to $985 per ounce, an all-time annual high Growth ß Buzwagi entered into production in May 2009, contributing 189 thousand ounces at total cash costs lower than the Company average ß Significant progress on our advanced projects ß Cortez Hills expected to start production in first quarter 20103 ß Pueblo Viejo on track to commence production in fourth quarter 2011, with expanded capacity and within its revised $3.0 billion pre-production capital budget Responsible Mining ß Included in Dow Jones Sustainability Index (World and North America) for the second consecutive year ß Cash margins increased by 21%, reflecting an increasing trend over the past five years ß Eliminated our Gold Hedges, giving us full leverage to gold price appreciation ß Copper production of 393 million pounds at lower cash costs than the previous year, continues to provide excellent margin contribution to our gold business ß Decision to construct Pascua-Lama project in May 2009, with first production expected in first quarter 2013 ß Acquired an additional 50% interest in our Hemlo mine in Canada ß Grew industry’s largest reserves to 139.8 million ounces ß 19 of 22 operations using cyanide have been certified under the International Cyanide Management Code, with the other three expected to be certified by the end of 2012 ß 25% improvement in Lost Time Injury incidents in 2009 3. In December 2009, the appeal of the denial of a preliminary injunction sought by certain opponents of the Cortez Hills Project was denied in part and granted in part. As a result, the Company has sought a limited injunction that would restrict groundwater pumping to current levels and enjoin trucking of refractory ore (representing approximately 3% of the ore) to Goldstrike pending completion of a supplemental EIS. The plaintiffs have sought a broader injunction that would enjoin further construction and operation of the Project pending completion of the supplemental EIS. GOLD PRODUCTION (000s of ounces) COPPER PRODUCTION (millions of pounds) 8,000 6,000 4,000 2,000 0 400 300 200 100 0 2005 2006 2007 2008 2009 2006 2007 2008 2009 GOLD MARGIN ($USD per ounce) GOLD REVENUES AND REALIZED PRICES ($USD millions and per ounce) 500 400 300 200 100 0 6,000 4,000 2,000 0 1,000 800 600 400 200 0 2005 2006 2007 2008 2009 2005 2006 2007 2008 2009 Gold Revenues Realized Prices Management’s Discussion and Analysis | Barrick Financial Report 2009 37 2009 Business Developments Elimination of Gold Sales Contracts In 2009, we eliminated our Gold Hedges and a sub- stantial portion of our Floating Contracts. We made this strategic decision to gain full leverage to the gold price on all future production due to an increasingly positive outlook on the gold price and continuing robust gold supply/demand fundamentals. In addition, we believe that the Gold Sales Contracts were adversely impacting Barrick’s appeal to the broader investment community and, hence, its share price performance. Our Gold Hedges were fixed price contracts which did not participate in gold price movements. At the time we announced the plan to eliminate them, our Gold Hedges totaled 3.0 million ounces with a mark- to-market (“MTM”) position (calculated at a spot price of $993 per ounce) of negative $1.9 billion. Our Floating Contracts are essentially Gold Hedges that have been offset against future move- ments in the gold price but not yet settled. At the time we announced the plan to eliminate a significant portion of our Floating Contracts, they had a MTM position of negative $3.7 billion. This liability does not change with gold prices and is therefore economically similar to a fixed US dollar obligation as it is only sub- ject to interest rate risk. No activity in the gold market is required to settle our Floating Contracts and we fully participate in any subsequent increase in the price of gold. As at December 31, 2009, the obligation relating to the Floating Contracts has been reduced to approximately $0.7 billion. The obligations related to the Floating Contracts are non-amortizing and pri- marily have 10-year terms with a current weighted average financing charge of 2%–3%. Any further reductions in the obligation related to the Floating Contracts will be subject to the same capital allocation process as our other liabilities. Gold Hedges ($ billions, except ounce amounts in millions) Ounces MTM Liability Floating Contracts Liability Total Liability1 As at September 7, 2009 3.0 $ 1.9 $ 3.7 $ 5.6 MTM adjustment2 – 0.2 – 0.2 Ounces eliminated/net proceeds used to date (3.0) (2.1) (3.0) (5.1) Remaining liability as at December 31, 2009 – $ – $ 0.7 $ 0.7 1. The total liability excludes a $0.1 billion settlement obligation for silver sales contracts. 2. The change in liability is net of an increase in the MTM of the Gold Hedges of $0.3 billion and $0.1 billion of certain balance sheet reclassifications. New Sources of Capital Equity Offering In September 2009, we completed an equity bought deal offering of 109 million common shares at a price of $36.95 per common share for net proceeds of $3.9 billion (the “Common Share Offering”), which was used to eliminate the Gold Hedges and a portion of the Floating Contracts. The Common Share Offering was the largest equity bought deal in Canadian history and underscores the investor appetite for our stock. The increase in our common shares outstanding to 983 million shares represented a dilution to the own- ership interests of shareholders prior to the Common Share Offering of approximately 12%. This dilution will have a similarly dilutive impact on our earnings per share performance on a go forward basis. Debt Offerings In March 2009, we issued an aggregate of $750 million of 10 year notes with a coupon rate of 6.95% for gen- eral corporate purposes. The notes are unsecured, unsubordinated obligations and will rank equally with our other unsecured, unsubordinated obligations In October 2009, we issued $1.25 billion in debt securities comprised of: $400 million of 4.95% notes due 2020 and $850 million of 5.95% notes due 2039 (the “Debt Offering”). The net proceeds from this transaction were used to fund a further reduction of our Floating Contracts. We continue to maintain the only “A” credit rating in the industry following these transactions. 38 Management’s Discussion and Analysis Pueblo Viejo Development Our Pueblo Viejo project is progressing well and ini- tial production is anticipated in the fourth quarter of 2011. The project continues to track within its budget estimate, but as a result of the plan to accelerate the expansion in processing capacity, the previously disclosed expansion capital of $0.3 billion will be brought forward such that pre-production capital is expected to be about $3.0 billion (100% basis). This will have an impact of increasing average production and lowering cash costs in the first five years of pro- duction. This project is a long life asset with an expected mine life of over 25 years. Pascua-Lama Construction In 2009, we began construction of Pascua-Lama with initial production expected in first quarter 2013. When complete, it is expected to be one of the lowest oper- ating cost gold producing mines in the world. This project is a long life asset with an expected mine life of over 20 years. Cerro Casale Advancement We recently completed the feasibility study optimiza- tion work at our Cerro Casale joint venture project in Chile. The pre-production capital is expected to be about $4.2 billion (100% basis) with a construction period of approximately 3 years following the receipt of key permits. Cerro Casale is one of the world’s largest undeveloped gold-copper deposits. Acquisitions and Divestitures IPO of African Gold Mining Operations On Fe br u ar y 17, 2010, our Bo ard of Dire ctors approved a plan to create African Barrick Gold, a new company whose equity it will seek to list with the United Kingdom Listing Authority and to admit to trading on the London Stock Exchange, subject to market conditions. The new company also intends to seek a future listing on the Dar es Salaam Stock Silver Agreement In September 2009, we entered into an agreement with Silver Wheaton Corp. (“Silver Wheaton”) to sell a portion of the life-of-mine silver production from the Pascua-Lama project and silver production from the Lagunas Norte, Pierina and Veladero mines until Pascua-Lama is in production. Silver Wheaton has made a cash payment of $212.5 million and will make further payments for a total cash deposit of $625 mil- lion, plus an ongoing payment for each ounce of silver delivered under the agreement. The upfront payment stream allows us to mone- tize some of Pascua-Lama’s value immediately, which also enhances the overall return on investment of Pascua-Lama and leaving us with significant exposure on the remaining silver production from Pascua-Lama. We commenced the sale of silver to Silver Wheaton from the Lagunas Norte, Pierina and Veladero mines effective September 1, 2009. Project Financing We continue to work towards obtaining project financ- ing for our Pueblo Viejo and Pascua-Lama projects. This external financing will assist in funding the large capital cost associated with building these mines at terms that meet our internal return on capital metrics. Advanced Project Development Buzwagi Production Start-up Mine construction of our Buzwagi project in Tanzania was completed in May 2009, on time and in line with budget, and the mine has since contributed significant gold production at lower total cash costs. Cortez Hills Commissioning Our Cortez Hills4 project is essentially complete and in the final stages of commissioning. The project is anticipated to be completed in line with its $500 mil- lion pre-production budget and is expected to become the seventh project in five years that we have delivered on time. 4. In December 2009, the appeal of the denial of a preliminary injunction sought by certain opponents of the Cortez Hills Project was denied in part and granted in part. As a result, the Company has sought a limited injunction that would restrict groundwater pumping to current levels and enjoin trucking of refractory ore (representing approximately 3% of the ore) to Goldstrike pending completion of a supplemental EIS. The plaintiffs have sought a broader injunction that would enjoin further construction and operation of the Project pending completion of the supplemental EIS. Management’s Discussion and Analysis | Barrick Financial Report 2009 39 Exchange in Tanzania. African Barrick Gold will hold Barrick’s African gold mines and exploration proper- ties. The new company will offer about 25% of its equity in an initial public offering and Barrick will retain the remaining interest. The pricing and terms are yet to be determined; however, the offering is expected to be priced in late March, with closing expected to occur by the end of March. Acquisitions In February 2010, we agreed to acquire an additional 25% interest in the Cerro Casale project in Chile from Kinross Gold Corporation for consideration of $475 million, comprised of $455 million cash and the elimination of a $20 million contingent obligation which was payable by Kinross to Barrick on a produc- tion decision, thereby increasing our interest in the project to 75%. Als o in Fe br u ar y 2010, we e nte re d into an Implementation Agreement with Tusker Gold Limited (“Tusker”) setting out the basis of a takeover bid for net consideration of approximately $75 million. Tusker holds the other 49% interest in our Nyanzaga joint venture in Tanzania. If and when acquired, Tusker will be held in African Barrick Gold. In September 2009, we completed the acquisition of 50% interest in the Valhalla oil and gas field, which is close to our existing Sturgeon Lake field, for total cash consideration of $53 million. This transaction was considered an asset purchase. This asset acquisition will increase the production capacity of Barrick Energy by approximately 900 boe/day in 2010. In April 2009, we acquired the remaining 50% interest in the Williams and David Bell gold mines (“Hemlo”) for cash consideration of $50 million, thereby increasing our interest to 100%. Asset Sales In December 2009, we committed to a plan to dispose of our Osborne mine in Australia and we expect to finalize a transaction in first half of 2010. In July 2009, we sold our Henty mine also in our Australia Pacific operating segment for consideration of $4 million cash and $2 million in Bendigo Mining Limited shares. Both of these mines were nearing the end of their planned life. Outlook for 2010 2010 Guidance Summary Gold Production (millions of ounces) Cost of Sales Net cash costs ($ per ounce)2 Total cash costs ($ per ounce) Amortization ($ per ounce) Copper Production (millions of pounds) Cost of sales Total cash costs ($ per pound) Amortization ($ per pound) Other amortization and accretion Corporate administration Exploration expense Project expense, net (including equity)3 Other expense Interest income Interest expense Capital expenditures – minesite sustaining Capital expenditures – minesite expansion Capital expenditures – projects4 Effective income tax rate 2009 Actual1 2010 Guidance 7.4 3,431 363 466 119 393 444 1.17 0.20 140 171 144 178 359 10 57 784 60 1,514 29% 7.6 – 8.0 3,400 – 3,800 345 – 375 425 – 455 130 – 135 340 – 365 440 – 460 1.10 – 1.20 0.20 – 0.25 125 155 170 – 180 210 – 230 280 – 300 15 190 – 220 1,000 – 1,200 225 – 275 1,600 – 1,800 30% 1. The amounts presented in this table include the results of discontinued operations. 2. Assuming a copper price of $2.75 per pound. 3. Represents Barrick’s share of expenditures. 4. Represent’s Barrick’s share of expenditures including capitalized interest of about $250 million in 2010 (2009: $257 million). 40 Management’s Discussion and Analysis 2010 Guidance Analysis Production We prepare estimates of future production based on mine plans that reflect the expected method by which we will mine reserves at each site. Actual gold and copper production may vary from these estimates due to a number of operational factors, including if the volume and/or grade of ore mined differs from esti- mates, which could occur because of changing mining rates, ore dilution, varying metallurgical and other ore characteristics, and/or short-term mining conditions that require different sequential development of ore bodies or mining in different areas of the mine. Certain non-operating factors may also cause actual production to vary from guidance, including litigation risk, the regulatory environment and the impact of global economic conditions. Mining rates are also impacted by various risks and hazards inherent at each operation, including natural phenomena, such as inclement weather conditions, floods and earth- quakes, and unexpected civil disturbances, labor shortages or strikes. We expect 2010 gold production to increase from its 2009 level of 7.4 million ounces to about 7.6 to 8.0 million ounces subject to the US District Court allowing Cortez Hills to operate consistent with Barrick’s motion for a limited preliminary injunction of activities. This is 0.1 million ounces lower than previously disclosed, reflecting Barrick’s reduced equity interest in production from African Barrick Gold. Increased gold production is expected primarily in North America and Africa as a result of a full year of production from both Cortez Hills and Buzwagi, respectively, as well as in South America as a result of the completion of the overland conveyor, crusher expansion and higher ore grades at Veladero; partly offset by lower production in Australia Pacific due to the divestiture of Henty during 2009, the planned divestiture of Osborne in Australia and the impact of the IPO of our African gold mining operations. Production in 2010 is expected to be higher than 2009 throughout the year, in the first half principally due to Veladero and Buzwagi, and in the second half principally due to Cortez and Goldstrike, with overall production levels higher in the second half of the year. Production for 2011 is expected to be in a similar range to 2010. Decreased copper production is expected from 393 million pounds in 2009 to about 340 to 365 mil- lion pounds due to the planned divestiture of the Osborne mine in the second half of 2010. Accordingly, copper production is expected to be weighted to the first half of 2010. Cost of Sales, Net Cash Costs and Total Cash Costs We prepare estimates of cost of sales, net cash costs and total cash costs based on expected costs associated with mine plans that reflect the expected method by which we will mine reserves at each site. Cost of sales, net cash costs and total cash costs per ounce/pound are also affected by ore metallurgy 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. The following table provides a reconciliation of our cost of sales guidance to our net cash costs and total cash costs guidance. Cost of sales applicable to gold is expected to be in the range of $3.4 to $3.8 billion and total cash costs are expected to be in the range of $425 to $455 per ounce. Gold total cash costs in 2010 are forecast to be about 5% lower than 2009 primarily due to higher production levels from an increase in recovery rates, a Management’s Discussion and Analysis | Barrick Financial Report 2009 41 decrease in waste tons mined, higher silver and cop- per by-product credits due to increases in realized prices, and lower expected maintenance costs due to a general focus on cost reduction and effectiveness of our maintenance programs. These cost decreases are expected to be partly offset by lower tons processed, higher royalties and production taxes due to higher spot prices for gold and copper, and higher energy costs. Total gold cash costs and net cash costs for 2010 include forecasted currency and fuel hedge net gains of about $11 per ounce based on a spot oil price assumption of $75 per barrel (WTI) and a U.S. dollar to Australian dollar exchange rate assumption of $0.90. Gold total cash costs during the year are expected to vary due to mine sequencing. Total cash costs are expected to be higher in the second quarter of 2010 due to the production mix, but year over year total cash costs are expected to decrease, particularly in the second half of 2010 with the mining of higher ore grades at Cortez and Goldstrike. Total cash costs for 2011 are expected to be slightly higher after factoring in inflation and subsequently are expected to benefit from lower cost projects, primarily Pascua Lama and Pueblo Viejo, as these come on stream. TOTAL CASH COSTS PER OUNCE1 59 13 4 $466 3 10 17 $425– $455 74 y g r e n E l a u t c A 9 0 0 2 d e n m i s n o T d e s s e c o r p d n a s t i d e r c t c u d o r p - y B e c n a n e t n a M i d n a s e i t l a y o R s e x a t n o i t c u d o r p y r e v o c e R e d a r G i e c n a d u G 0 1 0 2 1. Chart depicts approximate impacts of each category on total cash costs per ounce. Cost of sales applicable to copper is expected to be about $440 to $460 million. Total cash costs are expected to be in the range of $1.10 to $1.20 per pound for copper. Total cash costs for copper are expected to be approximately $0.04 per pound lower than 2009, primarily as a result of the reduction in the price of sulfuric acid at Zaldívar. Net cash costs are expected to be in the range of $345 to $375 per ounce5, as the expected copper mar- gin is expected to be approximately $80 per ounce. 5. Assuming a copper price of $2.75 per pound Reconciliation of Cost of Sales Guidance to Total Cash Costs per Ounce/Pound and Net Cash Costs per Ounce Guidance Gold Copper Cost of sales ($ millions) Production (millions of ounces/lbs) $3,400 – $3,800 7.6 – 8.0 $440 – $460 340 – 365 Total cash costs ($ per ounce/per lb) $425 – $455 $1.10 – $1.20 Expected copper margin per ounce1 ~$80 Net cash costs ($ per ounce) $345 – $375 1. Assuming a copper price of $2.75 per pound Exploration Higher costs are expected in 2010 primarily reflecting ongoing mine site reserve and resource development programs, principally at Cortez, Turquoise Ridge and Porgera. Project Expenses Project expenses are classified under a combination of project expenses and equity method investments on our income statement. The timing of the funding for project expenditures through equity method investments and the subsequent expense recognition vary. The funding is initially recorded as an increase in the carrying amount of our investment. Our share of expenses is recognized as amounts are spent on the projects through “equity investees” in our consoli- dated statement of income. 42 Management’s Discussion and Analysis In aggregate, we expect to expense approximately $210 to $230 million for our share of expenditures in 2010, compared to actual 2009 expense of $178 mil- lion. Our expected project expenses are primarily attributable to our commitment to complete feasibil- ity studies at Reko Diq, Donlin Creek and Kabanga; further project optimization at Cerro Casale; the cost of studies to evaluate additional reserve and resource potential at Cortez Hills; and project feasibility studies at Lagunas Norte. Other The expected decrease in other expenses is primarily due to restructuring costs and non-hedge derivative and currency translation losses incurred in 2009 not presently expected to reoccur, as well as lower regional business unit costs expected in 2010. Interest Income and Interest Expense We expect slightly higher interest income in 2010 pri- marily due to higher average cash balances. We expect higher interest expense in 2010 due to higher annualized interest expense attributable to the $2 billion in debt securities issued in 2009 and project financing for the Pueblo Viejo expected to be finalized in 2010 and Pascua-Lama shortly thereafter. We also expect less interest to be capitalized mainly as a result of the startup of operations at Cortez Hills. Outlook Assumptions and Economic Sensitivity Analysis Gold revenue Copper revenue Gold total cash costs Gold royalties and production taxes Crude oil price1 Australian dollar exchange rate1 Argentinean peso exchange rate Copper total cash costs Crude oil price1 Chilean peso exchange rate 1. Due to hedging activities we are largely protected against changes in these factors. Capital Expenditures Projects The expected increase in our share of capital expendi- tures from $1,514 million in 2009 to about $1,600 to $1,800 million in 2010 is mainly due to accelerated construction activities at the Pueblo Viejo and Pascua- Lama projects, partly offset by the completion of the Cortez Hills and Buzwagi projects. Expansion The expected increase in expansion capital relates to development projects at Goldstrike, Bald Mountain, Golden Sunlight and Cortez in North America, and Veladero and Lagunas Norte in South America. Sustaining Capital Sustaining capital expenditures for the mine sites and corporate and regional offices are expected to increase from 2009 expenditure levels of $784 million to about $1,000 to $1,200 million, primarily due to mine devel- opment, pit dewatering, leach pad and tailings pond expansion, and other projects designed to improve plant capacity and/or efficiency. Capital expenditures for drilling at Barrick Energy are also expected to increase, to take advantage of the Alberta government drilling incentives. Income Tax Rate Our underlying expected effective tax rate excludes the impact of currency translation gains/losses and changes in tax valuation allowances. We do not antici- pate any significant change in our underlying effective tax rate for 2010. 2010 Guidance Assumption Hypothetical Change Impact on Impact on EBITDA (millions) Total Cash Costs $1,050/oz $50/oz $2.75/lb $0.25/lb n/a n/a $380 – $400 $85 – $90 $1,050/oz $75/bbl 0.90 : 1 4 : 1 $75/bbl 525 : 1 $50/oz $10/bbl 10% 10% $10/bbl 10% $2/oz $1/oz – $1/oz $0.01/lb $0.01/lb $14 $8 – $9 $3 $5 Management’s Discussion and Analysis | Barrick Financial Report 2009 43 Market Review In 2009, the global economy once again experienced a tumultuous year, as many commodity and stock mar- ket indices experienced historically high levels of volatility in the face of the global economic downturn and the subsequent start of the recovery process. Financial market conditions improved in the latter half of the year as global credit markets started to ease up, investor confidence began to return and many economies returned to positive growth. However, global unemployment rates are still high, global mon- etary conditions remain at historic lows and the prospects for a sustained recovery remain uncertain. During the year, the US dollar was generally in decline, primarily as a result of the low interest rates offered on US dollars, investment into riskier assets, and concerns about the level of US government bor- rowings and deficits. Gold has historically been inversely correlated to the US dollar and that trend continued in 2009, with gold prices trading to all-time highs in a number of major currencies. In 2009, we sold all our gold production in the spot market at market prices, providing shareholders with maximum leverage to gold prices, which allowed us to capitalize on record high gold prices. A weaken- ing US dollar, while acting as a catalyst to higher market gold prices, also causes costs denominated in other currencies to rise when reported in US dollar terms. To the extent costs in other currencies are not hedged, the growth in gross margins from higher gold prices is eroded by appreciation in US dollar terms of those costs. To provide better leverage to market gold prices and secure higher cash margins in a rising gold price environment, we have hedged a significant portion of our input costs that are sensitive to a decline in the US dollar, particularly operating costs denominated in Australian dollars and fuel prices. Our strategy of being fully leveraged to market gold prices while hedging our exposure to input costs that are sensitive to a decline in the US dollar helped us to grow cash margin from gold sales in 2009 as US dol- lar weakness contributed significantly to higher market gold prices. Should gold prices decline due to US dollar appreciation, then we would not participate under this strategy from depreciating costs in other currencies since the currency component of those costs has been fixed. This strategy has the result of increasing the upside potential to generate better cash margins in a rising gold price environment, to the extent US dollar gold price increases are driven by US dollar currency depreciation. Gold The market price of gold is the most significant factor in determining the earnings and cash flow generating capacity of Barrick’s operations. The price of gold is subject to volatile price movements over short periods of time, especially in the current market environment, and is affected by numerous industry and macroeco- nomic factors that are beyond our control. Gold price volatility remained high in 2009, with the price ranging from $803 to $1,227 per ounce during the year. The average market price for the year of $972 per ounce was an all-time high. The market price of gold has been influenced by low US dollar interest rates, volatility in the credit and financial markets, invest- ment demand and the monetary policies put in place by the world’s most prominent central banks. As a result of the global easing of monetary policy, as well as increases in announced government spending, par- ticularly in the US, we believe that there is a possibility that both inflation and US dollar depreciation could emerge in the coming years. Gold is viewed as a hedge against inflation and has historically been inversely correlated to the US dollar. Therefore, higher inflation 44 Management’s Discussion and Analysis and/or depreciation in the US dollar should be posi- tive for the price of gold. While gold prices have come down and the US dollar has strengthened slightly in early 2010, we believe this to be a short-term move- ment and the long-term upward trend in prices will continue. AVERAGE MONTHLY SPOT GOLD PRICES VS. USD INDEX $/oz 1,250 1,150 1,050 950 850 750 650 550 450 USD 90 85 70 75 70 65 60 55 50 2007 2008 2009 Average Spot Price USD Index Throughout 2009, we have continued to see increased interest in holding gold as an investment, through global Exchange Traded Funds (ETFs), exchange hold- ings and coins. This was evidenced by the increased volumes held by ETFs and also the backlog that mints worldwide had in meeting consumer demand for gold coins. GOLD ETF HOLDINGS1 as at December 31 (millions of ounces) 60 50 40 30 20 10 0 57.7 38.2 28.0 20.1 11.7 5.0 2004 2005 2006 2007 2008 2009 1. Includes the holdings of GBS (ASX), GBS (LSE), NewGold (JSE), GLD (NYSE), IAU (Amex), ZKB (Swiss), ETFS (London), XETRA (DAX), Julius Baer (SWX), ETFS (NYSE), CS-XMTCH (SIX), UBS-IS (USD). We believe that the outlook for global gold mine production will be one of declining supply in the years to come. The industry has seen a declining trend over much of the past decade, and although there has been an increase in 2009, we expect a decline over the long term. The primary drivers for the global decline are a trend of lower grade production by many producers; increasing delays and impediments in bringing projects – especially large-scale projects – to the pro- duction stage; a lack of global exploration success in recent years; and a scarcity of new, promising regions for gold exploration and production. A decrease in global industry production raises the potential for a higher sustainable long-term gold price. INDUSTRY GOLD PRODUCTION (millions of ounces) 90 85 80 75 70 65 60 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09E Source: GFMS Management’s Discussion and Analysis | Barrick Financial Report 2009 45 OFFICIAL GOLD HOLDINGS as at December 31, 2009 (% of reserves) 68.7 64.6 64.2 63.4 75 60 45 30 15 0 A S U y n a m r e G e c n a r F y l a t I Source: World Gold Council 28.8 d n a l r e z t i w S 6.4 4.7 1.5 0.5 i a d n I a i s s u R i a n h C l i z a r B Copper Copper prices generally rose throughout 2009, as London Metals Exchange (LME) copper prices traded in a wide range of $1.37 to $3.37 per pound, averaging $2.34 per pound, and closing the year at $3.33 per pound. Our realized price of $3.16 per pound in 2009 exceeded LME spot prices by $0.82 per pound due to the benefit from our copper hedging program. Copper’s rise during the year occurred mainly as a result of strong Chinese demand and increasingly pos- itive sentiments about the prospects of future global economic expansion, including the expected impact on copper demand from government stimulus spend- ing on infrastructure projects. Copper prices should continue to be positively influenced by demand from Asia, a return to global economic growth, the limited availability of scrap metal and production levels of mines and smelters in the future. Utilizing option collar strategies, we have put in place floor protection on approximately 80% of our expected copper production for 2010 at an average price of $2.19 per pound but can fully participate in copper price upside on approximately 100% of our expected 2010 copper production up to a maximum average price of $3.63 per pound. Gold sales from the official sector under the Central Bank Gold Agreement (CBGA) also have a significant impact on gold prices. Sales for the year ended in S e pte mb e r 200 9 we re ab out 70% b e low the 500 tonnes full-year quota. A renewed CBGA took effect in September 2009 upon the expiry of the previous accord, with the quota lowered to 400 tonnes per year over this 5-year agreement. This renewal is structured to accommodate the expected sales of up to 403 tonnes of gold from the International Monetary Fund (IMF). Net official sector sales have been declining in recent years and during the final three quarters of 2009, central banks became net buyers. In November 2009, the IMF announced the sale of 200 tonnes of gold to the Reserve Bank of India and earlier in the year China announced that it has added more than 400 tonnes to its reserves since the last report of their holdings in 2003. OFFICIAL SECTOR GOLD SALES (tonnes) 750 600 450 300 150 0 663 479 484 365 236 44 2004 2005 2006 2007 2008 2009 Source: World Gold Council and GFMS The reserve gold holdings of emerging market coun- tries, such as the BRIC countries (Brazil, Russia, India, and China), are significantly lower than the reserve holdings of more developed countries. The central banks of these developing economies hold a signifi- cant portion of their reserves in US dollars and as they identify a need to diversify their portfolio and reduce their exposure to the US dollar, we believe that gold will be one of the main benefactors. In conjunction with the below quota selling of gold under the CBGA, which is expected to continue in the current year of the agreement, these recent purchases of gold by global central banks provide a strong indication that the view of gold as a reserve asset is returning to favor. 46 Management’s Discussion and Analysis AVERAGE MONTHLY SPOT COPPER PRICES (dollars per pound) 4.00 3.50 3.00 2.50 2.00 1.50 1.00 2007 2008 2009 Silver Silver traded in a range of $10.35 to $19.46 per ounce in 2009, averaged $14.70 per ounce and closed the year at $16.87 per ounce. Despite weak industrial demand, silver managed to rise during the year due to very strong investor demand. The ounces held by major global ETFs increased by 123 million ounces during the year with holdings totaling 396 million ounces at the end of 2009. The silver market is currently in sur- plus and while a return to global economic growth will help improve industrial demand, the primary influence of prices should continue to be investor demand. In Q3 2009, the Company eliminated all of its silver sales hedge contracts at a total cost of $114 mil- lion. This amount was paid from the Company’s cash balances. In September 2009, the Company entered into a transaction with Silver Wheaton Corp. where we have sold 25% of the life-of-mine Pascua-Lama silver production upon the later of January 1, 2014 or com- pletion of construction at the project, and 100% of silver production from the Lagunas Norte, Pierina and Veladero mines until that time, for a total cash deposit of $625 million. Silver Wheaton will also make ongo- ing payments of $3.90 per ounce in cash (subject to a 1% annual inflation adjustment starting three years after completing construction at Pascua-Lama) for each ounce of silver delivered under the agreement. Currency Exchange Rates The results of our mining operations outside of the United States are affected by US dollar exchange rates. The largest single exposure we have is to the Australian dollar/US dollar exchange rate. We also have exposure to the Canadian dollar through a combination of Canadian mine operating costs and corporate admin- istration costs and increasing exposure to the Chilean peso as a result of the construction of our Pascua-Lama project. In addition, we have exposure to the Papua New Guinea kina, Peruvian sol, and Argentinean peso through mine operating and capital costs. In 2009, the US dollar was generally in decline, primarily as a result of the low interest rates offered on US dollars, re-leveraging by investors into riskier assets, and concerns about the level of US government borrowing and deficits. In early 2010, the US dollar experienced a small rally as money flows moved from Euros to the US dollar on the news of debt concerns for certain EMU countries. However, we feel there is more risk for the US dollar to decline from these levels, which should be supportive of gold prices. Fluctuations in the US dollar increase the volatil- ity of our costs reported in US dollars, subject to protection that we have put in place through our cur- rency hedging program. In 2009, the Canadian dollar traded in a wide range of $0.77 to $0.98 and closed at $0.96 due to volatility in the global economy, as well as energy and commodity prices. The Australian dol- lar also experienced high volatility, trading in a range of $0.63 to $0.94 and closed at $0.90, strengthening towards the end of the year due in part to increasing interest rate differentials and higher commodity prices. About 60–65% of our consolidated production costs are denominated in US dollars and are not exposed to fluctuations in US dollar exchange rates. For the remaining portion, our currency hedge posi- tion allows for more accurate forecasting of our antic- ipated expenditures in US dollar terms and mitigates our exposure to volatility in the US dollar. Over the last three years, our currency hedge position has pro- vided benefits to us in the form of hedge gains when contract exchange rates are compared to prevailing market exchange rates as follows: 2009 – $27 million; 2008 – $106 million; and 2007 – $166 million. These gains are recorded within our operating costs. We have also recorded hedge losses increasing corporate administration costs in 2009 by $7 million (2008 – $11 million gain and 2007 – $19 million gain). Management’s Discussion and Analysis | Barrick Financial Report 2009 47 For 2010, our average Australian and Canadian dollar hedge rates are favorable when compared to the year-end market rates for these currencies. The aver- age hedge rates vary depending on when the contracts were put in place. We are approximately 90% hedged in 2010 for expected Australian and Canadian operat- ing costs, and sustainable and eligible project capital expenditures at rates of $0.80 and $0.93, respectively. In addition, we have hedged 83%, 68%, and 62% of our total expected 2011, 2012, and 2013 Australian expenditures at rates of $0.76, $0.74, and $0.70, respectively. Assuming market exchange rates at the December 31st levels of $0.90 and $0.95, we expect to record opportunity gains of approximately $106 mil- lion in 2010 (about $13 per ounce on total 2010 pro- duction), or approximately $97 million for the Australian dollar and approximately $9 million for the Canadian dollar. Further information on our currency hedge positions is included in note 20 to the consoli- dated financial statements. A$ Currency Contracts A$:US$ Contracts (A$ millions) Effective % of Expected A$ Exposure1 Hedge Rate 1,423 1,322 964 750 0.80 0.76 0.74 0.70 93% 83% 68% 62% 2010 2011 2012 2013 C$ Currency Contracts C$:US$ Contracts (C$ millions) Effective % of Expected C$ Exposure1 Hedge Rate 2010 2011 381 27 0.93 0.95 89% 7% CLP Currency Contracts CLP:US$ Contracts (CLP millions)2 Effective % of Expected CLP Exposure3 Hedge Rate 2010 2011 96,240 60,000 519.21 507.57 44% 27% 1. Includes all forecasted operating, sustainable and eligible project capital expenditures. 2. CLP 120,000 million collar contracts are an economic hedge on pre-produc- tion expenditures at our Pascua-Lama project with a cap and floor of 500 and 550, respectively. The CLP exchange rate was 507.57 at December 31, 2009. 3. Includes all forecasted operating, sustainable and forecasted project capital expenditures. 48 Management’s Discussion and Analysis AVERAGE MONTHLY AUD$ SPOT AND HEDGE RATES 1.00 0.95 0.90 0.85 0.80 0.75 0.70 0.65 0.60 0.55 0.50 2007 2008 2009 Spot Rate Average Hedge Rate AVERAGE MONTHLY CAD$ SPOT AND HEDGE RATES 1.10 1.05 1.00 0.95 0.90 0.85 0.80 0.75 0.70 0.65 0.60 2007 2008 2009 Spot Rate Average Hedge Rate Fuel Oil prices were volatile during 2009, trading between $34 and $82 per barrel and averaged $62 per barrel. Oil prices closed the year at $79 per barrel as the global economy appears to be returning to growth conditions. We consume on average approximately 3.8 million barrels of diesel fuel annually across all our mines. Diesel fuel is refined from crude oil and is therefore subject to the same price volatility affecting crude oil prices. Volatility in crude prices has a significant direct and indirect impact on our production costs. In order to mitigate this volatility, we employ a strategy of combining the use of financial contracts and our production from Barrick Energy to effectively hedge our exposure to high oil prices. We currently have financial contracts in place totaling 4.2 million bar- rels, which represents 60% of our total estimated direct consumption in 2010 and 16% of our total esti- mated direct consumption over the following three years. Those contracts are primarily designated for our Nevada-based mines, and have an average price of $90 per barrel. In 2009, we recorded hedge losses in earnings of approximately $97 million on our fuel hedge positions (2008: $33 million gain; 2007: $29 million gain). Assuming market rates at the December 31st level of $79 per barrel, we expect to realize opportunity losses of approximately $30 mil- lion in 2010 from our financial contracts. Financial Fuel Hedge Summary 2010 2011 2012 2013 Barrels1 (thousands) Average Price % of Expected Exposure 2,340 $ 101 804 590 440 87 69 63 4,174 $ 90 60% 20% 16% 12% 27% 1. Refers to hedge contracts for a combination of WTI, WTB, MOPS and JET. In 2010, we expect Barrick Energy to produce about 1.5 million barrels of oil equivalent at a cash cost of approximately $40 per barrel. Barrick Energy produc- tion mitigates our exposure on approximately 15% of our 2010 fuel requirements. CRUDE OIL MARKET PRICE (WTI) (dollars per barrel) $150 $120 $90 $60 $30 US Dollar Interest Rates Beginning in 2008, in response to the contraction of global credit markets and in an effort to spur economic activity and avoid potential deflation, the US Federal Reserve reduced its benchmark rate to between 0% and 0.25%. The benchmark rate was kept at this level throughout 2009. We expect that short-term rates will remain at low levels well into 2010, with the US Federal Reserve continuing to use monetary policy initiatives in an effort to keep long-term interest rates low. We expect such initiatives to be followed by incre- mental increases to short-term rates once economic conditions and credit markets normalize. At present, our interest rate exposure mainly relates to interest receipts on our cash balances ($2.6 billion at the end of the year); the mark-to-market value of derivative instruments, including our remaining Floating Contracts ($0.7 billion at December 31, 2009); the fair value and ongoing payments under US dollar interest-rate swaps; and to the interest pay- ments on our variable-rate debt ($0.3 billion at December 31, 2009). Currently, the amount of interest expense recorded in our consolidated statement of income is not materially impacted by changes in inter- est rates, because the majority of debt was issued at fixed interest costs rates. The relative amounts of vari- able-rate financial assets and liabilities may change in the future, depending on the amount of operating cash flow we generate, as well as the level of capital expenditures and our ability to borrow on favorable terms using fixed rate debt instruments. US DOLLAR INTEREST RATES (%) 6.0 5.0 4.0 3.0 2.0 1.0 0.0 2007 2008 2009 2007 2008 2009 3 Month Libor 5 Year Interest Rates 10 Year Interest Rates 30 Year Interest Rates Management’s Discussion and Analysis | Barrick Financial Report 2009 49 The historically low near-term rates and the upward-sloping yield curve are enabling more con- sumers to avoid defaulting on debt and are helping previously at-risk financial institutions to stabilize their businesses through borrowing at low short-term rates and lending at higher medium-to-long term rates. This yield curve impacts the net amounts of interest income and expense since our debt issuances were set at predominantly 10-year and 30-year interest rates, while our cash and equivalents balances are generating interest income at lower rates in the 30 to 90 day range. If shorter term interest rates rise, this should result in us generating higher amounts of interest income on our cash balances, while our interest expense is largely at fixed rates and insensitive to increasing interest rates. Financial and Operational Results Review of Financial Results1 ($ millions, except per share data in dollars) For the years ended December 31 Revenues Net income/(loss) Per share2 Net income/(loss) Elimination of gold sales contracts Effect of tax rate changes Impairment charges related to goodwill, property, plant and equipment, and investments Gains on acquisitions/dispositions Foreign currency translation (gains)/losses Non-recurring restructuring costs Unrealized (gains)/losses on non-hedge derivative instruments Adjusted net income3 Per share2 EBITDA4 Adjusted EBITDA5 Operating cash flow Adjusted operating cash flow6 Capital expenditures – minesite sustaining7 Capital expenditures – minesite expansionary7 Capital expenditures – projects7 Total assets Total liabilities Dividends declared 2009 2008 $ Change % Change 2007 $ 8,404 (4,274) (4.73) (4,274) 5,901 59 259 (85) (95) 15 30 1,810 2.00 (2,514) 3,419 (2,322) 2,899 784 60 965 $ 7,913 785 0.90 785 – – 899 (178) 135 – 20 1,661 1.90 2,347 2,347 2,254 2,254 742 – 739 27,075 11,528 $ 369 24,161 8,702 $ 349 491 (5,059) (5.63) (5,059) 5,901 59 (640) 93 (230) 15 10 149 0.10 (4,861) 1,072 (4,576) 645 42 60 226 2,914 2,826 20 6% (644%) (626%) (644%) 100% 100% (71%) 52% (170%) 100% 50% 9% 5% (207%) 46% (203%) 29% 6% 100% 31% 12% 32% 6% $ 6,332 1,119 1.29 1,119 – – 59 (59) (73) – (10) 1,036 1.19 2,436 2,436 1,768 1,768 679 – 243 21,951 6,613 $ 261 1. The amounts presented in this table include the results of discontinued operations. 2. Calculated using weighted average number of shares outstanding under the basic method. 3. Adjusted net income is a non-GAAP financial performance measure with no standardized meaning under US GAAP. For further information and a detailed reconciliation, please see page 85 of this MD&A. 4. EBITDA is a non-GAAP financial performance measure with no standardized meaning under US GAAP. For further information and a detailed reconciliation, please see page 88 of this MD&A. 5. Adjusted EBITDA is a non-GAAP financial performance measure with no standardized meaning under US GAAP. For further information and a detailed reconciliation, please see page 88 of this MD&A. 6. Adjusted operating cash flow is a non-GAAP financial performance measure with no standardized meaning under US GAAP. For further information and a detailed reconciliation, please see page 86 of this MD&A. 7. Amount presented is on a cash basis and projects amount reflects our equity share of capital expenditures on our advanced projects. For a detailed reconciliation and further discussion, please see page 70 of this MD&A. 50 Management’s Discussion and Analysis In 2009, we reported a net loss of $4,274 million compared to net income of $785 million in the prior year. The $5,059 million decrease in net income was primarily driven by the $5,901 million post-tax loss on the elimination of our gold sales contracts; lower gold production; higher gold cash costs and lower realized copper prices. These decreases were partially offset by higher realized gold prices; lower impairment charges; and lower project development expense as costs at Pueblo Viejo were capitalized in 2009. Adjusted net income was $1,810 million in 2009, compared to $1,661 recorded in the prior year. The significant adjusting items in 2009 include: the elimi- nation of our gold sales contracts; a $248 million impairment charge related to goodwill and long-lived assets at our Plutonic mine and Sedibelo project; a $72 million gain recognized on the acquisition of the additional 50% interest in our Hemlo gold mine; a $70 million currency translation gain on deferred tax assets due to an election to adopt a US dollar func- tional currency for Canadian tax purposes; and a $59 million loss on deferred tax assets due to a reduc- tion in corporate income tax rates in Ontario. FACTORS AFFECTING ADJUSTED NET INCOME 157 777 210 173 1,661 124 116 1,810 96 66 EBITDA was a loss of $2,514 million in 2009, compared to income of $2,347 in the same prior year period. The significant decrease is primarily attributa- ble to the $5,933 million, before tax, charge relating to the elimination of our gold sales contracts. EBITDA was also impacted by the same factors affecting net income with the exception of income tax expense. Excluding the impact of the gold sales contracts, Adjusted EBITDA was $3,419 million in 2009, com- pared to $2,347 in the same prior year period. Operating cash flow for 2009 was $(2,322) million, a significant decrease over the prior year due to the $5,221 million in payments related to the settlement of our gold sales contracts. Operating cash flow was positively affected by higher realized gold prices, and lower income taxes paid as a result of the production mix and the use of tax loss carry forwards. These increases were partially offset by higher gold cash costs, lower realized copper prices, and lower gold sales volumes. Adjuste d ope rating c ash flow in 200 9 was $2,899 million, representing a $645 million increase over the prior year. Adjusted operating cash flow was affected by the same factors as operating cash flow and was adjusted for the $5,221 million in payments related to the settlement of our gold sales contracts. The 29% increase over the prior year period illustrates the underlying capability of our business to generate robust operating cash flow. 8 0 0 2 e m o c n I t e N d e t s u d A j l d o G – e c i r P d e z i l a e R n o i t a r o p x E l d n a t n e m p o e v e D l j t c e o r P e s n e p x E x a T e m o c n I l d o G – s t s o C h s a C l d o G – l s e m u o V s e a S l n o i t a z i t r o m A n o i t e r c c A d n a i n g r a M r e p p o C r e h t O t e N d e t s u d A j 9 0 0 2 e m o c n I Management’s Discussion and Analysis | Barrick Financial Report 2009 51 Review of Operating Results1 ($ millions, except per ounce/pound data in dollars) For the years ended December 31 Production (000s ounces/millions pounds)2 Reserves (millions of contained ounces/billions of contained pounds)3 Sales4 000s ounces/millions pounds $ millions Market price5 Realized price5,6 Cost of sales ($ millions) Total cash costs5,7,8 Net cash costs5,7,9 Gold 2008 7,657 138.5 7,595 $ 6,656 872 872 3,426 2009 7,423 139.8 7,306 $ 7,191 972 985 3,431 2007 8,060 124.6 8,055 $ 5,027 695 621 2,805 2009 393 6.1 380 $ 1,155 2.34 3.16 444 Copper 2008 370 6.4 367 $ 1,228 3.15 3.39 436 2007 402 6.2 401 $ 1,305 3.23 3.22 339 $ 466 $ 443 $ 345 $ 1.17 $ 1.19 $ 0.82 $ 363 $ 337 $ 228 1. The amounts presented in this table include the results of discontinued operations. 2. Gold production reflects our equity share of production. 3. 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, Cerro Casale is classified as mineralized material. For a breakdown of reserves and resources by category and additional information relating to reserves and resources, see pages 155 to 162. 4. Gold sales reflect our equity share of sales. 5. Per ounce/pound weighted average. 6. Realized price is a non-GAAP financial performance measure with no standard meaning under US GAAP. For further information and a detailed reconciliation, please see page 89 of this MD&A. 7. Reflects our equity share of production. 8. Total cash costs is a non-GAAP financial performance measure with no standard meaning under US GAAP. For further information and a detailed reconciliation to cost of sales, please see page 87 of this MD&A. 9. Net cash costs is a non-GAAP financial performance measure with no standard meaning under US GAAP. For further information and a detailed reconciliation to cost of sales, please see page 87 of this MD&A. In 2009, total revenues of $8.4 billion were up 6% compared to the prior year, primarily due to higher realized gold prices and copper sales volumes. These factors were partially offset by lower gold sales vol- umes and lower realized copper prices. Realized gold prices of $985 per ounce in 2009 were up $113 per ounce compared to the prior year, consistent with the year over year increase in average market price of $100 per ounce. The higher realized price compared to the market price in 2009 is primarily due to the timing of gold sales and additional trading activities utilizing various gold market contracts. Realized cop- per prices for the year were 7% lower than in the prior year period; however, they were 35% higher than mar- ket prices due to the impact of our copper hedges. Our copper hedge position resulted in an additional $283 million in realized revenue during 2009. Cost of sales applicable to gold was $3.4 billion for 2009, representing a slight increase over the prior year. Cost of sales was impacted by increased labor costs and maintenance costs, partially offset by decreasing costs of commodities and consumables used in the production process. For the year, cost of sales was within our original cost of sales guidance of $3.2 billion to $3.6 billion. Net cash costs per ounce were 8% higher in 2009 compared to the prior year. The increase reflects higher labor costs, maintenance costs, realized losses from fuel hedges, and lower copper credits from Zaldívar and Osborne as a result of lower realized copper prices. Net cash costs per ounce were also impacted by our relative production mix in 2009, with South America, our lowest cost region, contributing a smaller share of total gold production when compared to 2008, largely due to the sequencing of production. Net cash costs of $363 per ounce were within our original guidance of $360 to $385 per ounce. Total cash costs per ounce were 5% higher in 2009 compared to the prior year. The changes in total cash costs reflect the factors impacting net cash costs described above, except for the impact of lower copper credits. Total cash costs of $466 per ounce were within our original guidance of $450 to $475 per ounce. In 2009, cost of sales applicable to copper of $4446 million and total cash costs of $1.17 were in line with the $4366 million in cost of sales and $1.19 per pound recorded in 2008. When compared to the prior 6. Cost of sales applicable to copper includes $83 million (2008: $121 million) related to Osborne, which is classified as a discontinued operation in the consolidated financial statements. 