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Barrick stakes out 5-year gold production plan

Barrick Gold Corp. outlined a five-year production forecast as it released third-quarter earnings, pegging annual output between 5.1 million and 5.6 million ounces of gold and all-in sustaining costs between US$850/oz and US$950/oz.

Taking analyst questions on a Nov. 6 earnings call, Barrick President and CEO Mark Bristow cast the projection as conservative. "This is our best business case based on what we believe we can deliver," Bristow said.

Barrick's five-year guidance came as it continues to integrate operations after its acquisition of Randgold Resources Ltd. and joint venture with Newmont Goldcorp Corp. covering key assets in Nevada.

On the latter front, the company has touted synergies between US$450 million and US$500 million. Bristow said that, so far, Barrick had found US$311 million of those with the rest set to come by early 2020.

Longer term, he said Barrick may find more savings in Nevada, such as by accessing ground that was previously sterilized in boundary areas between what used to be separate properties.

In the third quarter, Barrick swung year on year to a net profit of US$2.28 billion and boosted its dividend to 5 U.S. cents per share from 4 U.S. cents per share. While profits climbed, in part driven by higher gold prices, so did costs. All-in sustaining costs per ounce of gold jumped from US$785 in the third quarter last year to US$984.

Bristow noted that, in Nevada, mining of higher gold grades in the Cortez Hills mine's open pit came to an end during the quarter. "Costs were contained despite the depletion," Bristow said. At Cortez, all-in sustaining costs of gold production rose from US$444/oz to US$772/oz on an annual basis.

"This is our very first effort at putting this complex business together," Bristow said of the overall Nevada joint venture. "So I have no doubt the team will further refine this profile as we go forward."

Addressing Barrick's dividend strategy in answer to a question about whether the miner would tie it to a portion of net profits, Bristow pointed to his history at the helm of Randgold where dividend increases were the norm. But he did not commit to a particular formula.

"My job is to convert reserves into cash flow, make sure we've got enough to be able to invest in our future and give the rest to our shareholders and a substantial part of that to our stakeholders," he said.

In a Nov. 6 note, Deutsche Bank analyst Chris Terry said the dividend increase comes "as an initial sign of what we believe will be a trend."

Bristow also said Barrick still expects to reap US$1.5 billion in asset sales by the end of next year, as it adjusts its portfolio in the wake of the merger with Randgold.

In exploration, Barrick highlighted recent drilling results from the Fourmile project on the Goldrush property, where it expects to grow resources after outlining new gold zones. The company highlighted intercepts of 25.6 meters grading 80.9 g/t gold and 29.0 meters grading 54.6 g/t gold from drilling below and south of known resources.

"We are guiding to a significant increase in resources when we come out with our annual reserve and resource statements next year," Bristow said.