52 Management’s Discussion and Analysis year, lower direct mining costs were offset by higher electricity prices resulting from a higher-cost power contract at Zaldívar, which came into effect in July 2008. Both cost of sales applicable to copper and total cash costs per pound were below our original 2009 guidance for cost of sales of $470 to $540 million and total cash costs per pound of $1.25 to $1.35 per ounce. Net cash margins per ounce illustrate the trends in profitability and the impact of fluctuations in realized prices and net cash costs on our ability to generate earnings and operating cash flow. Net cash margins per ounce increased in 2009 as the rise in gold prices outpaced the rise in net cash costs. Operational Overview1 For the years ended December 31 Gold 2009 2008 % Change 2007 Ore tons mined (millions) 174 Waste tons mined (millions) 555 Total tons mined (millions) 729 182 498 680 (4%) 11% 7% 167 486 653 Ore tons processed (millions) 171 191 (10%) 172 Average grade (ozs/ton) 0.052 0.047 11% 0.055 Recovery rate 82.1% 84.4% (3%) 84.7% Gold produced (000s/oz) 7,423 7,657 (3%) 8,060 NET CASH MARGINS PER OUNCE $1,200 $1,000 $800 $600 $400 $200 $0 $622 $670– $700 $535 $337 $363 $350– $380 $393 $228 2007 2008 2009 2010E Net Cash Costs Net Cash Margin Copper Ore tons mined (millions) 50 Waste tons mined (millions) 30 Total tons mined (millions) 80 Ore tons processed (millions) Average grade (percent) Copper produced (millions/lbs) 49 0.6 45 38 83 44 0.6 11% (21%) (4%) 11% – 41 49 90 39 0.7 393 370 6% 402 1. The amounts presented in this table include the results of discontinued operations. Production Gold production in 2009 was 234 thousand ounces or 3% lower than in the prior year, reflecting lower production in South America and North America, partially offset by higher production in Africa and Australia. Production of 7,423 thousand ounces was within our original guidance range of 7,200 to 7,600 thousand ounces. Copper production was 6% higher than the prior year period due to higher pro- duction from both Zaldívar and Osborne in 2009. Production of 393 million pounds was within our original guidance range of 375 to 400 million pounds. Tons Mined and Tons Processed – Gold Total tons mined increased by 7% and tons processed decreased by 10% when compared to 2008. The higher tons mined was mainly due to the start up of our new Buzwagi mine; an incre ase in stockpile s at our Veladero mine as a result of an increase in the mining fleet in 2009, in preparation for the processing capac- ity increase as a result of the crusher expansion com- pleted in third quarter 2009; and increased waste stripping at Golden Sunlight. These increases were Management’s Discussion and Analysis | Barrick Financial Report 2009 53 partially offset by a decrease at Cowal, where wall fail- ure remediation activities increased the number of tons mined in 2008. Ore tons processed decreased by 10% due to decreases at Cortez, where a shift towards more underground ore led to fewer tons processed at higher grades, partly offset by increases at Veladero, due to an increase in the cut-off grade, thereby mak- ing it economical to process material that would have previously been classified as waste. Average Mill Head Grades – Gold Average mill head grades increased by approximately 11% in 2009 compared to the prior year, primarily due to mine sequencing that resulted in higher ore grades at certain mines. Reserve grades have been trending downwards in recent years, primarily as a result of rising gold prices which make it economical to process lower grade material. TONS MINED AND TONS PROCESSED1 AVERAGE MILL HEAD GRADES1 (ounces/ton) Tons Mined Tons Processed 800,000 600,000 400,000 200,000 0 250,000 200,000 150,000 100,000 50,000 0 0.08 0.06 0.04 0.02 0 2007 2008 2009 2007 2008 2009 Tons Mined Tons Processed 1. All amounts presented are based on equity production. Average Recovery Rates – Gold Average recovery rates decreased by approximately 3% in 2009 compared to the prior year, primarily due to an increase in ore tons placed on the leach pad at Veladero in the fourth quarter 2009 as a result of the crusher expansion completed in the third quarter, which resulted in a reduction in gold recovered and an increase in leach pad inventory. The recovery of the ore in leach pad inventory is expected to have a posi- tive impact on recovery rates in 2010. This was par- tially offset by an increase in recovery rates at Cortez as more ounces were recovered through the carbon in pulp process plant than the heap leach facility. Average Head Grade 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. 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. Safety In 2009, we achieved a 10% reduction in the number of recordable injuries and a 25% decrease in lost time injuries, continuing a trend of year over year perform- ance improvements. Lost time injuries are recorded when an employee or contractor takes time off the fol- lowing day or shift following an incident. Thirteen sites achieved zero lost time injury rates in 2009, including Pascua-Lama which has achieved a total of 7 million hours and five years worked without a lost time injury. In addition, our Ruby Hill operation completed the entire year with zero recordable injuries, an outstand- ing achievement. Despite these positive achievements, there were four work related fatalities at Barrick sites during 2009 and we were deeply saddened by these incidents. We conducted full investigations and have 54 Management’s Discussion and Analysis developed new policies and procedures to reduce the risk of similar incidents occurring. An incident-free work place is our vision and our safety culture contin- ues to improve, which is evidenced by our continued improvement in incident rates. LOST TIME INJURY FREQUENCY RATES 0.35 0.30 0.25 0.20 0.15 0.10 0.05 0.00 2007 2008 2009 Lost Time Injury Frequency Rates Reserves7 At year-end 2009, we added 10.3 million ounces of proven and probable reserves. After depletion of 9.0 million ounces, proven and probable gold reserves increased by 1.3 million ounces to 139.8 million ounces, the largest in the industry, based on an assumed $8258 per ounce gold price. The increase pri- marily reflects additions at Bald Mountain, South Arturo, Cortez and Hemlo partially offset by a decrease at Bulyanhulu. Measured and indicated gold mineral resources declined by 5% to 61.8 million ounces and inferred gold mineral resources declined 9% to 31.6 million ounces based on a $900 per ounce gold price. Copper reserves decreased slightly to 6.1 billion pounds and measured and indicated resources increased by 0.4 billion pounds to 12.9 billion pounds. Contained silver within reported gold reserves is over one billion ounces. Replacing gold and copper reserves depleted by production year over year is necessary in order to maintain production levels over the long term. 7. For a breakdown of reserves and resources by category and additional infor- mation relating to reserves and resources, see pages 155 to 162 of this Financial Report. 8. Reserves at Cerro Casale and Round Mountain have been calculated using an assumed price of $800 per ounce. If depletion of reserves exceeds discoveries over the long term, then we may not be able to sustain gold and copper production levels. Reserves can be replaced by expanding known ore bodies, acquiring mines or properties or discovering new deposits. Once a site with gold or copper mineralization is discovered, it takes several years from the initial phases of drilling until production is possible, during which time the economic feasibility of production may change. Substantial expenditures are required to establish proven and probable reserves and to permit and con- struct mining and processing facilities. Review of Operating Segment Performance We report our results of operations using a geograph- ical business unit approach: North America, South America, Australia Pacific and Africa. In addition, we have a Capital Projects segment, distinct from our regional business units, to focus on managing projects. This structure reflects how we manage our business and how we classify our operations for planning and measuring performance. In our consolidated financial statements, we present a measure of historical segment income that reflects gold sales and copper sales at average con- solidated realized gold and copper prices, respectively, less segment expenses and amortization of segment property, plant and equipment. We monitor segment expenses and period to period fluctuations in our total cost of sales on a unit basis, per ounce of gold and per pound of copper, which is referred to as total cash costs. Therefore, the discussion of results for our producing mines focuses primarily on this statistic to explain changes in seg- ment expenses. North America Key Operating Statistics For the years ended December 31 Tons mined (millions) Ore tons processed (millions) 2009 2008 % Change 2007 397 64 360 92 10% (30%) 335 76 Average grade (ozs/ton) 0.053 0.041 29% 0.051 Gold produced (000s/oz) 2,810 3,028 (7%) 3,201 Cost of sales ($ millions) $ 1,423 $ 1,534 (7%) $ 1,178 Total cash costs (per oz) $ 504 $ 493 2% $ 363 Segment income ($ millions) $ 970 $ 722 34% $ 483 Management’s Discussion and Analysis | Barrick Financial Report 2009 55 in ore suitable for acidic autoclaving at Goldstrike. 2010 production at Goldstrike is expected to be lower than 2009 due to lower grade areas being mined after mine sequencing in which deeper areas of the pit con- taining higher grade ore were mined in 2009, resulting in fewer ore tons to feed to the roaster in 2010. The life of mine plan also anticipated a decrease in ore suitable for acidic autoclaving. Although we are evaluating options to extend its life, we currently plan to phase out the autoclave facility throughout 2010 and cease its operation in 2011. In 2010, the autoclave will be operating at about half the capacity as it was in 2009, resulting in fewer ore tons processed. In order to uti- lize the potential available capacity, ore tons from Storm will be shipped to Goldstrike for processing. Cost of sales applicable to gold is expected to be $1.3 to $1.5 billion, or $450 to $475 per ounce on a total cash costs basis. Cost of sales and total cash costs per ounce are expected to decrease as a result of the production mix shift towards lower cost Cortez Hills production. South America Key Operating Statistics For the years ended December 31 Gold 2009 2008 % Change 2007 Tons mined (millions) 158 Ore tons processed (millions) 70 151 65 5% 8% 151 59 Average grade (ozs/ton) 0.036 0.037 (3%) 0.042 Gold produced (000s/oz) 1,889 2,111 (11%) 2,079 Cost of sales ($ millions) $ 499 $ 531 (6%) $ 400 Total cash costs (per oz) $ 265 $ 251 6% $ 193 Segment income ($ millions) $1,189 $1,127 6% $ 664 Copper Copper produced (millions of lbs) 302 295 2% 315 Cost of sales ($ millions) $ 361 $ 315 15% $ 232 Total cash costs (per lb) $ 1.17 $ 1.08 8% $ 0.69 Segment income ($ millions) $ 504 $ 624 (19%) $ 751 Segment income was $970 million, a 34% increase over the prior year, primarily as a result of higher real- ized prices, partially offset by higher total cash costs and lower production. Production for 2009 was 7% lower than the prior year mainly due to lower production at Goldstrike, Golden Sunlight and Bald Mountain, partly offset by higher production at Cortez, Hemlo and Storm. At Goldstrike, production for the year was down 351 thousand ounces over the prior year, mainly as a result of the planned partial shutdown of the auto- claves in the second half of 2009. Golden Sunlight production decreased by 92 thousand ounces from 2008 as it has entered an extended development phase and is not expected to produce gold again until 2011. Bald Mountain’s pro duction was lowe r due to unplanned permitting delays in 2009. These permit- ting issues have been addressed in conjunction with a mine expansion plan and Bald Mountain should return to higher production levels within three years. Higher production of 90 thousand ounces at Cortez was mainly a result of increasing ore grades as we expand operations at the Cortez Hills underground, as well as the acquisition of our joint venture partner’s 40% interest, which was effective March 2008. At Hemlo and Storm, production increased 145 thousand and 43 thousand ounces, respectively, reflecting our increased ownership interest in those mines effective April 2009 and October 2008, respectively. In 2009, cost of sales was 7% lower than the prior year period mainly due to lower production levels and decreasing commodity costs, while total cash costs per ounce were up 2% compared to the prior year. The decrease in cost of sales is due to a decrease in com- modity costs, which was partially offset by increases attributable to the acquisitions of additional interests in Hemlo and Storm, which are higher cost opera- tions, and planned increases in labor as we ramp up underground activities at Cortez Hills. The increase in total cash costs per ounce reflects the lower produc- tion partially offset by the cost of sales decreases. In 2010, we expect gold production in the range of 2.95 to 3.10 million ounces. Production is expected to be higher than 2009 primarily due to production from Cortez Hills9 partly offset by the anticipated decrease 9. In December 2009, the appeal of the denial of a preliminary injunction sought by certain opponents of the Cortez Hills Project was denied in part and granted in part. As a result, the Company has sought a limited injunction that would restrict groundwater pumping to current levels and enjoin trucking of refractory ore (representing approximately 3% of the ore) to Goldstrike pending completion of a supplemental EIS. The plaintiffs have sought a broader injunction that would enjoin further construction and operation of the Project pending completion of the supplemental EIS. 56 Management’s Discussion and Analysis Gold segment income was $1,189 million, a 6% increase over the prior year, primarily as a result of higher realized prices, partially offset by higher total cash costs and lower gold production. Gold production for the year was 11% lower than 2008 due to the planned mining of lower grade ore at Pierina and Lagunas Norte, partially offset by higher production at Veladero. Production at Veladero increased in the second half of 2009 as we started to access higher grades from both the Amable and Federico pits and increased crushing capacity due to the start-up of the crusher circuit expansion. Cost of sales applicable to gold decreased by 6% in 2009 compared to the prior year, primarily due to lower production levels and lower blasting and con- tract costs at Veladero, and higher silver credits due to higher market silver prices. Total cash costs per ounce for the year were up 6% to $265 over the prior year, as the decrease in cost of sales was more than offset by the decrease in production. In 2010, we expect gold production in the range of 2.11 to 2.25 million ounces, compared to 2009 pro- duction of 1.89 million ounces. The expected increase in production is primarily due to higher production at Veladero as a result of an increase in tons processed due to the availability of the overland conveyor and completion of the crusher expansion, as well as an increase in ore grade and recovery. The increase in Veladero production is expected to be partly offset by lower production at Lagunas Norte, due to lower ore grades, and Pierina. Cost of sales applicable to gold is expected to be about $550 to $650 million, or $240 to $270 per ounce on a total cash costs basis, similar to 2009 levels. Copper segment income was $504 million, a 19% decrease over the prior year. Slightly higher produc- tion was more than offset by lower realized prices and lower cost of sales. Copper production for 2009 increased slightly compared to the prior year, mainly due to increases in heap leach ore and improved leaching kinetics, which was adversely affected by acid supply shortages in 2008. Copper cost of sales increased by 15% as higher production levels combined with higher total cash costs. The 8% increase in total cash costs per pound was mainly due to higher prices for electricity under a new contract effective July 2008. The cost of power under the new contract fluctuates with market oil prices. We expect 2010 copper production to be in the range of 305 to 325 million pounds and cost of sales applicable to copper to be in the range of $310 to $360 million, with total cash costs in the range of $1.05 to $1.20 per pound. Australia Pacific Key Operating Statistics1 For the years ended December 31 Gold 2009 2008 % Change 2007 Tons mined (millions) 133 Ore tons processed (millions) 30 147 29 10% 3% 144 33 Average grade (ozs/ton) 0.075 0.077 (3%) 0.078 Gold produced (000s/oz) 1,977 1,942 2% 2,123 Cost of sales ($ millions) $1,144 $1,079 6% $ 934 Total cash costs (per oz) $ 588 $ 550 7% $ 447 Segment income ($ millions) $ 457 $ 314 46% $ 108 Copper Copper produced (millions of lbs) 91 75 21% 87 Cost of sales ($ millions) $ 83 $ 121 (31%) $ 107 Total cash costs (per lb) $ 1.15 $ 1.64 (30%) $ 1.36 Segment income ($ millions) $ 125 $ 44 184% $ 92 1. The amounts presented in this table include the results of discontinued operations. Gold segment income was $457 million, a 46% increase over the prior year, primarily as a result of higher realized prices and higher production, partially offset by higher cost of sales. Total gold production in 2009 was 2% higher than the prior year as a result of increased gold production at Kalgoorlie, Cowal and Yilgarn South10, partially offset by lower production at Porgera and Henty. At Kalgoorlie, production increased by 42 thou- sand ounces, primarily due to an 18% increase in the ore grade over the prior year. At Cowal, the slip on the east wall restricted access to high grade ore for the majority of 2008, leading to a 22% increase in produc- tion for 2009. At Yilgarn South, higher production in 2009 was principally due to better ore grades and an increase in ore tons processed as a result of an ore purchase arrangement with a third party mining company. In 2009, production at Porgera decreased by 10. Effective first quarter 2008, the Darlot, Lawlers, and Granny Smith mines are being managed as a single unit (Yilgarn South), with shared administra- tive services in order to achieve operational and administrative efficiencies. Management’s Discussion and Analysis | Barrick Financial Report 2009 57 76 thousand ounces over the prior year, as wall stabil- ity issues affected production in the second and third quarters of 2009. In the fourth quarter production was affected by power supply issues due to vandalism. By the end of the year, production levels at Porgera had returned to expected levels. Cost of sales applicable to gold in 2009 was 6% higher than the prior year, mainly due to higher con- tractor costs, maintenance expense and royalties. Total cash costs per ounce were up $38 per ounce compared to 2008. This 7% increase in total cash costs per ounce reflected the higher cost of sales, which was partially offset by marginally higher production levels. In 2010, we expect gold production in the range of 1.85 to 2.0 million ounces as a result of lower expected production at Kanowna due to lower ore tons from the underground and a reduction in ounces recovered, the divestiture of Henty during 2009, and the expected divestiture of Osborne in 2010, partly offset by higher expected production at Kalgoorlie and Plutonic as operations progress to higher grade areas of the mine, and at Granny Smith as development allows access to mine additional zones in the underground. Cost of sales is expected to be about $1.1 to $1.3 billion. Total cash costs are expected to be in the range of $600 to $625 per ounce, similar to 2009 levels. Copper segment income was $125 million, a 184% increase over the prior year. Higher production and lower cost of sales was partially offset by lower realized prices. Copper production at Osborne was up 21% compared to the prior year. This increase was achieved due to better ore grades and recovery rates in 2009. Cost of sales decreased by 31% in 2009 due to lower activity levels across the site as the mine nears closure. The higher production levels and lower cost of sales resulted in total cash costs per pound being 30% lower for 2009, when compared to the prior year. We expect 2010 copper production in the period prior to the expected disposition of Osborne to be in the range of 35 to 40 million pounds and cost of sales applicable to copper to be in the range of $45 to $55 million, with total cash costs in the range of $1.30 to $1.40 per pound. The decision to dispose of Osborne was made due to the short remaining economic life in an attempt to monetize some of the remaining value of the property. 58 Management’s Discussion and Analysis Africa Key Operating Statistics For the years ended December 31 Tons mined (millions) Ore tons processed (millions) 2009 2008 % Change 2007 41 7 22 4 86% 75% 23 4 Average grade (ozs/ton) 0.114 0.154 (26%) 0.165 Gold produced (000s/oz) 716 545 31% 605 Cost of sales ($ millions) $ 377 $ 327 15% $ 293 Total cash costs (per oz) $ 545 $ 560 (3%) $ 405 Segment income ($ millions) $ 215 $ 145 48% $ 55 Segment income was $215 million, a 48% increase over the prior year, primarily as a result of higher real- ized prices and higher production, partially offset by higher cost of sales. Total gold production in 2009 increased by 31% compared to the prior year. The increase primarily reflects new production from Buzwagi and an increase in production at Bulyanhulu, partially offset by lower production at Tulawaka. The start of production at Buzwagi in May 2009 contributed 189 thousand ounces at lower total cash costs than the regional aver- age. Higher production at Bulyanhulu was reflective of a more stable operating environment in 2009 as the prior year saw the lingering effects of the illegal strike in late 2007. Tulawaka production was 55% lower than the prior year, due to the planned shift from open pit to underground mining in 2009. Cost of sales increased 15% in 2009 over the prior year period. The increase resulted from higher pro- duction volumes, partly offset by lower total cash costs. Total cash costs were slightly lower in the cur- rent year as they were positively impacted by the low cost production from Buzwagi and lower diesel costs offset by increases in labor at Bulyanhulu. In 2010, we expect equity gold production, reflect- ing the reduced ownership as a result of the IPO of African Barrick Gold, in the range of 0.65 to 0.69 mil- lion ounces. We expect cost of sales applicable to gold to be in the range of $375 to $455 million on an equity basis, or $500 to $550 per ounce on a total cash costs basis. Production in this region is expected to increase; however, we will report lower production due to the decreased ownership. The increase in production is primarily due to a full year of mining operations at Buzwagi and higher ore grades at Bulyanhulu, partly offset by lower production expected at Tulawaka and North Mara due to lower ore grades. Cost of sales and total cash costs per ounce are expected to be lower in 2010, reflecting the increase in production levels and the production mix favoring lower cost production from Buzwagi. Capital Projects Key Operating Statistics ($ millions) For the years ended December 31 2009 2008 2007 Project expenses1 $ 49 $ 140 $ 173 Project expense incurred by equity investees2 Total project expense Capital expenditures3 93 142 691 69 209 584 14 187 169 Capital commitments4 $1,018 $ 552 $ 159 1. Amounts presented represent our share of project development expense. 2. Amounts presented represent our share of project development expense from projects for which we use the equity accounting method, including Reko Diq, Cerro Casale, Kabanga and Donlin Creek. 3. Amounts presented represent our share of capital expenditures on a cash basis, and exclude expenditures incurred at our Cortez Hills property (2009: $278 million, 2008: $155 million). 4. Capital commitments represent purchase obligations as at December 31 where binding commitments have been entered into for long lead capital items related to construction activities at our projects. We spent $142 million in project expense s and $691 million (our share) in capital expenditures in 2009. The decrease in project expenses primarily relates to expenditures at Pueblo Viejo now being cap- italized and lower activity at Kainantu and Fedorova. Capital expenditures are mainly attributable to construction of our Pueblo Viejo and Pascua-Lama projects and the completion of our Buzwagi mine. We expect capital expenditures to increase in 2010 as construction activities at these two capital projects ramp up. Overview The successful advancement and exploitation of devel- opment projects is determined by the deposit knowl- edge, optimization of the technical design, metal and input costs, financing and execution of plans. We utilize a system called the Barrick Development System (BDS) to govern advancement of projects as they progress from scoping through execution stages. In our opinion this disciplined system of standards and processes, which includes the involvement of multiple functional groups, ensures completeness; enhances the study quality and consistency; and enhances the identification of risk and development of related mitigation plans, thus improving the over- all certainty of assessment and project delivery in accordance with plans developed. The foundation of the assessment of any project is a strong knowledge of the deposit. We have established processes and procedures for resource modeling, subject to strict quality control, peer reviews and audit which must be met before mineralized material is included in our mine plans. We utilize a combination of contractors and in house resources to develop the technical design and cost estimates for our projects. Our Capital Projects group is made up of functional experts, which com- plement and enhance project teams’ ability to opti- mize de sign, e ncourage transfer of knowle dge between projects and provide an ongoing quality control process through continuous peer reviews as studies and construction advance. In addition, we have an in house research and development facility that has added significant value to our projects in recent years which we believe is a competitive advan- tage. Successful project execution is determined by the availability of quality personnel, inputs and adherence to schedule. The fluctuations in prices for gold, copper, silver, nickel, energy, input commodities and consumables and foreign currencies could have a significant impact on the pre-production capital costs, operating costs as well as the overall development time frame of our projects. Coming out of the recent global economic downturn, the environment for developing projects has become more favorable as lead times for equip- ment have shrunk and prices are stable. Pueblo Viejo has benefited from the recent stability in pricing and we are accelerating procurement for Pascua-Lama in an attempt to lock in current pricing. Barrick’s ability to finance its project pipeline is aided by its ‘A’ rated balance sheet. Credit markets have stabilized from earlier in the year but remain tight in historic terms. Our experience is that lenders for project financing are becoming progressively more sensitive to non-monetary factors that slow the speed at which facilities can be arranged and add cost pres- sure to the process. Management’s Discussion and Analysis | Barrick Financial Report 2009 59 Project Summaries Our Cortez Hills project11 in Nevada is essentially complete and in the final stages of commissioning. The project is anticipated to be completed in line with its $500 million pre-production capital budget and is expected to become the seventh project in five years which Barrick has delivered on time. The entire Cortez property is expected to produce 1.08–1.12 mil- lion ounces of gold at total cash costs of $295– $315 per ounce in 2010, subject to Cortez Hills being allowed to operate consistent with Barrick’s motion for a limited preliminary injunction of activities, cur- rently before the US District Court12. The Pue blo Viejo project in the Dominican Republic is advancing on schedule with initial produc- tion anticipated in the fourth quarter of 2011. The majority of site preparation earthworks has been com- pleted, about 44,000 cubic meters of concrete poured and 1,500 tons of steel has been erected. As a result of a plan to accelerate the previously phased expansion of the processing plant from 18,000 to 24,000 tonnes per day and other updates to the mine plan, Barrick’s 60% share of annual gold production in its first full five years of operation is now expected to increase to an average of 625,000–675,000 ounces up from 600,000–650,000 ounces at lower total cash costs of $250–$275 per ounce compared to $275–$300 per ounce. The project continues to track within its budget estimate, but as a result of the plan to accelerate the expansion in processing capacity, the previously disclosed expansion capital of $0.3 billion will be brought forward such that pre-production capital is expected to be about $3.0 billion (100% basis). Barrick has continued to grow the reserves at Pueblo Viejo. Since acquiring the project with the Placer Dome acquisition, reserves have increased approximately 77% or 10.3 million ounces to 23.7 million ounces (100% basis), resulting in an expected mine life of over 25 years. 11. The Cortez Hills project is managed by our North America regional business unit and not our Capital Projects Group. An update of the project has been included in this section so that it has been grouped with the other Barrick projects. 12. In December 2009, the appeal of the denial of a preliminary injunction sought by certain opponents of the Cortez Hills Project was denied in part and granted in part. As a result, the Company has sought a limited injunc- tion that would restrict groundwater pumping to current levels and enjoin trucking of refractory ore (representing approximately 3% of the ore) to Goldstrike pending completion of a supplemental EIS. The plaintiffs have sought a broader injunction that would enjoin further construction and operation of the Project pending completion of the supplemental EIS. 60 Management’s Discussion and Analysis At the Pascua-Lama13 project on the border of Chile and Argentina, detailed engineering is about 90% complete. Major earthworks on the Chilean side are advancing, the portal for the tunnel which pro- vides access for the shipment of ore between Chile and Argentina has been established and the Barrealis camp has been progressing well with about 540 peo- ple currently on site. In Argentina, contractors for early earthworks site preparation have mobilized to site. Over 25% of the capital has been committed, securing the mining fleet, processing mills, camp accommodation and earthworks contractors. The project remains in line with its pre-production capital budget of $2.8–$3.0 billion and is on schedule to enter production in the first quarter of 2013. Average annual gold production is expected to be 750,000–800,000 ounces in its first full five years of operation at total cash costs of $20–$50 per ounce14 assuming a silver price of $12 per ounce. For every $1 per ounce increase in the silver spot price, total cash costs are expected to decrease by $35 per ounce over this period. The feasibility study optimization work at Cerro Casale has been completed. Pre-production capital is expected to be about $4.2 billion (100% basis) with a construction period of approximately 3 years follow- ing the receipt of key permits. Pre-production capital is higher than indicated in the pre-feasibility study due to additional expected expenditures related to increased processing capacity, a change from SAG milling to High Pressure Grinding Rolls, and an increase in the Chilean peso foreign exchange rate. Total cash costs are expected to be lower than the prefeasibility study indicated as a result of further optimization of the mine plan, improved metallurgi- cal recoveries and cost efficiencies as a result of the change to High Pressure Grinding Rolls. The next step is to review additional permit requirements before considering a construction decision. 13. The Company is aware of a number of actions that have been initiated against the Government of Argentina, the Province of San Juan in Argentina or the Government of Chile relating to approvals granted in respect of or actions affecting the Pascua-Lama project. The Company is not party to such actions and has limited information with respect to the nature or status of the claims or complaints. In addition, certain complaints or actions relat- ing to the project have been brought against subsidiaries of the Company. Based on the information currently available to the Company, none of such actions or complaints are believed to present a significant risk to the construction of the project. 14. Total cash costs are calculated net of silver credits assuming silver, gold and oil prices of $12 per ounce, $950 per ounce and $75 per barrel, respectively. Reko Diq is a large copper-gold porphyry mineral deposit on the Tethyan belt, located in southwest Pakistan in the province of Balochistan in which we hold a 37.5% interest. The feasibility study is being finalized and is now under review, and progress con- tinues with the expansion studies and the baseline environmental and social impact assessment which is expected to be completed in the first half of 2010. Discussions continue with the government to advance the project15. Kabanga is one of the world’s largest undeveloped nickel sulfide deposits located in Tanzania in which we hold a 50% interest. Xstrata Nickel earned a 50% interest in the project under the earn-in agreement during the fourth quarter 2008 and is currently the operator of this project. Expenditures are funded equally by Xstrata Nickel and Barrick. The project specifications continue to evolve and finalization of a feasibility study has been extended through to July 2010 to allow optimization of project engineering and associated capital requirements. Barrick holds a 10% interest in Sedibelo, a plat- inum project in South Africa. During the third quarter 2009, the decision was made to halt work and we recorded an impairment charge of $158 million, reducing the carrying amount of our investment in the project and related assets to their estimated fair values. Since that time efforts have been underway to wind down the project in accordance with the share- holder agreement. 15. Certain media reports have indicated that the Government of Bolochistan has threatened to terminate the exploration license for the project. No official notice of any such termination has been received. Barrick has agreed to acquire an additional 25% interest in the Cerro Casale project in Chile from Kinross Gold Corporation for consideration of $475 million, comprised of $455 million cash and the elimination of a $20 million contingent obligation which was payable by Kinross to Barrick on a produc- tion decision, thereby increasing our interest in the project to 75%. Cerro Casale is one of the world’s largest undeveloped gold-copper deposits, with gold reserves of 23.2 million ounces and 5.8 billion pounds of copper in gold reserves (100% basis) providing for an expected mine life of about 20 years. The project is located in the Maricunga district of Region III in Chile, 130 kilometers north of the Pascua-Lama project. Its proximity to Pascua-Lama is expected to provide opportunities for construction and operating synergies. Upon completion of the transaction with Kinross Gold, our 75% share of average annual pro- duction is anticipated to be about 750,000–825,000 ounces of gold and 170–190 million pounds of copper in its first full five years of operation at total cash costs of about $240–$260 per ounce assuming a copper price of $2.50 per pound. A $0.25 per pound change in the copper price would result in an approximate $50 per ounce impact on the expected total cash cost per ounce over this period. On a life of mine basis, our share of average annual production is anticipated to be about 600,000 to 650,000 ounces of gold and 170–190 million pounds of copper at total cash costs of about $140–$160 per ounce. At Donlin Creek, a large, undeveloped, refractory gold deposit in Alaska, a feasibility study update of our 50% owned project was approved by the Board of Donlin Creek LLC in second quarter 2009. Further optimization studies are underway primarily focused on the potential to utilize natural gas to reduce operat- ing costs. These studies are expected to be completed by mid-2010, at which point the Donlin Creek LLC will either file permit applications for the original project design or, upon unanimous Donlin Creek LLC board approval, approve a supplemental budget and proceed to revise the feasibility study to include the natural gas option. Management’s Discussion and Analysis | Barrick Financial Report 2009 61 Review of Significant Income and Expenses1 Exploration Expense ($ millions) For the years ended December 31 2009 2008 2007 Comments on significant trends and variances North America $ 62 $ 79 $ 70 Decrease mainly due to lower expenditures incurred at Cortez ($8 million) and Bald Mountain ($5 million) and the termination of exploration activities at Pinson ($9 million), partially offset by higher activity at Turquoise Ridge ($3 million). Prior year increase reflects higher activity at Pinson. South America 23 40 33 Mainly due to lower expenditures at Zaldívar ($15 million) compared to the prior year. The increase in 2008 over 2007 reflects higher activity at both Lagunas Norte and Zaldívar. Australia Pacific 42 62 46 Decrease mainly due to reduced expenditures at Osborne ($14 million), Kainantu ($11 million) and Lawlers ($4 million), partially offset by increased exploration activities in areas of Papua New Guinea ($5 million). Prior year increase reflects higher activity at Osborne and Kainantu, partially offset by Granny Smith. Africa Capital Projects Other Total 8 – 9 18 15 Decrease in 2009 mainly reflects reduced expenditures at North Mara ($7 million) and Golden Ridge ($3 million). 5 12 7 8 Decrease in the current year is mainly due to capitalization of costs related to Pueblo Viejo in the current year. Prior year decrease reflects lower expenditures at Pueblo Viejo. Decrease in expenditures mainly reflects lower exploration-related administrative expenses ($3 million). $ 144 $ 216 $ 179 Project Development Expense ($ millions) For the years ended December 31 2009 2008 2007 Comments on significant trends and variances Mine development $ 50 $ 150 $ 151 Non-capitalizable project costs 12 51 32 Other projects 23 41 5 Decrease is mainly due to the capitalization of all development costs incurred at Pueblo Viejo in 2009 that were expensed in 2008 ($67 million), decreased activ- ity at both Fedorova ($22 million) and Kainantu ($17 million), partially offset by increased spending in development-related support expenses ($8 million). In 2008, higher expenditures at Kainantu ($27 million) and Fedorova ($5 million) were largely offset by lower expenditures at Donlin Creek ($33 million). Non-capitalizable costs mainly represent items incurred in the development/con- struction phase that cannot be capitalized. Decreased expenditures in 2009 reflect lower spending at the Pinson property ($15 million), Sedibelo ($9 million), Golden Sunlight ($9 million) and Cortez Hills ($2 million). The increase in the prior year was mainly due to higher spending at the Pinson property ($17 million) and Cortez Hills ($2 million). Decrease mainly reflects management fees received from our partner at Pueblo Viejo ($11 million) and lower expenditures related to corporate development and corporate efficiency programs ($8 million). Total $ 85 $ 242 $ 188 1. The amounts presented in the Review of Significant Income and Expenses tables include the results of discontinued operations. 62 Management’s Discussion and Analysis Amortization and Accretion Expense ($ millions) For the years ended December 31 Gold mines 2009 2008 2007 Comments on significant trends and variances North America $ 361 $ 350 $ 314 South America 133 165 234 Australia Pacific 279 258 239 Africa 91 62 78 Higher amortization reflects our acquisition of the remaining 50% of Hemlo ($42 million) and increased sales volume at Storm ($6 million), partially offset by lower sales volume at Golden Sunlight ($27 million), Cortez ($6 million), and Bald Mountain ($4 million). Increase in 2008 reflects the additional 40% ownership interest at Cortez. Decrease in 2009 is mainly due to lower sales volume at Pierina ($24 million) and Lagunas Norte ($8 million). Lower amortization in the prior year reflects an increase in reserve estimates at Pierina. Higher amortization in the current year is mainly due to the impact of one time accounting adjustments made in early 2009. Increase in 2008 reflects a full year of amortization at Porgera compared to 2007. Higher amortization is mainly due to the production start up at Buzwagi in 2009 ($24 million), as well as the shift from open pit to underground mining at Tulawaka ($5 million). Decrease in the prior year reflects lower sales volumes across all mines. Copper mines South America 75 66 80 Increase in 2009 reflects higher sales volume at our Zaldívar mine ($9 million) compared to the prior year. Lower expenditures in 2008 compared to 2007 are as a result of lower copper sales volumes as well as an increase in reserves. Australia Pacific 3 57 39 Barrick Energy Other 30 52 13 19 – 20 Current year amortization reflects impairments taken in fourth quarter 2008 which reduced property, plant and equipment amounts to salvage values. Prior year increase in amortization expense is mainly due to a decrease in the reserve base at Osborne. Increase reflects a full year of amortization at Barrick Energy. Year over year increase reflects higher amortization at our corporate and regional administrative offices as a result of one time accounting adjustments made in early 2009. Amortization total 1,024 990 1,004 Accretion Total 58 43 50 Increase in 2009 reflects higher ARO balances at our operating mines compared to the prior year. $ 1,082 $ 1,033 $ 1,054 Management’s Discussion and Analysis | Barrick Financial Report 2009 63 Other Significant Income and Expenses ($ millions) For the years ended December 31 2009 2008 2007 Comments on significant trends and variances Impairment charges $ 277 $ 749 $ 42 Impairments in 2009 mainly reflect a write-down of our assets at Sedibelo ($158 million) and Plutonic ($43 million) and an impairment of goodwill at Plutonic ($63 million). Impairment charges in 2008 reflect charges taken for goodwill ($678 million) and impairment of long-lived assets ($71 million). Write-down of investments 1 205 23 We recorded no significant impairments in 2009. In 2008, we recorded an impair- ment charge on our investment in Highland Gold ($140 million), on Asset-Backed Commercial Paper ($39 million) which was subsequently reversed into Other Income, and various other investments in junior gold mining companies ($26 mil- lion). In 2007, we recorded an impairment charge on Asset-Backed Commercial Paper of $20 million. Corporate administration 171 155 155 Interest income 10 39 141 Increase in 2009 mainly reflects higher compensation expense ($7 million), higher spending related to our information technology infrastructure ($4 million) and technical services ($4 million). Decrease is mainly due to lower interest rates in 2009. Significant decrease in 2008 reflects lower average cash balances compared to the prior year. Interest costs Total incurred 326 243 237 Increase mainly reflects additional interest from bond issuances (Q3 2008: $1,250 million, Q1 2009: $750 million, Q4 2009: $1,250 million). Capitalized 269 222 124 Higher interest capitalized primarily relates to additional capital expenditure as mine construction continued. Increases in 2009 related to Pueblo Viejo ($22 mil- lion), Pascua-Lama ($14 million), and Cortez Hills ($12 million). Increase in 2008 reflects costs capitalized at Cortez Hills ($40 million), Cerro Casale ($41 million), and Buzwagi ($11 million). Expensed $ 57 $ 21 $ 113 Income Tax (percentages) For the years ended December 31 Effective tax rate on ordinary income Elimination of gold sales contracts Non-taxable goodwill impairment charges Net currency translation (gains)/losses on deferred tax balances Canadian functional currency election Deliveries into corporate gold sales contracts Canadian tax rate changes Release of deferred tax valuation allowances Actual effective tax rate 2009 29% (48%) 2% (1%) (2%) – 2% – (18%) 2008 30% – 10% 5% – – – (7%) 38% 2007 28% – 1% (4%) – 7% 3% (12%) 23% Our effective tax rate on ordinary income decreased from 30% to 29% in 2009 primarily due to the impact of changes in the mix of production and on the mix of taxable income in the various tax jurisdictions where we operate. Release of Deferred Tax Valuation Allowances In 200 8, we rele as e d $175 million of valuation allowances primarily because sources of income became available that enabled tax losses and US Alternative Minimum Tax (“AMT”) credits to be realized. In 2007, we released $156 million of end of year valuation allowances in Tanzania due to the estimated effect of higher market gold prices on the ability to utilize deferred tax assets. We released other valuation allowances during 2007 totaling $88 million, partly because sources of income became available that enabled tax losses to be realized. Currency Translation Deferred tax balances are subject to remeasurement for changes in currency exchange rates each period. The most significant balances are Canadian deferred 64 Management’s Discussion and Analysis tax liabilities with a carrying amount of approximately $30 million, Argentinean deferred tax liabilities with a carrying amount of approximately $32 million, and Australian and Papua New Guinea net deferred tax liabilities with a carrying amount of approximately $105 million. In 2009 and 2007, the appreciation of the Canadian and Australian dollar against the US dollar, and the weakening of the Argentinean peso against the US dollar resulted in net translation gains arising total- ing $40 million and $76 million, respectively. These gains are included within deferred tax expense/recovery. Canadian Functional Currency Election In fourth quarter 2008, we filed an election under Canadian draft legislation to prepare some of our Canadian tax returns using US dollar functional currency effective January 1, 2008. The legislation was enacted in first quarter 2009 which resulted in a one- time deferred tax benefit of $70 million. Canadian Tax Rate Changes In the fourth quarter of 2009, a provincial 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 $59 million, recorded as a component of deferred tax expense. In the second and fourth quarters of 2007, federal rate changes were enacted in Canada that lowered the applicable tax rate. The impact of these tax rate changes was to reduce net deferred tax assets in Canada by $64 million which was recorded as a com- ponent of deferred income tax expense. Financial Condition Review Summary Balance Sheet and Key Financial Ratios ($ millions, except ratios) As at December 31 Total cash and cash equivalents Non-cash working capital Non-current assets Non-current liabilities excluding debt Debt1 Total shareholders’ equity Net Debt Total common shares outstanding (millions of shares)2 Key Financial Ratios: Current ratio3 Net debt-to-equity4 2009 2008 $ 2,564 1,575 22,137 2,827 6,919 15,063 4,355 984 2.79:1 0.29:1 $ 1,437 1,842 20,049 2,508 4,326 15,277 2,889 873 2.23:1 0.19:1 1. Represents total long-term debt of $6,264 million (2008: $4,326 million) excluding fair value adjustments plus the remaining settlement obligation to close out gold sales contracts of $655 million (2008: nil). 2. Total common shares outstanding do not include 12.4 million stock options. The increase from December 31, 2008 is caused by the Common Share Offering and the exercise of stock options. 3. Represents current assets divided by current liabilities as at December 31, 2009 and December 31, 2008. 4. Represents net debt divided by total shareholders’ equity as at December 31, 2009 and December 31, 2008. Net Debt Summary ($ millions) For the years ended December 31 Long-term debt excluding fair value adjustments1 Settlement obligation to close out gold sales contracts2 Cash Total net debt 2009 2008 $ 6,264 $ 4,326 655 (2,564) – (1,437) Non-cash Working Capital ($ millions) For the years ended December 31 Inventories1 Other current assets Trade and other receivables VAT and fuel tax receivables2 Accounts payable and other current liabilities $ 4,355 $ 2,889 Non-cash working capital 2009 2008 $ 2,336 422 251 285 (1,719) $ 1,966 1,092 197 225 (1,638) $ 1,575 $ 1,842 1. Represents total long-term debt excluding fair value adjustments. 2. Based on the final settlement value of these contracts. 1. Includes long-term stockpiles of $796 million (2008: $688 million). 2. Includes long-term VAT and fuel tax receivables of $124 million (2008: $117 million). Management’s Discussion and Analysis | Barrick Financial Report 2009 65 The decrease in non-cash working capital prima- rily relates to a decrease in derivative assets, as we have realized a majority of the unrealized copper gains that existed at December 31, 2008, offset by an increase in ore inventories. Balance Sheet Review Total assets were $27.1 billion in 2009, an increase of $2.9 billion or 12% compared to the prior year. The increase primarily reflects an increase of $1.6 billion in property, plant and equipment from sustaining and project capital expenditures and growth in our cash balance as a result of strong operating cash flows, excluding the settlement of the gold sales contracts, which was financed through the Common Share Offering and the Debt Offering. These increases were partially offset by a decrease in derivative assets. Total liabilities increased by $2.8 billion, or 32% compared to the prior year, primarily due to an increase in long- term debt of $1.9 billion reflecting the Debt Offering and the issuance of fixed rate notes in March 2009; $0.7 billion related to the remaining obligation of the Floating Contracts; and an increase in our deferred tax liabilities. Our asset base is primarily comprised of non- current assets such as property, plant and equipment and goodwill, reflecting the capital intensive nature of the mining business and our history of growing through acquisitions, plus production inventories and cash and equivalents. We typically do not carry a material accounts receivable balance, since only sales of concentrate have a settlement period. Shareholders’ Equity Shares outstanding As at January 29, 2010 Common shares Stock options No. of shares 984,355,181 12,413,187 In September 2009, we completed the Common Share Offering of 109 million common shares at a price of $36.95 per common share for net proceeds of $3.9 bil- lion. This increase in our common shares outstanding represented a dilution of the ownership interests of shareholders prior to the offering of approximately 12%. During first quarter 2009, we redeemed the remainder (0.5 million) of the Barrick Gold Inc. exchangeable shares into Barrick common shares. The special voting share was also redeemed and cancelled in the first quarter 2009. For further information regarding the outstand- ing shares and stock options, please refer to note 28 of the consolidated financial statements and our 2009 Manage me nt Infor mation Circul ar and Proxy Statement. Dividend Policy Our 2009 dividend rate was $0.40 per common share. This dividend reflects our ability to generate substan- tial cash flows from our operations in a high gold price environment. With strong cash flow and the industry’s only ‘A’-rated balance sheet, we determined that we have the financial resources to return additional value to shareholders while still investing in advanced projects. The amount and timing of any dividends is within the discretion of our Board of Directors. The Board of Directors reviews the dividend policy semi- annually based on our current and projected liquidity profile, and capital requirements for capital projects and potential acquisitions. Comprehensive Income Comprehensive income consists of net income or loss, together with certain other economic gains and losses, that collectively are described as “other com- prehensive income” or “OCI”, and excluded from the income statement. In 2009, other comprehensive gains of $411 mil- lion, after-tax, mainly included: gains of $705 million on hedge contracts designated for future periods, caused primarily by changes in currency exchange rates, copper prices, and fuel prices; reclassification adjustments totaling $216 million for gains on hedge contracts designated for 2009 that were transferred to earnings in 2009; $6 million transferred to earnings related to gains recorded on the sale of shares in various investments in junior mining companies; $1 million in losses transferred to income due to the impairment of investments; $34 million of gains recorded as a result of changes in the fair value of investments held during the year; and $56 million in gains for currency translation adjustments on Barrick Energy. 66 Management’s Discussion and Analysis Included in accumulated other comprehensive income at December 31, 2009 were unrealized pre-tax gains on currency, commodity and interest rate hedge contracts totaling $276 million. The balance primarily relates to currency hedge contracts which are desig- nated against operating costs and capital expenditures mostly over the next three years and are expected to help protect against the impact of the strengthening of the Australian and Canadian dollar against the US dollar. These hedge gains/losses are expected to be recorded in earnings at the same time as the corre- sponding hedged operating costs and amortization of capital expenditures are also recorded in earnings. Financial Position We have maintained a sound financial position in 2009 despite the market turbulence that was experienced in late 2008 and throughout 2009. This is illustrated by our significant cash and working capital balances and our relatively low debt to equity and debt to total capi- talization ratios as at December 31, 2009. Our sound financial position is reflected in the fact that we have the only A-rated balance sheet in the gold mining industry as measured by S&P. Our credit ratings, as established by S&P and Moody’s, have remained stable. Our ability to access unsecured debt markets and the related cost of debt financing is, in part, dependent upon maintaining an acceptable credit rating. Deterioration in our credit rating would not adversely affect existing debt securities, but could impact funding costs for any new debt financing. Credit Rating from Major Rating Agencies At January 29, 2009 Standard and Poor’s (“S&P”) Moody’s A– Baa1 The key factors impacting our financial position, and therefore our credit rating, include the following: ß Our market capitalization and the strength of our balance sheet, including the amount of net debt and our debt-to-equity ratio (refer to liquidity section of this MD&A for discussion of key factors impacting these measures in 2009); ß Our net cash flow, including cash generated by operating activities (refer to liquidity section of this MD&A for discussion of key factors impacting these measures in 2009); ß Expected capital expenditure requirements (refer to the outlook section of this MD&A for a discussion of key factors impacting these measures in future periods); ß The quantity of our gold reserves (refer to page 155 to 162 for more information); and ß Our geo-political risk profile. Liquidity and Cash Flow Total cash and cash equivalents at the end of 2009 were $2.6 billion. At year end, our cash position con- sisted of a mix of term deposits, treasury bills and money market investments. Cash Summary As as December 31 US dollars Canadian dollars Australian dollars Other 2009 2008 $ 2,392 $ 1,265 71 57 44 74 54 44 $ 2,564 $ 1,437 Net debt was $4.4 billion, with a net debt-to-equity ratio of 0.29:1. The majority of our outstanding long- term debt matures at various dates beyond 2012, with approximately $227 million repayable in the period 2010 to 2012. In addition, counterparties to debt and derivative instruments do not have unilateral discre- tionary rights to accelerate repayment at earlier dates, and therefore we are largely protected from short-term liquidity fluctuations. Management’s Discussion and Analysis | Barrick Financial Report 2009 67 Sources and Uses of Net Debt ($ millions) For the years ended December 31 2009 2008 Operating activities Adjusted operating cash flow $ 2,899 $ 2,254 Settlement of gold sales contracts Total operating activities Investing activities (5,221) – (2,322) 2,254 Capital expenditures – minesite sustaining (784) (742) Capital expenditures – minesite expansion (60) – Capital expenditures – projects1 (1,514) (1,034) Acquisitions Other investing activities Total investing activities Financing activities Common share offering Dividends Funding from non-controlling interests Deposit on silver sale agreement Other financing activities Total financing activities Repayment with restricted cash Other non-cash movements Remaining settlement obligation to close out gold sales contracts Net increase in net debt Net debt at beginning of period (101) (2,174) 44 30 (2,415) (3,920) 3,885 – (369) (349) 304 213 39 88 – 40 4,072 (221) (113) (33) (18) (43) (655) – (1,466) (1,948) (2,889) (941) Net debt at end of period $ (4,355) $ (2,889) 1. The amounts include capitalized interest of $257 million (2008: $191 million). One of our primary ongoing sources of liquidity is operating cash flow and, in 2009, adjusting for the settlement of Gold Hedges and Floating Contracts, we generated $2.9 billion in operating cash flow. We have generated an average of $2.3 billion in adjusted oper- ating cash flow over the past three years. The principal risk factor affecting operating cash flow is realized gold prices which, in turn, are impacted by market gold prices. Lower market copper prices also impact operating cash flow. Utilizing option collar strategies, we have put in place floor protection on approximately 80% of our expected copper production for 2010 at an average price of $2.19 per pound but can fully 68 Management’s Discussion and Analysis participate in copper price upside on approximately 100% of our expected 2010 copper production up to a maximum average price of $3.63 per pound. Beyond 2010, we are fully exposed to market copper prices. The principal uses of liquidity were settlement of gold sales contracts, sustaining capital expenditures, construction activities at capital projects, acquisitions, and dividend payments. The $5.2 billion settlement of gold sales contracts in 2009 was funded primarily by the proceeds of the Common Share Offering in September 2009 and the $1.25 billion Debt Offering in October 2009. In 2009, cash flow generated by operations, adjusted for the settlement of gold sales contracts and after paying for sustaining capital, was $2.2 billion. Assuming we are able to sustain this level of cash generation and current dividend rates totaling about $0.4 billion per year, $1.8 billion per year would be available for investment in capital projects and acqui- sitions. The most significant factor impacting whether this level of cash generation is sustainable is market gold and copper prices. We expect to spend about $3.6 billion over the next four years to fund remaining construction activities at Pueblo Viejo and Pascua- Lama, partly funded by deposits received from Silver Wheaton and external project financing for a portion of the construction cost of Pueblo Viejo and Pascua- Lama. For Pueblo Viejo, we remain in active discussions with a group of export credit agencies and commercial banks to put in place $1 billion of project financing, including our partner’s share, which covers a portion of the total capital cost of the project. We have also finalized a feasibility study for Cerro Casale that, subject to approving the project to go forward into construction, would require us to spend about $3.15 billion for our share of the cost of construction over a three year period following the receipt of key permits. We are also finalizing feasibility studies for various other projects, which would require substan- tial up front capital investments to bring them into production, and are still subject to a final capital allocation review. Investments in capital projects and acquisitions are subject to an internal capital allocation review prior to proceeding with new expenditures. This review entails an assessment of our overall liquidity, the overall level of investment required, and the prior- itization of investments. The assessment also takes into account expected levels of future operating cash FACTORS AFFECTING OPERATING CASH FLOW 199 777 62 2,899 2,254 173 124 96 8 0 0 2 – w o l F h s a C g n i t a r e p O d e t s u d A j l d o G – s e c i r P d e z i l a e R i d a P s e x a T e m o c n I l d o G – s t s o C h s a C l d o G – l e m u o V s e a S l r e h t O i n g r a M r e p p o C 9 0 0 2 – w o l F h s a C g n i t a r e p O d e t s u d A j Cash us e d in inve sting activ itie s amounte d to $2,415 million, a decrease of $1,505 million compared to the prior year, primarily related to a decrease in acquisitions, partially offset by an increase in capital expenditures. Significant investing activities in 2008 included the $1.7 billion cash acquisition of the addi- tional 40% interest in Cortez and the $460 million cash acquisition of Barrick Energy. Capital expendi- tures, including capitalized interest, amounted to $2,358 million, of which $784 million were sustaining capital expenditures related to our operating mines and $965 million related to our development projects on an equity basis. flow and the cost and availability of new financing. A decline in market gold prices and/or copper prices could impact the timing and amount of future invest- ment in capital projects and/or other uses of capital. Alternatives for sourcing our future capital or other liquidity needs include other credit facilities, future operating cash flow, sale of non-core assets, project financings and debt or equity financings. These alternatives are continually evaluated to determine the optimal mix of capital resources of our capital needs. In light of current global economic conditions, our ability to secure new financing for our expected capital needs for capital projects could be significantly impacted, particularly if these conditions persist for an extended period of time. In particular: ß An increased cost of financing due to rising credit spreads could have a negative impact on overall project economics. ß A lack of availability of credit on acceptable terms could make it difficult for us to raise the capital required to build some or all of our projects on the timelines previously anticipated or at all. ß Our joint venture partners may also have difficulty securing funding for their share of project capital requirements which could impact the ability to build some of the projects. Sources and Uses of Cash In 2009, net cash used by operating activities totaled $2,322 million, an increase of $4,576 million com- pared to the prior year, primarily related to the $5,221 million in payments related to the settlement of our gold sales contracts. Operating cash flow was also affected by higher realized gold prices, lower income taxes paid as a result of the production mix and the use of tax loss carry forwards, partially offset by higher gold cash costs, lower realized copper prices, and lower gold sales volumes. Adjuste d ope rating c ash flow in 200 9 was $2,899 million, representing a $645 million increase over 2008. Adjusted operating cash flow was affected by the same factors as operating cash flow and was adjusted for the $5,221 million charge related to the elimination of our gold sales contracts. Management’s Discussion and Analysis | Barrick Financial Report 2009 69 Capital Expenditures1,2 ($ millions) For the years ended December 31 2009 2008 2007 Project capital expenditures quarter, and the silver sale deposit received from Silver Wheaton for $213 million. These amounts were partially offset by debt repayments of $397 million and dividend payments of $369 million. Buzwagi3 Pascua-Lama Pueblo Viejo Cortez Hills Kainantu Sedibelo Sub-total4 $ 52 $ 273 $ 66 202 433 278 – – 112 157 155 4 38 102 – 75 – – $ 965 $ 739 $ 243 Capital expenditures attributable to non-controlling interests5 292 104 – Total project capital expenditures $ 1,257 $ 843 $ 243 Minesite expansionary capital expenditures Golden Sunlight Veladero6 Total capital expenditures – minesite expansionary Sustaining capital expenditures North America South America Australia Pacific Africa3 Other7 $ 37 23 $ 60 – – – – – – $ 170 $ 161 $ 143 181 245 134 54 154 215 172 40 195 218 106 17 Total capital expenditures – minesite sustaining $ 784 $ 742 $ 679 Capitalized interest 257 191 124 Total $ 2,358 $ 1,776 $ 1,046 1. The amounts presented in this table include the results of discontinued operations. 2. These amounts are presented on a cash basis consistent with the amounts presented on the consolidated statement of cash flows. 3. Buzwagi entered into production as of May 1, 2009. Capital expenditures from May onwards have been reflected in minesite sustaining, although construction continued until third quarter 2009. 4. On an accrual basis, our share of project capital expenditures is $1,364 mil- lion including capitalized interest. 5. Amount reflects our partner’s share of expenditures at the Pueblo Viejo project on a cash basis. 6. These amounts include capital expenditures related to the development of a new pit at our Veladero mine. 7. These amounts include capital expenditures at Barrick Energy. Cash provided by financing activities for 2009 was $5,829 million. The significant financing activities were the Common Share Offering and Debt Offering, representing combined net proceeds of $5,104 million used in the fourth quarter settlement of the gold sales contracts. Other financ ing activ itie s include d proceeds of $750 million from debt issuance in first 70 Management’s Discussion and Analysis Financial Instruments We use a mixture of cash, long-term debt and share- holders’ equity to maintain an efficient capital struc- ture and ensure adequate liquidity exists to meet the cash needs of our business. We use interest rate contracts to mitigate interest rate risk that is implicit in our cash balances and outstanding long-term debt. In the normal course of business, we are inherently exposed to currency and commodity price risk. We use currency and commodity hedging instruments to mitigate these inherent business risks. We also hold certain derivative instruments that do not qualify for hedge accounting treatment. These non-hedge deriva- tives are described in note 20 to our consolidated 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 20 to our consolidated finan- cial statements. For a discussion of the methods used to value financial instruments, as well as any signifi- cant assumptions, refer to note 20 to our consolidated financial statements. Counterparty Risk Our financial position is also dependent, in part, on our exposure to the risk of counterparty defaults related to the net fair value of our derivative contracts, including the liabilities related to our Floating Contracts. Counterparty risk is the risk that a third party might fail to fulfill its performance obligations unde r the te r ms of a financ i al instr ume nt. Counterparty risk can be assessed both in terms of credit risk and liquidity risk. For cash and equivalents and accounts receivable, credit risk represents the carrying amount on the balance sheet, net of any overdraft positions. For derivatives, when the fair value is positive, this creates credit risk. When the fair value of a deriv- ative is negative, we assume no credit risk. However, liquidity risk exists to the extent a counterparty is no longer able to perform in accordance with the terms of the contract due to insolvency. In cases where we have a legally enforceable master netting agreement with a counterparty, credit risk exposure represents the net amount of the positive and negative fair values for similar types of derivatives. For a net negative amount, we regard credit risk as being zero. For a net positive amount, this is a reasonable basis to measure credit risk when there is a legally enforceable master netting agreement. We mitigate credit and liquidity risk by: ß Entering into derivatives with high credit-quality counterparties; ß Limiting the amount of exposure to each counterparty; and ß Monitoring the financial condition of counterparties. As of December 31, 2009, we had 26 counterpar- ties to our derivative positions, including the Floating Contracts, consisting primarily of large commercial banks. We proactively manage our exposure to indi- vidual counterparties in order to mitigate both credit and liquidity risks. For those counterparties in a net asset position, three hold greater than 10% of our mark-to-market asset position, with the largest coun- terparty holding 28%. For those counterparties in a net liability position, four hold greater than 10% of our mark-to-market liability position, with the largest counterparty holding 18%. Through January 29, 2010, none of the counterparties with which we held out- standing contracts had declared insolvency. Summary of Financial Instruments As at and for the year ended December 31, 2009 Financial Instrument Cash and equivalents Accounts receivable Available-for-sale securities Floating Contracts Accounts payable Long-term debt Restricted share units Deferred share units Derivative instruments – currency contracts Derivative instruments – copper contracts Derivative instruments – energy contracts Non-hedge derivatives Principal/ Notional Amount $ 2,564 million $ 251 million $ 61 million $ 655 million $ 1,221 million $ 6,264 million $ 124 million $ 6 million C $ 408 million A $ 4,459 million CLP 36,240 million 203 million lbs Fuel 4.1 million bbls Propane 12 million gallons Natural Gas 0.8 million gigajoules Associated Risks ß Interest rate ß Credit ß Credit ß Market ß Interest rate ß Interest rate ß Interest rate ß Market ß Market ß Market/liquidity ß Market/liquidity ß Credit ß Market/liquidity ß Credit various ß Market/liquidity ß Credit Commitments and Contingencies 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 stages of development, from preliminary exploration or scoping study stage through to the construction execution stage. The ultimate decision to incur capital expenditures at each potential site is subject to positive results which allow the proj- ect to advance past decision hurdles. Three projects were at an advanced stage at December 31, 2009, namely Cortez Hills, Pueblo Viejo and Pascua-Lama (refer to page 60 for further details). Management’s Discussion and Analysis | Barrick Financial Report 2009 71 Contractual Obligations and Commitments Payments due ($ millions) As at December 31, 2009 Long-term debt1 Repayment of principal Capital leases Interest Asset retirement obligations2 Operating leases Restricted share units Pension benefits Other post-retirement obligations Derivative liabilities3 Purchase obligations for supplies and consumables4 Capital commitments5 Social development costs 2010 2011 2012 2013 2014 2015 and thereafter Total $ 30 24 366 89 13 38 29 3 538 497 855 101 $ 10 14 359 77 7 47 23 3 79 206 241 10 $ 139 10 361 52 3 39 23 3 170 126 51 9 $ 565 9 345 56 – – 23 3 56 98 1 9 $ 350 3 320 128 – – 23 2 2 89 – 39 $ 5,108 2 4,075 1,269 – – 111 11 – 191 – 42 $ 6,202 62 5,826 1,671 24 124 232 25 845 1,207 1,148 210 Total $ 2,584 $ 1,076 $ 986 $ 1,165 $ 956 $ 10,809 $ 17,576 1. Long-term Debt and Interest – Our debt obligations do not include any subjective acceleration clauses or other clauses that enable the holder of the debt to call for early repayment, except in the event that we breach any of the terms and conditions of the debt or for other customary events of default. The Veladero financing is collateralized by assets at the Veladero mine. Pursuant to the terms of the Veladero financing, certain operational and technical requirements must be achieved prior to December 31, 2009. An extension was granted until March 31, 2010 to amend the relevant documents, with an expectation that these necessary operational and technical requirement deadlines will be postponed until December 31, 2010. If the amendments are not obtained, Barrick may be required to repay the debt prior to its scheduled maturity. As at December 31, 2009, the outstanding debt is about $62 million. Other than this security, we are not required to post any collat- eral under any debt obligations. The terms of our debt obligations would not be affected by deterioration in our credit rating. Projected interest payments on variable rate debt were based on interest rates in effect at December 31, 2009. Interest is calculated on our long-term debt obligations using both fixed and variable rates. 2. Asset Retirement Obligations – Amounts presented in the table represent the undiscounted future payments for the expected cost of asset retirement obligations. 3. Derivative Liabilities – Amounts presented in the table relate to derivative contracts disclosed under notes 2 and 20 to the consolidated financial statements. Payments related to derivative contracts cannot be reasonably estimated given variable market conditions. 4. Purchase Obligations for Supplies and Consumables – Includes commitments related to new purchase obligations to secure a supply of acid, tires and cyanide for our production process. 5. Capital Commitments – Purchase obligations for capital expenditures include only those items where binding commitments have been entered into. Commitments at the end of 2009 mainly related to construction capital at Pueblo Viejo and Pascua-Lama. Litigation and Claims We are currently subject to various litigation as disclosed in note 30 to the consolidated financial statements, and we may be involved in disputes with other parties in the future that may result in litigation. If we are unable to resolve these disputes favorably, it may have a material adverse impact on our financial condition, cash flow and results of operations. 72 Management’s Discussion and Analysis Review of Quarterly Results Quarterly Information1 ($ millions, except where indicated) Sales2 Realized price3 – gold Realized price3 – copper Cost of sales Net income/(loss) Per share4 – (dollars) Adjusted net income5 Per share4 – (dollars) EBITDA6 Operating cash flow Adjusted operating cash flow7 2009 2008 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 $ 2,452 $ 2,096 971 2.90 971 (5,350) (6.07) 473 0.54 (4,933) 911 $ 921 $ 911 1,119 3.44 1,013 215 0.22 604 0.61 813 (4,300) $ 2,029 931 3.18 975 492 0.56 431 0.49 954 718 $ 718 $ 1,827 915 2.93 955 371 0.42 296 0.34 655 349 $ 349 $ 2,110 $ 1,878 874 3.49 1,028 254 0.29 404 0.46 522 544 $ 439 $ 544 809 3.06 1,191 (468) (0.54) 277 0.32 (45) 439 $ 1,967 898 3.65 882 485 0.56 442 0.51 886 505 $ 505 $ 1,958 930 3.50 775 514 0.59 537 0.62 984 718 $ 718 1. The amounts presented in this table include the results of discontinued operations. 2. Per our consolidated financial statements. 3. Per ounce/pound weighted average. Realized price is a non-GAAP financial performance measure with no standard meaning under US GAAP. For further information and a detailed reconciliation, please see page 89 of this MD&A. 4. Calculated using weighted average number of shares outstanding under the basic method of earnings per share. 5. Adjusted net income is a non-GAAP financial performance measure with no standard meaning under US GAAP. For further information and a detailed reconcilia- tion, please see page 85 of this MD&A. 6. EBITDA is a non-GAAP financial performance measure with no standard meaning under US GAAP. For further information and a detailed reconciliation, please see page 88 of this MD&A. 7. Adjusted operating cash flow is a non-GAAP financial performance measure with no standard meaning under US GAAP. For further information and a detailed reconciliation, please see page 86 of this MD&A. Our financial results for the last eight quarters reflect: volatile spot gold and copper prices that impact real- ized sales price and generally higher gold and copper production costs mainly caused by inflationary pres- sures. The net loss realized in third quarter 2009 includes a $5.7 billion charge relating to a decision to eliminate our gold sales contracts. In fourth quarter 2008, the net loss included write-downs of goodwill and property, plant and equipment, and investments totaling $773 million, net of tax. Fourth Quarter Results In fourth quarter 2009, we reported net income of $215 million, compared to a loss of $468 million in the same prior year period. The loss in fourth quarter 2008 was primarily driven by post-tax impairment charges totaling $773 million. Adjusted net income in fourth quarter 2009, which excludes the impact of impairment charges, was $327 million higher than the same prior year period, an increase of 118%, as higher gold and copper prices and higher copper sales volumes were offset by lower gold sales volumes and higher total cash costs for gold and copper. In fourth quarter 2009, we sold 1.82 million ounces of gold and 118 million pounds of copper, compared to 2.19 million ounces and 105 million pounds in the same prior year quarter. Sales in fourth quarter 2009 were higher than the same prior year period reflecting higher market prices for both copper and gold and higher copper sales volumes. In fourth quarter 2009, cost of sales applicable to gold was $872 million or $474 per ounce on a total cash cost basis, a decrease of $186 million and increase of $3 per ounce from the prior year, respectively. Cost of sales applicable to gold was impacted by lower production in fourth quarter 2009, compared to the same prior year period. Total cash costs for gold were slightly higher, as the regional production mix shifted to our higher cost regions in fourth quarter 2009. Net cash costs decreased by $61 per ounce to $321 per ounce, compared to $382 per ounce in the prior year reflect- ing higher realized copper prices and lower copper total cash costs. Operating cash flow in fourth quarter 2009 was $(4,300) million, a significant decrease from the same prior year period as a result of the cost of settling the gold sales contracts amounting to $5,221 million. Adjusted operating cash flow in fourth quarter 2009, which excludes the cost of settling the gold sales contracts, was $921 million, a 110% increase over the same prior year period reflecting higher market prices for gold and copper and an increase in copper sales volumes. Management’s Discussion and Analysis | Barrick Financial Report 2009 73 US GAAP 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 different amounts. We exercise judgment in selecting and applying our accounting policies and methods to ensure that, while US GAAP compliant, they reflect our judgment of an appropriate manner in which to record and report our financial condition and results of operations. Accounting Policy Changes in 2009 This section includes a discussion of significant accounting policy changes and critical accounting estimates that were adopted in our 2009 consolidated financial statements. On July 1, 200 9, the Financ ial Accounting Standards Board’s (FASB) Codification of US GAAP was launched as the sole source of authoritative non- governmental US GAAP. The Accounting Standards Codification (“ASC”) is not intended to change US GAAP, but rather reorganize existing guidance by accounting topic to allow easier identification of applicable standards. We have updated any references to US GAAP to reflect the Codification. Measuring Fair Value of Liabilities In August 2009, the FASB issued Accounting Standards Update (ASU) 2009-05, Measuring Fair Value of Liabilities which is effective prospectively for interim periods beginning after August 1, 2009, with early adoption permitted. Existing guidance required that the fair value of liabilities be measured under the assumption that the liability is transferred to a market 74 Management’s Discussion and Analysis participant. ASU 2009-05 provides further clarification that fair value measurement of a liability should assume transfer to a market participant as of the measurement date without settlement with the coun- terparty. Therefore, the fair value of the liability shall reflect non-performance risk, including but not limited to a reporting entity’s own credit risk. We have adopted ASU 2009-05 in fourth quarter 2009. Interim Disclosures about Fair Value of Financial Instruments In April 2009, to enhance the transparency surround- ing the treatment of financial instruments, the FASB issued new guidance requiring disclosures relating to the fair value of financial instruments to be made at each interim reporting period regardless of how these instruments are recognized in the financial statements. We adopted the increased disclosure requirements beginning in first quarter 2009. Refer to note 21 for related disclosures. Disclosures by Public Entities (Enterprises) about Transfers of Financial Assets and Interests in Variable Interest Entities In December 2008, the FASB issued guidance for the purpose of improving the transparency of transfers of financial assets and an enterprise’s involvement with variable interest entities (VIEs), including qualifying special-purpose entities (QSPEs). The impact on our financial reporting requirements is limited to the new VIE disclosures. The VIE disclosure requirements focus on an enterprise’s involvement with VIEs and its judgments about the accounting for them. The new guidance also required disclosure of the details of any financial or other support provided to a VIE that the enterprise was not previously contractually required to provide, and the primary reasons for providing the support. The primary beneficiary of a VIE is also required to disclose the terms of any arrangements that could require the enterprise to provide future support to the VIE. In addition, it required disclosure of the carrying amount and classification of the variable interest entity’s assets and liabilities in the Balance Sheet and a reconciliation of those amounts to the enterprise’s maximum exposure to loss. The adoption of this guidance has resulted in expanded disclosure around our involvement with our VIEs and the significant judgments and assumptions we make in accounting for the m. We have also included tables that reflect how our consolidated VIEs are included in our Consolidated Statement of Income and Balance Sheet. Disclosures about Derivative Instruments and Hedging Activities In first quarter 2009, we adopted new disclosure requirements for derivative instruments and hedging activities issued by the FASB in March 2008. Under this new guidance, entities are required to provide enhanced disclosures about (a) how and why an entity uses derivative instruments, (b) how derivative instru- ments and related hedged items are accounted for, and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial performance and cash flows. To the exte nt the required information was not previously disclosed in our 2008 annual consolidated financial statements, we incorporated new disclosures in note 20. Business Combinations In first quarter 2009, we began applying the new provisions for business combinations consummated after December 31, 2008. Under the new guidance, business acquisitions are accounted for under the “acquisition method”, compared to the “purchase method” mandated previously. The more significant changes to our accounting for business combinations that will result from apply- ing the acquisition method include: (i) the definition of a business is broadened to include some develop- ment stage entities, and therefore more acquisitions may be accounted for as business combinations rather than asset acquisitions; (ii) the measurement date for equity interests issued by the acquirer is the acquisi- tion date instead of a few days before and after terms are agreed to and announced, which may significantly change the amount recorded for the acquired busi- ness if share prices differ from the agreement and announcement date to the acquisition date; (iii) all future adjustments to income tax estimates will be recorded to income tax expense, whereas under the previous requirements, certain changes in income tax estimates were recorded to goodwill; (iv) acquisition- related costs of the acquirer, including investment banking fees, legal fees, accounting fees, valuation fees, and other professional or consulting fees will be expensed as incurred, whereas under the previous guidance these costs were capitalized as part of the business combination; (v) the assets acquired and liabilities assumed as part of a business combination, whether full, partial or step acquisition, result in all assets and liabilities recorded at 100% of fair value, whereas under the previous requirements only the controlling interest’s portion is recorded at fair value; (vi) recognition of a bargain purchase gain when the fair value of the identifiable assets exceeds the pur- chase price, whereas under the previous guidance, the net book value of the identifiable assets would have been adjusted downward; and (vii) the non-controlling interest will be recorded at its share of fair value of net assets acquired, including its share of goodwill, whereas under previous guidance the non-controlling interest is recorded at its share of carrying value of net assets acquired with no goodwill being allocated. Non-controlling Interests in Consolidated Financial Statements In first quarter 2009, we adopted the provisions for non-control ling inte re sts is sue d by the FASB in December 2007. Under the new guidance, non- controlling interests are measured at 100% of the fair value of assets acquired and liabilities assumed. Prior to the effective date of the new guidance, non- controlling interests were measured at book value. For presentation and disclosure purposes, non-controlling interests are now classified as a separate component of equity. In addition, the new guidance changes the manner in which increases/decreases in ownership percentages are accounted for. Changes in ownership percentages are recorded as equity transactions and no gain or loss is recognized as long as the parent retains control of the subsidiary. When a parent com- pany deconsolidates a subsidiary but retains a non- controlling interest, the non-controlling interest is re-measured at fair value on the date control is lost and a gain or loss is recognized at that time. Further, accumulated losses attributable to the non-controlling interests are no longer limited to the original carrying amount, and therefore non-controlling interests could have a negative carrying balance. Management’s Discussion and Analysis | Barrick Financial Report 2009 75 The new provisions are to be applied prospectively with the exception of the presentation and disclosure provisions, which are to be applied for all prior periods presented in the consolidated financial statements. The presentation and disclosure provisions resulted in the reclassification of non-controlling interests to the Equity section of the Balance Sheet totaling $484 mil- lion as at December 31, 2009 (December 31, 2008: $182 million). Employers’ Disclosures about Post Retirement Benefit Plan Assets In December 2008, the FASB issued guidance on employers’ disclosures about their post retirement benefit plan assets. The objectives of the disclosures about plan assets in an employer’s defined benefit pension or other post retirement plan are to provide users of financial statements with an understanding of: (i) how investment allocation decisions are made, including the factors that are pertinent to an under- standing of investment policies and strategies; (ii) the major categories of plan assets; (iii) the inputs and valuation techniques used to measure the fair value of plan assets; (iv) the effect of fair value measurements using significant unobservable inputs (Level 3) on changes in plan assets for the period; and (v) signifi- cant concentrations of risk within plan assets. We adopted the increased disclosure requirements beginning in fourth quarter 2009. Refer to note 29 for related disclosures. Future Accounting Policy Changes This section includes a discussion of future account- ing changes that may have a significant impact on our consolidated financial statements. Amendments to Accounting for VIEs In second quarter 2009, the FASB issued an amend- ment to its guidance on VIEs. Although not effective until first quarter 2010, this new guidance makes significant changes to the model for determining who should consolidate a VIE and how often this assess- ment should be performed. We are assessing the impact of these changes on our consolidated financial statements. Critical Accounting Estimates and Judgments Certain accounting estimates have been identified as being “critical” to the presentation of our financial condition and results of operations because they 76 Management’s Discussion and Analysis require us to make subjective and/or complex judg- ments about matters that are inherently uncertain; or there is a reasonable likelihood that materially dif- ferent amounts could be reported under different con- ditions 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 esti- mate that most significantly affects the measurement of amortization 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 quan- tities of gold and copper reserves, in accordance with the principles in Industry Guide No. 7, issued by the US Securities and Exchange Commission (“SEC”) is complex, requiring significant subjective assumptions that arise from the evaluation of geological, geophysi- cal, engineering and economic data for a given ore body. This data could change over time as a result of numerous factors, including new information gained from development activities, evolving production his- tory 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 production could differ 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 used in preparing reserve estimates is calculated based on the trailing three-year average market price. As this assumption rises, it 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 $82516 per ounce in 2009 (2008: $725 per ounce; 2007: $575 per ounce). The copper price assumption was $2.00 per pound in 2009 (2008: $2.00 per pound; 2007: $2.00 per pound). The impact of a change in reserve estimates is generally more significant for mines near the end of the mine life because the overall impact on amortiza- tion is spread over a shorter time period. Also, amorti- zation expense is more significantly impacted by changes in reserve estimates at underground mines than open-pit mines due to the following factors: (i) Underground development costs incurred to access ore at underground mines are significant and amortized using the units-of-production method; and (ii) Reserves at underground mines are often more sensitive to mineral price assumptions and changes in production costs. Production costs at underground mines are impacted by factors such as dilution, which can significantly impact mining and processing costs per ounce. Impact of Historic Changes in Reserve Estimates on Amortization for the years ended December 31 ($ millions, except reserves in millions of contained oz/pounds) Gold North America2 Australia Pacific Africa South America3 Total Gold Copper Australia Pacific4 South America3 Total Copper 2009 2008 Reserves increase (decrease)1 Amortization increase (decrease) Reserves increase (decrease)1 Amortization increase (decrease) 9.6 0.3 (0.5) 13.5 22.9 (153) 1,023 870 $ (32) (11) (2) (9) $ (54) $ (3) (13) $ (16) 3.1 3.6 1.5 0.5 8.7 (51) 750 699 $ (9) (39) (10) (5) $ (63) $ 10 (4) $ 6 1. Each year we update our reserve estimates as at the end of the year as part of our normal business cycle. We then use those updated reserve estimates to calculate amortization expense in the following fiscal year on assets which use the units-of-production method of amortization. Reserve changes presented were calculated as at the end of 2008 and 2007 and are in millions of contained ounces/pounds. 2. The increase in reserves attributable to North America is primarily due to the acquisitions of the additional 40% interest of Cortez reflected in third quarter 2008 and the additional 50% of Hemlo reflected in third quarter 2009. The impact of this reserve increase on amortization is partially offset by the increase in property, plant and equipment at Cortez and Hemlo as a result of the purchase price allocation. 3. The increase in gold and copper reserves in South America is primarily due to the inclusion of Cerro Casale in reserves at the end of 2008. Cerro Casale is a develop- ment project and therefore this increase does not impact current amortization expense. 4. Amortization expense in 2009 reflects the impairment charges at Osborne in fourth quarter 2008 which reduced property, plant and equipment to salvage values. Consequently, the decrease in reserves had an insignificant impact on amortization expense recorded in 2009. Long-Lived Asset and Goodwill Impairment Evaluations Producing Mines and Development Projects On an annual basis, as at October 1, and at any other time if events or changes in circumstances indicate that the fair value of a reporting unit has been reduced below its carrying amount, we evaluate the carrying amount of goodwill for potential impairment by com- paring its fair value to its carrying amount. We also evaluate the long-lived assets of a reporting unit for potential impairment when events or changes in cir- cumstances indicate that its fair value has been reduced below its carrying amount by comparing that reporting 16. Reserves at Cerro Casale and Round Mountain have been calculated using an assumed price of $800 per ounce. unit’s undiscounted cash flows to its carrying amount (referred to as a “screen test”.) When a potential long- lived asset impairment is identified as a result of the screen test, the amount of impairment is calculated by comparing its fair value to its carrying amount. There is no active market for our reporting units. Consequently, when assessing a reporting unit for impairment, we use an income approach (being the net present value of expected future cash flows from our LOM plans, or net asset value (“NAV”) of the relevant reporting unit) to determine the fair value we could receive for the reporting unit in an arm’s length transaction at the measurement date. For our gold Management’s Discussion and Analysis | Barrick Financial Report 2009 77 reporting units, we apply a market multiple to the NAV in order to assess their estimated fair value. Gold companies typically trade at a market capitalization that is based on a multiple of their underlying NAV. Consequently, a market participant would generally apply a NAV multiple when estimating the fair value of an operating gold mine. Included in these forecasts is the production of mineral resources that do not currently qualify for inclusion in proven and probable ore reserves where there is a high degree of confidence in its economic extraction. This is consistent with the methodology we use to measure value beyond proven and probable reserves when allocating the purchase price of a busi- ness combination to acquired mining assets. Other significant estimates employed in our assessment of fair value include, short-term and long-term metal price s, foreign exchange rate s, the price of oil, weighted average cost of capital used in discounting and the NAV multiple. For further information on these estimates refer to note 17 of our consolidated financial statements. In fourth quarter 2009, we finalized our long-term life of mine (“LOM”) plans. Based on a review of those plans, we identified Darlot, Kanowna and Plutonic gold mines in Australia as being potentially impaired as a result of the screen test. Consequently, we compared the estimated fair value of each report- ing unit to its carrying amount and recorded an impairment charge of $43 million at Plutonic, prima- rily as a result of a significant reduction in its proven and probable reserves and its remaining mine life. No impairments were recorded at Darlot or Kanowna (2008: Marigold $12 million and Osborne $57 million, included in discontinued operations). In fourth quarter 2009, we also conducted our annual goodwill impairment test on all of our report- ing units to which goodwill has been assigned, by comparing their estimated fair value to their carrying amounts. As a result, we recorded a goodwill impair- ment charge of $63 million at our Plutonic gold mine in Australia (2008: Kanowna $272 million; North Mara $216 million; Osborne $64 million, included in discontinued operations; Henty $30 million, included in discontinued operations; Marigold $8 million; and Barrick Energy $88 million). Exploration Properties After acquisition, various factors can affect the recov- erability of the capitalized cost of land and mineral rights, particularly the results of exploration drilling. The length of time between the acquisition of land and mineral rights and when we undertake explo- ration work varies based on the prioritization of our exploration projects and the size of our exploration budget. If we determine that a potential impairment condition may exist, we compare the sum of the undiscounted cash flows expected to be generated from the project to its carrying amount. If the sum of undiscounted cash flows is less than the carrying amount, an impairment charge is recognized if the carrying amount of the individual long-lived assets within the group exceeds their fair value. For projects that do not have reliable cash flow projections, a market approach is applied. In 2008, we completed a bankable feasibility study (“BFS”) for our Sedibelo platinum project in South Africa meeting the conditions for a 10% interest in the property. We also held the right to increase our inter- est to 65% in return for a decision to develop Sedibelo and payment of approximately $106 million in fourth quarter 2009. In third quarter 2009, after conducting a thorough review of development alternatives to maximize the project’s potential, we decided not to increase our ownership interest in Sedibelo. As a result of this decision, we recorded an impairment charge of $158 million in third quarter 2009, reducing the car- rying amount of our investment in the project and related assets to their estimated fair values. Further, as a result of Barrick’s decision to not develop the Sedibelo project, our partner’s right to purchase our 10% interest by reimbursing us for direct and proven costs of prospecting activities and compiling the BFS, was triggered. This 90 day right expires at the end of February 2010. Intangible Assets Intangible assets having indefinite lives and intangible assets that are not yet ready for use are not amortized and are reviewed annually for impairment. We also review and test the carrying amounts of all intangible assets when events or changes in circumstances suggest that their carrying amount may not be recoverable. 78 Management’s Discussion and Analysis In third quarter, after making a decision not to continue developing the Sedibelo project, we recorded an impairment charge of $34 million for water rights (2008: Nil). No other indications of impairment were noted in 2009. Production Stage 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: (1) the level of capital expenditures compared to construction cost estimates; (2) completion of a reasonable period of testing of mine plant and equipment; (3) ability to produce min- erals in saleable form (within specifications); and (4) ability to sustain ongoing production of minerals. When a mine construction project moves into the production stage, the capitalization of certain mine construction costs ceases and costs are either capital- ized to inventory or expensed, except for capitalizable costs related to property, plant and equipment addi- tions or improvements, underground mine develop- ment or reserve development. Pre-production stripping costs are capitalized until an “other than de minimis” level of mineral is produced, after which time such costs are either capi- talized to inventory or expensed. We consider various relevant criteria to assess when an “other than de min- imis” level of mineral is produced. Some of the criteria considered would include, but are not limited to, the following: (1) the amount of ounces mined versus total ounces in reserves; (2) the amount of ore tons mined vs. total LOM expected ore tons mined; (3) the current stripping ratio versus the LOM strip ratio; and (4) the ore grade versus the LOM grade. 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 properties. We record the fair value of an ARO in our consolidated financial statements when it is incurred and capitalize this amount as an increase in the carry- ing amount of the related asset. At operating mines, the increase in an ARO is recorded as an adjustment to the corresponding asset carrying amount and results in a prospective increase in amortization expense. At closed mines, any adjustment to an ARO is charged directly to earnings. The fair values of AROs are measured by 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 unforeseen environmental contamination at, or related to, our mining properties, could result in us suffering significant costs. We mitigate these risks through environmental and health and safety pro- grams under which we monitor compliance with laws and regulations and take steps to reduce the risk of environmental contamination occurring. We maintain insurance for some environmental risks; however, for some risks, coverage cannot be purchased at a reason- able 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 correspon- ding change in the life of mine plan; changing ore characteristics that ultimately impact the environ- ment; changes in water quality that impact the extent of water treatment required; and changes in laws and regulations governing the protection of the environ- ment. 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 judgments and estimates are made when estimating the fair value of AROs. Expected cash flows relating to AROs could occur over periods up to 40 years and the assessment of the Management’s Discussion and Analysis | Barrick Financial Report 2009 79 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 continue to record AROs based on disturbance of the environment over time. It is reasonably possible that circumstances could arise during or by the end of the mine life that will require material revisions to AROs. In particular, the extent of water treatment can have a material effect on the fair value of AROs, and the expected water quality at the end of the mine life, which is the primary driver of the extent of water treatment, can change significantly. We periodically prepare updated studies for our mines, following which it may be necessary to adjust the fair value of AROs. The period of time over which we have assumed that water quality monitoring and treatment will be required has a sig- nificant impact on AROs at closed mines. The amount of AROs recorded reflects the expected cost, taking into account the probability of particular scenarios. The difference between the upper end of the range of these assumptions and the lower end of the range can be significant, and consequently changes in these assumptions could have a material effect on the fair value of AROs and future e arning s in a perio d 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. AROs ($ millions) As at December 31 Operating mines Closed mines Development projects Other Total 2009 2008 $ 958 208 40 24 $ 832 201 17 16 $ 1,230 $ 1,066 Deferred Tax Assets and Liabilities Measurement of Temporary Differences We are periodically required to estimate the tax basis of assets and liabilities. Where applicable tax laws and regulations are either unclear or subject to varying 80 Management’s Discussion and Analysis interpretations, it is possible that changes in these esti- mates could occur that materially affect the amounts of deferred income tax assets and liabilities recorded in our consolidated financial statements. Changes in deferred tax assets and liabilities generally have a direct impact on earnings in the period of changes. 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 activities. Levels of future taxable income are affected by, among other things, market gold prices, and 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, 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 income and the amount of valuation allowances, has been rising market gold prices. A continuation of a trend of higher gold prices could lead to the release of some of the valuation allowances recorded, with a correspon- ding effect on earnings in the period of release. Conversely, a decline in market gold prices could lead to an increase in valuation allowances and a corre- sponding increase in income tax expense. In 2008, we released $175 million of valuation allowances primarily because sources of income became available that enabled tax losses and US Alternative Minimum Tax (“AMT”) credits to be realized. Valuation Allowances ($ millions) As at December 31 United States Argentina Canada Tanzania Chile Barbados Other Total 2009 2008 $ 136 119 45 30 22 69 60 $ 123 61 50 30 23 10 21 $ 481 $ 318 United States: most of the valuation allowances relate to AMT credits, which have an unlimited carry-for- ward 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 AMT credits. Chile, Argentina, Tanzania and Other: 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 valuation allowances. Canada: most of the valuation allowances relate to capital losses that can only be utilized if any capital gains are realized. Internal Control over Financial Reporting and Disclosure Controls and Procedures Management is responsible for establishing and main- taining adequate internal control over financial reporting and other financial disclosure. Internal con- trol over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consoli- dated financial statements for external purposes 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 consolidated financial statements in accordance with US GAAP, and that receipts and expenditures 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 unautho- rized acquisition, use or disposition of the Company’s as s e ts that could have a mater ial ef fe ct on the Company’s consolidated financial statements. Internal control over other financial disclosure is a process designed to ensure that other financial infor- mation included in this MD&A and Barrick’s Annual Report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company for the periods presented in this report. The Company’s disclosure controls and proce- dures are designed to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to Management by others within those entities, particularly during the period in which this report is being prepared. Due to inherent limitations, internal control over financial reporting and disclosure may not prevent or detect all misstatements. Also, projections of any eval- uation 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 change. Fourth quarter changes as a result of the organizational review described on page 33 included the simplifica- tion and clarification of roles and responsibilities related to internal control over financial reporting and disclosure. The Company has acted to largely main- tain the organizational structure as regards year end reporting, thereby minimizing the impact to 2009. However, it is reasonable to conclude that these orga- nizational changes will impact the internal control over financial reporting and disclosure frameworks in the upcoming year. The management of Barrick, with the participa- tion of our chief executive and financial officers, have evaluated the effectiveness of the design and operation of the internal controls over financial reporting and disclosure controls and procedures as of the end of the period covered by this report and have concluded that they were effective at a reasonable assurance level. Barrick’s annual management report on internal control over financial reporting and the integrated audit report of Barrick’s auditors for the year ended December 31, 2009 will be included in Barrick’s 2009 Annual Report and its 2009 Form 4 0-F/Annual Information Form on file with the SEC and Canadian provincial securities regulatory authorities. Management’s Discussion and Analysis | Barrick Financial Report 2009 81 International Financial Reporting Standards (IFRS) We have commenced the process to convert our basis of accounting from US GAAP to IFRS effective for our first quarter report in 2011. The transition date of January 1, 2010 will require the conversion, for com- parative purposes, of our previously reported balance sheets as at December 31, 2009 and December 31, 2010 and our interim and annual consolidated statements of income and cash flows for 2010 from US GAAP to an IFRS basis. The conversion to IFRS from US GAAP is a signif- icant undertaking, and as a result, we established a dedicated IFRS conversion team in early 2009 to lead this process. The implementation project consists of three pri- mary phases: initial diagnostic phase; impact analysis, evaluation and solution development phase; and an implementation and review phase. We are now in the implementation and review phase, having completed the impact analysis, evaluation and solution develop- ment phase in the fourth quarter of 2009. The following chart provides a summary of the key activities contained in our conversion plan, the estimated completion date for each of these activities as well as a current status update. Key Activities Timing ß Quantification of impact of key differences on opening balance sheet by Q2 2010 ß Revised Accounting Policy Manual in place by January 1, 2011 ß Skeleton IFRS consolidated financial statements to be prepared for senior management approval in Q3 2010 ß Audit Committee review of the skeleton consolidated financial statements in Q4 2010 Current Status ß Finalization of key accounting differences completed in Q4 2009 ß Senior management approval and audit committee review of accounting/policy changes and IFRS 1 elections obtained in Q4 2009 ß Development of Accounting Policy Manual is in progress ß Development of draft consolidated financial statements and first-time adoption reconciliations in progress ß Ongoing training to key personnel as ß Technical training provided to key personnel needed ß Financial covenant, executive compensation and contract analysis to be completed by Q3 2010 ß Budgeting and long-range planning impact to be completed by Q4 2010 ß Taxation analysis to be completed by Q2 2010 in each of our RBUs in Q4 2009 ß Specific training provided to selected groups involved with the IFRS conversion in Q4 2009 ß Further training is planned for 2010 ß Analysis is underway ß Identification of taxation impacts is in progress ß Necessary changes to financial ß Necessary changes to financial information information systems implemented by transition date ß Solution for capturing financial information under US GAAP and IFRS in Q1 2010 systems is in progress ß IFRS reporting application has been implemented to enable the capturing of financial information under both US GAAP and IFRS ß Incremental controls to be developed by ß Completed impact assessment of IFRS Q2 2010 for the review of IFRS comparative financial information ß Redesigned business process standards and controls to be in place by Q1 2011 technical accounting differences on financial reporting risks, procedures, systems and controls ß Business processes are being assessed and redesigned (as needed) as the project progresses Financial Statement Preparation ß Analyze and select ongoing policies where alternatives are permitted including IFRS 1 exemptions ß Quantify key differences between IFRS and the Company’s application of US GAAP ß Revise Accounting Policy Manual ß Prepare IFRS consolidated financial statements including first-time adoption reconciliations Training ß Provide technical training to key finance and accounting personnel in each of our RBUs ß Provide specialized training to selected employees involved with the conversion to IFRS Business Activities ß Identify conversion impacts on financial covenants, executive compensation and contracts ß Assess impact on budgeting and long-range plans ß Identify impact on taxation Financial information systems ß Identify changes required to financial information systems and implement solutions ß Determine and implement solution for capturing financial information under US GAAP and IFRS in 2010 (for comparative information) Control environment ß Maintain effective Disclosure Controls & Procedures (DC&P) and Internal Controls over Financial Reporting (ICFR) throughout the IFRS project ß Design and implement new IFRS control environment 82 Management’s Discussion and Analysis Set out below are the key areas where changes in accounting policies are expected that could have a significant impact on our consolidated financial state- ments. The list and components below should not be regarded as a complete list of changes that will result from the transition to IFRS. It is intended to highlight those areas we believe to be most significant. In addition, the differences described below are based on US GAAP and IFRS standards as they exist today. At this stage, we have not completed quantifying the impact of these differences on our consolidated finan- cial statements. Production phase stripping costs Under US GAAP, the removal of overburden and other waste materials to access ore from which minerals can be extracted during the production phase at a mine, referred to as production phase stripping costs, are treated as variable production costs and are included in the costs of the inventory produced during the period in which the stripping costs are incurred. Under IFRS, there is currently no specific guidance on the accounting treatment of production phase strip- ping costs and, as a result, industry practice varies. We have selected an accounting policy for produc- tion phase stripping costs whereby stripping costs that generate a future economic benefit will be capitalized as a mine development cost and amortized on a units of production basis over the attributable reserves that benefit from the stripping activity. This policy is con- sistent with the IFRS conceptual framework and the asset recognition criteria in IAS 16, Property, Plant and Equipme nt. The impac t of this c hange in accounting policy will be a decrease in direct operat- ing costs and an increase in amortization expense on the consolidated statement of income as well as a decrease in our total cash costs and net cash costs per ounce non-GAAP performance measures; an increase in operating cash flow and investing cash outflow on the consolidated statement of cash flow; and a decrease in inventory and an increase in property, plant and equipment on the consolidated balance sheet. Definition of proven and probable (“2P”) reserves Development costs incurred at a mineral property prior to establishment of 2P reserves are accounted for as current period operating expenses under US GAAP. We use SEC Industry Guide 7 (“Guide 7”) to determine when we have established 2P reserves. Development costs incurred after the establishment of 2P reserves are accounted for as capital expenditures. Under IFRS, we will use 2P reserves as defined by the Canadian Securities Administrators National Instrument 43-101 (“NI 43-101”) as the basis for our accounting . Generally, reserves are established under NI 43-101 at an earlier date than reserves under Guide 7, primarily due to the fact that Guide 7 requires a final feasibility study to be comple te d where as NI 43-101 only requires a pre-feasibility level of study to be completed before mineralized material can be classified as a 2P reserve. Consequently, the impact of using NI 43-101 as the basis of our reserves for accounting purposes will be a decrease in operating costs and an increase in amortization expense on the consolidated statement of income; an increase in operating cash flow and investing cash outflow on the consolidated statement of cash flows; and an increase in property, plant and equipment on the consolidated balance sheet. Impairment of non-current assets Under US GAAP, long-lived asset impairment testing is done using a two-step approach whereby long-lived assets are first tested for recoverability based on the undiscounted cash flows they are expected to gen- erate. If the undiscounted cash flow expected to be generated is higher than the carrying amount, then no impairment charge is required to be recorded. If the undiscounted cash flow is lower than the carrying amount of the assets, the assets are written down to their estimated fair value. Under IFRS, impairment testing is done using a one-step approach for both testing and measurement of impairment, with asset carrying amounts compared directly with the higher of fair value less costs to sell and value in use (which uses discounted cash flows). This may result in more frequent write-downs where carrying amounts of assets were previously supported under US GAAP on an undiscounted cash flow basis, but could not be supported on a discounted basis. However, the extent of any asset write-downs may be partially offset by the requirement under IFRS to reverse any previous impairment losses where circumstances have changed such that the impairments have reduced. US GAAP prohibits reversal of impairment losses. Under US GAAP, we test goodwill for impairment at the individual mineral property level. Under IFRS, individual mineral properties can be aggregated for goodwill impairment testing purposes up to an Management’s Discussion and Analysis | Barrick Financial Report 2009 83 operating segment level, provided that each of the mineral properties are expected to benefit from the synergies of the business combinations from which the goodwill arose and management does not inter- nally manage goodwill at a lower level. Consequently, under IFRS we will test for goodwill impairment at the operating segment level. The impact of this change in accounting will be a reduction in the frequency and amounts of any future goodwill impairment charges. Asset Retirement Obligations Under US GAAP, we would only record an asset retirement obligation (“ARO”) if there is a legal requirement to incur restoration costs. Under IFRS, the threshold for recognizing a liability is a legal or constructive obligation. Consequently, based on our established pattern for carrying out restoration activities and/or based on our internal environmental policies, we have identified a number of sites where we have a constructive obligation and, as a result, have to record an ARO upon adoption of IFRS. In addition, under US GAAP, we are required to use a credit- adjusted risk-free interest rate to present value an ARO. Under IFRS, we will utilize a US dollar risk-free interest rate in order to present value an ARO. At this stage, we have not determined the net impact of these changes on our consolidated statement of income or our consolidated balance sheet. There will be no impact on our consolidated statement of cash flow. First-time adoption of IFRS Most adjustments required on transition to IFRS will be made retrospectively as of the date of the first com- parative balance sheet presented, which is January 1, 2010. IFRS 1 provides entities adopting IFRS for the first time with a number of optional exemptions and mandatory exceptions, in certain areas, to the general requirement for full retrospective application of IFRS. The purpose of the election is to provide relief to com- panies and simplify the conversion process by not requiring them to recreate information that may not exist or may not have been collected at the inception of the transaction. We have analyzed the various exemptions available and are working towards imple- menting those most appropriate in our circumstances. Our IFRS 1 exemption decisions have been approved by senior management and reviewed by the Audit Committee of the Board of Directors in Q4 2009. The most significant IFRS 1 exemptions which we expect to apply in preparation of our first consolidated financial statements under IFRS are summarized in the following table: Areas of key differences Summary of Exemptions Available and Decisions Asset Retirement Obligations Property, Plant and Equipment Business Combinations Cumulative Translation Account (“CTA”) Under IFRS, when an ARO is established, we are required to set up a corresponding asset and depreciate it over the remaining useful life of the asset. Any changes in the ARO are added or deducted from the cost of the asset to which the obligation relates. Under IFRS 1, we have the option to take a simplified approach to calculate and record the asset related to the ARO on our opening IFRS balance sheet. We intend to take this election as it will simplify the conversion process. We have the option to record property, plant and equipment at their fair value on transition to IFRS. This fair value becomes the deemed cost of the asset. The election can be taken on an asset-by-asset basis. We are currently analyzing the potential for utilizing this election on certain assets. Under IFRS, we have the option to either retroactively apply IFRS 3R Business Combinations to all business combinations or may elect to apply the standard prospectively only to those acquisitions which meet the expanded definition of a business combination after the date of transition. We have the option to reclassify all cumulative translation gains or losses in accumulated other compre- hensive income to retained earnings on transition. We intend to take the election as it will simplify the conversion process (cumulative translation differences will not have to be recalculated). IFRS accounting standards, and the interpretation thereof, are constantly evolving. As a result, we expect that there may be additional new or revised IFRSs in relation to joint ventures, provisions, financial instru- ments, fair value and consolidation prior to the issuance of our first IFRS statements. Our conversion team monitors and evaluates IFRS accounting devel- opments and updates our conversion plan as necessary. The future impacts of IFRS will also depend on the particular circumstances prevailing in those years. As noted above, the differences described above are those existing based on US GAAP and IFRS today. 84 Management’s Discussion and Analysis Non-GAAP Financial Performance Measures17 Adjusted Net Income (Adjusted Net Income per Share) Adjusted net income is a non-GAAP financial meas- ure which excludes the following from net income: ß Elimination of gold sales contracts ß Effect of tax rate changes ß Impairment charges related to goodwill, property, plant and equipment, and investments; ß Gains/losses on acquisitions/dispositions; ß Foreign currency translation gains/losses; ß Non-recurring restructuring costs; and ß Unrealized gains/losses on non-hedge derivative instruments Management uses this measure internally to evaluate the unde rly ing ope rating pe rfor mance of the Company as a whole for the reporting periods pre- sented, and to assist with the planning and forecasting of future operating results. We believe that adjusted net income allows investors and analysts to better evaluate the results of the underlying business of the Company. While the adjustments to net income in this measure include items that are recurring, manage- ment believes that adjusted net income is a useful measure of the Company’s performance because impairment charges and gains/losses on asset acquisi- tions/dispositions do not reflect the underlying oper- ating performance of our core mining business and are not necessarily indicative of future operating re sults. Fur the r, fore ig n cur re nc y transl ation gains/losses and unrealized gains/losses from non- hedge derivative contracts are not necessarily reflective of the underlying operating results for the reporting periods presented. As noted, the Company uses this measure for its own internal purposes. Management’s internal budgets and forecasts and public guidance do not reflect potential impairment charges, potential gains/losses on the acquisition/disposition of assets, foreign currency translation gains/losses, or unrealized gains/losses on non-hedge derivative contracts. Consequently, the presentation of adjusted net income enables investors and analysts to better understand the underlying operating performance of our core mining business 17. The amounts presented in the non-GAAP financial performance measure tables include the results of discontinued operations. through the eyes of Management. Management peri- odically evaluates the components of adjusted net income based on an internal assessment of perform- ance measures that are useful for evaluating the oper- ating performance of our business segments and a review of the non-GAAP measures used by mining industry analysts and other mining companies. In 2009, we updated the items included in our reconciliation of net income to adjusted net income for items that are not reflective of the ongoing opera- tional results. These adjustments will result in a more meaningful adjusted net income for investors and analysts to assess our current operating performance and to predict future operating results: ß Added “Effect of tax rate changes” to exclude the effect of corporate income tax rate changes beyond the control of management. ß Added “Elimination of gold sales contracts” to exclude any gains/losses related to the elimination of the contracts. Included in this line is the loss incurred upon initial recognition of the liability and any gains/losses due to mark-to-market adjust- ments through the date contracts were settled. ß Added “Non-recurring restructuring costs” to exclude the non-recurring charges related to our Organization Review. Restructuring costs related to our mine closures are not included in this adjustment. ß Adjusted “Gains/losses on the disposition of long-lived assets” to “Gains/losses on acquisitions/ dispositions” to include bargain purchase gains and gains on step acquisitions. Adjusted net income is intended to provide additional information only and does not have any standardized meaning prescribed by US GAAP and should not be considered in isolation or as a substitute for meas- ures of performance prepared in accordance with US GAAP. The measure is not necessarily indicative of operating profit or cash flow from operations as determined under US GAAP. Other companies may calculate this measure differently. The following table reconciles this non-GAAP measure to the most directly comparable US GAAP measure. Management’s Discussion and Analysis | Barrick Financial Report 2009 85 Reconciliation of Net Income to Adjusted Net Income ($ millions, except per share amounts in dollars) For the years ended December 31 For the three months ended December 31 Net income Elimination of gold sales contracts Effect of tax rate changes Impairment charges related to goodwill, property, plant and equipment, and investments Gains on acquisitions/dispositions1 Foreign currency translation (gains)/losses2 Unrealized (gains)/losses on non-hedge derivative instruments Restructuring costs Adjusted net income Net income per share3 2009 2008 2007 $ $ (4,274) 5,901 59 259 (85) (95) 30 15 785 – – 899 (178) 135 20 – $ 1,119 – – 59 (59) (73) (10) – $ 1,810 $ 1,661 $ 1,036 (4.73) 0.90 1.29 Adjusted net income per share3 $ 2.00 $ 1.90 $ 1.19 2009 $ 215 241 59 102 (1) (22) 4 6 $ 604 0.22 $ 0.61 2008 $ (468) – – 773 (123) 84 11 – $ 277 (0.54) $ 0.32 1. Includes gains recorded on the Hemlo acquisition of $72 million. Refer to page 40 of this MD&A for further information. 2. Includes a currency translation gain of $70 million recorded in first quarter 2009 relating to Canadian deferred tax assets due to an election to adopt a US dollar functional currency for Canadian tax purposes. 3. Calculated using adjusted net income and weighted average number of shares outstanding under the basic method of earnings per share. Adjusted Operating Cash Flow Adjusted operating cash flow is a non-GAAP financial measure which excludes the effect of “Elimination of gold sales contracts.” Management uses this measure internally to eval- uate the underlying operating cash flow performance of the Company as a whole for the reporting periods presented, and to assist with the planning and fore- casting of future operating cash flow. This settlement activity is not reflective of the underlying capacity of our operations to generate operating cash flow and therefore this adjustment will result in a more mean- ingful operating cash flow measure for investors and analysts to evaluate our performance in the period and assess our future operating cash flow generating capability. Adjusted operating cash flow is intended to pro- vide additional information only and does not have any standardized meaning prescribed by US GAAP and should not be considered in isolation or as a sub- stitute for measures of performance prepared in accordance with US GAAP. The measure is not neces- sarily indicative of operating profit or cash flow from operations as determined under US GAAP. Other companies may calculate this measure differently. The following table reconciles this non-GAAP measure to the most directly comparable US GAAP measure. Reconciliation of Operating Cash Flow to Adjusted Operating Cash Flow ($ millions) For the years ended December 31 For the three months ended December 31 Operating cash flow $ (2,322) $ 2,254 $ 1,768 $ (4,300) Elimination of gold sales contracts 5,221 – – 5,221 2009 2008 2007 2009 2008 $ 439 – Adjusted operating cash flow $ 2,899 $ 2,254 $ 1,768 $ 921 $ 439 86 Management’s Discussion and Analysis Total Cash Costs per Ounce and Net Cash Costs per Ounce Total cash costs per ounce/pound and net cash costs per ounce are non-GAAP financial measures. Both measures include all costs absorbed into inventory, as well as royalties, by-product credits, and production taxes, and exclude inventory purchase accounting adjustments, unrealized gains/losses from non-hedge currency and commodity contracts, and amortization and accretion. These measures also include the gross margin generated by our Barrick Energy business unit, which was acquired to mitigate our exposure to oil prices as a credit against gold production costs. The presentation of these statistics in this manner allows us to monitor and manage those factors that impact production costs on a monthly basis. These measures are calculated by dividing the aggregate of the applicable costs by gold ounces or copper pounds sold. These measures are calculated on a consistent basis for the periods presented. Under purchase accounting rules, we record the fair value of acquired work in progress and finished goods inventories as at the date of acquisition. As the acquired inventory is sold, any purchase accounting adjustments, reflected in the carrying amount of inventory at acquisition, impacts cost of sales. The method of valuing these inventories is based on esti- mated selling prices less costs to complete and a rea- sonable profit margin. Consequently, the fair values do not necessarily reflect costs to produce consistent with ore mined and processed into gold and copper after the acquisition. Hence, we have removed such costs from our cash costs measurements. Many mining companies record the unrealized gains/losses from non-hedge currency and commodity contracts in other income, and therefore these amounts are not reflected in the cost of sales measures presented by these companies. Consequently, we believe that removing these unrealized gains/losses provides investors and analysts with a measure of our costs of production that is more comparable to the measures presented by other mining companies. We have pro- vided below reconciliations to illustrate the impact of excluding inventory purchase accounting adjustments and unrealized gains/losses from non-hedge currency and commodity contracts from our total cash costs and net cash costs measures. We calculate total cash costs and net cash costs based on our equity interest in production from our mines. We believe that using an equity interest presen- tation 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 production, we exclude the economic share of gold production that flows to our partners who hold a non-controlling interest. Consequently, for the Tulawaka mine, although we fully consolidated the results of operations from this mine in our consoli- dated financial statements, our production and total cash costs and net cash costs statistics only reflect our equity share of the production. Starting in 2008, we provided a net cash costs measure which treats the gross margin from all non- gold sales, whether or not these non-gold metals are produced in conjunction with gold, as a credit against the cost of producing gold. In 2009, we have begun using this measure to evaluate the overall performance of our business on a consolidated basis. A number of other gold producers present their costs net of the contribution from non-gold sales. We believe that including a measure of net cash costs per ounce on this basis provides investors and analysts with infor- mation with which to compare our performance to other gold producers, and to better assess the overall performance of our business. In addition, this meas- ure provides information to enable investors and analysts to understand the importance of non-gold revenues to our cost structure. Cash costs per ounce/pound 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 necessarily indicative of operating profit or cash flow from opera- tions as determined under US GAAP. Other companies may calculate these measures differently. Management’s Discussion and Analysis | Barrick Financial Report 2009 87 Reconciliation of Cost of Sales to Total Cash Costs per Ounce/Pound ($ millions, except per ounce/pound information in dollars) Gold Copper For the years ended December 31 2009 2008 2007 2009 2008 2007 Cost of sales Cost of sales applicable to discontinued operations Cost of sales applicable to non-controlling interests1 Unrealized non-hedge gains/(losses) on currency and commodity contracts Inventory purchase accounting adjustments Impact of Barrick Energy $ 3,407 24 (12) $ 3,377 49 (14) $ 2,766 30 (15) $ 361 83 – $ 315 121 – $ 232 107 – 7 – (20) (14) (16) (14) (5) – – – – – – – – – (9) – Total cash costs $ 3,406 $ 3,368 $ 2,776 $ 444 $ 436 $ 330 Ounces/pounds sold – consolidated basis (000s ounces/millions pounds) Ounces/pounds sold1 – non-controlling interest (000s ounces) 7,334 (28) 7,658 (63) 8,108 (53) Ounces/pounds sold – equity basis (000s ounces/millions pounds) 7,306 7,595 8,055 380 – 380 367 – 367 401 – 401 Total cash costs per ounce/per pound $ 466 $ 443 $ 345 $ 1.17 $ 1.19 $ 0.82 1. Relates to our partner’s 30% interest in Tulawaka. Net Cash Costs per Ounce ($ millions, except per ounce/pound data in dollars) For the years ended December 31 For the three months ended December 31 Ounces gold sold – equity basis (000s) Total cash costs per ounce – equity basis Revenues from copper sales Revenues from copper sales at discontinued operations Unrealized non-hedge gold/copper derivative (gains) losses Unrealized mark-to-market provisional price adjustments Net revenues from copper excluding unrealized non-hedge gains/losses from copper contracts Copper cost of sales per consolidated statement of income Copper cost of sales from discontinued operations Copper credits Copper credits per ounce 2009 7,306 466 943 212 49 (4) 2008 2007 7,595 443 $ $ 1,007 221 (23) 38 8,055 345 $ $ 1,065 240 (26) 10 1,200 1,243 1,289 361 83 756 103 315 121 807 106 $ 232 107 950 117 $ $ $ $ 2009 1,823 474 398 – 13 (4) 407 128 – 279 153 $ $ $ 2008 2,190 471 321 – (3) – 318 122 – 196 89 $ $ $ Net cash costs per ounce $ 363 $ 337 $ 228 $ 321 $ 382 EBITDA and Adjusted EBITDA EBITDA is a non-GAAP financial measure, which excludes the following from net income: ß income tax expense; ß interest expense; ß interest income; and ß depreciation and amortization. Management believes that EBITDA is a valuable indi- cator of the Company’s ability to generate liquidity by producing operating cash flow to: fund working capital needs, service debt obligations, and fund capi- tal expenditures. Management uses EBITDA for this purpose. EBITDA is also frequently used by investors and analysts for valuation purposes whereby EBITDA is multiplied by a factor or “EBITDA multiple” that is based on observed or inferred relationship between EBITDA and market values to determine the approxi- mate total enterprise value of a company. EBITDA is intended to provide additional infor- mation to investors and analysts, does 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. EBITDA excludes the impact of cash costs of financing activities and taxes, and the effects 88 Management’s Discussion and Analysis of changes in operating working capital balances, and therefore is not necessarily indicative of operating profit or cash flow from operations as determined under US GAAP. Other companies may calculate EBITDA differently. Star ting in this MD&A, we are introducing “Adjusted EBITDA” as a non-GAAP measure. We have adjuste d our E BITDA to re move the ef fe ct of “Elimination of gold sales contracts.” This settlement activity is not reflective of the underlying capacity of our operations to generate earnings and therefore this adjustment will result in a more meaningful earnings measure for investors and analysts to evaluate our per- formance in the period and assess our future earnings generating capability. The following table provides a reconciliation of net income to EBITDA and adjusted EBITDA. Reconciliation of Net Income to EBITDA and Adjusted EBITDA ($ millions, except per share amounts in dollars) For the years ended December 31 For the three months ended December 31 Net income Income tax expense Interest expense Interest income Depreciation and amortization EBITDA 2009 2008 2007 2009 $ (4,274) 689 57 (10) 1,024 $ 785 590 21 (39) 990 $ 1,119 341 113 (141) 1,004 $ 215 313 29 (3) 259 $ (2,514) $ 2,347 $ 2,436 $ 813 Elimination of gold sales contracts 5,933 – – 241 2008 $ (468) 164 – (5) 264 $ (45) – Adjusted EBITDA $ 3,419 $ 2,347 $ 2,436 $ 1,054 $ (45) Realized Prices Realized price is a non-GAAP financial measure which excludes from sales: ß Unrealized gains and losses on non-hedge derivative contracts; ß Unrealized mark-to-market gains and losses on provisional pricing from copper and gold sales contracts; and ß Export duties This measure is intended to enable management to better understand the price realized in each reporting period for gold and copper sales because unrealized mark-to-market value of non-hedge gold and copper derivatives and unrealized mark-to-market gains and losses on outstanding receivables from copper and gold sales contracts are subject to change each period due to changes in market factors such as spot and for- ward gold and copper prices such that prices ulti- mately realized may differ from those recorded. The exclusion of such unrealized mark-to-market gains and losses from the presentation of this performance measure enables investors to understand performance based on the realized proceeds of selling gold and copper production. The gains and losses on non- hedge derivatives and receivable balances relate to instruments/balances that mature in future periods, at which time the gains and losses will become realized. The amounts of these gains and losses reflect fair values based on market valuation assumptions at the end of each period and do not necessarily represent the amounts that will become realized on maturity. For those reasons, management believes that this measure provides a more accurate reflection of the Company’s past performance and is a better indicator of its expected performance in future periods. Starting with second quarter 2009, we have begun to adjust our realized price calculation for export duties that are paid upon sale and are currently netted against revenues. We believe this provides investors and analysts with a more accurate measure with which to compare to market gold prices and to assess our gold sales performance. The realized price measure is intended to provide additional information, and does not have any stan- dardized meaning prescribed by US GAAP and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with Management’s Discussion and Analysis | Barrick Financial Report 2009 89 US GAAP. The measure is not necessarily indicative of sales as determined under US GAAP. Other companies may calculate this measure differently. The following table reconciles realized prices to the most directly comparable US GAAP measure. Reconciliation of Sales to Realized Price per Ounce/per Pound ($ millions, except per ounce/pound data in dollars) Gold Copper For the years ended December 31 2009 2008 2007 2009 2008 2007 Sales Sales applicable to discontinued operations Sales applicable to non-controlling interests Unrealized non-hedge gold/copper derivative (gains) losses Unrealized mark-to-market provisional price adjustments Export duties Sales – as adjusted Ounces/pounds sold (000s) $ 7,135 56 (27) – – 30 $ 7,194 7,306 $ 6,577 79 (56) 2 (1) 23 $ 6,624 7,595 $ 4,949 78 (38) (2) (2) 15 $ 5,000 8,055 $ 943 212 – 49 (4) – $ 1,200 380 $ 1,007 221 – (23) 38 – $ 1,243 367 $ 1,065 240 – (26) 10 – $ 1,289 401 Realized gold/copper price per ounce/pound $ 985 $ 872 $ 621 $ 3.16 $ 3.39 $ 3.22 Net Cash Margin Management uses a non-GAAP financial measure, net cash margin, which represents realized price per ounce less net cash costs per ounce. This measure is used by management to analyze profitability trends and to assess the cash generating capability from the sale of gold on a consolidated basis in each reporting period, expressed on a unit basis. In this MD&A, we have placed greater emphasis on our net cash costs per ounce measure because we believe that it illustrates the performance of our business on a consolidated basis and enables investors to better understand our performance in comparison to other gold producers who present results on a similar basis. As part of this emphasis, we have introduced the measure “net cash margin”, to reflect the net contribution from our gold sales and is an important indicator of expected performance in future periods. Our net cash margin is intended to provide addi- tional information, does 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. This measure is not necessarily indicative of operating profit or cash flow from operations as determined under US GAAP. Other companies may calculate cash margin differently. The following table derives this non-GAAP measure from previously defined non- GAAP measures of realized gold price per ounce, total cash costs per ounce, and copper credit per ounce, as determined in the net cash cost reconciliation. Net cash margin could also be derived from realized price per ounce and net cash costs per ounce. Reconciliation of Net Cash Margin per Ounce (per ounce data in dollars) For the years ended December 31 For the three months ended December 31 Realized gold price per ounce Total cash costs per ounce Total cash margin per ounce Copper credit per ounce1 Net cash margin per ounce 2009 $ 985 466 $ 519 103 $ 622 2008 $ 872 443 $ 429 106 $ 535 2007 $ 621 345 $ 276 117 $ 393 2009 $ 1,119 474 $ 645 153 $ 798 2008 $ 809 471 $ 338 89 $ 427 1. Copper credit per ounce is calculated as the margin from copper sales divided by gold ounces sold. Refer to the calculation in the net cash costs reconciliation on page 88. 90 Management’s Discussion and Analysis Glossary of Technical Terms AUTOCLAVE: Oxidation process in which high temperatures and pressures are applied to convert refractory sulfide mineraliza- tion into amenable oxide ore. BACKFILL: Primarily waste sand or rock used to support the roof or walls after removal of ore from a stope. BY-PRODUCT: A secondary metal or mineral product recovered in the milling process such as copper and silver. CONCENTRATE: A very fine, powder-like product containing the valuable ore mineral from which most of the waste mineral has been eliminated. CONTAINED OUNCES: Represents ounces in the ground before reduction of ounces not able to be recovered by the applicable metallurgical process. 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 unavoid- ably included in the mined ore, lowering the recovered grade. DORÉ: Unrefined gold and silver bullion bars usually consisting of approximately 90 percent precious metals that will be fur- ther refined to almost pure metal. DRILLING: Core: drilling with a hollow bit with a diamond cutting rim to produce a cylindrical core that is used for geological study and assays. Used in mineral exploration. In-fill: any method of drilling intervals between existing holes, used to provide greater geological detail and to help establish reserve estimates. EXPLORATION: Prospecting, sampling, mapping, diamond- drilling and other work involved in searching for ore. GRADE: The amount of metal in each ton of ore, expressed as troy ounces per ton or grams per tonne for precious metals and as a percentage for most other metals. Cut-off grade: the minimum metal grade at which an ore body can be economically mined (used in the calculation of ore reserves). Mill-head grade: metal content of mined ore going into a mill for processing. Recovered grade: actual metal content of ore determined after processing. Reserve grade: estimated metal content of an ore body, based on reserve calculations. HEAP LEACHING: A process whereby gold is extracted by “heap- ing” 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 there- after undergoes physical or chemical treatment to extract the valuable metals. MINERAL RESERVE: See pages 155 to 162 – “Summary Gold Mineral Reserves and Mineral Resources.” MINERAL RESOURCE: See pages 155 to 162 – “Summary Gold Mineral Reserves and Mineral Resources.” MINING CLAIM: That portion of applicable mineral lands that a party has staked or marked out in accordance with applicable mining laws to acquire the right to explore for and exploit the minerals under the surface. MINING RATE: Tons of ore mined per day or even specified time period. OPEN PIT: A mine where the minerals are mined entirely from the surface. ORE: Rock, generally containing metallic or non-metallic min- erals, which can be mined and processed at a profit. ORE BODY: A sufficiently large amount of ore that can be mined economically. OUNCES: Troy ounces of a fineness of 999.9 parts per 1,000 parts. RECLAMATION: The process by which lands 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. REFINING: The final stage of metal production in which impurities are removed from the molten metal. STRIPPING: Removal of overburden or waste rock overlying an ore body in preparation for mining by open pit methods. Expressed as the total number of tons mined or to be mined for each ounce of gold. TAILINGS: The material that remains after all economically and technically recoverable precious metals have been removed from the ore during processing. Management’s Discussion and Analysis | Barrick Financial Report 2009 91 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 17, 2010 92 Management’s Responsibility 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 at December 31, 2009, Barrick’s Management used the Committee of Sponsoring Organizations of the Treadway Commission (COSO) framework to evaluate the effectiveness of Barrick’s internal control over financial reporting. Based on Barrick management’s assessment, Barrick’s internal control over financial reporting is effective as at December 31, 2009. The effectiveness of the Company’s internal control over financial reporting as at December 31, 2009 has been audited by PricewaterhouseCoopers LLP, Chartered Accountants, as stated in their report which is located on pages 94–95 of Barrick’s 2009 Annual Financial Statements. Management’s Report on Internal Control Over Financial Reporting | Barrick Financial Report 2009 93 Independent Auditors’Report Independent Auditors’ Report To the Shareholders of Barrick Gold Corporation We have completed integrated audits of Barrick Gold Corporation’s (the Company) 2009, 2008 and 2007 consolidated financial statements and of its internal control over financial reporting as at December 31, 2009. 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 at December 31, 2009 and December 31, 2008, and the related consolidated statements of income, cash flow, equity and comprehensive income for each of the years in the three year period ended December 31, 2009. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits of the Company’s consolidated financial statements in accordance with Canadian generally accepted auditing standards and the standards of the Public Company Accounting Oversight Board (United States). 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. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as at December 31, 2009 and December 31, 2008 and the results of its operations and its cash flows for each of the years in the three year period ended December 31, 2009 in accordance with accounting principles generally accepted in the United States of America. As discussed in Note 2e to the consolidated financial statements, the Company changed the manner in which it accounts for Business Combinations and Non-Controlling Interests effective January 1, 2009. 94 Auditors’ Report Internal control over financial reporting We have also audited the Company’s internal control over financial reporting as at December 31, 2009, based on criteria estab- lished 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, included in the 2009 Annual Report to Shareholders. Our responsibility is to express an opinion on 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, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we consider necessary in the circum- stances. We believe that our audit provides a reasonable basis for our opinion. 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. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as at December 31, 2009 based on criteria established in Internal Control – Integrated Framework issued by the COSO. Chartered Accountants, Licensed Public Accountants Toronto, Canada February 17, 2010 Auditors’ Report | Barrick Financial Report 2009 95 Consolidated Statements of Income Barrick Gold Corporation For the years ended December 31 (in millions of United States dollars, except per share data) Sales (notes 4 and 5) Costs and expenses Cost of sales (notes 4 and 6)1 Amortization and accretion (notes 4 and 15b) Corporate administration Exploration (notes 4 and 7) Project development expense (note 7) Elimination of gold sales contracts (note 20h) Other expense (note 8a) Impairment charges (note 8b) Interest income Interest expense (note 20b) Other income (note 8c) Write-down of investments (note 8b) Income (loss) from continuing operations before income taxes and other items Income tax expense (note 9) Loss from equity investees (note 12) Income (loss) from continuing operations before non-controlling interests Income (loss) from discontinued operations (note 3j) Income (loss) before non-controlling interests Non-controlling interests (note 27) Net income (loss) Earnings (loss) per share data (note 10) Income (loss) from continuing operations Basic Diluted Income (loss) from discontinued operations Basic Diluted Net income (loss) Basic Diluted 1. Exclusive of amortization. The accompanying notes are an integral part of these consolidated financial statements. 2009 2008 2007 $ 8,136 $ 7,613 $ 6,014 3,807 1,073 171 141 85 5,933 343 277 11,830 10 (57) 112 (1) 64 (3,630) (648) (87) (4,365) 97 (4,268) (6) 3,706 957 155 198 242 – 302 598 6,158 39 (21) 291 (205) 104 1,559 (594) (64) 901 (104) 797 (12) 2,998 990 155 168 188 – 200 42 4,741 141 (113) 110 (23) 115 1,388 (313) (43) 1,032 73 1,105 14 $ (4,274) $ 785 $ 1,119 $ $ $ $ $ $ (4.84) (4.84) 0.11 0.11 (4.73) (4.73) $ $ $ $ $ $ 1.02 1.01 (0.12) (0.12) 0.90 0.89 $ $ $ $ $ $ 1.21 1.19 0.08 0.09 1.29 1.28 96 Financial Statements Consolidated Statements of Cash Flow Barrick Gold Corporation For the years ended December 31 (in millions of United States dollars) Operating Activities Net income (loss) Amortization and accretion (notes 4 and 15b) Impairment charges and write-down of investments (note 8b) Income tax expense (note 9) Income taxes paid Increase in inventory Elimination of gold sales contracts (note 20h) Payment on obligation of gold sales contracts (note 20h) Gain on sale/acquisition of long-lived assets (note 8c) Income (loss) from discontinued operations (note 3j) Operating cash flows of discontinued operations (note 3j) Other items (note 11a) 2009 2008 2007 $ (4,274) 1,073 278 648 (376) (372) 5,933 (5,221) (85) (97) 7 164 $ 785 957 803 594 (575) (370) – – (187) 104 26 117 $ 1,119 990 65 313 (585) (258) – – (2) (73) 35 164 Net cash provided by (used in) operating activities (2,322) 2,254 1,768 Investing Activities Property, plant and equipment Capital expenditures (note 4) Sales proceeds Acquisitions (note 3) Investments (note 12) Purchases Sales Decrease in restricted cash (note 14) Investing cash flows of discontinued operations (note 3j) Other investing activities (note 11b) (2,351) 10 (101) (3) 7 113 (3) (87) (1,749) 185 (2,174) (18) 76 18 (27) (231) (1,035) 100 (1,122) (11) 625 19 (11) (127) Net cash used in investing activities (2,415) (3,920) (1,562) Financing Activities Capital stock Proceeds on exercise of stock options Proceeds on common share offering (note 25) Long-term debt (note 20b) Proceeds Repayments Dividends Funding from non-controlling interests Deposit on silver sale agreement (notes 6 and 23) Financing cash flows of discontinued operations (note 3j) Other financing activities (note 11c) Net cash provided by (used in) financing activities Effect of exchange rate changes on cash and equivalents Net increase (decrease) in cash and equivalents Cash and equivalents at beginning of period (note 20a) 65 3,885 2,154 (397) (369) 304 213 – (26) 5,829 35 1,127 1,437 74 – 2,717 (1,603) (349) 88 – – (34) 893 3 (770) 2,207 142 – 393 (1,128) (261) – – – (197) (1,051) 9 (836) 3,043 Cash and equivalents at end of period (note 20a) $ 2,564 $ 1,437 $ 2,207 The accompanying notes are an integral part of these consolidated financial statements. Financial Statements | Barrick Financial Report 2009 97 Consolidated Balance Sheets Barrick Gold Corporation At December 31 (in millions of United States dollars) Assets Current assets Cash and equivalents (note 20a) Accounts receivable (note 14) Inventories (note 13) Other current assets (note 14) Assets of discontinued operations (note 3j) Non-current assets Equity in investees (note 12a) Other investments (note 12b) Property, plant and equipment (note 15) Goodwill (note 17) Intangible assets (note 16) Deferred income tax assets (note 24) Other assets (note 18) Assets of discontinued operations (note 3j) Total assets Liabilities and Equity Current liabilities Accounts payable Short-term debt (note 20b) Other current liabilities (note 19) Liabilities of discontinued operations (note 3j) Non-current liabilities Long-term debt (note 20b) Settlement obligation to close out gold sales contracts (note 20h) Asset retirement obligations (note 22) Deferred income tax liabilities (note 24) Other liabilities (note 23) Liabilities of discontinued operations (note 3j) Total liabilities Equity Capital stock (note 25) Retained earnings (deficit) Accumulated other comprehensive income (loss) (note 26) Total shareholders’ equity Non-controlling interests (note 27) Total equity Contingencies and commitments (notes 15 and 30) Total liabilities and equity The accompanying notes are an integral part of these consolidated financial statements. Signed on behalf of the Board, Aaron Regent, Director Steven J. Shapiro, Director 98 Financial Statements 2009 2008 $ 2,564 251 1,540 524 59 4,938 1,136 92 13,125 5,197 66 949 1,531 41 $ 1,437 197 1,278 1,167 33 4,112 1,085 60 11,505 5,280 74 869 1,133 43 $ 27,075 $ 24,161 $ $ 1,221 54 475 23 1,773 6,281 647 1,122 1,184 498 23 11,528 17,390 (2,382) 55 15,063 484 15,547 953 206 627 58 1,844 4,350 – 943 754 778 33 8,702 13,372 2,261 (356) 15,277 182 15,459 $ 27,075 $ 24,161 Consolidated Statements of Equity Barrick Gold Corporation For the years ended December 31 (in millions of United States dollars) Common shares (number in thousands) At January 1 Issued on public equity offering (note 25) Issued on exercise of stock options Issued on redemption of exchangeable shares (note 25b) At December 31 Common shares At January 1 Issued on public equity offering (note 25) Issued on exercise of stock options Recognition of stock option expense At December 31 Retained earnings (deficit) At January 1 Net income (loss) Dividends Repurchase of preferred shares of a subsidiary At December 31 Accumulated other comprehensive income (loss) (note 26) Total shareholders’ equity Non-controlling interests (note 27) At January 1 Net income (loss) attributable to non-controlling interests Funding from non-controlling interests Other increase (decrease) in non-controlling interests At December 31 Total equity at December 31 2009 2008 2007 872,739 108,973 2,349 267 984,328 $ 13,372 3,926 65 27 869,887 – 2,383 469 864,195 – 5,680 12 872,739 869,887 $ 13,273 – 74 25 $ 13,106 – 142 25 17,390 13,372 13,273 2,261 (4,274) (369) – (2,382) 55 15,063 182 6 299 (3) 484 1,832 785 (349) (7) 2,261 (356) 15,277 82 12 90 (2) 182 974 1,119 (261) – 1,832 151 15,256 56 (14) 35 5 82 $ 15,547 $ 15,459 $ 15,338 Consolidated Statements of Comprehensive Income Barrick Gold Corporation For the years ended December 31 (in millions of United States dollars) Net income (loss) Other comprehensive income (loss), net of tax (note 26) Comprehensive income (loss) The accompanying notes are an integral part of these consolidated financial statements. 2009 $ (4,274) 411 $ (3,863) 2008 785 (507) 2007 $ 1,119 32 278 $ 1,151 $ $ Financial Statements | Barrick Financial Report 2009 99 Notes to Consolidated Financial Statements Barrick Gold Corporation. Tabular dollar amounts in millions of United States dollars, unless otherwise shown. References to C$, A$, ZAR, CLP, PGK, TZS, JPY, ARS and EUR are to Canadian dollars, Australian dollars, South African rand, Chilean pesos, Papua New Guinea kina, Tanzanian schillings, Japanese yen, Argentinean pesos and Euros, respectively. 1 ß 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. We also produce significant amounts of cop- per and hold interests in oil and gas properties located in Canada. Our producing mines are concentrated in four regional business units: North America, South America, Africa and Australia Pacific. We sell our gold production into the world market and we sell our copper production into the world market and to private customers. 2 ß Significant Accounting Policies a) Basis of Preparation These consolidated financial statements have been prepared under United States generally accepted accounting princi- ples (“US GAAP”). To ensure comparability of financial information, prior year amounts have been reclassified to reflect changes in the financial statement presentation. b) Principles of Consolidation These consolidated financial statements include the accounts of Barrick Gold Corporation and those entities that we have the ability to control either through voting rights or means other than voting rights. These entities include development projects and operating mines in which we hold a less than 100% ownership interest, which generally operate as joint ventures. For these joint ventures, our risk is limited to our investment in the entity. We have assessed all of our incorpo- rated joint ventures (“JVs”), including those in the develop- ment stage to determine if they are variable interest entities (“VIEs”). We determine if we are the primary beneficiary based on whether we expect to participate in the majority of the entities’ future expected gains/losses, based on the fund- ing requirements set out in their respective agreements. For VIEs where we are the primary beneficiary, we consolidate the entity and record a non-controlling interest, measured initially at its estimated fair value, for the interest held by other entity owners. For our projects that qualify as VIEs and for which we expect to participate equally in future expected gains/losses with our partners, we are not the primary bene - ficiary, and therefore use the equity method of accounting to report their results (note 12). For unincorporated JVs under which we hold an undi- vided interest in the assets and liabilities and receive our share of production from the joint venture, we include our pro rata share of the assets, liabilities, revenue and expenses in our financial statements. 100 Notes to Consolidated Financial Statements The following table illustrates our policy used to account for significant entities where we hold less than a 100% economic interest. We consolidate all wholly owned entities. Consolidation Method at December 31, 2009 Entity type at December 31, 2009 Economic interest at December 31, 20091 Method North America Round Mountain Mine Marigold Mine Turquoise Ridge Mine Pueblo Viejo Project2 Donlin Creek Project South America Cerro Casale Project Australia Kalgoorlie Mine Porgera Mine3 Reko Diq Project4 Africa Tulawaka Mine Kabanga Project5 Unincorporated JV Unincorporated JV Unincorporated JV VIE VIE VIE Unincorporated JV Unincorporated JV VIE Unincorporated JV VIE 50% 33% 75% 60% 50% 50% 50% 95% 37.5% 70% 50% Pro Rata Pro Rata Pro Rata Consolidation Equity Method Equity Method Pro Rata Pro Rata Equity Method Consolidation Equity Method 1. Unless otherwise noted, all of our joint ventures are funded by contributions made by their partners in proportion to their economic interest. 2. In accordance with the terms of the agreement with our partner, Barrick is responsible for 60% of the funding requirements for the Pueblo Viejo project. We consol- idate our interest in Pueblo Viejo and record a non-controlling interest for the 40% that we don’t own. In 2009, we determined that mineralization at Pueblo Viejo met the definition of proven and probable reserves for United States reporting purposes and began capitalizing the cost of project activities. We recorded a non-control- ling interest gain of $1 million (2008: loss of $26 million) (note 27). At December 31, 2009, the consolidated carrying amount (100%) of the Pueblo Viejo project was $1,321 million (2008: $439 million) (note 15a). 3. We hold an undivided interest in our share of assets and liabilities at the Porgera mine. In August 2007, we increased our ownership interest from 75% to 95%. 4. We hold a 50% interest in Atacama Copper, which has a 75% interest in the Reko Diq project. We use the equity method to account for our interest in Atacama Copper (note 12). 5. In accordance with an agreement with our partner, from 2006 until the third quarter of 2008, our partner was responsible for funding 100% of exploration and project expenditures and we did not record any amounts for our economic interest in this period. During the third quarter of 2008, our partner completed the $145 million spending requirement, and we began funding 50% of the exploration and project expenditures (note 12). c) Foreign Currency Translation The functional currency of our gold and copper operations is the US dollar. We translate non-US dollar balances for these operations into US dollars as follows: ß Property, plant and equipment, intangible assets and equity method investments using historical rates; ß Available-for-sale securities using closing rates with translation gains and losses recorded in other compre- hensive income; ß Asset retirement obligations using historical rates; ß Deferred tax assets and liabilities using closing rates with translation gains and losses recorded in income tax expense; ß Other assets and liabilities using closing rates with translation gains and losses recorded in other income/ expense; and ß Income and expenses using average exchange rates, except for expenses that relate to non-monetary assets and liabilities measured at historical rates, which are translated using the same historical rate as the associated non-monetary assets and liabilities. The functional currency of our oil and gas operations, (“Barrick Energy”) is the Canadian dollar. We translate bal- ances related to Barrick Energy into US dollars as follows: ß Assets and liabilities using closing exchange rates with translation gains and losses recorded in other compre- hensive income; and ß Income and expense using average exchange rates with translation gains and losses recorded in other compre- hensive income. 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 mineral reserves; classification of mineralization as either reserves or non-reserves; fair values of acquired assets and liabilities under business combinations, including the value of min- eralized material beyond proven and probable mineral reserves; future costs and expenses to produce proven and probable mineral reserves; future commodity prices for gold, copper, silver and other products; future costs of oil Notes to Consolidated Financial Statements | Barrick Financial Report 2009 101 and other consumables; currency exchange rates; the future cost of asset retirement obligations; amounts and likelihood of contingencies; the fair values of reporting units that include goodwill; uncertain tax positions; and credit risk adjustments to discount rates. Using these and other esti- mates and assumptions, we make various decisions in preparing the financial statements including: ß The treatment of expenditures at mineral properties prior to when production begins as either an asset or an expense (note 15); ß Whether tangible, intangible long-lived assets and equity investments are impaired, and if so, estimates of the fair value of those assets and any corresponding impairment charge (note 15); ß Our ability to realize deferred income tax assets and amounts recorded for any corresponding valuation allowances and amounts recorded for uncertain tax positions (note 24); ß The useful lives of tangible and intangible long-lived assets and the measurement of amortization (note 15); ß The fair value of asset retirement obligations (note 22); ß Whether to record a liability for loss contingencies and the amount of any liability (notes 15 and 30); ß The amount of income tax expense (note 9); ß Allocations of the purchase price in business combina- tions to assets and liabilities acquired (notes 3 and 17); ß Whether any impairments of goodwill have occurred and if so the amounts of impairment charges (note 17); ß Transfers of value beyond proven and probable reserves to amortized assets (note 15); and ß Credit risk adjustments to the discount rates in determining the fair value at derivative instruments (notes 20 and 21). 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. e) Accounting Changes Accounting Changes Implemented in 2009 On July 1, 2009, the Financial Accounting Standards Board’s (FASB) Codification of US GAAP was launched as the sole source of authoritative non-governmental US GAAP. The Accounting Standards Codification (“ASC”) is not intended to change US GAAP, but rather reorganize existing guidance by accounting topic to allow easier identification of applica- ble standards. We have updated any references to US GAAP to reflect the Codification. 102 Notes to Consolidated Financial Statements Measuring Fair Value of Liabilities In August 2009, the FASB issued Accounting Standards Update (ASU) 2009-05, Measuring Fair Value of Liabilities which is effective prospectively for interim periods begin- ning after August 1, 2009, with early adoption permitted. Existing guidance required that the fair value of liabilities be measured under the assumption that the liability is transferred to a market participant. ASU 2009-05 provides further clarification that fair value measurement of a liabil- ity should assume transfer to a market participant as of the measurement date without settlement with the counter- party. Therefore, the fair value of the liability shall reflect non-performance risk, including but not limited to a reporting entity’s own credit risk. We have adopted ASU 2009-05 in fourth quarter 2009, resulting in an insignificant adjustment to our liabilities. Disclosures about Derivative Instruments and Hedging Activities In first quarter 2009, we adopted new disclosure require- ments for derivative instruments and hedging activities issued by the FASB in March 2008. Under this new guid- ance, entities are required to provide enhanced disclosures about (a) how and why an entity uses derivative instru- ments, (b) how derivative instruments and related hedged items are accounted for, and (c) how derivative instruments and related hedged items affect an entity’s financial posi- tion, financial performance and cash flows. To the extent the required information was not previously disclosed in our 2008 annual financial statements, we incorporated new disclosures in note 20. Business Combinations In first quarter 2009, we began applying the new provisions for business combinations consummated after December 31, 2008. Under the new guidance, business acquisitions are accounted for under the “acquisition method”, as opposed to the “purchase method”. The more significant changes to our accounting for business combinations that will result from applying the acquisition method include: (i) the definition of a business is broadened to include some development stage entities, and therefore more acquisitions may be accounted for as business combinations rather than asset acquisitions; (ii) the measurement date for equity interests issued by the acquirer is the acquisition date instead of a few days before and after terms are agreed to and announced, which may significantly change the amount recorded for the acquired business if share prices differ from the agreement and announcement date to the acquisition date; (iii) all future adjustments to income tax estimates will be recorded to income tax expense, whereas under the previous requirements, certain changes in income tax estimates were recorded to goodwill; Employers’ Disclosures about Post Retirement Benefit Plan Assets In December 2008, the FASB issued guidance on employers’ disclosures about their post retirement benefit plan assets. The objectives of the disclosures about plan assets in an employer’s defined benefit pension or other postretirement plan are to provide users of financial statements with an understanding of: (i) how investment allocation decisions are made, including the factors that are pertinent to an understanding of investment policies and strategies; (ii) the major categories of plan assets; (iii) the inputs and valuation techniques used to measure the fair value of plan assets; (iv) the effect of fair value measurements using significant unobservable inputs (Level 3) on changes in plan assets for the period; (v) significant concentrations of risk within plan assets. We adopted the increased disclosure requirements beginning in fourth quarter 2009. Refer to note 29 for related disclosures. Accounting Changes Implemented in 2008 Fair Value Measurements and Disclosures In 2008, we implemented new FASB guidance for financial assets and financial liabilities that are measured at fair value on a recurring basis. The primary financial assets and finan- cial liabilities that are recognized and disclosed at fair value on a recurring basis are: available-for-sale securities; receiv- ables from provisional copper and gold sales; derivate assets and derivative liabilities and held-to-maturity investments. Beginning in 2009, we applied this new guidance to non- financial assets and liabilities when we periodically meas- ure at fair value under US GAAP, which include: goodwill, tangible and intangible assets measured and recognized at fair value as a result of an impairment assessment; and non- financial assets and non-financial liabilities recognized as a result of a business combination. The adoption of this guidance resulted in expanded disclosures about our fair value measurements for financial assets and financial liabilities recognized in our financial statements. However, the adoption did not have an impact on the measurement of fair value as our valuation method- ology for these assets and liabilities is consistent with the fair value framework established by the new guidance. Refer to note 21 of the Consolidated Financial Statements for details of the adoption and related disclosures. (iv) acquisition-related costs of the acquirer, including investment banking fees, legal fees, accounting fees, valua- tion fees, and other professional or consulting fees will be expensed as incurred, whereas under the previous guidance these costs were capitalized as part of the business combina- tion; (v) the assets acquired and liabilities assumed as part of a business combination, whether full, partial or step acquisition, result in all assets and liabilities recorded at 100% of fair value, whereas under the previous requirements only the controlling interest’s portion was recorded at fair value; (vi) recognition of a bargain purchase gain when the fair value of the identifiable assets exceeds the purchase price, whereas under the previous guidance, the net book value of the identifiable assets would have been adjusted downward; and (vii) the non-controlling interest will be recorded at its share of fair value of net assets acquired, including its share of goodwill, whereas under previous guidance the non-controlling interest is recorded at its share of carrying value of net assets acquired with no goodwill being allocated. Non-controlling Interests in Consolidated Financial Statements In first quarter 2009, we adopted the provisions for non- controlling interests issued by the FASB in December 2007. Under the new guidance, non-controlling interests are measured at 100% of the fair value of assets acquired and liabilities assumed. Prior to the effective date of the new guidance, non-controlling interests were measured at book value. For presentation and disclosure purposes, non-con- trolling interests are now classified as a separate component of equity. In addition, the new guidance changes the man- ner in which increases/decreases in ownership percentages are accounted for. Changes in ownership percentages are recorded as equity transactions and no gain or loss is recog- nized as long as the parent retains control of the subsidiary. When a parent company deconsolidates a subsidiary but retains a non-controlling interest, the non-controlling inter- est is re-measured at fair value on the date control is lost and a gain or loss is recognized at that time. Further, accu- mulated losses attributable to the non-controlling interests are no longer limited to the original carrying amount, and therefore non-controlling interests could have a negative carrying balance. The new provisions have been applied prospectively with the exception of the presentation and disclosure pro- visions, which have been applied for all prior periods pre- sented in the financial statements. The presentation and disclosure provisions resulted in the reclassification of non- controlling interests to the Equity section of the Balance Sheet totaling $484 million as at December 31, 2009 (Decem ber 31, 2008: $182 million). Notes to Consolidated Financial Statements | Barrick Financial Report 2009 103 g) Other Notes to the Financial Statements Note Page Acquisitions and divestitures Segment information Revenues Cost of sales Exploration and project development expense Other charges Income tax expense Earnings (loss) per share Cash flow – other items Equity in investees and other investments Inventories Accounts receivable and other current assets Property, plant and equipment Intangible assets Goodwill Other assets Other current liabilities Financial instruments Fair value measurements Asset retirement obligations Other non-current liabilities Deferred income taxes Capital stock Other comprehensive income (loss) (“OCI”) Non-controlling interests Stock-based compensation Post-retirement benefits Litigation and claims Subsequent events 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 29 30 31 105 108 110 111 113 114 115 116 117 118 120 121 122 126 127 129 129 129 140 142 142 143 145 146 146 147 149 152 154 Disclosures by Public Entities (Enterprises) About Transfers of Financial Assets and Interests in VIEs In December 2008, the FASB issued guidance for the pur- pose of improving the transparency of transfers of financial assets and an enterprise’s involvement with variable inter- est entities (“VIEs”), including qualifying special-purpose entities (“QSPEs”). The impact on our financial reporting requirements is limited to the new VIE disclosures. The VIE disclosure requirements focus on an enter- prise’s involvement with VIEs and its judgments about the accounting for them. The new guidance also requires disclosure of the details of any financial or other support provided to a VIE that the enterprise was not previously contractually required to provide, and the primary reasons for providing the support. The primary beneficiary of a VIE is also required to disclose the terms of any arrangements that could require the enterprise to provide future support to the VIE. In addition, it requires disclosure of the carry- ing amount and classification of the variable interest entity’s assets and liabilities in the Balance Sheet and a reconcilia- tion of those amounts to the enterprise’s maximum expo- sure to loss. The adoption of this guidance has resulted in expanded disclosure around our involvement with our VIEs and the significant judgments and assumptions we make in accounting for them. We have also included tables that reflect how our consolidated VIEs are included in our Consolidated Statement of Income and Balance Sheet. f) Significant Accounting Developments Amendments to Accounting for VIEs In second quarter 2009, the FASB issued an amendment to its guidance on VIEs. Although not effective until first quar- ter 2010, this new guidance makes significant changes to the model for determining who should consolidate a VIE by specifically eliminating the quantitative approach to deter- mining the primary beneficiary. The amendment requires the use of a qualitative approach to determine the primary beneficiary, based on the power to direct activities of the VIE that most significantly impact its economic perform- ance and an obligation to absorb losses or to receive benefits of the VIE. If the power is shared, then no party is the primary beneficiary. We are assessing the impact of these changes on our Consolidated Financial Statements. 104 Notes to Consolidated Financial Statements 3 ß Acquisitions and Divestitures For the years ended December 31 2009 2008 Cash paid on acquisition1 Valhalla Hemlo Barrick Energy Inc. Cortez (additional 40% interest) Other2 Less: cash acquired Cash proceeds on sale1 Royalty disposition $ 53 50 – – – $ – – 460 1,695 74 $ 103 (2) $ 2,229 (55) $ 101 $ 2,174 $ $ – – $ 150 $ 150 1. All amounts represent gross cash paid or received on acquisition or divestiture. 2. Includes $40 million for the remaining 6% interest in Arizona Star, which owned a 51% interest in Cerro Casale pursuant to a statutory right of com- pulsory acquisition; $29 million for the additional 40% interest in our Storm property; and $5 million related to the 2007 acquisition of Kainantu. a) IPO of African Gold Mining Operations On February 17, 2010, our Board of Directors approved a plan to create African Barrick Gold, a new company whose equity it will seek to list with the United Kingdom Listing Authority and to admit to trading on the London Stock Exchange, subject to market conditions. The new company also intends to seek a future listing on the Dar es Salaam Stock Exchange in Tanzania. African Barrick Gold will hold Barrick’s African gold mines, projects and exploration prop- erties. The new company will offer about 25% of its equity in an initial public offering and Barrick will retain the remain- ing interest. The pricing and terms are yet to be determined; however, the offering is expected to be priced in mid-March, with closing expected to occur by the end of March. b) Acquisition of 25% Interest in Cerro Casale On February 17, 2010, we agreed to acquire an additional 25% interest in the Cerro Casale project in Chile from Kinross Gold Corporation for consideration of $475 million, comprised of $455 million cash and the elimination of a $20 million contingent obligation which was payable by Kinross to Barrick on a production decision, thereby increas- ing our interest in the project to 75%. We currently account for Cerro Casale using the equity method of accounting. Upon the closing of this transaction, we will obtain control over the project and therefore will consolidate 100% of its operating results, cash flows and net assets, with an offsetting non-controlling interest of 25%, from that time. c) Acquisition of Tusker Gold Limited On February 8, 2010, we entered into an Implementation Agreement with Tusker Gold Limited (“Tusker”) setting out the basis on which Barrick or one of its subsidiaries would make a takeover bid for Tusker for aggregate net consid - eration of approximately $75 million. Tusker’s board of directors have unanimously recommended that Tusker shareholders accept the offer. Barrick has entered into pre bid acceptance agreements with three Tusker shareholders that collectively hold 20% of Tusker’s outstanding shares. Tusker holds the other 49% interest in our Nyanzaga joint venture in Tanzania, as well as certain other exploration interests in Tanzania. If and when acquired, Tusker will be held in African Barrick Gold plc, which will use cash on hand to make the acquisition. The offer, which is subject to certain conditions, is expected to be made in March 2010 and close in April 2010. d) Acquisition of 70% Interest in El Morro On October 11, 2009, we entered into an agreement to acquire a 70% interest in the El Morro project from Xstrata Plc. for $465 million in cash. El Morro is an advanced stage gold-copper project located near our Pascua-Lama and Cerro Casale projects in Chile. On January 7, 2010, New Gold Inc. announced that it had given Xstrata notice of its inten- tion to exercise a right of first refusal and on February 1, 2010 Xstrata notified Barrick that it was terminating its agreement with Barrick. The Company has filed an action in the Ontario Superior Court of Justice against New Gold and Goldcorp, challenging the purported exercise of New Gold’s right of first refusal on the basis that, among other things, it was not lawfully exercised. Barrick does not accept the ter- mination by Xstrata and intends to bring a motion to add Xstrata as a party and seeking to compel Xstrata to complete the sale to Barrick, as well as certain other remedies. e) Acquisition of 50% Interest in Valhalla On September 17, 2009, we completed the acquisition of 50% interest in the Valhalla oil and gas field, which is close to our existing Sturgeon Lake field, for total cash considera- tion of $53 million. This transaction was considered an asset purchase. Notes to Consolidated Financial Statements | Barrick Financial Report 2009 105 f) Acquisition of 50% Interest in Hemlo On April 22, 2009, we completed the acquisition of the remaining 50% interest in the Williams and David Bell gold mines (“Hemlo”) in Canada from Teck Resources Ltd. for cash consideration of $50 million, thereby increasing our interest to 100%. We recognized a bargain purchase gain of $43 million, resulting from the excess fair value of the net assets acquired over the cash consideration paid. Following this transaction, we remeasured our existing 50% interest in the assets and liabilities of Hemlo held prior to this transaction to their fair values, recognizing a gain of approximately $29 million. The total gain of $72 million is recorded in other income (note 8c). The tables below represent the purchase cost, our final purchase price allocation, and the bargain purchase recorded in other income (note 8c). Purchase Cost Purchase cost Purchase price adjustment Less: cash acquired Summary Purchase Price Allocation Current assets Property, plant and equipment Buildings, plant and equipment Capitalized development costs Capitalized reserve acquisition costs Total assets Current liabilities Asset retirement obligations Deferred income tax liabilities Total liabilities Net assets acquired $ 65 (15) (2) $ 48 $ 10 25 21 81 137 8 32 21 61 $ 76 g) Acquisition of Barrick Energy Inc. (“Barrick Energy”) In 2008, we acquired 59.2 million shares of Cadence Energy Inc. (“Cadence”) for cash consideration of $377 million, representing 100% of the issued and outstanding common shares. Subsequent to the acquisition, we renamed Cadence as Barrick Energy. In 2008, we also acquired all of the oil and gas assets at Sturgeon Lake, Alberta, from Daylight Resources Trust for $83 million. The Sturgeon Lake assets are adjacent to Cadence’s Sturgeon Lake assets and the transaction enabled us to consolidate 100% ownership of the Sturgeon Lake South Leduc pool. We determined that this transaction rep- resented an acquisition of assets, which were amalgamated with the Cadence operations to form Barrick Energy. 106 Notes to Consolidated Financial Statements The tables below represent the purchase cost and the final purchase price allocation. Purchase Cost Purchase cost Less: cash acquired Summary Purchase Price Allocation Current assets Property, plant and equipment Capitalized reserve acquisition and development costs Buildings, plant and equipment Goodwill Total assets Accounts payable Derivative liabilities Long-term debt Asset retirement obligations Deferred income tax liabilities Total liabilities Net assets acquired $ 377 (41) $ 336 $ 25 278 68 96 467 24 10 65 10 22 131 $ 336 h) Acquisition of 40% Interest in Cortez In 2008, we completed our acquisition of an additional 40% interest in the Cortez property from Kennecott Explora - tions (Australia) Ltd. (“Kennecott”), a subsidiary of Rio Tinto plc, for a total cash consideration of $1,695 million. A further $50 million will be payable if and when we add an additional 12 million ounces of contained gold resources beyond our December 31, 2007 reserve statement for Cortez. This contingent payment will be recognized as an additional cost of the acquisition only if the resource/pro- duction targets are met and the amounts become payable as a result. A sliding scale royalty is payable to Kennecott on 40% of all production in excess of 15 million ounces on and after January 1, 2008 . The acquisition consolidates 100% ownership for Barrick of the existing Cortez mine and the Cortez Hills expansion plus any future potential from the property. We have determined that the transaction represents a business combination. The acquisition was effective March 1, 2008 and the revenues and expenses attributable to the 40% interest have been included in our Consolidated Statements of Income from that date onwards. The tables below repre- sent the purchase cost and our final purchase price alloca- tion for the additional 40% of Cortez. Purchase Cost Purchase cost per agreement Less: cash acquired $ 1,695 (14) $ 1,681 Osborne Due to the short remaining economic life, in December 2009 we committed to a plan to dispose of our Osborne mine in our Australia Pacific regional business unit. We expect to have a sale agreement finalized in first quarter 2010. Osborne meets the criteria of an asset held for sale, and accordingly, the results of operations and the assets and liabilities of Osborne have been presented as discontinued operations in the Consolidated Statements of Income, the Consolidated Statements of Cash Flow and the Consoli - dated Balance Sheets. In fourth quarter 2008, Osborne’s property, plant and equipment was impaired and written down to salvage value. As such, amortization was recorded only on additions made during 2009 and, therefore, the classification of Osborne as an asset held for sale has mini- mal impact on amortization expense. Henty On July 6, 2009, we finalized an agreement with Bendigo Mining Limited (“Bendigo”) to divest our Henty mine in our Australia Pacific segment for consideration of $4 mil- lion cash, adjusted for the benefit of production from July 1, 2009 and Bendigo shares with a value of $2 million on closing. We are also entitled to receive a royalty payable on production from future exploration discoveries, capped at approximately $17 million. A gain of $4 million was recorded on the sale and recognized in income from dis- continued operations (note 3j). The results of operations and the assets and liabilities of Henty have been presented as discontinued operations in the Consolidated Statements of Income, the Consolidated Statements of Cash Flow and the Consolidated Balance Sheets. Summary Purchase Price Allocation Inventories Other current assets Property, plant and equipment Buildings, plant and equipment Capitalized reserve acquisition and development costs Value beyond proven and probable reserves Goodwill Non-current ore in stockpiles Deferred income tax assets Total assets Current liabilities Asset retirement obligations Total liabilities Net assets acquired $ 47 1 184 1,057 381 20 17 11 1,718 23 14 37 $ 1,681 i) Disposition of Royalties In 2008, we divested certain non-core royalties to Royal Gold Inc. (“Royal Gold”) in exchange for cash considera- tion of $150 million and a reduction in various royalties that we are currently obligated to pay to Royal Gold with an esti- mated fair value of $32 million. The transaction closed on October 2, 2008 and we recorded a pre-tax gain on sale of $167 million in other income (note 8c). j) Discontinued Operations Results of Discontinued Operations For the years ended December 31 2009 2008 2007 Gold sales Osborne Henty Copper sales Osborne Income (loss) before tax Osborne Henty $ 31 25 $ 27 52 $ 26 52 212 221 240 $ 268 $ 300 $ 318 129 9 (85) (23) 88 4 $ 138 $ (108) $ 92 Cash Proceeds on Sale of Discontinued Operations Henty South Deep mine1 2009 2008 2007 $ $ 4 – 4 $ $ – – – $ – 21 $ 21 1. In 2007, we received $21 million in cash relating to the sale of our 50% inter- est in the South Deep mine in 2006. Notes to Consolidated Financial Statements | Barrick Financial Report 2009 107 4 ß Segment Information In 2008, we formed a dedicated Capital Projects group, dis- tinct from our existing regional business units to focus on managing development projects and building new mines. This specialized group manages all project development activities up to and including the commissioning of new mines, at which point responsibility for mine operations will be handed over to the regional business units. We revised the format of information provided to the Chief Operating Decision Maker in order to make resource allocation decisions and assess the operating performance of this group. Accordingly, we revised our operating segment disclo- sure to be consistent with the internal management structure and reporting changes, with restatement of comparative information to conform to the current period presentation. Also in 2008, we completed the acquisition of Barrick Energy (note 3g). The results of Barrick Energy are distinct from our existing regional business units and as such are presented separately in our segment information. For the years ended December 31 2009 2008 2007 2009 2008 2007 2009 2008 2007 2009 2008 2007 Sales Segment expenses1 Amortization and accretion Segment income (loss) Gold North America South America Australia Pacific Africa Copper South America Capital Projects Barrick Energy $ 2,780 $ 2,627 $ 2,001 1,306 1,833 1,214 1,579 428 538 1,831 1,836 688 $ 1,423 $ 1,534 $ 1,178 400 895 293 531 1,030 327 499 1,120 377 $ 387 143 286 96 $ 371 175 245 66 $ 340 242 226 80 $ 970 $ 722 $ 483 664 1,127 93 304 55 145 1,189 430 215 943 – 58 1,007 – 29 1,065 – – 361 142 39 315 209 14 232 187 – 78 – 31 68 – 13 82 – – 504 (142) (12) 624 (209) 2 751 (187) – $ 8,136 $ 7,613 $ 6,014 $ 3,961 $ 3,960 $ 3,185 $ 1,021 $ 938 $ 970 $ 3,154 $ 2,715 $ 1,859 1. Segment expenses related to capital projects includes project development expense and losses from capital projects held through equity investees, see notes 7 and 12 for further details. Income Statement Information (cont’d) For the years ended December 31 2009 2008 2007 2009 2008 2007 Exploration1 Regional business unit costs1 North America South America Australia Pacific Africa Barrick Energy Other expenses outside reportable segments Capital projects $ 62 23 39 8 – 9 – $ 79 40 44 18 – 12 5 $ 70 33 35 15 – 8 7 $ 43 32 50 32 6 – – $ 46 29 48 24 2 – – $ 141 $ 198 $ 168 $ 163 $ 149 $ 27 23 38 11 – – – $ 99 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. 108 Notes to Consolidated Financial Statements Geographic Information 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 Long-lived assets1 Sales2 2009 2008 2007 2009 2008 2007 $ 5,118 $ 4,587 $ 2,637 796 139 1,017 446 1,423 1,352 293 3,063 1,233 1,764 682 1,725 180 337 2,763 1,123 1,707 677 1,816 179 392 2,485 1,048 1,574 702 1,336 478 $ 2,552 228 – $ 2,501 126 – $ 1,882 119 – 1,291 943 540 1,306 530 688 58 1,367 1,007 466 1,040 539 538 29 1,033 1,065 273 932 282 428 – 1. Long-lived assets include property, plant and equipment, equity in investments, other investments, deferred income tax assets and other assets. 2. Presented based on the location in which the sale originated. Reconciliation of Segment Income to Income from Continuing Operations Before Income Taxes and Other Items For the years ended December 31 2009 2008 2007 $ 16,833 $ 14,652 $ 11,587 $ 8,136 $ 7,613 $ 6,014 Segment income Amortization of corporate assets Exploration Other project expenses Elimination of gold sales contracts Corporate administration Other expense Impairment charges Interest income Interest expense Other income Write-down of investments Loss from capital projects held through equity investees Income (loss) from continuing operations before income taxes and other items $ 3,154 (52) (141) (24) (5,933) (171) (343) (277) 10 (57) 112 (1) 93 $ (3,630) $ 2,715 (19) (198) (57) – (155) (302) (598) 39 (21) 291 (205) 69 $ 1,859 (20) (168) (15) – (155) (200) (42) 141 (113) 110 (23) 14 $ 1,559 $ 1,388 Notes to Consolidated Financial Statements | Barrick Financial Report 2009 109 Asset Information Segment long-lived assets Amortization Segment capital expenditures1 For the years ended December 31 2009 2008 2007 2009 2008 2007 2009 2008 2007 Gold North America South America Australia Pacific Africa Copper South America Capital projects Barrick Energy Segment total Cash and equivalents Other current assets Intangible assets Assets of discontinued operations Goodwill $ 5,883 $ 5,063 $ 3,370 1,220 2,139 1,031 1,220 2,213 1,195 1,198 2,259 1,713 1,239 4,017 501 16,810 2,564 2,315 66 100 1,261 3,295 382 14,629 1,437 2,642 74 76 1,271 2,195 – 11,226 2,207 2,070 68 172 5,197 5,280 5,847 Other items not allocated to segments 23 23 361 $ 361 133 274 91 $ 350 165 237 62 $ 314 234 216 78 $ 553 161 221 126 $ 434 $ 227 158 214 118 84 207 138 75 – 30 964 – – – – – 52 66 – 13 893 – – – – – 19 80 – – 922 – – – – – 20 37 1,317 31 2,446 – – – – – 21 57 919 15 1,854 – – – – – 62 27 326 – 1,070 – – – – – 8 Enterprise total $ 27,075 $ 24,161 $ 21,951 $ 1,016 $ 912 $ 942 $ 2,467 $ 1,916 $ 1,078 1. Segment capital expenditures are presented for internal management reporting purposes on an accrual basis. Capital expenditures in the Consolidated Statements of Cash Flow are presented on a cash basis. In 2009, cash expenditures were $2,351 million (2008: $1,749 million; 2007: $1,035 million) and the increase in accrued expenditures was $116 million in 2009 (2008: $167 million increase; 2007: $43 million increase). 5 ß Revenues For the years ended December 31 2009 2008 2007 Gold bullion sales2 Spot market sales Gold sales contracts6 Concentrate sales3 Copper sales1,4 Copper cathode sales Oil and gas sales5 $ 6,991 – $ 6,455 – $ 3,771 1,026 6,991 144 6,455 122 4,797 152 $ 7,135 $ 6,577 $ 4,949 $ 943 $ 1,007 $ 1,065 $ 943 $ 1,007 29 58 $ $ $ 1,065 – $ $ 8,136 $ 7,613 $ 6,014 1. Revenues include amounts transferred from OCI to earnings for commodity cash flow hedges (see notes 20e and 26). 2. Gold sales include gains and losses on non-hedge derivative contracts: 2009: $56 million gain (2008: $19 million gain; 2007: $8 million loss). 3. Concentrate sales include gains and losses on embedded derivatives in smelting contracts: 2009: $1 million gain (2008: $3 million loss; 2007: $4 million loss). 4. Copper sales include gains and losses on economic copper hedges that do not qualify for hedge accounting treatment and non-hedge derivative contracts: 2009: $55 million loss (2008: $67 million gain; 2007: $48 million gain). 5. Represents Barrick Energy. Refer to note 3g for further details. 6. Represents the impact of deliveries into corporate gold sales contracts which were eliminated in second quarter 2007. Principal Products All of our gold mining operations produce gold in doré form, except Bulyanhulu and Buzwagi which produce 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 cus- tomers. 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. Gold concentrate is sold to third-party smelters. At our Zaldívar mine we produce copper cathode, which consists of 99.9% copper. Copper cathodes are sold directly under copper cathode sales contracts with various third-party buyers. Revenue Recognition 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 determinable; and collectability is reasonably assured. Revenue in 2009 is presented net of direct sales taxes of $30 million (2008: $23 million; 2007: $15 million). 110 Notes to Consolidated Financial Statements 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, primarily silver, are classified within cost of sales. Concentrate Sales Under the terms of concentrate sales contracts with inde- pendent smelting companies, gold and copper sales prices are provisionally 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 smelt- ing contracts are caused by changes in market gold and cop- per 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 provisional price adjust- ments and included as a component of revenue. Copper Cathode Sales Under the terms of copper cathode sales contracts, copper sales prices are provisionally 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 provisionally measured using forward market prices on the expected date that final selling prices will be fixed. Variations occur between the price 6 ß Cost of Sales 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 derivative in the accounts receivable. This embed- ded derivative is recorded at fair value each period until final settlement occurs, with changes in fair value classified as provisional price adjustments and included as a component of revenue. Provisional Copper and Gold Sales We had the following revenues before treatment and refining charges subject to final price adjustments: At December 31 Copper Gold 2009 2008 $ 88 8 $ 45 15 Final price adjustments recorded during the year: For the years ended December 31 2009 2008 2007 Gain (loss) Copper Gold $ 45 – $ (36) – $ (7) (1) Oil and Gas Sales Revenue from the sale of crude oil, natural gas and natural gas liquids is recorded at the time it enters the pipeline system, which is also when title transfers and there is reasonable assurance of collectability. At the time of delivery of oil and gas, prices are fixed and determinable based upon contracts referenced to monthly market commodity prices plus certain price adjustments. Price adjustments include product quality and transportation adjustments and market differentials. Gold Copper Oil & Gas For the years ended December 31 2009 2008 2007 2009 2008 2007 2009 2008 2007 Cost of goods sold1 Unrealized (gains) losses on non-hedge contracts By-product revenues Royalty expense Mining production taxes $ 3,230 $ 3,211 $ 2,678 $ 362 $ 315 $ 232 $ 29 $ 8 $ – (7) (73) 218 39 14 (92) 202 42 5 (104) 158 29 – (1) – – – – – – – – – – – – 10 – – – 6 – – – – – $ 3,407 $ 3,377 $ 2,766 $ 361 $ 315 $ 232 $ 39 $ 14 $ – 1. Cost of goods sold includes charges to reduce the cost of inventory to net realizable value as follows: $6 million for the year ended December 31, 2009 (2008: $62 million; 2007: $13 million). The cost of inventory sold in the period reflects all components capitalized to inventory, except that, for presentation purposes, the component of inventory cost relating to amortization of property, plant and equipment is classified in the income statement under “amortization”. Some companies present this amount under “cost of sales”. The amount presented in amortization rather than cost of sales was $964 million in the year ended December 31, 2009 (2008: $893 million; 2007: $922 million). Notes to Consolidated Financial Statements | Barrick Financial Report 2009 111 Silver Sale Agreement On September 22, 2009, we entered into an agreement with Silver Wheaton Corp. to sell the equivalent of 25% of the life-of-mine silver production from the Pascua-Lama proj- ect and 100% of silver production from the Lagunas Norte, Pierina and Veladero mines until project completion at Pascua-Lama. In return, we are entitled to an upfront cash payment of $625 million payable over three years from the date of the agreement, as well as ongoing payments in cash of the lesser of $3.90 (subject to an annual inflation adjust- ment of 1% starting three years after project completion at Pascua-Lama) and the prevailing market price for each ounce of silver delivered under the agreement. In third quarter 2009, we received cash of $213 million which is recorded in other non-current liabilities on the Consolidated Balance Sheet. Providing that construction continues to progress at Pascua-Lama, we are entitled to receive additional cash payments totaling $412 million in aggregate over the next three anniversary dates of the agree- ment. An imputed interest expense is being recorded on the liability at the rate implicit in the agreement. The liability plus imputed interest will be amortized based on the differ- ence between the effective contract price for silver and the amount of the ongoing cash payment per ounce of silver delivered under the agreement. Royalties Certain of our properties are subject to royalty arrange- ments based on mineral production at the properties. The primary type of royalty is a net smelter return (NSR) roy- alty. Under this type of royalty we pay the holder an amount calculated as the royalty percentage multiplied by the value of gold production at market gold prices less third-party smelting, refining and transportation costs. Other types of royalties include: ß Net profits interest (NPI) royalty, ß Modified Net smelter return (NSR) royalty, ß Net smelter return sliding scale (NSRSS) royalty, ß Gross proceeds sliding scale (GPSS) royalty, ß Gross smelter return (GSR) royalty, ß Net value (NV) royalty, and a ß Land tenement (LT) royalty. Royalty expense is recorded at the time of sale of gold production. Royalties applicable to our oil and gas properties include: ß Crown royalties, ß Net profits interest (NPI) royalty, and ß Overriding royalty (ORR). Producing mines & development projects North America Goldstrike Williams David Bell Round Mountain Bald Mountain Ruby Hill Cortez Cortez – Pipeline/South Pipeline deposit Cortez – portion of Pipeline/ Type of royalty 0%–5% NSR, 0%–6% NPI 1.5% NSR, 0.75% NV, 1% NV 3% NSR 3.53%–6.35% NSRSS 3.5%–7% NSRSS 2.9%–4% NSR 10% NPI 3% modified NSR 1.5% GSR 0.4%–9% GSR South Pipeline deposit 5% NV South America Veladero Lagunas Norte Australia Pacific 3.75% modified NSR 2.51% NSR Porgera Queensland & Western Australia 2% NSR, 0.25% other production1 Cowal Africa 2.5%–2.7% of gold revenue 4% of net gold revenue Bulyanhulu Tulawaka North Mara – Nyabirama and Nyabigena pit North Mara – Gokona pit Buzwagi 3% NSR 3% NSR 3% NSR, 1% LT 3% NSR, 1.1% LT 3% NSR, 30% NPI2 Capital Projects Donlin Creek Project Pascua-Lama Project – 1.5% NSR (first 5 years), 4.5% NSR (thereafter) Chile gold production 1.5%–9.8% GPSS Pascua-Lama Project – Chile copper production 2% NSR Pascua-Lama Project – Argentina production Pueblo Viejo Cerro Casale Reko Diq Kabanga Other Barrick Energy 3% modified NSR 3.2% NSR, 0–25% NPI 3% NSR (capped at $3 million cumulative) 5% NSR 3% NSR 1.1% NPI 1.3% ORR 21.6% Crown royalty, net 1. Includes the Kalgoorlie, Kanowna, Granny Smith, Plutonic, Darlot, Lawlers and Osborne mines. 2. The NPI is calculated as a percentage of profits realized from the Buzwagi mine after all capital, exploration, and development costs and interest incurred in relation to the Buzwagi mine have been recouped and all operat- ing costs relating to the Buzwagi mine have been paid. No amount is cur- rently payable. 112 Notes to Consolidated Financial Statements 7 ß Exploration and Project Development Expense For the years ended December 31 2009 2008 2007 Exploration: Minesite exploration Projects Project development expense: Pueblo Viejo1 Donlin Creek2 Sedibelo Fedorova Pascua-Lama Kainantu Pinson Other Other projects3 $ 42 99 $ 62 136 $ 52 116 $ 141 $ 198 $ 168 (3) – 8 2 17 10 2 25 62 – 17 24 21 28 17 16 67 32 22 18 12 – – 22 $ 61 $ 185 $ 173 24 57 15 $ 85 $ 242 $ 188 1. In 2009, the costs above represent 100% of start-up costs and include a reimbursement of historical remediation expenditures. We record a non- controlling interest recovery for our partner’s share of expenditures within “non-controlling interests” in the income statement. 2. Amounts for 2007 include a recovery of $64 million of cumulative project costs from our partner. 2008 and 2009 amounts are included in equity in investees. 3. Includes corporate development, research and development, and other corporate projects. Accounting Policy for Exploration and Project Expenditures Exploration Expenditures Exploration expenditures relate to the initial search for deposits with economic potential, including costs incurred at both greenfield sites (sites where we do not have any min- eral deposits that are already being mined or developed) and brownfield sites (sites that are adjacent to a mineral deposit that is classified within proven and probable reserves as defined by United States reporting standards and are already being mined or developed). Exploration expenditures relate to costs incurred to evaluate and assess deposits that have been identified as having economic potential, including exploratory drilling. Expenditures on exploration activity conducted at greenfield sites are expensed as incurred. Exploratory drilling and related costs are capitalized when incurred at brownfield sites where the activities are directed at obtaining additional information on the ore body that is classified within proven and probable reserves or for the purpose of converting a mineral resource into a proven and probable reserve and, prior to the commencement of the drilling program, we can conclude that it is probable that such a conversion will take place. Our assessment of probability is based on the follow- ing factors: results from previous drill programs; results from geological models; results from a mine scoping study confirming economic viability of the resource; and prelimi- nary estimates of mine inventory, ore grade, cash flow and mine life. Costs incurred at brownfield sites that meet the above criteria are capitalized as mine development costs. All other drilling and related exploration costs incurred at these sites are expensed as mine site exploration. Project Expenditures We capitalize the costs of activities at projects after mineral- ization is classified as proven and probable reserves. Before classifying mineralization as proven and probable reserves, the costs of project activities are expensed as incurred, except for costs incurred to construct tangible assets that are capitalized within property, plant and equipment. Project activities include: preparation of engineering scoping, prefeasi bility and feasibility studies; metallurgical testing; permitting; and sample mining. The costs of start-up activi- ties at mines and projects such as recruiting and training are also expensed as incurred within project expense. The Donlin Creek, Sedibelo, Kabanga, Cerro Casale and Fedorova projects are in various stages; however, none of these projects had met the criteria for cost capitalization at December 31, 2009. The Reko Diq project is owned through an equity investee and project expenses are included in “equity investees” in the Consolidated Income Statement (see note 12). Effective January 1, 2009, we determined that min- eralization of Pueblo Viejo met the definition of proven and probable reserves for United States reporting purposes. Effective May 1, 2007, we determined that mineralization at Buzwagi met the definition of proven and probable reserves for United States reporting purposes. Following these deter- minations, we began capitalizing the cost of project activities at Pueblo Viejo and Buzwagi. Notes to Consolidated Financial Statements | Barrick Financial Report 2009 113 8 ß Other Charges a) Other Expense b) Impairment Charges For the years ended December 31 2009 2008 2007 For the years ended December 31 2009 2008 2007 Regional business unit costs1 Community development costs2 Environmental costs World Gold Council fees Changes in estimate of AROs at closed mines Non-hedge derivative losses Currency translation losses (gains)3 Pension and other post-retirement benefit expense (notes 29b and 29e) Severance and other restructuring costs4 Other items $ 163 14 13 14 $ 149 21 7 11 $ 99 28 15 12 8 1 8 9 41 72 9 17 37 5 1 45 6 8 (4) 5 6 25 $ 343 $ 302 $ 200 1. Relates to costs incurred at regional business unit offices. 2. Amounts mainly related to community programs and other related expenses in Peru. 3. In 2009 and 2008, amounts primarily relate to translation losses on working capital balances in Australia and South America. 4. Includes $21 million in restructuring costs related to an organizational review, and other termination and restructuring costs. Environmental 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 prob- able and reasonably estimable. Amounts recorded are adjusted as further information develops or if circum- stances change. Recoveries of environmental remediation costs from other parties are recorded as assets when receipt is deemed probable. Impairment of goodwill (note 17)1 Impairment of long-lived assets2 Write-down of investments3 (note 12) $ 63 214 $ 277 1 $ 584 14 $ 598 205 $ 278 $ 803 $ 42 – $ 42 23 $ 65 1. In 2009, we recorded an impairment charge of $63 million for Plutonic. 2008 does not include impairment charges for Osborne ($64 million) and Henty ($30 million), which are reflected in the results of discontinued operations. 2. In 2009, impairment charges of $43 million and $158 million were recorded to reduce the carrying amount of long-lived assets to the estimated fair value for Plutonic and Sedibelo, respectively. In 2008, impairment charges primar - ily relate to $12 million recorded to reduce the carrying amount of long-lived assets at Marigold to their estimated fair value. 3. In 2008, we recorded impairment charges on our investment in Highland Gold ($140 million), on Asset-Backed Commercial Paper ($39 million) and various other investments in junior gold mining companies ($26 million). In 2007, impairment charges primarily relate to an impairment charge on Asset-Backed Commercial Paper of $20 million. c) Other Income For the years ended December 31 2009 2008 2007 Gains on sale of assets1 Gain on acquisition of assets2 Gains on sale of investments3 (note 12) Royalty income Sale of water rights Other $ 13 72 6 5 4 12 $ 187 – 59 25 4 16 $ 2 – 71 17 5 15 $ 112 $ 291 $ 110 1. In 2008, we recorded a gain of $167 million on the disposition of royalties to Royal Gold and a gain of $9 million on the sale of Doyon royalty. 2. In 2009, we recorded a gain of $72 million on the acquisition of the remain- ing 50% interest in Hemlo. Refer to note 3f for further details. 3. In 2008, we recorded a gain of $12 million on the sale of our investment in QGX Ltd. We also sold Asset-Backed Commercial Paper for cash proceeds of $49 million and recorded a gain on sale of $42 million. In 2007, we recorded a gain of $71 million related primarily to the sale of our investment in Gold Fields and Nova Gold. 114 Notes to Consolidated Financial Statements $ 689 $ 590 $ 341 Reconciliation to Canadian Statutory Rate 9 ß Income Tax Expense For the years ended December 31 2009 2008 2007 Current Canada International Deferred Canada International Income tax expense before elements below Net currency translation (gains) losses on deferred tax balances Canadian functional currency election Canadian tax rate changes Release of end of year valuation allowances – Tanzania Total expense Deferred income tax (expense) recovery – $ (21) 562 $ 22 613 $ (3) 518 $ 541 $ 635 $ 515 $ (11) 210 $ 3 (146) $ 19 (25) $ 199 $ (143) $ (6) $ 740 $ 492 $ 509 (40) (70) 59 – 98 – – (76) – 64 – (156) discontinued operations (41) 4 (28) Income tax expense – continuing operations $ 648 $ 594 $ 313 Currency Translation Deferred tax balances are subject to remeasurement for changes in currency exchange rates each period. The most significant balances are Canadian deferred tax liabilities with a carrying amount of approximately $30 million, Argentinean deferred tax liabilities with a carrying amount of approximately $32 million, and Australian and Papua New Guinea net deferred tax liabilities with a carrying amount of approximately $105 million. In 2009 and 2007, the appreciation of the Canadian and Australian dollar against the US dollar, and the weakening of the Argentine peso against the US dollar resulted in net translation gains totaling $40 million and $76 million, respectively. These gains are included within deferred tax expense/recovery. Canadian Functional Currency Election In fourth quarter 2008, we filed an election under Cana- dian draft legislation to prepare some of our Canadian tax returns using US dollar functional currency effective January 1, 2008. The legislation was enacted in first quarter 2009 which resulted in a one-time deferred tax benefit of $70 million. Canadian Tax Rate Changes In the fourth quarter of 2009, a provincial 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 $59 million, recorded as a compo- nent of deferred tax expense. In 2007, federal rate changes were enacted in Canada that lowered the applicable tax rate. The impact of these tax rate changes was to reduce net deferred tax assets in Canada by $64 million and was recorded as a component of deferred income tax expense. Release of Tanzanian Valuation Allowances In 2007, we released $156 million of end of year deferred tax valuation allowances in Tanzania due to the impact of higher market gold prices. For the years ended December 31 2009 2008 2007 At 33% (2008: 33.50%; 2007: 36.12%) statutory rate $ (1,198) $ 522 $ 501 Increase (decrease) due to: Allowances and special tax deductions1 Impact of foreign tax rates2 Expenses not tax deductible Impairment charges not tax deductible Gain on acquisition of assets not taxable Net currency translation (gains)/losses on deferred tax balances Canadian functional currency election Release of end of year valuation allowances – Tanzania Release of valuation allowances – Other Valuation allowances set up against current year tax losses Canadian tax rate changes Withholding taxes Mining taxes Other items (110) 1,786 16 (100) (86) 13 21 199 (99) 44 48 15 – (76) – – 98 – – (156) (175) (88) 74 – 21 19 9 5 64 17 19 19 (18) (40) (70) – – 163 59 16 21 2 Income tax expense $ 648 $ 594 $ 313 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. Amounts in 2009 include the impact of the elimination of gold sales contracts in a low tax jurisdiction. Amounts in 2007 included the impact of losses realized on deliveries into corporate gold sales contracts in a low tax jurisdiction. Notes to Consolidated Financial Statements | Barrick Financial Report 2009 115 10 ß Earnings (loss) per share For the years ended December 31 ($ millions, except shares in millions and per share amounts in dollars) Income (loss) from continuing operations Plus: interest on convertible debentures 2009 2008 2007 Basic Diluted Basic Diluted Basic Diluted $ (4,371) $ (4,371) – – $ 889 – $ 889 3 $ 1,046 – $ 1,046 2 Income (loss) available to common shareholders and after assumed conversions Income (loss) from discontinued operations (4,371) 97 (4,371) 97 889 (104) 892 (104) 1,046 73 1,048 73 Net income (loss) $ (4,274) $ (4,274) $ 785 $ 788 $ 1,119 $ 1,121 Weighted average shares outstanding Effect of dilutive securities Stock options Convertible debentures Earnings (loss) per share Income (loss) from continuing operations Net income (loss) 903 903 872 872 867 867 – – –1 –1 – – 4 9 – – 3 9 903 903 872 885 867 879 $ (4.84) $ (4.84) $ (4.73) $ (4.73) $ 1.02 $ 0.90 $ 1.01 $ 0.89 $ 1.21 $ 1.19 $ 1.29 $ 1.28 1. The impact of any additional securities issued under our stock option plan or as a result of conversion of convertible debentures would be anti-dilutive as a result of the net loss position. Consequently, diluted earnings per share would be computed in the same manner as basic earnings per share. 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 reflect 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 earnings 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 number 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 addi- tional shares for inclusion in diluted earnings per share cal- culations is determined using the as if converted method. The incremental number of common shares issued is included in the number of weighted average shares out- standing and interest on the convertible debentures is excluded from the calculation of income. 116 Notes to Consolidated Financial Statements 11 ß Cash Flow – Other Items a) Operating Cash Flows – Other Items For the years ended December 31 Adjustments for non-cash income statement items: Currency translation (gains) losses (note 8a) Amortization of premium on debt securities (note 20b) Amortization of debt issue costs (note 20b) Stock option expense (note 28a) Loss from equity in investees (note 12) Gain on sale of investments (note 8c) Losses on write-down of inventory (note 13) Non-controlling interests (notes 2b and 27) Net change in operating assets and liabilities, excluding inventory Revisions to AROs at closed mines and Barrick Energy (note 22) Settlement of AROs (note 22) Amortization of hedge gains/losses on acquired gold hedge position Other net operating activities Operating cash flow includes payments for: Pension plan contributions (note 29a) Cash interest paid (note 20b) b) Investing Cash Flows – Other Items For the years ended December 31 Loans to joint venture partners Purchase of land and water rights Purchases of royalties Funding for equity investees (note 12a) Long-term supply contract Reclassification of asset-backed commercial paper Other Other net investing activities c) Financing Cash Flows – Other Items For the years ended December 31 Financing fees on long-term debt (note 18) Derivative settlements (note 20e) Other net financing activities 2009 2008 2007 $ 8 (6) 6 27 87 (6) 6 6 75 10 (39) (10) $ 37 (7) 7 25 64 (59) 62 12 7 9 (38) (2) $ (4) (3) 9 25 43 (71) 13 (14) 161 6 (33) 32 $ 164 $ 117 $ 164 $ 50 $ 311 $ 47 $ 213 $ 49 $ 236 2009 2008 $ – – – (80) – – (7) $ (4) (16) (42) (107) (35) – (27) $ (87) $ (231) 2009 $ (16) (10) $ (26) 2008 $ (11) (23) $ (34) 2007 $ (47) – – – – (66) (14) $ (127) 2007 $ – (197) $ (197) Notes to Consolidated Financial Statements | Barrick Financial Report 2009 117 12 ß Equity in Investees and Other Investments a) Equity Method Investment Continuity At January 1, 2007 Acquired under Arizona Star acquisition Reclassifications Equity pick-up gain (loss) Capitalized interest Impairment charges At January 1, 2008 Purchases Funding Equity pick-up gain (loss) Capitalized interest Impairment charges At January 1, 2009 Funding Equity pick-up gain (loss) Capitalized interest At December 31, 2009 Publicly traded Highland Atacama1 Cerro Casale Donlin Creek Other2 Total $ 199 – – (30) – – 169 1 – 5 – (140) 35 – 6 – $ 124 – – (14) 8 – 118 – 62 (32) 9 – 157 31 (39) 8 $ – 732 – – 2 – 734 41 9 (11) 42 – 815 21 (21) 46 $ – – 64 – – – 64 – 27 (17) 4 – 78 11 (18) 4 $ 5 – (4) 1 – (2) – – 9 (9) – – – 17 (15) – $ 328 732 60 (43) 10 (2) 1,085 42 107 (64) 55 (140) 1,085 80 (87) 58 $ 41 Yes $ 157 No $ 861 No $ 75 No $ 2 $ 1,136 1. Represents our investment in Reko Diq. 2. Represents our investment in Kabanga. 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. For an investment in a company that represents a business, 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. Additional fund- ing into an investee is recorded as an increase in the carry- ing value of the investment. The carrying amount of each investment in a publicly traded equity investee is evaluated for impairment using the same method as an available-for- sale security. Our investments in non-publicly traded equity inves tees are exploration and development projects; therefore, we assess if there has been a potential impairment triggering event for an other-than-temporary impairment by: testing the under- lying assets of the equity investee for recoverability; and assessing if there has been a change in the mining plan or strategy for the project. If we determine underlying assets are recoverable and no other potential impairment conditions were identified, then our investment in the non-publicly traded equity investee is carried at cost. If the other underly- ing assets are not recoverable, we record an impairment charge equal to the difference between the carrying amount of the investee and its fair value. Where reliable information is available, we determine fair value based on the present value if cash flows are expected to be generated by the investee. Where reliable cash flow information is not avail- able, we determine fair value using a market approach. Highland Gold Mining Ltd. (“Highland”) In 2008, we recorded an impairment charge of $140 million against the carrying value at December 31, 2008 of High - land following an other-than-temporary decline in the mar- ket value of its publicly traded shares. Compañía Minera Casale (“Cerro Casale”) During 2008, we completed our acquisition of Arizona Star for $732 million. Arizona Star has an interest in the entity that holds the Cerro Casale deposit. We determined that we share joint control with Kinross and that Cerro Casale is a VIE. Neither party is the primary beneficiary as we jointly share in the expected earnings or losses of the project. We use the equity method of accounting for Arizona Star’s investment in Cerro Casale. Our maximum exposure to loss in this entity is limited to our investment in Cerro Casale, which totaled $861 million as of December 31, 2009. 118 Notes to Consolidated Financial Statements 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 cir- cumstances 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. Asset-Backed Commercial Paper (“ABCP”) In 2007, we recorded impairment charges of $20 million, resulting in a carrying value of $46 million at the end of 2007. An additional $39 million impairment charge was recorded in 2008, resulting in cumulative impairments totaling $59 million and a carrying value of $7 million. Subsequently, we reached an agreement with a third party to sell $66 million of our Asset Backed Commercial Paper (“ABCP”). We received $49 million in proceeds from this sale resulting in a recovery of $42 million which was recorded in Other income. b) Other Investments At December 31 Available-for-sale securities Other investments At December 31 Available-for-sale securities Securities in an unrealized gain position Equity securities Securities in an unrealized gain (loss) position Benefit plans2 Fixed-income Equity Other equity securities3 Other investments Long-term loan receivable from Yokohama Rubber Co. Ltd.4 2009 2008 $ 61 31 $ 92 Fair value $ 31 29 $ 60 2008 Gains (losses) in OCI 2009 Gains (losses) in OCI Fair value1 $ 54 $ 27 $ 15 $ 3 54 27 15 3 $ 1 5 1 7 61 31 $ 92 $ – – – – 27 n/a $ 27 $ 2 7 7 16 31 $ – (3) (2) (5) (2) 29 n/a $ 60 $ (2) 1. Refer to note 21 for further information on the measurement of fair value. 2. 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. 3. Other equity securities in a loss position consist of investments in various junior mining companies. 4. The long-term loan receivable is measured at amortized cost. Gains on Investments Recorded in Earnings Gains realized on sales Cash proceeds from sales 2009 2008 2007 $ 6 $ 7 $ 59 $ 76 $ 71 $ 625 Notes to Consolidated Financial Statements | Barrick Financial Report 2009 119 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 in process and finished goods inventory include the cost of stockpiles processed; direct and indirect materi- als and consumables; direct labor; repairs and maintenance; utilities; amortization of property, plant and equipment; and local mine administrative expenses. Costs are removed from inventory and recorded in cost of sales and amortiza- tion expense based on the average cost per ounce of gold in inventory. Mine operating supplies are recorded at the lower of purchase cost and market value. 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 2009 2008 2007 Inventory impairment charges $ 6 $ 62 $ 13 Ore on leach pads 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, Ruby Hill 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 dissolves 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 pur- poses, 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 recover- able 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). 13 ß Inventories At December 31 Raw materials Ore in stockpiles Ore on leach pads Mine operating supplies Work in process Finished products Gold doré Copper cathode Gold concentrate Non-current ore in stockpiles1 Gold Copper 2009 2008 2009 2008 $ 1,052 215 488 215 $ 825 161 432 187 $ 77 172 19 5 $ 41 189 27 5 69 – 20 65 – 21 – 4 – 2,059 (679) 1,691 (595) 277 (117) – 13 – 275 (93) $ 1,380 $ 1,096 $ 160 $ 182 1. Ore that we do not expect to process in the next 12 months is classified within other assets. Accounting Policy for Inventory Material extracted from our mines is classified as either ore or waste. Ore represents material that, at the time of extrac- tion, we expect to process into a saleable form, and sell at a profit. Ore is recorded as an asset that is classified within inventory as material is extracted from the open pit or underground mine. Ore is accumulated in stockpiles that are subsequently processed into gold/copper in a saleable form under a mine plan that takes into consideration opti- mal scheduling of production of our reserves, present plant capacity, and the market price of gold/copper. Gold/copper work in process represents gold/copper in the processing circuit that we count as production but is not yet in a saleable form. Gold and copper ore contained in stockpiles is mea - sured by estimating the number of tons added and removed from the stockpile, and the associated estimate of gold and copper contained therein (based on assay data) and apply- ing estimated metallurgical recovery rates (based on the expected processing method). Stockpile ore tonnages are verified by periodic surveys. Costs are allocated to ore stockpiles based on quantities of material stockpiled using current mining costs incurred up to the point of stockpil- ing the ore and including allocations of waste mining costs, overheads, depreciation, depletion and amortization relat- ing to mining operations. As ore is processed, costs are removed based on recoverable quantities of gold and/or copper and each stockpile’s average cost per unit. Ore stockpiles are reduced by provisions required to reduce inventory to net realizable value. 120 Notes to Consolidated Financial Statements 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 regularly 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, 2009, the weighted average cost per recoverable ounce of gold and recoverable pound of copper on leach pads was $383 per ounce and $1.01 per pound, respectively (2008: $439 per ounce of gold and $1.07 per pound of copper). Variations between actual and estimated quantities resulting from changes in assumptions and estimates that do not result in write-downs to net realizable value are accounted for on a prospective basis. The ultimate recovery of gold 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 2010 to 2027 and for copper ranging from 2010 to 2024. 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 Porgera Cowal Veladero Cortez Turquoise Ridge Other Copper Zaldívar 2009 2008 Year1 $ 452 46 80 117 88 26 98 15 130 $ 375 47 74 113 70 24 54 12 56 2035 2011 2021 2023 2019 2024 2032 2035 77 41 2024 $ 1,129 $ 866 1. Year in which we expect to fully process the ore in stockpiles. Ore on Leachpads At December 31 Gold Veladero Cortez Ruby Hill Bald Mountain Lagunas Norte Round Mountain Pierina Marigold Copper Zaldívar 2009 2008 Year1 $ 75 25 24 24 22 18 14 13 $ 30 50 13 20 14 10 16 8 2024 2021 2015 2027 2024 2013 2024 2011 172 189 2024 $ 387 $ 350 1. Year in which we expect to complete full processing of the ore on leachpads. Purchase Commitments At December 31, 2009, we had purchase obligations for sup- plies and consumables of approximately $1,207 million. 14 ß 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 20e) Goods and services taxes recoverable1 Restricted cash Deferred share-based compensation (note 28b) Prepaid expenses Other 2009 2008 $ 9 109 133 $ 8 42 147 $ 251 $ 197 $ 214 201 – 7 92 10 $ 817 153 113 – 45 39 $ 524 $ 1,167 1. 2009 includes $111 million and $50 million in VAT and fuel tax receivables in South America and Africa, respectively (2008: $108 million and nil, respectively). Notes to Consolidated Financial Statements | Barrick Financial Report 2009 121 15 ß Property, Plant and Equipment At January 1, 2007 Additions Acquisitions Capitalized interest6 Amortization Reclassification4 Transfers between categories5 At January 1, 2008 Additions Acquisitions Capitalized interest6 Amortization Impairments Transfers between categories5 At January 1, 2009 Additions Acquisitions Capitalized interest6 Amortization Impairments Currency translation adjustment Transfers between categories5 At December 31, 2009 Assets subject to amortization1,2 Exploration properties, Accumulated capital projects & VBPP amortization Construction in progress3 $ 12,956 758 145 16 – – 198 $ 14,073 584 1,609 57 – (14) 481 $ 16,790 445 276 71 – (56) 60 1,121 $ 18,707 $ (6,676) 20 – – (942) – – $ (7,598) (155) – – (912) – – $ (8,665) 21 – – (1,033) – – – $ 1,511 84 135 97 – (66) (198) $ 1,563 756 409 110 – – (209) $ 2,629 1,210 – 140 – (122) – (699) $ (9,677) $ 3,158 $ 397 – – – – – – $ 397 626 – – – – (272) $ 751 608 – – – – – (422) $ 937 Total $ 8,188 862 280 113 (942) (66) – $ 8,435 1,811 2,018 167 (912) (14) – $ 11,505 2,284 276 211 (1,033) (178) 60 – $ 13,125 1. Represents capitalized reserve acquisition and development costs and buildings, plant and equipment. 2. Includes assets under capital leases, leach pads and tailings dams. 3. Includes construction in process for tangible assets at capital projects and operating mines, as well as deposits on long lead capital items. Once an asset is available for use, it is transferred to assets subject to amortization and amortized over its estimated useful life. 4. Represents the reclassification of Donlin Creek to equity investments. 5. Includes construction in process that is transferred to buildings, plant and equipment as the asset is available for use and value beyond proven and probable reserves (“VBPP”) that is transferred to capitalized reserve acquisition and development costs, once mineralized material is converted into proven and probable reserves. In 2009, Buzwagi transitioned from a development project to an operating mine and its property, plant, and equipment balance was transferred from exploration properties, capital projects & VBPP to assets subject to amortization and construction in progress. 6. Capitalized interest for assets subject to amortization primarily reflects capitalized interest at Cortez Hills. 122 Notes to Consolidated Financial Statements a) Accounting Policy for Property, Plant and Equipment Capitalized Reserve Acquisition Costs We capitalize the cost of acquisition of land and mineral rights. On acquiring a mineral or petroleum and natural gas property, we estimate the fair value of proven and probable reserves, and we record these amounts as assets at the date of acquisition. When production begins, capitalized reserve acquisition costs are amortized using the “units-of-produc- tion” method, whereby the numerator is the number of ounces of gold/pounds of copper/barrels of oil equivalent (boe) produced and the denominator is the estimated recoverable ounces of gold/pounds of copper/boe con- tained in proven and probable reserves. Value Beyond Proven and Probable Reserves (“VBPP”) On acquisition of mineral property, we prepare an estimate of the fair value of the resources and exploration potential of that property and record this amount as an asset (VBPP) as at the date of acquisition. As part of our annual business cycle, we prepare estimates of proven and probable gold and copper mineral reserves for each mineral property. The change in reserves, net of production is, among other things, used to determine the amount to be converted from VBPP to proven and probable reserves subject to amortiza- tion. For 2009 the effect on amortization expense of trans- fers from VBPP to proven and probable reserves is an increase of $3 million (2008: $5 million increase; 2007: $5 million increase). At January 1, 2008 VBPP conversion to reserves Acquisitions1 At January 1, 2009 VBPP conversion to reserves At December 31, 2009 VBPP $ 313 (178) 381 516 (93) $ 423 1. Represents VBPP acquired on acquisition of the additional 40% interest in Cortez. Capitalized Development Costs Capitalized development costs include the costs of removing overburden and waste materials at our open pit mining oper- ations prior to the commencement of production; costs incurred to access reserves at our underground mining oper- ations; drilling and related costs incurred that meet the defi- nition of an asset (refer to note 7 for capitalization criteria for drilling and related costs), and qualifying development costs incurred at our petroleum and natural gas properties. The costs of removing overburden and waste materials to access the ore body at an open pit mine prior to the pro- duction phase are referred to as “pre-stripping costs”. Pre- stripping costs are capitalized during the development of an open pit mine. Where a mine operates several open pits that utilize common processing facilities, we capitalize the pre- stripping costs associated with each pit. The production phase of an open pit mine commences when saleable mate- rials , be yond a de minimus amount, are pro duce d. Stripping costs incurred during the production phase of a mine are variable production costs that are included as a component of inventory to be recognized as a component of cost of sales in the same period as the revenue from the sale of inventory. Capitalized pre-stripping costs are amor- tized using the units-of-production method, whereby the denominator is the estimated recoverable ounces of gold/pounds of copper in the associated open pit. At our 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, which could in some cases be greater than 25 years. These underground development costs are capitalized as incurred. Costs incurred and capitalized to enable access to specific ore blocks or areas of the mine, and which only provide an economic benefit over the period of mining that ore block or area, are amortized using the units-of-produc- tion method, whereby the denominator is estimated recov- erable ounces of gold/pounds of copper 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 amortized using the units-of-production method, whereby the denominator is the estimated recoverable ounces of gold/pounds of copper contained in total accessible proven and probable reserves. For our petroleum and natural gas properties, we fol- low the successful efforts method of accounting, whereby exploration expenditures which are either general in nature or related to an unsuccessful drilling program are written off. Only costs which relate directly to the discovery and development of specific commercial oil and gas reserves are capitalized as development costs and amortized using the units-of-production method, whereby the denominator is the estimated recoverable amount of boe. Notes to Consolidated Financial Statements | Barrick Financial Report 2009 123 Buildings, Plant and Equipment We record buildings, plant and equipment at cost, which includes all expenditures incurred to prepare an asset for its intended use. Cost includes the purchase price; brokers’ commissions; and installation costs including architectural, design and engineering fees, legal fees, survey costs, site preparation costs, freight charges, transportation insurance costs, duties, testing and preparation charges. In addition, if the cost of an asset acquired other than through a busi- ness combination is different from its tax basis on acquisi- tion, the cost is adjusted to reflect the related future income tax consequences. We capitalize costs that extend the productive capacity or useful economic life of an asset. Costs incurred that do not extend the productive capacity or useful economic life of an asset are considered repairs and maintenance and expensed as incurred. We amortize the capitalized cost of assets less any estimated residual value, using the straight line method over the estimated useful economic life of the asset based on their expected use in our business. The longest estimated useful economic life for buildings and equipment at ore processing facilities is 25 years and for mining equipment is 15 years. Depreciation of oil and gas plants and related facilities is calculated using the units-of- production method. 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 trans- fer 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. As at Decem ber 31, 2009, the carrying value of our capital leases is $62 million. Exploration Properties and Development Projects The amounts capitalized to exploration and development projects comprise the cost of mineral interests acquired either as individual asset purchases or as part of a business combination. The amount capitalized to development proj- ects, having established proven and probable reserves, also includes the capitalization cost associated with developing and constructing the mine. The value of such assets is pri- marily driven by the nature and amount of mineralized material contained in such properties. Exploration and development stage mineral interests represent interests in properties that contain proven and probable reserves or are believed to potentially contain mineralized material consisting of (i) other mineralized material such as mea - sured, indicated and inferred material within pits; (ii) other mine exploration potential such as inferred material not 124 Notes to Consolidated Financial Statements immediately adjacent to existing reserves and mineraliza- tion but located within the immediate mine area; (iii) other mine-related exploration potential that is not part of meas- ured, indicated or inferred material greenfield exploration potential; and (iv) any acquired right to explore or extract a potential mineral deposit. Amounts capitalized to capital projects include costs associated with the construction of tangible assets, such as processing plants, permanent hous- ing facilities and other tangible infrastructure associated with the project. Exploration Properties, Capital Projects and VBPP Carrying amount at December 31, 2009 Carrying amount at December 31, 2008 Exploration projects and other land positions PNG land positions Other VBPP at producing mines Capital projects1 Pascua-Lama Pueblo Viejo Sedibelo Buzwagi Punta Colorado Wind Farm $ 187 22 423 1,081 1,321 9 – 115 $ 171 26 516 777 439 123 495 82 $ 3,158 $ 2,629 1. The carrying amounts for the Cerro Casale, Donlin Creek, Reko Diq, and Kabanga projects are reflected in the carrying amounts of the equity invest- ments through which they are owned. Refer to note 12. Capitalized Interest 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 explo- ration properties and development projects prior to when production begins while exploration, development or con- struction activities are in progress. We also capitalize inter- est costs on the cost of certain equity method investments, wherein the only significant assets are exploration proper- ties or capital projects, and while exploration, development or construction activities are in progress. For 2009, we cap- italized $269 million of interest costs (2008: $222 million). 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 prospectively revise calculations of amortization expense for property, plant and equipment amortized using the units-of-production method, whereby the denominator is estimated recoverable ounces of gold/pounds of copper. The effect of changes in reserve estimates on amortization expense for 2009 was a decrease of $70 million (2008: $57 million decrease; 2007: $26 million increase). b) Amortization and Accretion Amortization Accretion (note 22) 2009 2008 2007 $ 1,016 57 $ 912 45 $ 942 48 $ 1,073 $ 957 $ 990 c) Impairment Evaluations Producing Mines, Development Projects and Petroleum & Natural Gas Properties 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, capital projects and petroleum and natural gas properties, the individual mine/project/property is included in a single group/reporting unit for impairment testing purposes. A potential impairment is identified if the sum of the reporting unit’s undiscounted cash flows is less than its carrying amount. When a potential long-lived asset impairment is identified, the amount of impairment is cal- culated by comparing its fair value to its carrying amount. Long-lived assets subject to potential impairment at mine sites/capital projects/petroleum and natural gas prop- erties include buildings, plant and equipment, and capital- ized reserve acquisition and development costs and VBPP. For impairment assessment purposes, the estimated fair value of buildings, plant and equipment is based on a com- bination of current depreciated replacement cost and cur- rent market value. The estimated fair value of capitalized reserve acquisition, development costs and VBPP is deter- mined using an income approach which measures the pres- ent value of the related cash flows expected to be derived from the asset. In fourth quarter 2009, we finalized our long-term life of mine (“LOM”) plans, and reviewed the LOM plans for our mines/projects/properties for indications of impair- ment. As a result we identified the long-lived assets of our Darlot, Kanowna and Plutonic gold mines in Australia as being potentially impaired with carrying amounts in excess of their undiscounted cash flows. Consequently, we com- pared their estimated fair values to their carrying amounts and recorded an impairment charge of $43 million at Plutonic and no impairments at Darlot or Kanowna (2008: Marigold $12 million and Osborne, included in discontin- ued operations $57 million). Exploration Properties After acquisition, various factors can affect the recoverabil- ity of the capitalized cost of land and mineral rights, particu- larly 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 prioriti- zation of our exploration projects and the size of our explo- ration budget. If we determine that a potential impairment condition may exist, we compare the sum of the undis- counted cash flows expected to be generated from the proj- ect to its carrying amount. If the sum of undiscounted cash flows is less than the carrying amount, an impairment charge is recognized if the carrying amount of the individual long- lived assets within the group exceeds their fair value. For projects that do not have reliable cash flow projections, a market approach is applied. In 2008, we completed a bankable feasibility study (“BFS”) for our Sedibelo platinum project in South Africa meeting the conditions for a 10% interest in the property. We also held the right to increase our interest to 65% in return for a decision to develop Sedibelo and payment of approxi- mately $106 million in fourth quarter 2009. In third quarter 2009, after conducting a thorough review of development alternatives to maximize the project’s potential, we decided not to proceed with this payment to increase our ownership interest in Sedibelo. As a consequence of this decision, we recorded an impairment charge of $158 million in third quarter 2009, reducing the carrying amount of our invest- ment in the project and related assets to their estimated fair values. In fourth quarter 2009, as a result of Barrick’s deci- sion to not develop the Sedibelo project, our partner’s right to purchase our 10% interest by reimbursing us for direct and proven costs of prospecting activities and compiling the BFS, was triggered. This 90 day right expires at the end of February 2010. There is no active market for our investment in Sedi - belo, and consequently, we used an income approach, being the net present value of expected future cash flows, to deter- mine its fair value. Based on this approach, the fair value assigned to our 10% investment in Sedibelo and the related PP&E was $6 million, resulting in an impairment charge of $122 million. We took an additional impairment charge of $36 million which was primarily attributable to water rights related to the project that were classified in Intangible assets. Notes to Consolidated Financial Statements | Barrick Financial Report 2009 125 d) Capital Commitments In addition to entering into various operational commit- ments in the normal course of business, we had commit- ments of approximately $1,018 million at December 31, 2009 for construction activities at our capital projects. e) Insurance We purchase insurance coverage for certain insurable losses, subject to varying deductibles, at our mineral prop- erties and corporate locations including losses such as property damage and business 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. Insurance Proceeds Cost of sales Other income Discontinued operations 2009 2008 2007 $ 18 26 – $ 44 $ 30 2 – $ 32 $ 16 – 21 $ 37 16 ß Intangible Assets For the years ended December 31 Water rights1 Technology2 Supply contracts3 Supply agreement4 Aggregate period amortization expense For the years ended December 31 Estimated aggregate amortization expense 2009 2008 Gross carrying amount Accumulated amortization Net carrying amount Gross carrying amount Accumulated amortization Net carrying amount $ 40 17 16 8 $ 81 $ – – 15 – $ 15 $ – 2010 $ 1 $ 40 17 1 8 $ 66 2011 $ 1 $ 48 17 16 8 $ 89 2012 $ 1 $ – – 15 – $ 15 $ 5 2013 $ 1 $ 48 17 1 8 $ 74 2014 $ 1 1. Water rights in South America ($40 million) are subject to annual impairment testing and will be amortized when used in the future. In 2009, we increased our investment in water rights for our Sedibelo project by $26 million. We subsequently recorded an impairment charge for water rights related to Sedibelo ($34 million) in third quarter 2009 (note 15c). 2. The amount will be amortized using the units-of-production method over the estimated proven and probable reserves of the Pueblo Viejo mine, with no assumed residual value. 3. Supply contracts are being amortized over the weighted average contract lives of 4–10 years, with no assumed residual value. 4. Primarily relates to a supply agreement with Yokohama Rubber Company to secure a supply of tires, which is being amortized evenly over the 120-month term of the agreement. Accounting Policy for Intangible Assets Intangible assets acquired as part of an acquisition of a business are recognized separately from goodwill if the asset is separable or arises from contractual or legal rights. Intangible assets are also recognized when acquired indi- vidually or with a group of other assets. Intangible assets are initially recorded at their esti- mated fair value. Intangible assets with a finite life are amortized over their useful economic lives on a straight line or units-of-production basis, as appropriate. Intangible assets having indefinite lives and intangible assets that are not yet ready for use are not amortized and are reviewed annually for impairment. We also review and test the carry- ing amounts of all intangible assets when events or changes in circumstances suggest that their carrying amount may not be recoverable. In third quarter 2009, after making a decision not to continue developing the Sedibleo project, we recorded an impairment charge of $34 million for water rights (2008: nil). No other indications of impairment were noted in 2009. 126 Notes to Consolidated Financial Statements 17 ß Goodwill Opening balance, January 1, 2007 Additions1 Impairments2 Closing balance, December 31, 2007 Additions3 Other4 Impairments5 Closing balance, December 31, 2008 Other6 Impairments7 Gold North America $ 2,423 – (42) $ 2,381 23 – (8) $ 2,396 (20) – Australia $ 1,781 34 – $ 1,815 – – (272) $ 1,543 – (63) Closing balance, December 31, 2009 $ 2,376 $ 1,480 South America $ 441 – – $ 441 – – – $ 441 – – $ 441 Africa $ 373 – – $ 373 – – (216) $ 157 – – $ 157 Copper South America $ 743 – – $ 743 – – – $ 743 – – $ 743 Other Barrick Energy $ $ $ $ – – – – 96 (8) (88) – – – – Total $ 5,761 34 (42) $ 5,753 119 (8) (584) $ 5,280 (20) (63) $ 5,197 1. Represents goodwill acquired as a result of the acquisition of an additional 20% interest in Porgera. 2. Impairment charges recorded in 2007 related to Golden Sunlight ($35 million) and Eskay Creek ($7 million). 3. Represents goodwill acquired as a result of the acquisitions of an additional 40% interest in Cortez ($20 million), an additional 40% interest in Storm ($3 million) and Barrick Energy ($96 million) (note 3). 4. Represents the impact of foreign exchange rate changes on the translation of Barrick Energy from C$ to US$. 5. Impairment charges recorded in 2008 related to Kanowna ($272 million), North Mara ($216 million), Barrick Energy ($88 million), and Marigold ($8 million). 6. Represents a reduction of goodwill as a result of the acquisition of an additional 50% interest in the Hemlo mine (note 3f). 7. Impairment charge recorded in 2009 related to Plutonic ($63 million). Accounting Policy for Goodwill and Goodwill Impairment Under the purchase method, the costs of business acquisi- tions are allocated to the assets acquired and liabilities assumed based on the estimated fair value at the date of acquisition. The excess of purchase cost over the net fair value of identified tangible and intangible assets and liabili- ties acquired represents goodwill that is allocated to report- ing units. We believe that goodwill arises principally because of the following factors: 1) the going concern value implicit in our ability to sustain and/or grow our business by increas- ing reserves and resources through new discoveries; 2) the ability to capture unique synergies that can be realized from managing a portfolio of both acquired and existing mines and mineral properties in our regional business units; and 3) the requirement to record a deferred tax liability for the difference between the assigned values and the tax bases of assets acquired and liabilities assumed in a business combi- nation at amounts that do not reflect fair value. We do not allocate goodwill to exploration properties or development projects as they do not have the inputs and processes applied to those inputs to have the ability to create outputs, and therefore do not meet the definition of a business or a reporting unit. Each individual mineral property that is an operating mine is a reporting unit for goodwill impairment testing purposes. On an annual basis, as at October 1, and at any other time if events or changes in circumstances indicate that the fair value of a reporting unit has been reduced below its carrying amount, we evaluate the carrying amount of goodwill for potential impairment. There is no active market for our reporting units. Consequently, when assessing a reporting unit for potential goodwill impairment, we use an income approach (being the net present value of expected future cash flows or net asset value (“NAV”) of the relevant reporting unit) to deter- mine the fair value we could receive for the reporting unit in an arm’s length transaction at the measurement date. Expected future cash flows are based on a probability- weighted approach applied to potential outcomes. Esti - mates of expected future cash flows reflect estimates of projected future revenues, cash costs of production and capital expenditures contained in our long-term life of mine (“LOM”) plans, which are updated for each reporting unit in the fourth quarter of each fiscal year. Notes to Consolidated Financial Statements | Barrick Financial Report 2009 127 Our LOM plans are based on detailed research, analysis and modeling to optimize the internal rate of return gener- ated from each reporting unit. As such, these plans consider the optimal level of investment, overall production levels and sequence of extraction taking into account all relevant characteristics of the ore body, including waste to ore ratios, ore grades, haul distances, chemical and metallurgical prop- erties impacting process recoveries and capacities of avail- able extraction, haulage and processing equipment. Therefore, the LOM plan is the appropriate basis for fore- casting production output in each future year and the related production costs and capital expenditures. Projected future revenues reflect the forecasted future production levels at each of our reporting units as detailed in our LOM plans. Included in these forecasts is the pro- duction of mineral resources that do not currently qualify for inclusion in proven and probable ore reserves where there is a high degree of confidence in its economic extrac- tion. This is consistent with the methodology we use to measure value beyond proven and probable reserves when allocating the purchase price of a business combination to acquired mining assets. Projected future revenues also reflect our estimated long-term metals prices, which are determined based on current prices, an analysis of the expected total production costs of the producers and forward pricing curves of the particular metal and forecasts of expected long-term met- als prices prepared by analysts. These estimates often differ from current price levels, but our methodology is consistent with how a market participant would assess future long- term metals prices. In 2009, we have used estimated 2010 and long-term gold prices of $1,050 and $950 per ounce, respectively (2008: $850), and estimated 2010 and long- term copper prices of $2.50 and $2.25 per pound, respec- tively (2008: $1.50 and $2.00). Our estimates of future cash costs of production and capital expenditures are based on the LOM plans for each reporting unit. Costs incurred in currencies other than the US dollar are translated to US dollars using expected long- term exchange rates based on the relevant forward pricing curve. Oil prices are a significant component, both direct and indirect, of our expected cash costs of production. We have used an estimated average oil price of $75 per barrel (2008: $75), which is based on the spot price, forward pricing curve, and long- term oil price forecasts prepared by analysts. The discount rate applied to present value the net future cash flows is based upon our real weighted average cost of capital with an appropriate adjustment for the remaining life of a mine and risks associated with the relevant cash flows based on the geographic location of the reporting unit. These risk adjustments were based on observed historical country risk premiums and the average credit default swap spreads for the period. In 2009, we used the following real discount rates for our gold mines: United States 3.03% – 4.61% (2008: 2.68% – 4.03%); Canada 3.15% (2008: 3.29%); Australia 3.53% – 4.45% (2008: 3.66% – 4.29%); Argentina 12.52% (2008: 13.74%); Tanzania 8.79% – 10.37% (2008: 8.77% – 9.84%); Papua New Guinea 8.46% (2008: 9.84%); and Peru 4.87% – 5.78% (2008: 6.33% – 6.96%). For our copper mines, we used the following real discount rates in 2009: Australia 7.09% (2008: 6.95%); and Chile 8.82% (2008: 8.83%). The increase in discount rates in North America, Australia and Africa compared to the prior year primarily reflects higher risk premiums over the risk free borrowing rate. The decrease in discount rates in South America and Papua New Guinea compared to the prior year primarily reflects lower country risk premiums due to declining credit spreads. For our gold reporting units, we apply a market multi- ple to the NAV computed using the present value of future cash flows approach in order to assess their estimated fair value. Gold companies typically trade at a market capital- ization that is based on a multiple of their underlying NAV. Consequently, a market participant would generally apply a NAV multiple when estimating the fair value of an operat- ing gold mine. For each reporting unit, the selection of an appropriate NAV multiple to apply considers the change in our total Enterprise value from December 31, 2008 and compares this to companies within each region. When selecting NAV multiples to arrive at fair value, we considered trading prices of comparable gold mining companies on October 1, 2009. The selected ranges of mul- tiples for all operating gold mines were also based on mine life. The range of selected multiples in respect of operating gold mines with lives of five years or less were based on the lower end of the observed multiples. Mines with lives greater than five years were generally based on median and/or average observation. Mines with lives of twenty years or greater were based on a 20% increase on the median and/or average observations. In 2009, we have 128 Notes to Consolidated Financial Statements 19 ß Other Current Liabilities At December 31 Asset retirement obligations (note 22) Derivative liabilities (note 20e) Post-retirement benefits (note 29) Income taxes payable (note 9) Restricted stock units (note 28b) Other 2009 2008 $ 85 180 16 94 33 67 $ 93 440 10 48 – 36 $ 475 $ 627 20 ß 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 14; investments – note 12; restricted share units – note 28b. a) Cash and Equivalents Cash and equivalents include cash, term deposits, treasury bills and money markets with original maturities of less than 90 days. At December 31 Cash deposits Term deposits Treasury bills Money market investments 2009 2008 $ 509 298 125 1,632 $ 482 160 185 610 $ 2,564 $ 1,437 used the following multiples in our assessment of the fair value of our gold reporting units: North America 1.2 – 2.2 (2008: 1.0 – 2.1); Australia 1.3 – 1.8 (2008: 1.0 – 1.6); South America 1.1 – 1.6 (2008: 1.0 – 1.4); and Africa 1.2 – 2.0 (2008: 1.0 – 1.6). In 2009, we recorded a goodwill impairment charge of $63 million at our Plutonic gold mine in Australia, prima- rily as a result of a significant reduction in their proven and probable reserves and its short remaining mine life (2008: Kanowna $272 million; North Mara $216 million; Osborne, included in discontinued operations $64 million; Henty, included in discontinued operations $30 million; Marigold $8 million; and Barrick Energy $88 million). In second quarter 2009, we acquired the remaining 50% interest in our Hemlo mine, which resulted in a $20 million reduction of goodwill (note 3f). 18 ß Other Assets At December 31 2009 2008 Non-current ore in stockpiles (note 13) Derivative assets (note 20e) Goods and services taxes recoverable1 Debt issue costs Unamortized share-based compensation (note 28b) Notes receivable Deposits receivable Other $ 796 290 124 42 67 94 11 107 $ 688 15 117 29 84 96 45 59 $ 1,531 $ 1,133 1. 2009 includes $94 million and $30 million in VAT and fuel tax receivables in South America and Africa, respectively (2008: $68 million and $49 million, respectively). Debt Issue Costs In 2009, $10 million and $6 million of debt issue costs arose on the debenture issuances of $1.25 billion and $750 mil- lion, respectively. In 2008, an addition of $11 million of debt issue costs arose on the issuance of $1,250 million in debentures. 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 20b). Notes to Consolidated Financial Statements | Barrick Financial Report 2009 129 b) Long-Term Debt1 2009 2008 2007 At Dec. 31 Pro- ceeds Currency transla- Repay- Amorti- tion and zation2 ments At other Dec. 31 Pro- ceeds Repay- ments Amorti- zation2 Assumed on acqui- sition of Barrick Energy At Dec. 31 Pro- ceeds Repay- ments Amorti- zation2 At Jan. 1 Fixed rate notes $ 3,214 $ 1,964 $ – $ – $ – $ 1,250 $ 1,250 $ – $ – $ – $ – $ – $ – $ – $ – 5.80%/4.875% notes3 Copper-linked notes US dollar notes Convertible senior debentures Project financing Capital leases Other debt obligations4 7.50% debentures5 First credit facility6 748 – 996 285 62 62 968 – – – – 190 – – 22 – – – – 190 – – 53 25 16 – – Less: current portion7 6,335 2,176 284 (54) – – (1) – (1) 4 – – 4 – – 6 – – – 325 – – 6 152 – 990 – – – – (5) 747 190 805 289 115 70 11 977 – – – – 6 – 4,443 2,723 1,585 (93) – – 325 – – 99 21 150 – 990 – (2) – – – – – – 57 – – 745 515 480 293 214 85 923 – – – – 393 – – 15 – – – 393 – – 91 24 101 500 – 57 3,255 408 1,109 – (102) – – – – – 3 – – – – – 3 – 745 908 87 296 305 94 1,024 498 – 3,957 (713) – – 4 – – 5 – – 7 – $ 6,281 $ 2,176 $ 284 $ 6 $ 6 $ 4,350 $ 2,723 $ 1,585 $ 7 $ 57 $ 3,153 $ 408 $ 1,109 $ 3 $ 3,244 Short-term debt Demand financing facility – – 113 – – 113 – 18 – – 131 – 19 – 150 $ – $ – $ 113 $ – $ – $ 113 $ – $ 18 $ – $ – $ 131 $ – $ 19 $ – $ 150 1. The agreements that 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 specified changes in tax legislation. 2. Amortization of debt premium/discount. 3. During third quarter 2004, we issued $400 million of debentures at a $3 million discount that mature on November 15, 2034 and $350 million of debentures at a $2 million discount that mature on November 15, 2014. 4. The obligations have an aggregate amount of $968 million, of which $163 million is subject to floating interest rates and $805 million is subject to fixed interest rates ranging from 4.75% to 8.05%. The obligations mature at various times between 2010 and 2035. 5. During second quarter 2007, we repaid the $500 million 7.5% debentures from existing cash balances and proceeds from the sale of investments. 6. 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. $50 million matures in 2012 and the remaining $1.45 billion matures in 2013. 7. The current portion of long-term debt consists of capital leases ($24 million) and project financing ($30 million). Fixed Rate Notes On October 16, 2009, we issued two tranches of debentures totaling $1.25 billion through our wholly-owned indirect subsidiar y Barrick (PD) Australia Finance Pty Ltd. (“BPDAF”) consisting of $850 million of 30 year notes with a coupon rate of 5.95%, and $400 million of 10 year notes with a coupon rate of 4.95% (collectively the “Notes”). BPDAF used the proceeds to provide loans to us for settling the Gold Hedges and some of the Floating Contracts. In exchange, we provide sufficient funds to BPDAF to meet the principal and interest obligations on the notes. We also provided an unconditional and irrevocable guarantee of these payments, which will rank equally with our other unsecured and unsubordinated obligations. On March 19, 2009, we issued an aggregate of $750 mil- lion of 10 year notes with a coupon rate of 6.95% for general corporate purposes. The notes are unsecured, unsub - ordinated obligations and will rank equally with our other unsecured, unsubordinated obligations. In September, 2008, we issued an aggregate of $1,250 million of notes through our wholly-owned indirect sub- sidiaries Barrick North America Finance LLC and Barrick Gold Financeco LLC (collectively the “LLCs”) consisting of $500 million of 5-year notes with a coupon rate of 6.125%, $500 million of 10-year notes with a coupon rate of 6.8%, and $250 million of 30-year notes with a coupon rate of 7.5% (collectively the “Notes”). The LLCs used the proceeds to provide loans to us. We provide sufficient funds to the 130 Notes to Consolidated Financial Statements LLCs to meet the principal and interest obligations on the notes. We also provided an unconditional and irrevocable guarantee of these payments, which will rank equally with our other unsecured and unsubordinated obligations. We used these proceeds to repay the $990 million we drew down in first quarter 2008, which was used to partially fund our acquisition of the 40% interest in Cortez. The amounts were drawn down using our existing $1.5 billion credit facility. Copper-Linked Notes/US Dollar Notes In October 2006, we issued $1 billion of Copper-Linked Notes. During the first three years, the full $1 billion obli- gation of these notes was to be repaid through the delivery of (the US dollar equivalent of) 324 million pounds of cop- per. At December 31, 2009, all of the required copper had been delivered. Coincident with the repayment of (the US dollar equivalent of ) 324 million pounds of copper, we reborrowed $1 billion. As the copper-linked equivalent was repaid, the fixed US dollar obligation increased ($190 mil- lion during the year). 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 derivative that must be separately accounted for) and for the underlying bond (see note 20c). $400 million of US dollar notes with a coupon of 5.75% mature in 2016 and $600 million of US dollar notes with a coupon of 6.35% mature in 2036. Convertible Senior Debentures The convertible senior debentures (the “Securities”) mature in 2023 and had an aggregate amount of $285 million out- standing as at the end of 2009. Holders of the Securities may, upon the occurrence of certain circumstances and within specified time periods, convert their Securities into common shares of Barrick. These circumstances 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 trad- ing days ending on the last trading day of the immediately preceding fiscal quarter; 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 converted and upon the occurrence of specified corporate transactions. On December 31, 2009, the conversion rate per each $1,000 principal amount of Securities was 40.6849 common shares and the effective con- version price was $24.58 per common share. The conversion rate is subject to adjustment in certain circumstances. As such, the effective conversion price may also change. The Securities were convertible from October 1, 2007 through December 31, 2009. During the period January 1, 2009 to December 31, 2009, $40 thousand principal amount of Securities was converted for 1,619 common shares of Barrick. If all the Securities had been converted and settle- ment occurred on December 31, 2009, we would have issued approximately 9.3 million common shares with an aggregate fair value of approximately $368.4 million based on our clos- ing share price on December 31, 2009. The Securities are also convertible from January 1, 2010 through March 31, 2010. 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 prin- cipal amount, plus accrued and unpaid interest. The maxi- mum 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 addi- tion, 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 “con- ventional convertible debenture” and the conversion feature has not been bifurcated from the host instrument. Project Financing One of our wholly-owned subsidiaries, Minera Argentina Gold S.A. in Argentina, had a limited recourse amortizing loan of $62 million outstanding at December 31, 2009, the majority of which has a variable interest rate. We have guar- anteed the loan until completion occurs, after which it will become non-recourse to the parent company. Pursuant to the terms of the loan, completion, as defined in the loan agreement, must be achieved prior to December 31, 2009. An extension was granted until March 31, 2010 to amend the loan documentation, with an expectation that the com- pletion deadline would be postponed until December 31, 2010. The loan is insured for political risks by branches of the Canadian and German governments. Demand Financing Facility We had a demand financing facility that permits borrowings of up to $150 million. The terms of the facility require us to maintain cash on deposit with the lender as a compensating 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. In second quarter 2009, we repaid the remaining $113 million drawn and terminated the facility. An equal amount required to be placed on deposit that was included in restricted cash has been released. Notes to Consolidated Financial Statements | Barrick Financial Report 2009 131 Interest Fixed rate notes 5.80%/4.875% notes Copper-linked notes/US dollar notes Convertible senior debentures Project financing Capital leases Other debt obligations 7.50% debentures Deposit on silver sale agreement (notes 6 and 23) First credit facility Demand financing facility Other interest Less: interest capitalized Cash interest paid Amortization of debt issue costs Amortization of premium/discount Losses on interest rate hedges Increase (decrease) in interest accruals Interest cost For the years ended December 31 2009 2008 2007 Interest Effective rate1 cost Interest Effective rate1 cost Interest Effective rate1 cost 6.4% 5.8% 6.2% 0.8% 8.2% 5.6% 5.1% – 9.5% – 8.7% $ 142 44 62 3 8 2 49 – 6 – 5 5 326 (269) $ 57 $ 311 6 (6) 3 12 $ 326 7.0% 5.7% 6.2% 1.5% 11.0% 5.0% 5.3% – – 3.3% 8.9% $ 26 42 62 4 19 4 50 – – 17 11 8 243 (222) $ 21 $ 213 7 (7) 1 29 $ 243 – 5.6% 6.2% 0.8% 9.1% 7.7% 6.1% 9.9% – – 8.9% $ – 41 63 2 26 6 60 16 – 1 13 9 237 (124) $ 113 $ 236 9 (3) 4 (9) $ 237 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 Fixed rate notes 5.80%/4.875% notes Project financing US dollar notes Other debt obligations Convertible senior debentures Minimum annual payments under capital leases 2010 2011 2012 $ – – 30 – – – $ 30 $ 24 $ – – 10 – – – $ 10 $ 14 $ – – 22 – 117 – $ 139 $ 10 2013 $ 500 – – – 65 – $ 565 $ 9 2014 and thereafter $ 2,750 750 – 1,000 728 230 $ 5,458 $ 5 132 Notes to Consolidated Financial Statements d) Other Use of Derivative Instruments We also enter into derivative instruments with the objec- tive of realizing trading gains to increase our reported net income. During the year, we wrote $500 million net USD pay- fixed swaptions. Changes in the fair value of the swaptions and the premiums earned were recognized in current period earnings through interest expense. For the year, we recognized a gain on premiums of $3 million in current period earnings. There were no swaptions outstanding at December 31, 2009. We enter into purchased and written contracts with the primary objective of increasing the realized price on our gold and copper sales. During 2009, we wrote gold put and call options with an average outstanding notional volume of 0.3 million and 0.3 million ounces, respectively, on a net basis. We also held other net purchased gold long positions during the year with an average outstanding notional volume of 0.1 million ounces. During the year, we wrote copper put and call options averaging 0.5 and 5 million pounds, respec- tively, and purchased other net long copper positions averag- ing 9 million pounds. As a result of these activities, we recorded realized gains in revenue of $56 million on gold contracts and realized losses of $2 million on copper contracts in 2009. There are no outstanding gold or copper positions at December 31, 2009. c) Use of Derivative Instruments (“Derivatives”) in Risk Management In the normal course of business, our assets, liabilities and forecasted transactions, as reported in US dollars, are im - pacted by various market risks including, but not limited to: Item ß Sales ß Cost of sales ß Consumption of diesel fuel, propane, natural gas and electricity ß Non-US dollar expenditures Impacted by ß Prices of gold, copper, oil and natural gas ß Prices of diesel fuel, propane, natural gas and electricity ß Currency exchange rates – US dollar versus A$, ARS, C$, CLP, JPY, PGK, TZS and ZAR ß By-product credits ß Prices of silver and copper ß Corporate and regional administration, exploration and business development costs ß Currency exchange rates – US dollar versus A$, ARS, C$, CLP, JPY, PGK, TZS and ZAR ß Capital expenditures ß Non-US dollar capital expenditures ß Currency exchange rates – US dollar versus A$, ARS, C$, CLP, EUR and PGK ß Consumption of steel ß Price of steel ß Interest earned on cash ß US dollar interest rates and equivalents ß Interest paid on fixed-rate debt ß US dollar interest rates The timeframe and manner in which we manage risks varies for each item based upon our assessment of the risk and available alternatives for mitigating risk. For these particu- lar risks, we believe that derivatives are an appropriate way of managing the risk. The primary objective of our risk management pro- gram is to mitigate variability associated with changing market values related to the hedged item. Many of the derivatives we use meet the hedge effectiveness criteria and are designated in a hedge accounting relationship. Some of the derivative instruments are effective in achieving our risk management objectives, but they do not meet the strict hedge effectiveness criteria, and they are classified as “eco- nomic hedges”. The change in fair value of these economic hedges is recorded in current period earnings, classified with the income statement line item that is consistent with the derivative instruments’ intended risk objective. Notes to Consolidated Financial Statements | Barrick Financial Report 2009 133 e) Summary of Derivatives at December 31, 2009 Notional amount by term to maturity Accounting classification by notional amount Fair value (USD) Within 1 year 2 to 3 years 4 to 5 years Cash flow hedge Fair value hedge Total Non- hedge US dollar interest rate contracts Net receive-fixed swap positions (millions) Currency contracts A$:US$ contracts (A$ millions) C$:US$ contracts (C$ millions) CLP:US$ contracts (CLP millions)1 EUR:US$ contracts (EUR millions) PGK:US$ contracts (PGK millions) Commodity contracts Copper collar sell contracts (millions of pounds) Copper net sold call contracts (millions of pounds) Diesel contracts (thousands of barrels)2 Propane contracts (millions of gallons) Natural gas contracts (thousands of gigajoules) Electricity contracts (thousands of megawatt hours) $ (75) $ – $ 100 $ 25 $ – $ – $ 25 $ (6) 1,426 381 96,240 23 76 282 79 2,355 12 805 31 2,286 27 60,000 19 – – – 1,366 – – 22 750 – – – – – – 440 – – – 4,462 408 156,240 42 76 282 79 4,161 12 805 53 4,459 408 36,240 42 76 203 – 4,161 12 805 – – – – – – – – – – – – 3 – 120,000 – – 79 79 – – – 53 $ 348 12 10 1 – $ (42) (13) (7) 2 – – 1. Non-hedge contracts economically hedge pre-production capital expenditures at our Pascua Lama project. 2. Diesel commodity contracts represent a combination of WTI and ULSD/WTI Crack spread swaps, WTB, MOPS and JET hedge contracts. These derivatives hedge phys- ical supply contracts based on the price of ULSD, WTB, MOPS and JET respectively, plus a spread. WTI represents West Texas Intermediate, WTB represents Waterborne, MOPS represents Mean of Platts Singapore, JET represents Jet Fuel, ULSD represents Ultra Low Sulfur Diesel US Gulf Coast. Fair Values of Derivative Instruments Asset Derivatives Liability Derivatives At Dec. 31, 2009 At Dec. 31, 2008 At Dec. 31, 2009 At Dec. 31, 2008 Balance sheet Fair classification value Balance sheet classification Fair value Balance sheet Fair classification value Balance sheet classification Fair value Derivatives designated as hedging instruments Currency contracts Commodity contracts Total derivatives classified as hedging instruments Derivatives not designated as hedging instruments US dollar interest rate contracts Currency contracts Commodity contracts Total derivatives not designated as hedging instruments Total derivatives Other assets Other assets $ 374 53 Other assets Other assets $ 22 Other liabilities 402 Other liabilities $ 9 Other liabilities 131 Other liabilities $ 526 205 $ 427 $ 424 $ 140 Other assets Other assets Other assets $ 1 15 61 Other assets Other assets Other assets $ – Other liabilities 4 Other liabilities 404 Other liabilities $ 7 Other liabilities 9 Other liabilities 43 Other liabilities $ 77 $ 504 $ 408 $ 832 $ 59 $ 199 $ 731 $ 8 1 135 $ 144 $ 875 134 Notes to Consolidated Financial Statements US Dollar Interest Rate Contracts Non-hedge Contracts We have a $75 million net US dollar pay-fixed interest rate swap position outstanding that was used to economically hedge the US dollar interest rate risk implicit in a prior gold lease rate swap position. Changes in the fair value of these interest rate swaps are recognized in current period earn- ings through interest expense. We also have a $100 million US dollar receive-fixed interest rate swap outstanding that is used to economically hedge US dollar interest rate risk on our outstanding cash balance. Currency Contracts Cash Flow Hedges During the year, currency contracts totaling A$1,407 mil- lion, C$462 million, EUR 73 million, PGK 160 million, and CLP 37,656 million have been designated against forecasted non-US dollar denominated expenditures, some of which are hedges that matured within the year. The outstanding contracts hedge the variability of the US dollar amount of those expenditures caused by changes in currency exchange rates over the next four years. Hedged items that relate to operating and/or sustain- ing capital expense are identified as the first stated quantity of dollars of forecasted expenditures in a future month. For C$193 million, A$110 million, and CLP 12,000 million of collar contracts, we have concluded that the hedges are 100% effective because the critical terms (including notional amount and maturity date) of the hedged items and the currency contracts are the same. For all remaining currency hedges, prospective and retrospective hedge effec- tiveness is assessed using the hypothetical derivative method. The prospective test is based on regression analysis of the month-on-month change in fair value of both the actual derivative and a hypothetical derivative caused by actual historic changes in forward exchange rates over the last three years. 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 deriva- tive, and ineffectiveness is measured using a dollar offset approach. The effective portion of changes in fair value of the currency contracts is recorded in OCI until the fore- casted expenditure impacts earnings. Hedged items that relate to pre-production expendi- tures at our development projects are identified as the stated quantity of dollars of the forecasted expenditures associated with a specific transaction in a pre-defined time period. For C$29 million, A$55 million and EUR 42 million hedge, effectiveness is assessed using the dual spot method, where changes in fair value attributable to changes in spot prices are calculated on a discounted basis for the actual derivative and an undiscounted basis for the hypothetical derivative. The effectiveness testing excludes time value of the hedging instrument. Prospective and retrospective hedge effectiveness uses a dollar offset method. Non-hedge Contracts We concluded that CLP 120,000 million of collar contracts do not meet the effectiveness criteria of the dual spot method. These contracts represent an economic hedge of pre-produc- tion capital expenditures at our Pascua Lama project. Although not qualifying as an accounting hedge, the contracts protect us against variability of the CLP to the US dollar on pre-production expenditures at our Pascua Lama project. Changes in the fair value of the non-hedge CLP contracts are recorded in current period project expense. In 2009, we recorded an unrealized loss of $4 million on the outstanding collar contracts. Non-hedge currency contracts are used to mitigate the variability of the US dollar amount of non-US dollar denominated exposures that do not meet the strict hedge effectiveness criteria. Changes in the fair value of non- hedge currency contracts are recorded in current period cost of sales, corporate administration, other income, other expense or income tax expense according to the intention of the hedging instrument. Commodity Contracts Diesel/Propane/Electricity/Natural Gas Cash Flow Hedges During the year, we entered into 734 thousand barrels of WTI/ULSD crack spread swaps, 762 thousand barrels of MOPS forwards, 199 thousand barrels of WTB forwards, 199 thousand barrels of JET forwards, and 12 million gallons of propane designated against forecasted fuel purchases for expected consumption at our mines. The designated con- tracts act as a hedge against variability in market prices on the cost of future fuel purchases over the next four years. We also entered into 867 thousand gigajoules of natural gas con- tracts that are used to mitigate the risk of price changes on natural gas sales at Barrick Energy. Hedged items are iden- tified as the first stated quantity of forecasted consumption purchased in a future month. Prospective and retrospective hedge effectiveness is assessed using the hypothetical deriva- tive method. The prospective test is based on regression analysis of the month-on-month change in fair value of both the actual derivative and a hypothetical derivative caused by actual historic changes in commodity prices over the last three years. The retrospective test involves comparing the effect of historic changes in commodity prices each period on the fair value of both the actual and hypothetical deriva- tive, and ineffectiveness is measured using a dollar offset approach. The effective portion of changes in fair value of the commodity contracts is recorded in OCI until the fore- casted transaction impacts earnings. Notes to Consolidated Financial Statements | Barrick Financial Report 2009 135 Concentrate sales at our Osborne mine contain both gold and copper, and as a result, are exposed to price changes of both commodities. For collars designated against copper concentrate production, the hedged items are identified as the first stated quantity of pounds of fore- casted sales in a future month. Prospective hedge effective- ness is assessed using a regression method. The regression method involves comparing month-by-month changes in fair value of both the actual hedging derivative and a hypo- thetical derivative (derived from the price of concentrate) caused by actual historical changes in commodity prices over the last three years. 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 derivative using a dollar offset approach. The effective portion of changes in fair value of the copper con- tracts is recorded in OCI until the forecasted copper sale impacts earnings. Non-hedge Contracts During 2009, we de-designated collar sell contracts for 79 million pounds and crystallized $31 million of losses in OCI, of which $30 million remains at year-end. These hedges were originally designated against future copper production at our Zaldívar mine. The exposure is still expected to occur and therefore amounts crystallized in OCI will be recorded in copper revenue when the originally designated sales occur. We continue to hold these collars as non-hedge contracts. At December 31, 2009, we had 79 mil- lion pounds of collar sell contracts outstanding. The con- tracts contain purchased put and sold call options with an average strike of $2.00/lb and $3.00/lb, respectively. During 2009, we purchased 79 million call options at an average strike of $2.99/lb and sold 158 million call options at an average strike of $3.74/lb for a net premium of $8 million. Premiums paid have been recorded as a reduc- tion of current period revenue. The options mature evenly throughout 2010. These contracts are not designated as cash flow hedges. Changes in the fair value of these copper options are recorded in current period revenue. On April 1, 2009, we entered into a new diesel fuel supply contract. Under the terms of the new contract, fuel purchased for consumption at our Nevada based mines is priced based on the ULSD index. We have continued to hedge our exposure to diesel using our existing WTI forward contracts. Retrospective hedge effectiveness testing shows a strong correlation between ULSD and WTI and thus we expect that these hedges will continue to be effective. The prospective and retrospective testing will continue to be assessed using the hypothetical derivative method. Non-hedge Contracts Non-hedge electricity contracts of 53 thousand megawatt hours are used to mitigate the risk of price changes on electricity consumption at Barrick Energy. Although not qualifying as an accounting hedge, the contracts protect the Com pany to a significant extent from the effects of changes in electricity prices. Changes in the fair value of non-hedge electricity contracts are recorded in current period cost of sales. Copper Cash Flow Hedges Copper collar contracts totaling 200 million pounds have been designated as hedges against copper cathode sales at our Zaldívar mine. The contracts contain purchased put and sold call options with weighted average strike prices of $2.25/lb and $3.53/lb, respectively. We also have copper collar contracts of 3 million pounds that have been desig- nated as hedges against copper concentrate sales at our Osborne mine. The contracts contain purchased put and sold call options with average strike prices of $2.49/lb and $3.79/lb, respectively. For collars designated against copper cathode produc- tion, the hedged items are identified as the first stated quan- tity of pounds of forecasted sales in a future month. Prospective hedge effectiveness is assessed on these hedges using a dollar offset method. The dollar offset assessment involves comparing the effect of theoretical shifts in for- ward copper prices on the fair value of both the actual hedging derivative and a hypothetical hedging 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 derivative using a dollar offset approach. The effective portion of changes in fair value of the copper contracts is recorded in OCI until the forecasted copper sale impacts earnings. 136 Notes to Consolidated Financial Statements 2009 2008 2007 Income statement classification $ (53) 1 – (4) $ 73 (30) (3) (8) $ 48 7 – (7) (7) – (63) 56 (2) 3 57 1 (3) – – (4) – 28 19 – – 19 (3) (6) – – (2) (1) 45 (8) – – (8) (4) 4 – (1) $ (2) $ (9) $ (1) Revenue Cost of sales Project expense Cost of sales/corporate administration/ other income/expense/ income tax expense Interest income/expense Other income/expense Revenue Revenue Interest income/expense Revenue Cost of sales/revenue/other income Other income/expense Non-hedge Gains (Losses) For the years ended December 31 Risk management activities Commodity contracts Copper Fuel Steel Currency contracts Interest rate contracts Share purchase warrants Other use of derivative instruments Commodity contracts Gold Copper Interest rate contracts Other gains (losses) Embedded derivatives1 Hedge ineffectiveness Amounts excluded from effectiveness test Share purchase warrants 1. Includes embedded derivatives on gold concentrate sales. Derivative Assets and Liabilities At January 1 Derivatives cash (inflow) outflow Operating activities Financing activities Change in fair value of: Non-hedge derivatives Cash flow hedges Effective portion Ineffective portion At December 31 Classification: Other current assets Other assets Other current liabilities Other long-term obligations 2009 2008 $ (43) $ 389 (328) 10 (39) 708 (3) (147) 23 (7) (295) (6) $ 305 $ (43) $ 214 290 (180) (19) $ 817 15 (440) (435) $ 305 $ (43) Notes to Consolidated Financial Statements | Barrick Financial Report 2009 137 Cash Flow Hedge Gains (Losses) in OCI At January 1, 2007 Effective portion of change in fair value of hedging instruments Transfers to earnings: On recording hedged items in earnings At December 31, 2007 Effective portion of change in fair value of hedging instruments Transfers to earnings: Commodity price hedges Currency hedges Interest rate hedges Gold/ silver Copper Fuel Operating costs Administration costs Capital expenditures Cash balances Long-term debt Total $ 17 $ 57 $ 21 $ 155 $ 14 $ 39 $ (3) $ (17) $ 283 – (2) (75) 87 249 32 (29) (166) 32 (19) (35) (5)1 – 3 (1) 1 257 (185) $ 15 $ 14 $ 79 $ 238 $ 27 $ (1) $ – $ (17) $ 355 On recording hedged items in earnings (2) (112) (33) (106) – 582 (215) (610) (46) (11) 5 (4) – – (17) (301) 1 (267) At December 31, 2008 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 original forecasted transaction $ 13 $ 484 $ (169) $ (478) $ (30) $ – $ – $ (33) $ (213) – (273) (10) (283) – – 68 95 2 820 (22) (5) 42 7 – 48 (3) – – – – – 3 – 705 (213) (3) At December 31, 2009 $ 3 $ (72) $ (4) $ 315 $ 19 $ 45 $ – $ (30) $ 276 Hedge gains/losses classified within Portion of hedge gain (loss) expected to affect 2010 earnings2 Gold sales Copper sales Cost of sales Cost of sales Administration Amortization Interest income Interest expense $ 2 $ (72) $ (27) $ 98 $ 14 $ – $ – $ (3) $ 12 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, 2009. Cash Flow Hedge Gains (Losses) at December 31 Derivatives in cash flow hedging relationships Amount of gain (loss) recognized in OCI 2009 2008 Location of gain (loss) transferred from OCI into income (effective portion) Amount of gain (loss) transferred from OCI into income (effective portion) 2009 2008 Location of gain (loss) recognized in income (ineffective portion and amount excluded from effectiveness testing) Amount of gain (loss) recognized in income (ineffective portion and amount excluded from effectiveness testing) 2009 2008 Interest rate contracts $ – $ (17) Interest income/expense $ (3) $ (1) Interest income/expense $ – $ – Foreign exchange contracts 910 (651) Cost of sales/corporate administration/amortization Commodity contracts (205) 367 Revenue/cost of sales Total $ 705 $ (301) Cost of sales/ corporate administration Revenue/cost of sales 21 198 121 147 $ 216 $ 267 2 (2) – (6) $ – $ (6) 138 Notes to Consolidated Financial Statements g) Risks Relating to the Use of Derivatives By using derivatives, in addition to credit risk, we are affected by market 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, 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. h) Settlement Obligation to Close Out Gold Sales Contracts In September 2009, we announced a plan to eliminate our “Gold Hedges” and a significant portion of our “Floating Contracts”. Our “Gold Hedges” were fixed price contracts which did not participate in gold price movements. At the time we announced the plan to eliminate them, our Gold Hedges totaled 3.0 million ounces with a mark-to-market (“MTM”) position (calculated at a spot price of $993 per ounce) of negative $1.9 billion. Our “Floating Contracts” are essentially Gold Hedges that have been offset against future movements in the gold price but not yet settled. At the time we announced the plan to eliminate a significant portion of our Floating Contracts, they had a MTM position of negative $3.7 billion. This lia- bility does not change with gold prices and is therefore eco- nomically similar to a fixed US dollar obligation. No activity in the gold market is required to settle the Floating Contracts and we fully participate in any subsequent increase in the price of gold. As at December 31, 2009, the obligation relat- ing to the Floating Contracts has been reduced to $0.6 bil- lion. The obligation related to the Floating Contracts are non-amortizing and primarily have 10-year terms with a cur- rent weighted average financing charge of approximately 2%–3%. Any further reductions in the obligation related to the Floating Contracts will be subject to the same capital allocation process as our other liabilities. f) Credit Risk The fair value of derivative contracts is adjusted for credit risk based on observed credit default swap spreads. In cases where we have a legally enforceable master netting agree- ment with a counterparty, credit risk exposure represents the net amount of the positive and negative fair values by counterparty. For derivatives in a net asset position, credit risk is measured using credit default swap spreads for each particu- lar counterparty, as appropriate. For derivatives in a net lia- bility position, credit risk is measured using Barrick’s credit default swap spreads. We mitigate credit risk on derivatives in a net asset position by: ß entering into derivatives with high credit-quality coun- terparties (investment grade); ß limiting the amount of exposure to each counterparty; and ß 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, 2009 S&P Credit rating AA – or higher A – or higher BBB or lower Not rated Total Cash and equivalents1 Derivatives2 Accounts receivable $ 1,940 177 – $ 585 195 18 $ 20 – 48 $ 19 – 185 $ 2,564 372 251 $ 2,117 $ 798 $ 68 $ 204 $ 3,187 Number of counterparties 15 22 16 Largest counterparty (%) 19% 49% 25% Concentrations of Credit Risk At December 31, 2009 Cash and equivalents1 Derivatives2 Accounts receivable United States $ 2,354 61 20 Other investment grade countries3 Other inter- national Total $ 162 99 87 $ 48 212 144 $ 2,564 372 251 $ 2,435 $ 348 $ 404 $ 3,187 1. Based on where the parent entity of the counterparties we transact with is domiciled. 2. The amounts presented reflect the net credit exposure after considering the effect of master netting agreements. 3. Investment grade countries include Canada, Chile, Australia, and Peru. Investment grade countries are defined as being rated BBB– or higher by S&P. Notes to Consolidated Financial Statements | Barrick Financial Report 2009 139 21 ß Fair Value Measurements Fair value is 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 measurement date. The fair value hierarchy establishes three levels to classify the inputs to valuation techniques used to measure fair value. Level 1 inputs are quoted prices (unadjusted) in active mar- kets for identical assets or liabilities. Level 2 inputs are quoted prices in markets that are not active, quoted prices for similar assets or liabilities in active markets, inputs other than quoted prices that are observable for the asset or lia- bility (for example, interest rate and yield curves observable at commonly quoted intervals, forward pricing curves used to value currency and commodity contracts and volatility measurements used to value option contracts), or inputs that are derived principally from or corroborated by observable market data or other means. Level 3 inputs are unobservable (supported by little or no market activity). The fair value hierarchy gives the highest priority to Level 1 inputs and the lowest priority to Level 3 inputs. a) Assets and Liabilities Measured at Fair Value on a Recurring Basis Fair Value Measurements at December 31, 2009 Quoted prices in active markets for identical assets (Level 1) Significant other observable inputs (Level 2) Cash equivalents Available-for-sale securities Receivables from provisional copper and gold sales Derivative instruments Settlement obligation to close out gold sales contracts $ 2,055 $ 61 – – – – – 118 305 (647) Significant unobservable inputs (Level 3) Aggregate fair value $ – $ 2,055 – – – – 61 118 305 (647) $ 2,116 $ (224) $ – $ 1,892 b) Fair Values of Financial Instruments At December 31 2009 Carrying amount Estimated fair value Carrying amount 2008 Estimated fair value Financial assets Cash and equivalents1 Accounts receivable1 Available-for-sale securities2 Derivative assets $ 2,564 251 61 504 $ 2,564 251 61 504 $ 1,437 197 31 832 $ 1,437 197 31 832 Financial liabilities Accounts payable1 Long-term debt3 Derivative liabilities Settlement obligation to close out gold sales contracts Restricted share units4 Deferred share units4 $ 3,380 $ 3,380 $ 2,497 $ 2,497 $ 1,221 6,335 199 $ 1,221 6,723 199 $ 953 4,556 875 $ 953 3,620 875 647 124 6 647 124 6 – 120 5 – 120 5 $ 8,532 $ 8,920 $ 6,509 $ 5,573 1. Fair value approximates the carrying amounts due to the short-term nature and historically negligible credit losses. 2. Recorded at fair value. Quoted market prices are used to determine fair value. 3. 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 when a hedge relationship exists. The fair value of long-term debt is primarily determined using quoted market prices. Balance includes current portion of long-term debt. 4. Recorded at fair value based on our period-end closing market share price. c) Assets Measured at Fair Value on a Non-recurring Basis Quoted prices in active markets for identical assets (Level 1) Significant other observable inputs (Level 2) Significant unobservable inputs (Level 3) Aggregate fair value Property, plant and equipment1 Intangible assets2 Goodwill3 $ – – $ – $ – – $ – $ 125 – $ 25 $ 125 – $ 25 1. Property plant and equipment with a carrying amount of $290 million were written down to their fair value of $125 million, resulting in an impairment of $165 million, which was included in earnings this period. Refer to note 15. 2. Intangible assets with a carrying amount of $34 million were written down to their fair value of nil, resulting in an impairment of $34 million, which was included in earnings this period. Refer to note 16. 3. Goodwill with a carrying amount of $88 million was written down to its fair value of $25 million, resulting in an impairment of $63 million, which was included in earnings this period. Refer to note 17. 140 Notes to Consolidated Financial Statements d) Valuation Techniques Cash Equivalents The fair value of our cash equivalents are classified within Level 1 of the fair value hierarchy because they are valued using quoted market prices in active markets. Our cash equivalents are comprised of U.S. Treasury bills and money market securities that are invested primarily in U.S. Treasury bills. Available-for-Sale Securities The fair value of available-for-sale securities is determined based on a market approach reflecting the closing price of each particular security at the balance sheet date. The clos- ing price is a quoted market price obtained from the exchange that is the principal active market for the partic- ular security, and therefore available-for-sale securities are classified within Level 1 of the fair value hierarchy. Derivative Instruments The fair value of derivative instruments is determined using either present value techniques or option pricing models that utilize a variety of inputs that are a combination of quoted prices and market-corroborated inputs. The fair val- ues of all our derivative contracts include an adjustment for credit risk. For counterparties in a net asset position credit risk is based upon the observed credit default swap spread for each particular counterparty, as appropriate. For coun- terparties in a net liability position credit risk is based upon Barrick’s observed credit default swap spread. The fair value of US dollar interest rate and currency swap contracts is determined by discounting contracted cash flows using a discount rate derived from observed LIBOR and swap rate curves and CDS rates. In the case of currency contracts, we convert non-US dollar cash flows into US dollars using an exchange rate derived from currency swap curves and CDS rates. The fair value of commodity forward contracts is determined by discounting contractual cash flows using a discount rate derived from observed LIBOR and swap rate curves and CDS rates. Contractual cash flows are calculated using a forward pricing curve derived from observed for- ward prices for each commodity. Derivative instruments are classified within Level 2 of the fair value hierarchy. Receivables from Provisional Copper and Gold Sales The fair value of receivables rising from copper and gold sales contracts that contain provisional pricing mechanisms is determined using the appropriate quoted forward price from the exchange that is the principal active market for the particular metal. As such, these receivables are classified within Level 2 of the fair value hierarchy. Property Plant and Equipment, Intangible Assets and Goodwill The fair value of property plant and equipment and intan- gible assets is determined primarily using an income approach based on unobservable cash flows and, as a result, are classified within Level 3 of the fair value hierarchy. Refer to notes 15, 16, and 17. Notes to Consolidated Financial Statements | Barrick Financial Report 2009 141 22 ß Asset Retirement Obligations Asset Retirement Obligations (AROs) At January 1 AROs acquired during the year AROs arising in the year Impact of revisions to expected cash flows Recorded in earnings Settlements Cash payments Settlement gains Accretion At December 31 Current portion (note 19) 2009 2008 $ 1,036 30 119 $ 932 37 56 10 (39) (6) 57 9 (38) (5) 45 1,207 (85) 1,036 (93) $ 1,122 $ 943 Each period we assess cost estimates and other assumptions used in the valuation of AROs at each of our mineral prop- erties to reflect events, changes in circumstances and new information 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, whereas at operating mines the charge is recorded as an adjustment to the carrying amount of the corresponding asset. In 2009, charges of $10 million were recorded for changes in cost estimates for AROs at closed mines and at Barrick Energy (2008: $9 million; 2007: $6 million). At December 31 Operating mines ARO increase1 ARO decrease2 Closed mines ARO increase3 Barrick Energy ARO increase 2009 2008 $119 (1) $ 56 (3) 8 2 9 – 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 that 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 reduced 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 discount factor implicit in the initial fair-value measure- ment to the beginning-of-period carrying amount of the AROs. For producing mines, development projects and closed mines, accretion is recorded in amortization and accretion. 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/losses are recorded in other (income) expense. Other environmental remediation costs that are not AROs are expensed as incurred (see note 8a). 1. These adjustments were recorded with a corresponding adjustment to prop- 23 ß Other Non-current Liabilities At December 31 Deposit on silver sale agreement (note 6) Pension benefits (note 29c) Other post-retirement benefits (note 29e) Derivative liabilities (note 20e) Restricted share units (note 28b) Other 2009 2008 $ 196 96 26 19 91 70 $ – 113 29 435 120 81 $ 498 $ 778 erty, plant and equipment. 2. Represents a decrease in AROs at a mine where the corresponding ARO asset had been fully amortized and was therefore recorded as a recovery in other income. 3. For closed mines, any change in the fair value of AROs results in a correspon- ding charge or credit to other expense or other income, respectively. 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 142 Notes to Consolidated Financial Statements 24 ß 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. Sources of Deferred Income Tax Assets and Liabilities At December 31 Deferred tax assets Tax loss carry forwards Alternative minimum tax (“AMT”) credits Asset retirement obligations Property, plant and equipment Post-retirement benefit obligations Derivative instruments Accrued interest payable Other Valuation allowances Deferred tax liabilities Property, plant and equipment Derivative instruments Inventory Other Classification: Non-current assets Non-current liabilities 2009 2008 $ 659 287 413 268 16 – 108 – $ 657 251 366 232 32 90 70 3 1,751 (481) 1,701 (318) 1,270 1,383 (1,328) (81) (70) (26) (1,102) – (162) (4) $ (235) $ 115 949 (1,184) 869 (754) $ (235) $ 115 Expiry Dates of Tax Losses and AMT Credits 2010 2011 2012 2013 2014+ No expiry date Total Tax losses1 Canada Barbados Chile Tanzania U.S. Other AMT credits2 $ 9 – – – – – $ 9 – $ – – – – – 1 $ 1 – $ 2 – – – – 3 $ 5 $ – $ 1,530 6,933 – – 219 12 – – – – – $ – $ 1,541 6,933 – 369 369 101 101 219 – 114 98 $ – $ 8,694 $ 568 $ 9,277 – – – $ 287 $ 287 1. Represents the gross amount of tax loss carry forwards translated at closing exchange rates at December 31, 2009. 2. Represents the amounts deductible against future taxes payable in years when taxes payable exceed “minimum tax” as defined by United States tax legislation. Net Deferred Tax Assets Gross deferred tax assets Canada Chile Argentina Australia Tanzania United States Barbados Other Valuation allowances Canada Chile Argentina Australia Tanzania United States Barbados Other Net 2009 2008 $ 366 44 119 109 122 542 69 59 $ 384 41 61 171 199 289 10 32 1,430 1,187 (45) (22) (119) (11) (30) (136) (69) (49) (50) (23) (61) (9) (30) (123) (10) (12) $ (481) $ (318) $ 949 $ 869 Notes to Consolidated Financial Statements | Barrick Financial Report 2009 143 Valuation Allowances We consider the need to record a valuation allowance against deferred tax assets, taking into account the effects of local tax law. A valuation allowance is not recorded when we conclude that sufficient positive evidence exists to demon- strate that it is more likely than not that a deferred tax asset will be realized. The main factors considered are: ß Historic and expected future levels of taxable income; ß Tax plans that affect whether tax assets can be realized; and ß The nature, amount and expected timing of reversal of taxable temporary differences. Levels of future taxable income are mainly affected by: mar- ket 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 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 $321 million has been recorded in Canada. This deferred tax asset primarily arose due to mark-to-market losses realized for acquired Placer Dome derivative instruments. Projections of various sources of income support the conclusion that the realiz- ability of this deferred tax asset is more likely than not, and consequently no valuation allowance has been set up for this deferred tax asset. A deferred tax asset of $92 million has been recorded in Tanzania following the release of tax valuation allowances totaling $189 million in 2007. The release of tax valuation allowances resulted from the impact of rising market gold prices on expectations of future taxable income and the abil- ity to realize these tax assets. A partial valuation allowance of $136 million has been set up against deferred tax assets in the United States at De ce mb er 31, 200 9. The major it y of this valu ation allowance relates to AMT credits in periods when partly due to low market gold prices, Barrick was an AMT tax- payer in the United States. If market gold prices continue to rise, it is reasonably possible that some or all of these valua- tion allowances could be released in future periods. Source of Changes in Deferred Tax Balances For the years ended December 31 2009 2008 2007 Temporary differences Property, plant and equipment Asset retirement obligations Tax loss carry forwards Derivatives Other Net currency translation gains/ (losses) on deferred tax balances Canadian tax rate changes Canadian functional currency election Release of end of year Tanzanian valuation allowances Release of other valuation allowances $ (279) 47 2 (171) 8 $ (3) 24 (72) 212 (2) $ 24 39 (69) (113) 9 $ (393) $ 159 $ (110) 40 (59) 70 – – (98) – – – 175 76 (64) – 156 88 $ (342) $ 236 $ 146 Intraperiod allocation to: Income (loss) from continuing operations before income taxes $ (107) $ 41 $ 202 Income (loss) from discontinued operations Porgera mine acquisition Acquisition of Hemlo Share issue costs Cortez acquisition (note 3h) Barrick Energy Inc. acquisition (note 3g) Kainantu acquisition Other acquisition OCI (note 26) Other (41) – (56) 40 – – – – (178) (8) 4 – – – 11 (22) (19) 2 219 (2) (28) 20 – – – – – – (48) 5 $ (350) $ 234 $ 151 Unrecognized Tax Benefits Balance at January 1 Additions based on tax positions related to the current year Additions for tax positions of prior years Reductions for tax positions of prior years Settlements 2009 2008 $ 46 $ 15 – 38 – (17) 2 40 – (11) Balance at December 311,2 $ 67 $ 46 1. If recognized, the total amount of $67 million would be recognized as a benefit to income taxes on the income statement, and therefore would impact the reported effective tax rate. 2. Includes interest and penalties of $1 million. 144 Notes to Consolidated Financial Statements We anticipate the amount of unrecognized tax benefits to decrease within 12 months of the reporting date by approximately $5 million to $7 million, related primarily to the expected settlement of income tax and mining tax assessments. We further anticipate that it is reasonably possible for the amount of unrecognized tax benefits to decrease within 12 months of the reporting date by approximately $37 mil- lion through a potential settlement with tax authorities that may result in a reduction of available tax pools. Tax Years Still Under Examination Canada United States Peru Chile1 Argentina Australia Papua New Guinea Tanzania 2005–2009 2006, 2007, 2009 2005–2009 2006–2009 2004–2009 all years open 2004–2009 all years open 1. In addition, operating loss carry forwards from earlier periods are still open for examination. 25 ß Capital Stock a) Common Shares Our authorized capital stock includes an unlimited number of common shares (issued 984,327,816 common shares); 9,764,929 First preferred shares Series A (issued nil); 9,047,619 Series B (issued nil); and 14,726,854 Second pre- ferred shares Series A (issued nil). Common Share Offering On September 23, 2009, we issued 109 million common shares of Barrick at a price of $36.95 per share, for net pro- ceeds of $3,885 million. In 2009, we declared and paid dividends in US dollars totaling $0.40 per share ($369 million) (2008: $0.40 per share, $349 million; 2007: $0.30 per share, $261 million). 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 for an amount of $32 million, excluding interest and penalties. The assessment mainly related to the validity of a revaluation of the Pierina mining concession, which affected its tax basis for the years 1999 and 2000. 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. In January 2005, we received written confirmation that there would be no appeal of the September 30, 2004 Tax Court of Peru decision. In December 2004, we recorded a $141 million reduction in current and deferred income tax liabilities and a $21 million reduction in other accrued costs. The confirmation concluded the administrative and judicial appeals process with resolution in Barrick’s favor. Notwithstanding the favorable Tax Court decision we received in 2004 on the 1999 to 2000 revaluation matter, in an audit concluded in 2005, SUNAT has reassessed us on the same issue for tax years 2001 to 2003. On October 19, 2007, SUNAT confirmed their reassessment. The tax assess- ment is for $51 million of tax, plus interest and penalties of $182 million updated as of December 31, 2009. We filed an appeal to the Tax Court of Peru within the statutory period. We believe that the audit reassessment has no merit, that we will prevail in court again, and accordingly no liability has been recorded for this reassessment. b) Exchangeable Shares In connection with a 1998 acquisition, Barrick Gold Inc. (“BGI”) issued 11.1 million BGI exchangeable shares, which were each exchangeable for 0.53 of a Barrick common share at any time at the option of the holder, and had 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. We had the right to require the exchange of each outstanding BGI exchangeable share for 0.53 of a Barrick common share. In first quarter 2009, the remaining 0.5 million BGI exchangeable shares were redeemed for 0.3 million Barrick common shares. Notes to Consolidated Financial Statements | Barrick Financial Report 2009 145 26 ß Other Comprehensive Income (Loss) (“OCI”) Accumulated OCI at January 1 Cash flow hedge gains (losses), net of tax of $89, $105, $60 Investments, net of tax of $nil, $4, $7 Currency translation adjustments, net of tax of $nil, $nil, $nil Pension plans and other post-retirement benefits, net of tax of $19, $2, $4 Other comprehensive income (loss) for the period: Changes in fair value of cash flow hedges Changes in fair value of investments Currency translation adjustments1 Pension plan and other post-retirement benefit adjustments (note 29c): Net actuarial gain (loss) Transition obligation (asset) Less: reclassification adjustments for gains/losses recorded in earnings: Transfers of cash flow hedge gains to earnings on recording hedged items in earnings 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 (losses), net of tax of $81, $89, $105 Investments, net of tax of $3, $nil, $4 Currency translation adjustments, net of tax of $nil, $nil, $nil Pension plans and other post-retirement benefits, net of tax of $14, $19, $2 1. Represents currency translation adjustments for Barrick Energy. 27 ß Non-controlling Interests 2009 2008 2007 $ (124) (2) (197) (33) $ 250 37 (143) 7 $ 223 46 (143) (7) $ (356) $ 151 $ 119 705 34 56 15 – (301) (52) (54) (62) 1 257 58 – 19 1 (216) (267) (185) 1 (6) 589 (178) 26 (17) (726) 219 1 (71) 80 (48) $ 411 $ (507) $ 32 195 24 (141) (23) (124) (2) (197) (33) 250 37 (143) 7 $ 55 $ (356) $ 151 At January 1, 2007 Share of income (loss) Cash contributed Increase in non-controlling interest At December 31, 2007 Share of income (loss) Cash contributed (withdrawn) Decrease in non-controlling interest At December 31, 2008 Share of income (loss) Cash contributed (withdrawn) Decrease in non-controlling interest At December 31, 2009 Pueblo Viejo project Tulawaka mine Other1 $ 55 (30) 35 – $ 60 (26) 120 – $ 154 1 307 – $ 462 $ 1 16 – – $ 17 38 (30) – $ 25 5 (8) – $ 22 $ – – – 5 $ 5 – – (2) $ 3 – – (3) $ – Total $ 56 (14) 35 5 $ 82 12 90 (2) $ 182 6 299 (3) $ 484 1. Represents non-controlling interest in Arizona Star and Minera Sierra Mariposa. In 2007, Barrick acquired 94% of the common shares of Arizona Star and in 2008, the remaining common shares were acquired. In 2008, Barrick acquired 76.3% of the common shares of Minera Sierra Mariposa and in 2009, these common shares were sold. 146 Notes to Consolidated Financial Statements 28 ß 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. The 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. 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 seven years. At December 31, 2009, 6.9 million (2008: 7.4 million; 2007: 10 million) common shares, in addition to those currently outstanding, were available for granting Employee Stock Option Activity (Number of Shares in Millions) C$ options At January 1 Exercised Forfeited Cancelled/expired At December 31 US$ options At January 1 Granted Exercised Forfeited Cancelled/expired At December 31 options. Stock options when exercised result in an increase to the number of common shares issued by Barrick. Compensation expense for stock options was $27 mil- lion in 2009 (2008: $25 million; 2007: $25 million), and is presented as a component of corporate administration and other expense, consistent with the classification of other elements of compensation expense for those employees who had stock options. The recognition of compensation expense for stock options reduced earnings per share for 2009 by $0.03 per share (2008: $0.03 per share; 2007: $0.03 per share). Total intrinsic value relating to options exercised in 2009 was $38 million (2008: $61 million; 2007: $58 million). 2009 2008 2007 Average price Shares Average price Shares Average price Shares 4.8 (1.4) – (0.1) 3.3 8.9 1.6 (1.3) (0.1) – 9.1 $ 27 26 – 23 $ 27 $ 28 41 24 35 – $ 33 7.1 (2.1) – (0.2) 4.8 7.0 2.8 (0.8) (0.1) – 8.9 $ 27 28 – 28 $ 27 $ 28 34 24 31 – $ 28 11.9 (3.9) (0.1) (0.8) $ 28 28 29 35 7.1 $ 27 7.7 1.4 (1.7) (0.3) (0.1) $ 25 40 23 25 22 7.0 $ 28 Stock Options Outstanding (Number of Shares in Millions) Range of exercise prices Shares Outstanding Exercisable Average price Average life (years) Intrinsic value1 ($ millions) Shares Average price Intrinsic value1 ($ millions) C$ options $ 22 – $ 27 $ 28 – $ 31 US$ options $ 9 – $ 19 $ 20 – $ 27 $ 28 – $ 32 $ 33 – $ 42 1.8 1.5 3.3 0.1 3.9 1.1 4.0 9.1 $ 24 30 $ 27 $ 13 25 30 41 $ 33 2 4 3 3 4 6 5 4 $ 31 18 $ 49 $ 3 55 10 (8) $ 60 1.8 1.5 3.3 0.1 2.6 0.8 0.9 4.4 $ 24 30 $ 27 $ 13 25 30 42 $ 29 $ 31 18 $ 49 $ 3 39 7 – $ 49 1. Based on the closing market share price on December 31, 2009 of C$41.46 and US$39.38. Notes to Consolidated Financial Statements | Barrick Financial Report 2009 147 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 Options granted (in millions) Weighted average fair value per option 2009 2008 2007 Lattice1,2 5.0–5.1 35%–60% 51% 1%–1.1% 0.16%–3.44% Lattice1,2 4.5–5.2 30%–70% 43% 0.7%–1.5% 0.25%–5.1% Lattice1,2 4.5–5 30%–38% 36.6% 0.7%–0.9% 3.2%–5.1% 1.6 $ 12.92 2.8 $ 12.07 1.4 $ 12.91 1. Different assumptions were used for the multiple stock option grants during the year. 2. The volatility and risk-free interest rate assumption varied over the expected term of these stock option grants. The expected volatility assumptions have been developed taking into consideration both historical and implied volatility of our US dollar share price. The risk-free rate for periods within the contractual life of the option is based on the US Treasury yield curve in effect at the time of the grant. We use the straight-line method for attributing stock option expense over the vesting period. Stock option expense incorporates an expected forfeiture rate. The expected forfei- ture rate is estimated based on historical forfeiture rates and expectations of future forfeiture rates. We make adjustments if the actual forfeiture rate differs from the expected rate. 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, 2009, there was $58 million (2008: $42 million; 2007: $33 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 (2008: two years; 2007: two years). b) Restricted Share Units (RSUs) and Deferred Share Units (DSUs) Under our RSU plan, selected employees are granted RSUs where each RSU has a value equal to one Barrick common share. RSUs vest at the end of a two and a half or three-year period and are settled in cash on the third anniversary of the grant date. Additional RSUs are credited to reflect dividends paid on Barrick common shares over the vesting period. A liability for RSUs is recorded at fair value on the grant date, with a corresponding amount recorded as a deferred compensation asset that is amortized on a straight- line basis over the vesting period. Changes in the fair value of the RSU liability are recorded each period, with a corre- sponding adjustment to the deferred compensation asset. Compensation expense for RSUs incorporates an expected forfeiture rate. The expected forfeiture rate is esti- mated based on historical forfeiture rates and expectations of future forfeiture rates. We make adjustments if the actual for- feiture rate differs from the expected rate. At December 31, 2009, the weighted average remaining contractual life of RSUs was 1.64 years. Compensation expense for RSUs was $40 million in 2009 (2008: $33 million; 2007: $16 million) and is presented as a component of corporate administration and other expense, consistent with the classification of other elements of compensation expense for those employees who had RSUs. As at December 31, 2009 there was $74 million of total unamortized compensation cost relating to unvested RSUs (2008: $84 million; 2007: $75 million). Under our DSU plan, Directors must receive a specified 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. 148 Notes to Consolidated Financial Statements c) Performance Restricted Share Units (PRSUs) In 2008, Barrick launched a PRSU plan. Under this plan, selected employees are granted PRSUs, where each PRSU has a value equal to one Barrick common share. PRSUs vest at the end of a three-year period and are settled in cash on the third anniversary of the grant date. Additional PRSUs are credited to reflect dividends paid on Barrick common shares over the vesting period. Vesting, and therefore, the liability is based on the achievement of performance goals and the target settlement will range from 0% to 200% of the value. At December 31, 2009, 250 thousand units were outstanding (2008: 133 thousand units). d) Employee Share Purchase Plan (ESPP) In 2008, Barrick launched an Employee Share Purchase Plan. This plan enables Barrick employees to purchase Company shares through payroll deduction. Each year, employees may contribute 1%–6% of their combined base salary and annual bonus, and Barrick will match 50% of the contribution, up to a maximum of $5,000 per year. During 2009, Barrick contributed $0.8 million to this plan (2008: $0.5 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 $6 million in 2009 (2008: $9 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 2009 2008 2007 Expected return on plan assets Service cost Interest cost Actuarial losses $ (14) – 19 2 $ (19) – 21 1 $ (21) 2 21 1 $ 7 $ 3 $ 3 DSU and RSU Activity At January 1, 2007 Settled for cash Forfeited Granted Credits for dividends Change in value At December 31, 2007 Settled for cash Forfeited Granted Credits for dividends Change in value At December 31, 2008 Settled for cash Forfeited Granted Credits for dividends Change in value At December 31, 2009 DSUs (thousands) Fair value (millions) RSUs (thousands) Fair value (millions) $ 41.6 (4.9) (1.4) 47.5 0.4 17.0 $ 100.2 (10.3) (10.6) 42.0 0.7 (1.7) $ 120.3 (35.7) (11.1) 42.1 1.0 7.4 $ 2.1 (0.3) – 1.4 – 0.9 $ 4.1 (0.1) – 1.2 – (0.5) $ 4.7 – – 1.2 – 0.7 1,354 (119) (38) 1,174 12 – 2,383 (348) (262) 1,493 20 – 3,286 (897) (279) 1,013 27 – $ 6.6 3,150 $ 124.0 69 (11) – 42 – – 100 (4) – 34 – – 130 – – 37 – – 167 29 ß Post-retirement Benefits a) Defined Contribution Pension Plans Certain employees take part in defined contribution employee benefit plans. We also have a retirement plan for certain officers of the Company, under which we 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 $50 million in 2009, $47 million in 2008 and $49 million in 2007. b) Defined Benefit Pension Plans We have qualified defined benefit pension plans that cover certain of our United States and Canadian employees and provide benefits based on employees’ years of service. Through the acquisition of Placer Dome, we acquired pen- sion 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. In 2009, two of our qualified defined benefit plans in Canada were wound up. No curtailment gain or loss resulted and the obligations of the plans were settled in 2009. In 2007, one of our qualified defined benefit plans in Canada was wound up. No curtailment gain or loss resulted and the obligations of the plans were settled in 2009. Also in 2007, both of our defined benefit plans in Australia were wound up. No curtailment gain or loss resulted for either plan. Notes to Consolidated Financial Statements | Barrick Financial Report 2009 149 c) Pension Plan Information Fair Value of Plan Assets For the years ended December 31 2009 2008 2007 Balance at January 1 Increase for plans assumed on acquisitions1 Actual return on plan assets Company contributions Settlements Benefits paid Foreign currency adjustments $ 237 $ 293 $ 301 8 36 9 (24) (52) 1 9 (41) 12 – (33) (3) – 31 10 (14) (35) – Balance at December 31 $ 215 $ 237 $ 293 1. In 2009, represents plan acquired on acquisition of additional 50% in Hemlo. In 2008, represents plan acquired on acquisition of additional 40% in Cortez. At December 31 Composition of plan assets2: Equity securities Fixed income securities 2009 2009 Target1 Actual Actual 54% 46% 54% $ 115 100 46% 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, 2009 and 2008 were as follows: For the years ended December 31 Projected benefit obligation, end of year Fair value of plan assets, end of year 2009 2008 $ 314 $ 206 $ 326 $ 205 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, 2009 and 2008 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 2009 2008 $ 314 $ 314 $ 206 $ 357 $ 326 $ 205 Expected Future Benefit Payments 100% 100% $ 215 For the years ending December 31 1. Based on the weighted average target for all defined benefit plans. 2. Holdings in Equity and Fixed income securities consist only of Level 1 assets within the fair value hierarchy. Projected Benefit Obligation (PBO) For the years ended December 31 2009 2008 2010 2011 2012 2013 2014 2015 – 2019 $ 29 23 23 23 23 $ 111 Balance at January 1 Increase for plans assumed on acquisitions Service cost Interest cost Actuarial losses Benefits paid Foreign currency adjustments Settlements Balance at December 31 Funded status1 ABO 2,3 $ 357 6 – 19 6 (52) 8 (23) $ 364 9 – 21 4 (33) (8) – $ 321 $ 357 $ (106) $ (120) $ 321 $ 357 1. Represents the fair value of plan assets less projected benefit obligations. Plan assets exclude investments held in a rabbi trust that are recorded sepa- rately on our balance sheet under Investments (fair value $6 million at December 31, 2009). 2. For 2009, we used a measurement date of December 31, 2009 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 $314 million (2008: $326 million). Based on actuarial reports at December 31, 2009, our funding requirements for 2010 is nil. Pension Plan Assets/Liabilities For the years ended December 31 Non-current assets Current liabilities Non-current liabilities Other comprehensive income1 1. Amounts represent actuarial losses. 2009 2008 $ 3 (13) (96) 34 $ – (7) (113) 52 $ (72) $ (68) 150 Notes to Consolidated Financial Statements d) Actuarial Assumptions For the years ended December 31 2009 2008 2007 Discount rate1 Benefit obligation Pension cost Return on plan assets1 Wage increases 5.55–6.87% 4.50–6.25% 4.50–6.30% 6.00–6.25% 4.50–6.25% 4.50–5.81% 4.50–7.00% 3.75–7.00% 4.50–7.25% 5.00% 3.50–5.00% 3.50–5.00% 1. Effect of a one-percent change: Discount rate: $32 million increase in ABO and $0.3 million decrease in pension cost; Return on plan assets: $0.4 million decrease in pension cost. Pension plan assets, which consist primarily of fixed- income and equity securities, are valued using current market quotations. Plan obligations and the annual 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 used to calculate the benefit obliga- tion and pension cost is the rate at which the pension obli- gation could be effectively settled. This rate was developed by matching the cash flows underlying the pension obliga- tion with a spot rate curve based on the actual returns avail- able on high-grade (Moody’s Aa) US corporate bonds. Bonds included in this analysis were restricted to those with a minimum outstanding balance of $50 million. Only non- callable bonds, or bonds with a make-whole provision, were included. Finally, outlying bonds (highest and lowest 10%) were discarded as being non-representative and likely to be subject to a change in investment grade. The resulting dis- count rate from this analysis was rounded to the nearest five basis points. The procedure was applied separately for pen- sion 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 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. Other Post-retirement Benefits Expense For the years ended December 31 2009 2008 2007 Interest cost $ 2 $ 2 $ 2 Fair Value of Plan Assets For the years ended December 31 2009 2008 2007 Balance at January 1 Contributions Benefits paid Balance at December 31 $ – 1 (1) $ – $ – 2 (2) $ – $ – 2 (2) $ – Accumulated Post-retirement Benefit Obligation (APBO) For the years ended December 31 2009 2008 2007 Balance at January 1 Interest cost Actuarial (gains) losses Benefits paid Balance at December 31 Funded status Unrecognized net transition obligation Unrecognized actuarial losses Net benefit liability recorded Other Post-retirement Liabilities For the years ended December 31 Current liability Non-current liability $ 32 2 (3) (2) $ 29 (29) n/a n/a n/a $ 30 2 2 (2) $ 37 2 (7) (2) $ 32 $ 30 (32) n/a n/a n/a (30) n/a n/a n/a 2009 2008 $ 3 26 $ 29 $ 3 29 $ 32 Amounts recognized in accumulated other comprehensive income consist of:1 For the years ended December 31 Net actuarial loss (gain) Transition obligation (asset) 2009 2008 $ (4) 1 $ (3) $ 1 (1) $ – 1. The estimated amounts that will be amortized into net periodic benefit cost in 2010. We have assumed a health care cost trend of 8% in 2010, decreasing ratability to 5% in 2016 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, 2009 would have had no significant effect on the post-retirement obligation and would have had no significant effect on the benefit expense for 2009. Expected Future Benefit Payments For the years ending December 31 2010 2011 2012 2013 2014 2015 – 2019 $ 3 3 3 3 2 $ 11 Notes to Consolidated Financial Statements | Barrick Financial Report 2009 151 30 ß Litigation and Claims Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. In assessing loss contingencies related to legal proceedings that are pending against us or unasserted claims that may result in such pro- ceedings, the Company and its legal counsel evaluate the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought. If the assessment of a contingency suggests that a loss is probable, and the amount can be reliably estimated, then a loss is recorded. When a contingent loss is not probable but is reasonably possible, or is probable but the amount of loss cannot be reliably estimated, then details of the contin- gent loss are disclosed. Loss contingencies considered remote are generally not disclosed unless they involve guar- antees, in which case we disclose the nature of the guaran- tee. Legal fees incurred in connection with pending legal proceedings are expensed as incurred. Cortez Hills Complaint On November 12, 2008, the United States Bureau of Land Management issued a Record of Decision approving the Cortez Hills Expansion Project. On November 20, 2008, the TeMoak Shoshone Tribe, the East Fork Band Council of the TeMoak Shoshone Tribe and the Timbisha Shoshone Tribe, the Western Shoshone Defense Project, and Great Basin Resource Watch filed a lawsuit against the United States seeking to enjoin the majority of the activities comprising the Proje ct on grounds that it violate d the We stern Shoshone rights under the Religious Freedom Restoration Act (“RFRA”), that it violated the Federal Land Policy and Management Act’s (“FLPMA”) prohibition on “unnecessary and undue degradation,” and that the Project’s Environ - ment Impact Statement did not meet the requirements of the National Environmental Policy Act (“NEPA”). The Plaintiffs subsequently dismissed their RFRA claim, with prejudice, conceding that it was without merit, in light of a decision in another case. On November 24, 2008, the Plaintiffs filed a Motion for a Temporary Restraining Order and a Preliminary Injunc - tion barring work on the Project until after a trial on the merits. On January 26, 2009, the Court denied the Plaintiffs’ Motion for a Preliminary Injunction, concluding that the Plaintiffs had failed to demonstrate a likelihood of success on the merits and that the Plaintiffs had otherwise failed to satisfy the necessary elements for a preliminary injunction. The Plaintiffs appealed that decision to the United States 152 Notes to Consolidated Financial Statements Court of Appeals for the Ninth Circuit, which heard oral arguments on June 10, 2009. On December 3, 2009, the Ninth Circuit issued an opinion in which it held that the Plaintiffs had failed to show that they were likely to succeed on the merits of their FLPMA claims, and thus were not entitled to an injunction based on those claims. The Ninth Circuit, however, held that Plaintiffs were likely to succeed on two of their NEPA claims and ordered that a supplemen- tal EIS be prepared by Barrick that specifically provided more information on (i) the effectiveness of proposed mit- igation measures for seeps and springs that might be affected by groundwater pumping, and (ii) the air quality impact of the shipment of refractory ore to Goldstrike for processing and that additional air quality modeling for fine particulate matter using updated EPA procedures should be performed and included in the supplemental EIS. The Ninth Circuit decision directed the District Court to enter an injunction consistent with the decision. In late January 2010, the matter was remanded by the Ninth Circuit to the District Court, where it is currently pending. Barrick has filed a motion seeking a preliminary injunction that is tailored to the recent decision of the Ninth Circuit. The Plaintiffs have filed a motion seeking a broad injunction. The District Court will determine the appropriate scope of any preliminary injunction. Marinduque Complaint Placer Dome was named the sole defendant in a Complaint filed on October 4, 2005, by the Provincial Government of Marinduque, an island prov ince of the Philippine s (“Province”), with the District Court in Clark County, Nevada. The action was removed to the Nevada Federal District Court on motion of Placer Dome. The Complaint asserted that Placer Dome was responsible for alleged envi- ronmental degradation with consequent economic damages and impacts to the environment in the vicinity of the Marcopper mine that was owned and operated by Mar - copper Mining Corporation (“Marcopper”). Placer Dome indirectly owned a minority shareholding of 39.9% in Marcopper until the divestiture of its shareholding in 1997. The Province seeks “to recover damages for injuries to the natural, ecological and wildlife resources within its terri- tory”, but “does not seek to recover damages for individual injuries sustained by its citizens either to their persons or their property”. In addition to damages for injury to natu- ral resources, the Province seeks compensation for the costs of restoring the environment, an order directing Placer Dome to undertake and complete “the remediation, envi- ronmental cleanup, and balancing of the ecology of the affected areas,” and payment of the costs of environmental monitoring. The Complaint addresses the discharge of mine tailings into Calancan Bay, the 1993 Maguila-guila dam breach, the 1996 Boac river tailings spill, and alleged past and continuing damage from acid rock drainage. At the time of the amalgamation of Placer Dome and Barrick Gold Corporation, a variety of motions were pend- ing before the District Court, including motions to dismiss the action for lack of personal jurisdiction and for forum non conveniens (improper choice of forum). On June 29, 2006, the Province filed a Motion to join Barrick Gold Corporation as an additional named Defendant and for leave to file a Third Amended Complaint which the Court granted on March 2, 2007. On March 6, 2007, the Court issued an order setting a briefing schedule on the Com - pany’s motion to dismiss on grounds of forum non conve- niens. On June 7, 2007, the Court issued an order granting the Company’s motion to dismiss. On June 25, 2007, the Province filed a motion requesting the Court to reconsider its Order dismissing the action. On January 16, 2008, the district court issued an order denying the Province’s motion for reconsideration. Following the District Court’s order, the Province filed Notice of Appeal to the U.S. Court of Appeals for the Ninth Circuit. On September 29, 2009 the Ninth Circuit reversed the decision of the District Court on the ground that the District Court lacked subject matter jurisdiction over the case and removal from the Nevada State Court was improper. On October 13, 2009 the Company filed a petition requesting the Ninth Circuit to reconsider its decision and for a rehearing on the issues before a nine judge panel (en banc) on the grounds that the decision is contrary to a recent United States Supreme Court decision, which petition was subsequently denied. The formal mandate entering the judgment of the Ninth Circuit was entered on November 23, 2009. The District Court has not yet entered an order of remand to Nevada state court. Barrick has filed a petition with the U.S. Supreme Court seeking review of the Ninth Circuit’s deci- sion and will continue to challenge the claims of the Province in Nevada state court on various grounds and oth- erwise vigorously defend the action. No amounts have been accrued for any potential loss under this complaint. Calancan Bay (Philippines) Complaint On July 23, 2004, a complaint was filed against Marcopper and Placer Dome Inc. (“PDI”) in the Regional Trial Court of Boac, on the Philippine island of Marinduque, on behalf of a putative class of fishermen who reside in the commu- nities around Calancan Bay, in northern Marinduque. The complaint alleges injuries to health and economic damages to the local fisheries resulting from the disposal of mine tailings from the Marcopper mine. The total amount of damages claimed is approximately US$1 billion. On October 16, 2006, the court granted the plaintiffs’ application for indigent status, allowing the case to proceed without payment of filing fees. On January 17, 2007, the Court issued a summons to Marcopper and PDI. On March 25, 2008, an attempt was made to serve PDI by serving the summons and complaint on Placer Dome Technical Services (Philippines) Inc. (“PDTS”). PDTS has returned the summons and complaint with a manifestation stating that PDTS is not an agent of PDI for any purpose and is not authorized to accept service or to take any other action on behalf of PDI. On April 3, 2008, PDI made a spe- cial appearance by counsel to move to dismiss the com- plaint for lack of personal jurisdiction and on other grounds. The plaintiffs have opposed the motion to dismiss. The motion has been briefed and is currently pending. In October 2008, the plaintiffs filed their motion chal- lenging PDI’s legal capacity to participate in the proceed- ings in light of its alleged “acquisition” by Barrick. PDI opposed this motion. The motion has been briefed and is currently pending. The Company intends to defend the action vigorously. No amounts have been accrued for any potential loss under this complaint. Perilla Complaint On August 5, 2009, Barrick Gold Inc. was purportedly served in Ontario with a complaint filed on November 25, 2008 in the Regional Trial Court of Boac, on the Philippine island of Marinduque, on behalf of two named individuals and pur- portedly on behalf of the approximately 200,000 residents of Marinduque. In December 2009, the complaint was also pur- portedly served in Ontario in the name of Placer Dome Inc. The complaint alleges injury to the economy and the ecology of Marinduque as a result of the discharge of mine tailings from the Marcopper mine into the Calancan Bay, the Boac River, and the Mogpog River. The plaintiffs are claiming for abatement of a public nuisance allegedly caused by the tail- ings discharge and for nominal damages for an alleged violation of their constitutional right to a balanced and healthful ecology. Barrick Gold Inc. has moved to dismiss the complaint on a variety of grounds, which motion is now pending a decision of the Court following the failure of plaintiffs’ counsel to appear at the hearing on February 2, 2010 or to timely file any comment or opposition to the motion. Motions to dismiss the complaint on a variety of grounds have also been filed in the name of Placer Dome Inc. No amounts have been accrued for any potential loss under this complaint. Notes to Consolidated Financial Statements | Barrick Financial Report 2009 153 31 ß Subsequent Events We examined all significant transactions from our year-end close date of December 31, 2009 up to and including the date the financial statements were available to be issued, February 17, 2010, and have not noted any significant events or transactions that would materially impact the financial statements as they are presented. Pakistani Constitutional Litigation On November 28, 2006, a Constitutional Petition was filed in the High Court of Balochistan by three Pakistani citizens against: Barrick, the governments of Balochistan and Pakistan, the Balochistan Development Authority (“BDA”), Tethyan Copper Company (“TCC”), Antofagasta Plc (“Antofagasta”), Muslim Lakhani and BHP (Pakistan) Pvt Limited (“BHP”). The Petition alleged, among other things, that the entry by the BDA into the 1993 Joint Venture Agreement (“JVA”) with BHP to facilitate the exploration of the Reko Diq area and the grant of related exploration licenses were illegal and that the subsequent transfer of the interests of BHP in the JVA and the licenses to TCC was also illegal and should therefore be set aside. Barrick currently indirectly holds 50% of the shares of TCC, with Antofagasta indirectly hold- ing the other 50%. On June 26, 2007, the High Court of Balochistan dis- missed the Petition against Barrick and the other respon- dents in its entirety. On August 23, 2007, the petitioners filed a Civil Petition for Leave to Appeal in the Supreme Court of Pakistan. No court date has been set for the hearing of this matter. Barrick intends to defend this action vigorously. No amounts have been accrued for any potential loss under this complaint. 154 Notes to Consolidated Financial Statements Mineral Reserves and Mineral Resources The tables on the next seven pages set forth Barrick’s interest in the total proven and probable gold and copper reserves and in the total measured and indicated gold, copper and nickel resources and certain related information at each property. For further details of proven and probable mineral reserves and measured, indicated and inferred mineral resources by category, metal and property, see pages 158 to 162. The Company has carefully prepared and verified the mineral reserve and mineral resource figures and believes that its method of estimating mineral reserves has been verified by mining experience. These figures are estimates, however, and no assurance can be given that the indicated quantities of metal will be produced. Metal price fluctuations may render mineral reserves containing rela- tively lower grades of mineralization uneconomic. Moreover, short-term operating factors relating to the mineral reserves, such as the need for orderly development of ore bodies or the processing of new or different ore grades, could affect the Company’s profitability in any particular accounting period. Definitions A mineral resource is a concentration or occurrence of dia- monds, natural solid inorganic material, or natural solid fos- silized organic material including base and precious metals, coal, and industrial minerals in or on the Earth’s crust in such form and quantity and of such a grade or quality that it has reasonable prospects for economic extraction. The location, quantity, grade, geological characteristics and continuity of a mineral resource are known, estimated or interpreted from specific geological evidence and knowledge. Mineral resources are sub-divided, in order of increasing geological confidence, into inferred, indicated and measured categories. An inferred mineral resource is that part of a mineral resource for which quantity and grade or quality can be estimated on the basis of geological evidence and limited sampling and rea- sonably assumed, but not verified, geological and grade conti- nuity. The estimate is based on limited information and sampling gathered through appropriate techniques from loca- tions such as outcrops, trenches, pits, workings and drill holes. An indicated mineral resource is that part of a mineral resource for which quantity, grade or quality, densities, shape and phys- ical characteristics, can be estimated with a level of confidence sufficient to allow the appropriate application of technical and economic parameters, to support mine planning and evalua- tion of the economic viability of the deposit. The estimate is based on detailed and reliable exploration and testing informa- tion gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes that are spaced closely enough for geological and grade continuity to be reasonably assumed. A measured mineral resource is that part of a mineral resource for which quantity, grade or quality, densities, shape and physi- cal characteristics are so well established that they can be esti- mated with confidence sufficient to allow the appropriate application of technical and economic parameters, to support production planning and evaluation of the economic viability of the deposit. The estimate is based on detailed and reliable exploration, sampling and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes that are spaced closely enough to confirm both geological and grade continuity. Mineral resources, which are not mineral reserves, do not have demonstrated economic viability. A mineral reserve is the economically mineable part of a mea sured or indicated mineral resource demonstrated by at least a preliminary feasibility study. This study must include adequate information on mining, processing, metallurgical, economic and other relevant factors that demonstrate, at the time of reporting, that economic extraction can be justified. A mineral reserve includes diluting materials and allowances for losses that may occur when the material is mined. Mineral reserves are sub-divided in order of increasing confidence into probable mineral reserves and proven mineral reserves. A probable mineral reserve is the economically mineable part of an indicated and, in some circumstances, a measured mineral resource demonstrated by a least a preliminary feasibility study. This study must include adequate information on min- ing, processing, metallurgical, economic and other relevant factors that demonstrate, at the time of reporting, that eco- nomic extraction can be justified. A proven mineral reserve is the economically mineable part of a measured mineral resource demonstrated by at least a pre- liminary feasibility study. This study must include adequate information on mining, processing, metallurgical, economic and other relevant factors that demonstrate, at the time of reporting, that economic extraction is justified. Mineral Reserves and Mineral Resources | Barrick Financial Report 2009 155 Summary Gold Mineral Reserves and Mineral Resources1,2 For the years ended December 31 2009 2008 Based on attributable ounces North America Goldstrike Open Pit Goldstrike Underground Goldstrike Property Total Pueblo Viejo (60%) Cortez Bald Mountain Turquoise Ridge (75%) Round Mountain (50%) South Arturo (60%) Ruby Hill Hemlo3 Marigold (33%) Golden Sunlight Donlin Creek (50%) South America Cerro Casale (50%)4 Pascua-Lama Veladero Lagunas Norte Pierina (proven and probable) (mineral resource) (proven and probable) (mineral resource) (proven and probable) (mineral resource) (proven and probable) (mineral resource) (proven and probable) (mineral resource) (proven and probable) (mineral resource) (proven and probable) (mineral resource) (proven and probable) (mineral resource) (proven and probable) (mineral resource) (proven and probable) (mineral resource) (proven and probable) (mineral resource) (proven and probable) (mineral resource) (proven and probable) (mineral resource) (proven and probable) (mineral resource) (proven and probable) (mineral resource) (proven and probable) (mineral resource) (proven and probable) (mineral resource) (proven and probable) (mineral resource) (proven and probable) (mineral resource) 1. Resources which are not reserves do not have demonstrated economic viability. 2. See accompanying footnote #1. 3. See accompanying footnote #2. 4. See accompanying footnote #3. Tons (000s) Grade (oz/ton) Ounces (000s) Tons (000s) Grade (oz/ton) Ounces (000s) 82,902 16,687 8,998 4,436 91,900 21,123 166,638 70,834 243,669 46,622 227,346 99,338 8,030 1,730 78,807 43,912 26,314 3,377 13,933 8,960 17,500 2,545 49,997 14,064 8,239 282 – 270,022 668,481 119,855 423,858 153,371 503,787 65,253 234,423 39,419 43,595 6,366 9,296 0.112 870 0.052 2,860 0.318 0.334 1,483 0.132 12,156 2,353 0.111 0.085 14,244 0.061 4,287 0.058 14,100 3,467 0.074 4,489 0.020 1,178 0.012 4,072 0.507 745 0.431 1,466 0.019 0.021 939 1,350 0.051 162 0.048 702 0.050 0.057 514 1,325 0.076 179 0.070 807 0.016 218 0.016 508 0.062 19 0.067 – – 0.068 18,449 0.017 11,585 1,365 0.011 0.042 17,839 0.031 4,821 0.024 12,008 884 0.014 7,501 0.032 678 0.017 648 0.015 108 0.017 86,254 15,751 6,923 4,467 93,177 20,218 0.119 10,294 0.055 0.368 0.323 868 2,545 1,444 0.138 12,839 0.114 2,312 147,946 0.091 13,440 77,068 0.056 4,330 222,125 0.060 13,384 81,088 157,675 90,374 7,961 2,467 92,581 28,570 – 22,114 18,844 11,919 7,075 1,314 25,462 15,673 8,665 131 – 0.046 0.018 0.019 0.501 0.435 0.018 0.019 – 0.045 0.044 0.040 0.080 0.079 0.020 0.016 0.062 0.061 – 3,743 2,846 1,718 3,985 1,074 1,621 529 – 987 831 480 564 104 511 253 540 8 – 269,496 0.066 17,737 612,273 194,722 440,226 131,494 491,316 50,191 230,635 55,573 29,182 11,141 0.018 10,831 2,372 0.012 17,806 0.040 0.036 4,687 0.025 12,233 0.014 0.039 0.023 0.023 0.014 706 8,949 1,278 683 156 156 Mineral Reserves and Mineral Resources Summary Gold Mineral Reserves and Mineral Resources1,2 For the years ended December 31 2009 2008 Based on attributable ounces Australia Pacific Porgera (95%) Kalgoorlie (50%) Cowal Plutonic Kanowna Darlot Granny Smith Lawlers Henty Osborne Reko Diq (37.5%) Africa Bulyanhulu North Mara Buzwagi Tulawaka (70%) Other Total (proven and probable) (mineral resource) (proven and probable) (mineral resource) (proven and probable) (mineral resource) (proven and probable) (mineral resource) (proven and probable) (mineral resource) (proven and probable) (mineral resource) (proven and probable) (mineral resource) (proven and probable) (mineral resource) (proven and probable) (mineral resource) (proven and probable) (mineral resource) (proven and probable) (mineral resource) (proven and probable) (mineral resource) (proven and probable) (mineral resource) (proven and probable) (mineral resource) (proven and probable) (mineral resource) (proven and probable) (mineral resource) (proven and probable) (mineral resource) 1. Resources which are not reserves do not have demonstrated economic viability. 2. See accompanying footnote #1. Tons (000s) Grade (oz/ton) Ounces (000s) Tons (000s) Grade (oz/ton) Ounces (000s) 77,534 23,960 75,080 6,479 76,928 25,705 4,225 10,257 7,337 5,649 3,305 2,856 3,024 1,505 3,108 1,883 – – 813 4,379 – 1,232,986 0.099 0.067 0.056 0.056 0.035 0.034 0.182 0.195 0.168 0.141 0.134 0.126 0.169 0.150 0.156 0.204 – – 0.023 0.026 – 0.008 7,683 1,602 4,205 362 2,697 881 771 1,995 1,233 798 444 359 510 226 486 384 – – 19 115 – 9,506 78,975 61,025 77,516 8,611 79,500 31,463 5,828 11,037 6,294 5,234 4,394 3,598 3,620 2,514 2,484 6,791 402 199 2,174 3,410 – 1,125,071 0.099 0.066 0.056 0.059 0.035 0.034 0.179 0.157 0.200 0.164 0.127 0.125 0.136 0.168 0.142 0.151 0.229 0.231 0.021 0.026 – 0.008 7,828 4,031 4,360 512 2,795 1,072 1,042 1,733 1,256 859 557 451 491 423 353 1,023 92 46 45 89 – 8,487 27,630 11,350 31,905 8,810 72,611 20,573 406 192 0.374 10,320 3,585 0.316 2,949 0.092 861 0.098 3,401 0.047 692 0.034 93 0.229 32 0.167 325 65 0.431 0.369 140 24 37,728 0.317 11,977 4,936 30,505 19,046 65,088 20,371 514 267 538 – 0.339 0.099 0.063 0.050 0.043 0.156 0.330 0.468 – 1,675 3,031 1,191 3,284 886 80 88 252 – 3,190,748 2,323,722 0.044 139,751 0.027 61,788 2,980,703 0.046 138,506 2,367,126 0.027 65,040 Mineral Reserves and Mineral Resources | Barrick Financial Report 2009 157 Gold Mineral Reserves1 As at December 31, 2009 Proven Probable Total Based on attributable ounces North America Goldstrike Open Pit Goldstrike Underground Goldstrike Property Total Pueblo Viejo (60%) Cortez Bald Mountain Turquoise Ridge (75%) Round Mountain (50%) South Arturo (60%) Ruby Hill Hemlo2 Marigold (33%) Golden Sunlight South America Cerro Casale (50%)3 Pascua-Lama Veladero Lagunas Norte Pierina Australia Pacific Porgera (95%) Kalgoorlie (50%) Cowal Plutonic Kanowna Darlot Granny Smith Lawlers Osborne Africa Bulyanhulu North Mara Buzwagi Tulawaka (70%) Other Total Tons (000s) Grade (oz/ton) Contained ounces (000s) Tons (000s) Grade (oz/ton) Contained ounces (000s) Tons (000s) Grade (oz/ton) Contained ounces (000s) 41,888 3,614 45,502 8,498 23,288 77,454 3,418 30,696 – 669 13,902 15,500 1,967 127,619 42,132 29,734 18,673 21,370 46,172 35,450 12,891 138 3,609 2,111 838 226 680 1,414 15,125 3,634 166 0.107 0.405 0.131 0.097 0.092 0.021 0.481 0.022 – 0.055 0.072 0.018 0.074 0.019 0.050 0.031 0.034 0.016 0.092 0.049 0.024 0.152 0.187 0.126 0.156 0.128 0.024 0.380 0.098 0.035 0.084 4,477 1,464 5,941 826 2,149 1,653 1,643 670 – 37 1,006 281 146 2,383 2,126 927 631 345 4,247 1,730 305 21 675 265 131 29 16 537 1,477 127 14 41,014 5,384 46,398 158,140 220,381 149,892 4,612 48,111 26,314 13,264 3,598 34,497 6,272 540,862 381,726 474,053 215,750 22,225 31,362 39,630 64,037 4,087 3,728 1,194 2,186 2,882 133 26,216 16,780 68,977 240 0.117 0.259 0.134 0.085 0.054 0.019 0.527 0.017 0.051 0.050 0.089 0.015 0.058 0.017 0.041 0.023 0.032 0.014 0.110 0.062 0.037 0.184 0.150 0.150 0.173 0.159 0.023 0.373 0.088 0.047 0.329 4,819 1,396 6,215 13,418 11,951 2,836 2,429 796 1,350 665 319 526 362 9,202 15,713 11,081 6,870 303 3,436 2,475 2,392 750 558 179 379 457 3 9,783 1,472 3,274 79 82,902 8,998 91,900 166,638 243,669 227,346 8,030 78,807 26,314 13,933 17,500 49,997 8,239 668,481 423,858 503,787 234,423 43,595 77,534 75,080 76,928 4,225 7,337 3,305 3,024 3,108 813 27,630 31,905 72,611 406 0.112 9,296 2,860 0.318 0.132 12,156 0.085 14,244 0.058 14,100 4,489 0.020 4,072 0.507 1,466 0.019 1,350 0.051 702 0.050 1,325 0.076 807 0.016 508 0.062 0.017 0.042 0.024 0.032 0.015 0.099 0.056 0.035 0.182 0.168 0.134 0.169 0.156 0.023 11,585 17,839 12,008 7,501 648 7,683 4,205 2,697 771 1,233 444 510 486 19 0.374 10,320 2,949 0.092 3,401 0.047 93 0.229 19 0.263 5 306 0.441 135 325 0.431 140 582,895 0.052 30,343 2,607,853 0.042 109,408 3,190,748 0.044 139,751 Copper Mineral Reserves1 As at December 31, 2009 Proven Probable Total Tons (000s) 353,638 680 Grade (%) 0.538 1.765 Contained lbs (millions) Tons (000s) 3,803 24 222,113 133 Contained lbs (millions) Tons (000s) 2,229 7 575,751 813 Grade (%) 0.502 2.632 Contained lbs (millions) 6,032 31 Grade (%) 0.524 1.907 354,318 0.540 3,827 222,246 0.503 2,236 576,564 0.526 6,063 Based on attributable pounds Zaldívar Osborne Total 1. See accompanying footnote #1. 2. See accompanying footnote #2. 3. See accompanying footnote #3. 158 Mineral Reserves and Mineral Resources Gold Mineral Resources1,2 As at December 31, 2009 Measured (M) Indicated (I) Based on attributable ounces North America Goldstrike Open Pit Goldstrike Underground Goldstrike Property Total Pueblo Viejo (60%) Cortez Bald Mountain Turquoise Ridge (75%) Round Mountain (50%) Ruby Hill Hemlo3 Marigold (33%) Golden Sunlight South Arturo (60%) Donlin Creek (50%) South America Cerro Casale (50%)4 Pascua-Lama Veladero Lagunas Norte Pierina Australia Pacific Porgera (95%) Kalgoorlie (50%) Cowal Plutonic Kanowna Darlot Granny Smith Lawlers Osborne Reko Diq (37.5%) Africa Bulyanhulu North Mara Buzwagi Tulawaka (70%) Other Total Tons (000s) Grade (oz/ton) Contained ounces (000s) Tons (000s) Grade (oz/ton) Contained ounces (000s) 10,446 952 11,398 2,113 3,652 29,552 906 10,560 428 1,986 – 113 – 3,983 8,098 13,316 4,269 1,089 3,337 10,642 2,341 – 612 2,985 386 148 – 523 718,521 – 1,600 94 – 0.055 0.401 0.084 0.058 0.047 0.013 0.412 0.029 0.051 0.064 – 0.071 – 0.075 0.010 0.041 0.011 0.017 0.018 0.077 0.059 – 0.374 0.131 0.148 0.189 – 0.019 0.009 – 0.137 0.043 – – – 577 382 959 123 170 373 373 303 22 128 – 8 – 300 79 543 46 18 59 818 139 – 229 392 57 28 – 10 6,466 – 219 4 – – 6,241 3,484 9,725 68,721 42,970 69,786 824 33,352 8,532 559 14,064 169 3,377 266,039 111,757 140,055 60,984 38,330 3,029 13,318 4,138 25,705 9,645 2,664 2,470 1,357 1,883 3,856 514,465 11,350 7,210 20,479 192 0.047 0.316 0.143 0.061 0.077 0.012 0.451 0.019 0.058 0.091 0.016 0.065 0.048 0.068 0.012 0.031 0.014 0.017 0.016 0.059 0.054 0.034 0.183 0.152 0.122 0.146 0.204 0.027 0.006 0.316 0.089 0.034 0.167 293 1,101 1,394 4,164 3,297 805 372 636 492 51 218 11 162 18,149 1,286 4,278 838 660 49 784 223 881 1,766 406 302 198 384 105 3,040 3,585 642 688 32 (M) + (I) Contained ounces (000s) Inferred Tons (000s) Grade (oz/ton) Contained ounces (000s) 870 1,483 2,353 4,287 3,467 1,178 745 939 514 179 218 19 162 18,449 3,568 1,858 5,426 11,654 30,128 40,184 3,775 28,604 2,928 1,036 25,049 801 2,539 40,295 1,365 244,644 24,298 4,821 64,086 884 9,302 678 4,066 108 1,602 362 881 1,995 798 359 226 384 115 12,465 1,604 3,017 6,216 3,174 93 4,509 442 3,137 9,506 1,192,569 3,585 861 692 32 7,362 1,447 7,377 1 0.116 0.341 0.193 0.056 0.144 0.012 0.456 0.017 0.051 0.150 0.015 0.045 0.018 0.065 0.011 0.041 0.008 0.016 0.012 0.111 0.136 0.028 0.243 0.152 0.226 0.241 0.235 0.024 0.005 0.429 0.082 0.036 – 413 633 1,046 656 4,325 468 1,721 497 148 155 388 36 45 2,625 2,660 1,007 529 151 49 1,383 218 85 1,511 484 21 1,088 104 75 6,399 3,159 119 268 – 832,652 0.014 11,866 1,491,070 0.033 49,922 61,788 1,782,820 0.018 31,594 65 0.369 24 24 592 0.294 174 Copper Mineral Resources1,2 As at December 31, 2009 Measured (M) Indicated (I) Based on attributable pounds Zaldívar Osborne Reko Diq (37.5%) Tons (000s) 62,298 523 718,521 Grade (%) 0.411 1.530 0.536 Contained lbs (millions) Tons (000s) 512 16 7,697 61,154 3,856 514,465 Grade (%) 0.428 1.504 0.392 (M) + (I) Contained lbs (millions) Tons (000s) Contained lbs (millions) 524 116 4,034 1,036 132 83,293 3,137 11,731 1,192,569 Inferred Contained lbs (millions) 883 79 8,393 Grade (%) 0.530 1.259 0.352 Total 781,342 0.526 8,225 579,475 0.403 4,674 12,899 1,278,999 0.366 9,355 1. Resources which are not reserves do not have demonstrated economic viability. 2. See accompanying footnote #1. 3. See accompanying footnote #2. 4. See accompanying footnote #3. Mineral Reserves and Mineral Resources | Barrick Financial Report 2009 159 Contained Silver Within Reported Gold Reserves1 For the year ended December 31, 2009 In proven gold reserves In probable gold reserves Total Tons (000s) Grade (oz/ton) Contained ounces (000s) Tons (000s) Grade (oz/ton) Contained ounces (000s) Tons (000s) Grade (oz/ton) Contained ounces (000s) Process recovery % Based on attributable ounces North America Pueblo Viejo (60%) 8,498 0.63 5,358 158,140 0.50 79,707 166,638 0.51 85,065 86.7% South America Cerro Casale (50%)2 Pascua-Lama Lagunas Norte Veladero Pierina Africa Bulyanhulu Total 127,619 42,132 18,673 29,734 21,370 0.05 1.75 0.12 0.40 0.37 6,988 73,548 2,160 11,802 7,837 540,862 381,726 215,750 474,053 22,225 0.04 1.57 0.11 0.45 0.34 22,376 597,573 22,753 212,802 7,571 668,481 423,858 234,423 503,787 43,595 0.04 29,364 1.58 671,121 0.11 24,913 0.45 224,604 15,408 0.35 46.1% 80.4% 21.4% 6.3% 37.0% 1,414 0.20 276 26,216 0.29 7,673 27,630 0.29 7,949 77.5% 249,440 0.43 107,969 1,818,972 0.52 950,455 2,068,412 0.51 1,058,424 62.2% 1. Silver is accounted for as a by-product credit against reported or projected gold production costs. 2. See accompanying footnote #2. Contained Copper Within Reported Gold Reserves1 For the year ended December 31, 2009 In proven gold reserves In probable gold reserves Total Tons (000s) Grade (%) Contained lbs (millions) Tons (000s) Grade (%) Contained lbs (millions) Tons (000s) Grade (%) Contained lbs (millions) Process recovery % Based on attributable pounds North America Pueblo Viejo (60%) 8,498 0.114 19.4 158,140 0.090 283.8 166,638 0.091 303.2 79.5% South America Cerro Casale (50%)2 Pascua-Lama Africa Buzwagi Bulyanhulu Total 127,619 42,132 0.189 0.096 481.3 81.2 540,862 381,726 0.223 0.075 2,409.6 574.5 668,481 423,858 0.216 0.077 2,890.9 655.7 82.7% 63.0% 3,634 1,414 0.014 0.396 1.0 11.2 68,977 26,216 0.122 0.712 168.1 373.4 72,611 27,630 0.116 0.696 169.1 384.6 76.9% 93.3% 183,297 0.162 594.1 1,175,921 0.162 3,809.4 1,359,218 0.162 4,403.5 80.2% 1. Copper is accounted for as a by-product credit against reported or projected gold production costs. 2. See accompanying footnote #2. 160 Mineral Reserves and Mineral Resources Contained Silver Within Reported Gold Resources1 For the year ended December 31, 2009 Measured (M) Indicated (I) Based on attributable ounces North America Pueblo Viejo (60%) South America Cerro Casale (50%)2 Pascua-Lama Lagunas Norte Veladero Pierina Africa Bulyanhulu Total Tons (000s) Grade (oz/ton) Contained ounces (000s) Tons (000s) Grade (oz/ton) Contained ounces (000s) (M) + (I) Contained ounces (000s) Inferred Tons (000s) Grade (oz/ton) Contained ounces (000s) 2,113 0.36 760 68,721 0.32 21,792 22,552 11,654 0.51 5,981 8,098 13,316 909 4,269 3,337 0.04 299 0.91 12,148 91 0.10 878 0.21 920 0.28 111,757 140,055 36,651 60,984 3,029 0.03 3,425 0.89 123,986 2,880 0.08 0.39 23,980 700 0.23 3,724 244,644 24,298 9,784 64,086 4,066 136,134 2,971 24,858 1,620 0.03 7,607 0.55 13,398 451 0.05 0.33 21,427 1,632 0.40 – – – 11,350 0.27 3,058 3,058 7,296 0.35 2,557 32,042 0.47 15,096 432,547 0.42 179,821 194,917 365,828 0.15 53,053 1. Resources which are not reserves do not have demonstrated economic viability. 2. See accompanying footnote #2. Contained Copper Within Reported Gold Resources1 For the year ended December 31, 2009 In measured (M) gold resources In indicated (I) gold resources Based on attributable pounds North America Pueblo Viejo (60%) South America Cerro Casale (50%)2 Pascua-Lama Africa Buzwagi Total Tons (000s) Grade (%) Contained lbs (millions) Tons (000s) Grade (%) Contained lbs (millions) (M) + (I) Contained lbs (millions) Inferred Tons (000s) Grade (%) Contained lbs (millions) 2,113 0.097 4.1 68,721 0.073 100.8 104.9 11,654 0.037 8.6 8,098 13,316 0.157 0.077 25.5 20.6 111,757 140,055 0.185 0.062 414.4 173.4 439.9 244,644 24,298 194.0 0.191 0.044 936.3 21.4 94 0.104 0.2 20,479 0.097 39.6 39.8 7,377 0.087 12.8 23,621 0.107 50.4 341,012 0.107 728.2 778.6 287,973 0.170 979.1 1. Resources which are not reserves do not have demonstrated economic viability. 2. See accompanying footnote #2. Nickel Mineral Resources1 For the year ended December 31, 2009 Measured (M) Indicated (I) Based on attributable pounds Africa Tons (000s) Grade (%) Contained lbs (millions) Tons (000s) Grade (%) Contained lbs (millions) (M) + (I) Contained lbs (millions) Inferred Tons (000s) Grade (%) Contained lbs (millions) Kabanga (50%) 7,601 2.480 377.0 12,985 2.653 689.0 1,066.0 8,874 2.958 525.0 1. Resources, which are not reserves, do not have demonstrated economic viability. Mineral Reserves and Mineral Resources | Barrick Financial Report 2009 161 Mineral Reserves and Resources Notes 1. Mineral reserves (“reserves”) and mineral resources (“resources”) have been calculated as at December 31, 2009 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, Cerro Casale is 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 comparable 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 Ivan Mullany, Vice President, Operations Support of Barrick, Rick Allan, Senior Director, Mining of Barrick, and Rick Sims, Senior Director, Resources and Reserves of Barrick. Except as noted below, reserves have been calculated using an assumed long-term average gold price of $US 825 ($Aus. 1,030) per ounce, a silver price of $US 14.00 per ounce, a copper price of $US 2.00 per pound and exchange rates of $1.10 $Can/$US and $0.80 $US/$Aus. Reserves at Cerro Casale and Round Mountain have been calculated using an assumed long-term average gold price of $US 800. 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, 2009 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. In January 2009, Barrick acquired the remaining 50% interest of the Hemlo mine. 2008 reserves and resources reflect Barrick’s then 50% interest. 2009 reserves and resources reflect Barrick’s 100% interest. 3. 2008 reserves and resources for the Cerro Casale project reflect Barrick’s then 51% interest. 2009 reserves and resources reflect the change in Barrick’s interest to 50% of the Cerro Casale project. 162 Mineral Reserves and Mineral Resources Corporate Governance and Committees of the Board Corporate Governance Over the past several years, there has been an increased focus on corporate governance in both the United States and Canada. Among other regulatory initiatives, the New York Stock Exchange added corporate governance standards to its listing rules. Although, as a regulatory matter, the vast majority of the NYSE corporate governance standards are not directly applicable to Barrick as a Canadian company, Barrick has implemented a number of structures and pro- cedures to comply with the NYSE standards. There are no significant differences between Barrick’s corporate governance practices and the NYSE standards applicable to U.S. companies. The Board of Directors has approved a set of Corporate Governance Guidelines to promote the effective function- ing of the Board of Directors and its Committees and to set forth a common set of expectations as to how the Board Committees of the Board Audit Committee (S.J. Shapiro, D.J. Carty, P.A. Crossgrove, R.M. Franklin) Reviews the Company’s financial statements and manage- ment’s discussion and analysis of financial and operating results, and assists the Board in its oversight of the integrity of Barrick’s financial reporting process and the quality, transparency, and integrity of Barrick’s financial statements and other relevant public disclosures, the Company’s com- pliance with legal and regulatory requirements relating to financial reporting, the external auditors’ qualifications and indepen dence, and the performance of the internal and external auditors. Compensation Committee (D.J. Carty, M.A. Cohen, P.C. Godsoe, J.B. Harvey, S.J. Shapiro) Assists the Board in monitoring, reviewing and approving Barrick’s compensation policies and practices, and adminis- tering Barrick’s share compensation plans. The Committee is responsible for reviewing and recommending director and senior management compensation and for succession planning with respect to senior executives. should manage its affairs and perform its responsibilities. Barrick has also adopted a Code of Business Conduct and Ethics that is applicable to all directors, officers and employees of Barrick. In conjunction with the adoption of the Code, Barrick established a toll-free compliance hotline to allow for anonymous reporting of any suspected Code violations, including concerns regarding accounting, internal accounting controls or other auditing matters. A copy of the Corporate Governance Guidelines, the Code of Business Conduct and Ethics, and the mandates of the Board of Directors and each of the Committees of the Board, including the Audit Committee, Compensation Com mit tee and Corporate Governance and Nominating Com mittee, is posted on Barrick’s website at www.barrick.com and is available in print from the Company to any shareholder upon request. Corporate Governance and Nominating Committee (M.A. Cohen, R.M. Franklin, P.C. Godsoe) Assists the Board in establishing Barrick’s corporate gover- nance policies and practices. The Committee also identifies individuals qualified to become members of the Board and reviews the composition and functioning of the Board and its Committees. Environmental, Health and Safety Committee (P.A. Crossgrove, C.W.D. Birchall, J.B. Harvey, A.W. Regent) Reviews environmental, health and safety, and corporate social responsibility policies and programs, oversees the Company’s environmental, health and safety, and corporate social responsibility performance, and monitors current and future regulatory issues. Finance Committee (C.W.D. Birchall, H.L. Beck, A. Munk) Reviews the Company’s financial structure and investment and financial risk management programs. Corporate Governance and Committees of the Board | Barrick Financial Report 2009 163 Shareholder Information Barrick shares are traded on two stock exchanges: New York Toronto Ticker Symbol ABX Common Shares (millions) Outstanding at December 31, 2009 Weighted average 2009 Basic Fully diluted 984 903 903 Number of Registered Shareholders at December 31, 2009 17,974 The Company’s shares were split on a two-for-one basis in 1987, 1989 and 1993. Index Listings S&P/TSX Composite Index S&P/TSX 60 Index S&P Global 1200 Index Philadelphia Gold/Silver Index AMEX Gold Miners Index Dow Jones Sustainability Index (DJSI) – North America Dow Jones Sustainability Index (DJSI) – World 2009 Dividend per Share US$0.40 Share Trading Information New York Stock Exchange Volume of Shares Traded (millions) NYSE TSX Closing Price of Shares December 31, 2009 NYSE TSX 2009 1,203 1,078 2008 1,153 1,154 US$39.38 C$41.46 Share Volume (millions) High Low 2009 2008 2009 2008 2009 2008 361 246 258 338 234 162 362 395 US$40.90 38.96 41.98 48.02 US$54.74 46.20 52.47 39.23 US$25.54 27.09 30.67 34.50 US$41.54 37.00 26.03 17.95 1,203 1,153 Share Volume (millions) High Low 2009 2008 2009 2008 2009 2008 331 251 237 259 282 225 301 346 C$49.87 43.24 43.97 50.33 C$54.11 46.71 52.47 45.34 C$32.69 33.01 35.50 37.04 C$42.51 37.76 28.01 22.00 1,078 1,154 Quarter First Second Third Fourth Toronto Stock Exchange Quarter First Second Third Fourth 164 Shareholder Information For information on such matters as share transfers, dividend cheques and change of address, inquiries should be directed to the Transfer Agents: Transfer Agents and Registrars CIBC Mellon Trust Company P.O. Box 7010 Adelaide Street Postal Station Toronto, Ontario M5C 2W9 Telephone: 416-643-5500 Toll-free throughout North America: 1-800-387-0825 Fax: 416-643-5501 Email: inquiries@cibcmellon.com Website: www.cibcmellon.com BYN Mellon Shareowner Services, L.L.C. 480 Washington Boulevard – 27th Floor Jersey City, NJ 07310 Telephone: Toll-free throughout North America: 1-800-589-9836 Fax: 201-680-4665 Email: shrrelations@mellon.com Website: www.melloninvestor.com Auditors PricewaterhouseCoopers LLP Toronto, Canada Annual Meeting The Annual Meeting of Shareholders will be held on Wednesday, April 28, 2010 at 10:00 a.m. (Toronto time) in the Metro Toronto Convention Centre, John Bassett Theatre, 255 Front Street West, Toronto, Ontario. Dividend Payments In 2009, the Company paid a cash dividend of $0.40 per share – $0.20 on June 15 and $0.20 on December 15. A cash dividend of $0.40 per share was paid in 2008 – $0.20 on June 16 and $0.20 on December 15. Dividend Policy The Board of Directors reviews the dividend policy semi- annually based on the cash requirements of the Company’s operating assets, exploration and development activities, as well as potential acquisitions, combined with the current and projected financial position of the Company. Form 40-F The Company’s Annual Report on Form 40-F is filed with the United States Securities and Exchange Commission. This report is available on Barrick’s website www.barrick.com and will be made available to shareholders, without charge, upon written request to the Secretary of the Company at the Corporate Office. Other Language Reports French and Spanish versions of this annual report are available from Investor Relations at the Corporate Office and on Barrick’s website www.barrick.com. Shareholder Contacts Shareholders are welcome to contact the Investor Relations Department for general information on the Company: Deni Nicoski Vice President, Investor Relations Telephone: 416-307-7410 Email: dnicoski@barrick.com Susan Muir Senior Director, Investor Relations Telephone: 416-307-5107 Email: s.muir@barrick.com Amy Schwalm Senior Director, Investor Relations Telephone: 416-307-7422 Email: aschwalm@barrick.com Shareholder Information | Barrick Financial Report 2009 165 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 Chairman, Porter Airlines Inc. and Virgin America Airlines Gustavo A. Cisneros Caracas, Venezuela Chairman, Cisneros Group of Companies Senior Officers Peter Munk Chairman C. William D. Birchall Vice Chairman Aaron W. Regent 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 Robert M. Franklin Toronto, Ontario President, Signalta Capital Corporation Peter C. Godsoe, O.C. Toronto, Ontario Corporate Director J. Brett Harvey Canonsburg, Pennsylvania President and Chief Executive Officer, CONSOL Energy Inc. The Right Honourable Brian Mulroney, P.C. Montreal, Quebec Chairman, Barrick International Advisory Board Senior Partner, Ogilvy Renault Anthony Munk New York, New York Managing Director, Onex Corporation Peter Munk, C.C. Toronto, Ontario Founder and Chairman, Barrick Gold Corporation Aaron W. Regent Toronto, Ontario President and Chief Executive Officer, Barrick Gold Corporation Steven J. Shapiro Houston, Texas Corporate Director Vincent A. Borg Executive Vice President, Corporate Communications Patrick J. Garver Executive Vice President and General Counsel Jamie C. Sokalsky Executive Vice President and Chief Financial Officer Kelvin P.M. Dushnisky Executive Vice President, Corporate Affairs Peter J. Kinver Executive Vice President and Chief Operating Officer George M. Potter Senior Vice President, Capital Projects International Advisory Board The International Advisory Board was established to provide advice to Barrick’s Board of Directors and management on geopolitical and other strategic issues affecting the Company. Chairman The Right Honourable Brian Mulroney Former Prime Minister of Canada Members Gustavo A. Cisneros Venezuela Secretary William S. Cohen United States Vernon E. Jordan, Jr. United States Andrónico Luksic Chile Angus A. MacNaughton United States Karl Otto Pöhl Germany Lord Charles Powell of Bayswater KCMG United Kingdom The Honourable Nathaniel P. Rothschild Switzerland The Honorable Andrew Young United States 166 Board of Directors and Senior Officers Cautionary Statement on Forward-Looking Information Certain information contained in this Annual Report 2009, including any information as to our strategy, projects, plans or future financial or operating performance and other statements that express management’s expectations or estimates of future performance, constitute “forward-looking statements”. All statements, other than statements of historical fact, are forward-looking statements. The words “believe”, “expect”, “will”, “anticipate”, “contemplate”, “target”, “plan”, “continue”, “budget”, “may”, “intend”, “esti- mate” 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 management, are inherently subject to significant business, economic and competitive uncertainties and contingencies. The Company cautions the reader that such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual financial results, performance or achieve- ments of Barrick to be materially different from the Company’s estimated future results, performance or achievements expressed or implied by those forward-looking statements and the forward-looking statements are not guarantees of future performance. These risks, uncertainties and other factors include, but are not limited to: the impact of global liquidity and credit availability on the timing of cash flows and the values of assets and liabilities based on projected future cash flows; changes in the worldwide price of gold, copper or certain other commodities (such as silver, fuel and electricity); fluctuations in currency markets; changes in U.S. dollar interest rates; risks arising from holding derivative instruments; ability to successfully complete announced transactions and integrate acquired assets; legislative, political or economic developments in the jurisdictions in which the Company carries on business; operating or technical difficulties in connection with mining or development activities; employee relations; availability and costs associated with mining inputs and labor; the speculative nature of exploration and development, including the risks of obtaining necessary licenses and permits and diminishing quantities or grades of reserves; changes in costs and estimates associated with our projects; adverse changes in our credit rating, level of indebtedness and liquidity, contests over title to properties, particularly title to undeveloped properties; the risks involved in the exploration, development and mining business. Certain of these factors are discussed in greater detail in the Company’s most recent Form 40-F/Annual Information Form on file with the U.S. Securities and Exchange Commission and Canadian provincial securities regulatory authorities. The Company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise, except as required by applicable law. l i e u m a S g a r C y h p a r g o t o h P t i a r t r o P / r e h p o t s i r h C r e t e P y h p a r g o t o h P n o i t a c o L / a d a n a C n o i t a r o p r o C l l i r r e M / . c n I l e b a e v o M / . d t L s n o i t a c i n u m m o C & n g i s e D e v O barrick.com Barrick Gold Corporation Corporate Office: Brookfield Place TD Canada Trust Tower 161 Bay Street, Suite 3700 P.O. Box 212 Toronto, Canada M5J 2S1 Tel: 416.861.9911 Toll-free throughout North America: 1.800.720.7415 Fax: 416.861.2492 Email: investors@barrick.com